Manufactured Home Community Owner UMH Properties Sells a Preferred Issue

July 26, 2017

By Tim McPartland

UMH Properties (NYSE:UMH), a real estate investment trust (REIT) that owns manufactured home communities, has sold an offering of five million preferred shares.

The issue is cumulative, optionally redeemable by the issuer approximately five years after its official offering and carries a coupon of 6.75%. As a REIT, UMH does not pay qualified dividends, so investor income will be taxed at the owner’s ordinary tax rate.

UMH has been a publicly traded company since 1985 and continues to grow through a steady stream of acquisitions. The REIT owns 107 manufactured home communities in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan and Maryland.

Despite the stigma that mobile home parks can carry, a portfolio of well-kept parks can toss off significant cash flows to the owner. The key to success is to keep parks well kept, meaning that deferred maintenance can’t be allowed.

Parks must have well-kept roadways and amenities. Some parks also may have clubhouses and pools. Proper maintenance and rental income is to be maintained and increased on a regular basis.

For those not familiar with these “communities,” the owner of the land, which is UMH in this case, rents it to individuals who install their manufactured home on one of the sites. Of course, the homeowner pays a monthly rental fee for the right to live in the community. While not an exciting business (what REIT is exciting?) this appears to be a solid business, since there always is a need for affordable housing.

Currently, UMH has two other preferred issues outstanding with coupons of 8.25% and 8%. A portion of the proceeds from this new offering will be used to redeem the 8.25% issue (NYSE:UMH-A), with the balance of the proceeds going to general corporate purposes to be used for anything they want. You always can compare the issues on our “swaps” page here.

Details of the new UMH preferred stock issue can be found here.

UMH common shares currently trade around $16.50/share and have traded in a range of $11.28 to $17.90 during the last 12 months. The current dividend is 18 cents/share quarterly for an annualized yield of 4.34%.

Shares are now trading on the OTC Grey Market under the temporary ticker of UMHPP and were last priced at $25.20.

Tim McPartland

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Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.

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