UMH Properties, Inc. (NYSE:UMH) Q1 2020 Earnings Conference Call May 8, 2020 10:00 AM ET
Company Participants
Nelli Madden – Director of IR
Samuel Landy – President, CEO
Anna Chew – VP, CFO
Eugene Landy – Chairman of the Board
Brett Taft – VP, COO
James Lykins – VP of Capital Markets
Daniel Landy – VP
Conference Call Participants
Rob Stevenson – Janney
Barry Oxford – D.A. Davidson
Craig Kucera – B. Riley FBR
Operator
Good day. And welcome to the UMH Properties First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded.
It is now my pleasure to introduce your host, Miss. Nelli Madden, Director of Investor Relations. Thank you. Miss. Madden, you may begin.
Nelli Madden
Thank you very much, operator. In addition to the 10-Q that we filed with the SEC yesterday, we have filed an unaudited first quarter supplemental information presentation. The supplemental information presentation along with our 10-Q are available in the company’s website at umh.reit.
I would like to remind everyone that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties.
Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved.
The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the company’s first quarter 2020 earnings release and filings with the Securities and Exchange Commission. The company disclaims any obligation to update its forward-looking statements.
In addition, during today’s call, we will be discussing non-GAAP financial metrics. Reconciliations of these non-GAAP financial metrics to the comparable GAAP financial metrics as well as explanatory and cautioning language are included in our earnings release, our supplemental information and our historical SEC filings.
Having said that, I would like to introduce management with us today. Eugene Landy, Chairman; Samuel Landy, President and Chief Executive Officer; Anna Chew, Vice President and Chief Financial Officer; Brett Taft, Vice President and Chief Operating Officer; James Lykins, Vice President of Capital Markets; and Daniel Landy, Vice President.
It is now my pleasure to turn the call over to UMH’s President and Chief Executive Officer, Samuel Landy.
Samuel Landy
Thank you very much, Nelli. We are pleased to report our results for the first quarter ended December 31st, 2020 and provide an update and the state of our operations given the COVID-19 pandemic.
While all of our communities understand home orders of some sort, community personnel are continuing to maintain our community and deliver essential services to our residents. In most states where we operate, we are not permitted to conduct in-person sales and leasing.
However, we have been able to sell and rent all remotely by providing online visual tools of the home and completing all required paperwork using our online application and digital signature software. Our website also allows for the online payment of rent.
We are pleased with the state of our operations. Remarkably March and April sales are holding a 2019 levels and occupancy is increasing. Many of our residents have been impacted financially by these stay at home order. A large portion of our residents continue to remain employed throughout the crisis and many are on fixed income.
Keeping all this in mind, our rent collections have been strong. We collected 94% of our April site and home rental charges. As of May 5th, we’ve collected 64% of our main site and home charges as compared to 53% at this point in May of 2019. We expected any delinquent tenants will be able to pay the rent when and if they are able to resume work or receive the stimulus checks or unemployment checks.
Our employees have worked incredibly hard to further the goals of UMH. These are truly challenging times and difficult work environments and we are proud of our team which has stepped up to the challenge. UMH continues to maintain a solid balance sheet.
During the first quarter, we utilize our preferred ATM to raise net proceeds of approximately $63 million of our Series D Preferred stock. Although this preferred issuances had a negative impact on first quarter earnings, this capital ensures the financial strength of UMH.
This will also allow UMH to continue to invest in new rental homes, expansions and capital improvements. We are also pleased to announce that we have assigned term sheet in place with the lender to obtain $100 million of fixed rate mortgage step on a portfolio of the included communities and its interest rate below 3%.
We are positioning the company to be able to redeem our $95 million, 8% Series B Perpetual Preferred stock in October with proceeds from this fixed rate mortgage debt. Assuming no unforeseen issues related to closing on this transaction, we anticipate an increase in FFO of approximately $5 million while $0.11 per share annually as a direct result of this preferred redemption.
UMH is also working with the GSEs to pioneer the recognition of rental manufactured homes in communities as rental housing that should be entitled to the same financing as traditional apartments. Further success in obtaining their recognition will allow us to finance our $310 million of rental homes that were purchased with preferred stock reducing our cost of capital.
I am pleased to report that rental and related income for the quarter increased 12% year-over-year. A community net operating income for the quarter increased 22% year-over-year. These outstanding operating results are in testament to our value add business plan.
The rental home program continues to perform very well. At quarter end, we owned 7543 rentals which is an increase of 878 over the first quarter of 2019. Our rental home occupancy rate was 94%. Although our rental home orders were delayed by the crisis, we anticipate adding an additional 750 to 800 rental homes to our portfolio this year.
The rental home program is a key component of our business plan. It allows us to quickly and efficiently increase occupancy resulting in improved community operation. Our same property portfolio generated exceptional results to begin the year. Same property NOI grew 14%. This is the second quarter in a row that we have delivered double digit same store NOI growth.
As we complete turnaround work at our recent acquisitions, we have seen increased demand for rentals and sales. This paired with the reduction in operating expenses should result in significant NOI growth and ultimately strong value creation. This value can be realized when we finance or refinance our community.
Our same property occupancy rate improved 180 basis points to 84.6% from the same quarter last year and a 100 basis points from the year-end; this translates to an increase of 416 revenue producing sites year-over-year and 215 sites here today. We remain encouraged by our sales operation and believe that this area of our business has the potential to deliver meaningful profits.
Gross sales for the quarter were $3.2 million representing a decrease of 12% of the same period last year. We are pleased to report that our April sales were $1.9 million marking a slight improvement over April of 2019. As a result of obtaining a lower cost capital, we are reducing our rate on the retail financing to 5.99% from 6.75% which should increase sales and occupancy.
Our sales for the quarter were negatively impacted by the stay-at-home orders issued in March. We believe that as business returns to normal throughout the year, our results will improve. We have several expansions coming online in group sales markets that should drive improved sales results.
We are proud to announce that the Manufactured Housing Institute recently named UMH’s Sunny Acres Sales Center in Somerset, Pennsylvania to 2020 Retail Sales Center of The Year. This award is a testament to UMH’s dedication providing quality affordable housing and enhancement of the buying experience for its customers.
Most of our expansions continued to move forward despite the delays that the pandemic has caused. Notably, the development of our Tennessee expansions continues to progress. We have started ordering homes for two locations and should have been set up and ready for open houses at the beginning of the summer.
As a result of the delays caused by the pandemic, we now expect to obtain approvals for 408 sites and to complete the development of 200 sites. Initially we had planned on obtaining approvals for 750 sites. We now expect to obtain the remaining approvals in the first half of 2021.
These newly developed sites will allow us to continue our sales and rental growth at community staff consistently produced excellent results. We have two communities under contract. These communities are located in Pennsylvania and New York and contains 315 sites which are 63% occupied.
They are in close proximity to communities that we had already owned. The purchase price for these communities is approximately $8 million representing a cost per site of $25,000. These communities are value added communities and are in relatively good condition.
We will benefit greatly from our rental home and marketing programs. The acquisition market of high-quality properties remains competitive.
We are looking at several other opportunities and anticipate continued growth of our pipeline. Looking forward to the remainder of 2020, rather as uncertainty stemming from the COVID-19 pandemic, we still believe that we are well positioned to execute our growth strategy, deliver improved property level operating results and increase FFO per share.
Although this crisis has delayed our rental home purchases and some rent increases, we believe that we are still on track to order 750 to 800 homes and obtain the majority of our annual rent increases. We’ve already declared our dividend for the second quarter and given the current strength of UMH’s financial position, we do not anticipate any changes to our current dividend policy.
UMH is delaying the groundwork to substantially increase FFO per share. The plan is to improve our community level operating results and reduce our cost of capital by taking advantage of historically low interest rates. We are succeeding in both. The capital raise from issuing preferred stock results in near term pressure on FFO per share.
We believe shareholders should recognize that UMH is a 52-year history of successfully deploying capital. Although the new capital was not immediately accretive, it will be as we are able to invest the capital into our portfolio and future acquisitions.
Our substantial improvement in operating results in addition to a meaningful breakthrough in obtaining a lower cost debt should translate in the near future to increase FFO per share. I would like to take this opportunity to thank our dedicated UMH team for all their hard work.
We are proud of the results achieved despite the adversity that we have faced during the first quarter. And now, Anna will provide you with greater detail on our results for the quarter and for the year.
Anna Chew
Thank you, Sam. Normalized FFO which excludes realized gains on the sales and security and other non-recurring items was $6.1 million or $0.15 per deluded share for the first quarter of 2020 compared to $6.5. Million or $0.17 per deluded share for the prior year period.
This decrease was primarily attributable to the impact of raising capital to our preferred ATM. This capital will allow us to continue our growth in a period of economic uncertainty during which tapping the capital markets is more difficult. Rental and related income for the quarter was $34.4 million compared to $30.6 million a year ago; representing an increase of 12%.
Community NOI increased by 22% for the quarter from $16.5 million in 2019 to $18.9 million in 2020. These increases are attributable to our acquisitions, rent increases and the success of our rental home program. Our monthly site rent increased by 3% to $453 over the same period last year.
Our monthly home rent increased by 3.5% to $775 over the same period last year. Same property income for the first quarter increased 7.6% over the same period last year while expenses remained relatively stable, resulting in same property NOI growth of 14%.
Sales of manufactured homes decreased 12% for the quarter from $3.6 million in 2019 to $3.2 million in 2020. We sold a total of 62 homes of which 20 were new home sales and 42 were used home sales. We anticipate that sales will improve at the impact of the virus is reduced and stay-at-home orders are listed.
As we turn to our capital structure, at quarter end we had approximately $416 million in debt of which $372 million was community level mortgage debt and $44 million was loans payable. 90% of our total debt is fixed rate. The weighted average interest rate and our mortgage debt was 4.14% at quarter end compared to 4.29% in the prior year.
The weighted average maturity on our mortgage debt was 5.7 years at quarter end compared to 6.0 years a year ago. UMH further increased our liquidity by utilizing our preferred ATM program. During the quarter, we sold 2.6 million shares of our 6.375% Series D Cumulative Redeemable Preferred Stock at a weighted average price of $25.06 per share.
Generating net proceeds of approximately $63.1 million. We plan to use these proceeds for general corporate purposes which includes the purchase of manufactured homes for sale or lease to customers, expansion of our existing communities, acquisitions of additional properties, attain down our lines of credit on a temporary basis.
At quarter end, UMH had a total of $469 million in perpetual preferred equity. Our preferred stock combines with an equity market capitalization of $447 million and are $416 million in debt, results in a total market capitalization of approximately $1.3 billion at quarter end representing an increase of 4% over the prior year period.
From a credit standpoint, our net debt total market capitalization was 30%, our net debt by securities to total market capitalization was 24%. Our net debt to adjusted EBITDA was 5.4 times, our net debt for securities to adjusted EBITDA was 4.3 times. Our interest coverage was 3.9 times and our fixed charge coverage was 1.5 times.
From a liquidity standpoint, we ended the quarter with $14.6 million in cash and cash equivalence, $60 million available on our unsecured credit facility with an additional $50 million potentially available pursuant to an accordion feature and $34 million available on our revolving lines credit, for the financing of home sales and the purchase of inventory.
We also had $78 million in our REIT securities portfolio encumbered by $18.5 million in margin loans. This portfolio represents approximately 6% of our undepreciated assets. We limit our portfolio to no more than 15% of our undepreciated assets.
With the exception of reinvesting our dividends in Mammoth real-estate, we are committed to not increasing our investments in the REIT securities portfolio.
We continue to work on providing the company with additional financial flexibility. As Sam mentioned, we have assigned term sheet in place with the lender to finance a portfolio of free and clear communities with fixed rate mortgage debt at rates below 3% generating proceeds of approximately $100 million.
We are also in discussions with several lenders to create a credit facility utilizing our rental homes are collateral with favorable pricing. We plan to use these sources of capital to redeem our 8% Series B Perpetual Preferred stock generating approximately $5 million of additional FFO or $0.11 annually.
These sources of capital will also allow us to continue to invest in our rental home program, capital improvements, expansions, and additional acquisitions further improving our operating results and the quality of our portfolio. With our strong financial position and access to the capital markets, we are well positioned to continue our growth initiatives.
And now, let me turn it over to Eugene before we open it up for questions.
Eugene Landy
Thank you, Anna. At year end, we were experiencing historically low unemployment rates. Rising wages, strong GDP growth, fast market highs and endless possibilities for the economy. Over the past few weeks, more people will apply out for unemployment than ever before.
GDP shrunk 4.8%, we’ve experienced the biggest contraction since the financial crisis and we’ve concerned about how long it will take to reopen the economy and that whether or not there will be long lasting consequences. Fortunately, we’ve always positioned UMH for a Black Swan event.
Our solid balance sheet has put us in a position to excel during a time when many are trying to stay in business. The oil and gas industry has also been hit hard during this crisis. Global stock piles have fallen and simply is not enough demand to support the oil prices we’ve become accustomed to.
That being said, the investments that we have made in the Marcellus and Utica Shale areas should continue to do well. The communities that we have acquired have a stable residency base that is not overtly concentrated in the oil and gas business. As deploying our community managers in the Marcellus and Utica Shale regions, we believe that less than 10% of our residence had sort of actually employed in the oil and gas industry.
The upside in our portfolio will be realized with strong oil, gas, and ancillary businesses. We remain optimistic about this region. With disruption of the supply chain during this crisis, demonstrates the need to bring manufacturing back to the United States with sudden turns drive incremental demand for workforce housing.
Low-cost energy increases the ability of our manufactures to compete in the global market. Larger plants are being built to turn natural gas into electricity. Back up plants are being developed to turn natural gas byproducts and the plastics. Pipelines are being built to the lower this energy or over than he last base.
As these multi-billion developments and investments continue to progress, we will see the continued transformation of this region and growth in our overall occupancy and operating results. UMH has a mission to provide affordable housing for the nation. Our response to the pandemic crisis which does increase risk and uncertainty is to continue on this mission.
UMH has the financial resources and the experienced staff to build, buy and expand manufactured housing community. The need is now, and the future land and construction cost might be much higher due to accommodation of inflation and demand exceeding supply. Over the decades we’ve created a platform that enhances the quality, value, and stability of our portfolio properties.
We endeavor to also generate increased value per share for our shareholders. As we’re able to execute on our business plans, these increases of value will be reflected in our stock price.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question today will come from Rob Stevenson with Janney. Please go ahead.
Rob Stevenson
Hi, good morning guys. Eugene, thanks for the sort of commentary. Can you guys talk about what you’re seeing in terms of the ability to absorb the rental rate increases and occupancy levels across some of your assets in the Marcellus and Utica Shale region?
I mean, has that started to basically impact your ability to drive the 4% rental rate bump there at all?
Eugene Landy
We’ve been talking to our managers and regional managers and its impressive how strong pent-up demand is. Tennessee’s almost back open for business and they’re busy in Tennessee. Each state we talk to are very optimistic about the demands for our product in our ability to fill site.
We’ve deferred our rent increases during the crisis, so that they’re not incurring April, May, and potentially June. But they will increase thereafter and our consistent experience is because we upgrade and take care of our properties, passing through 4% rent increases is not a problem.
And Brett, if you want to be more specific on various items?
Brett Taft
Yes, sure. So, on the occupancy front, I do just want to point out that in the first quarter the majority of our occupancy increase did come from Ohio which is next to our the Utica Shale region. That was a 149 sites of our total occupancy gain. So, we’re definitely continuing to see strong demand in that region.
If we could look into May, we did continue to improve our occupancy rates. We added 91 overall units from April to May and then stirring this pandemics. So, we really haven’t seen a decrease in demand. All of our communities are still reporting very strong demand and given the circumstances we’re very pleased with what we’ve been able to accomplish.
Rob Stevenson
Do you guys have any idea at present what percentage of the tenant in your rental units are now unemployed?
Eugene Landy
To the extent we know, we’ve only asked people what’s going on. And I think we believe as many as 30%.
Samuel Landy
Yes. It’s a tough question to answer and we are looking forward to everybody getting back to work in the coming weeks. But what we understand is it’s 30% across the board. When we look into our residency base, approximately 23% of our residents are 65 and older on fixed income and about 39% of our residents are 55 and older.
So, while employment’s important and we do want everybody to get back online, we do think that those two items are one of the reasons why our collection rates are as strong as they are.
Eugene Landy
And just that 30% unemployed, that’s temporary unemployed and they do collect unemployment benefit and the rent collections have been as strongest we already mentioned.
Rob Stevenson
Those are age cohorts, is that for either the entire portfolio or for just the site rentals. I mean, the rental units have got to be a lower age demographics alright?
Eugene Landy
That’s across the entire portfolio, correct. We can look into that and get back to you. Break it out between rental and owned but that would be the entire portfolio.
Rob Stevenson
And to what extent you guys impacted by some of the eviction ban that are to see in the apartment space wherever they’ve taken Fannie or Freddie or whether it’s individual states or local governments that are put eviction bands in?
Eugene Landy
Well, prior to the governors creating these eviction ban, we made a decision that we were not filing evictions anyhow. That if people going to pay April rent, May rent, what we would do if a resident includes standing, is differ that rent — so that when they’re back on work, they’ll pay the first month they’re back on work, let’s say June 1st.
And if they didn’t pay May, they pay that 25% per month for the following month. And we believe by giving them an affordable deferral payment. They will in fact pay because they know that we’re providing the highest quality housing there is at the price. And if they don’t pay us they’re going to wind up living somewhere else that’s not as good for a higher price.
And they’re proving that out by the percentage paying the rent. We’ve entered into this.
Samuel Landy
It’s only 80 payment agreements to this point and that includes April and May.
Eugene Landy
So, we’re very satisfied with our products working. We’ve had an incredible marketing program for about three years. And part of our marketing program is not just to bring new residence in but to let the existing residents know what a great choice they made by choosing UMH communities or rental housing in our communities and never aware of this in as long as it’s at all possible, we believe they will pay the rent.
Rob Stevenson
Okay. But I mean, that’s the decision that you guys made in your portfolio. I mean, to what extent though already of these local places that you’re operating in subject to government eviction bans. Like I know you don’t operate in New York City or in Seattle.
But those just — Seattle just extended into the — to the end of the year, and New York extended it further into the fall. Just curious I mean your ability to extend that on your own is going to be limited. I mean if it and so eventually you’ll have to get back to doing stuff what needs to be done.
Just curious as to where you are today legally not able to come end of summer if you choose to.
Samuel Landy
Yes, it’s an issue across the portfolio, there’s no doubt about it. It’s and I don’t have it broken down state-by-state but you look at Pennsylvania Governor Wolf just announced yesterday pausing all eviction proceedings et cetera.
We also do have I believe its 43 GSE loans. So, we’re not able to pursue evictions, charge late fees, et cetera, until I believe it’s the middle of July at this point. So right now, it’ll be seen what happens at the rest of the year and what happens when everything opens up.
But certainly for the foreseeable future, pursuing evictions will be an issue.
Rob Stevenson
Okay, that was what I was looking for. Thank you, that was very helpful. And then, last one from me. Anna, what capital source are you planning to use today to redeem the theories be. I mean, obviously the grade of the common stock price were $20 or something.
But assuming that that’s not in the card. Was that debt, is that additional preferred, do you use some of the securities portfolio, how are you thinking about taking out that, it’s roughly a $100 million I think of Series B.
Anna Chew
Well, we have a term sheet right now which will give us approximately a $100 million at under 3% and so that is one of the sources that we would be using to called preferred.
Rob Stevenson
Okay, that’s secured debt?
Anna Chew
The money. That will be secured debt.
Rob Stevenson
Okay.
Anna Chew
And money is fundable but we have other sources too keeping our lines with credit et cetera.
Rob Stevenson
Okay, perfect. I appreciate it. That’s it.
Anna Chew
No problem.
Rob Stevenson
Alright, thanks guys.
Operator
Our next question will come from Barry Oxford with D.A. Davidson. Please go ahead.
Barry Oxford
Great, thanks guys. When you were looking at that debt in that rate, it’s a good rate. And you’ve seen the rate come down but have the spreads kind of come out a little bit too. Have you noticed that or the spreads kind of staying where you have normally seen them?
Anna Chew
Well, the spread tab increased a little bit but because the 10 year has gone down so tremendously, the rate itself has gone down. So, that was important to know. So, it will be under a 3% rate which we think would be fantastic. This will be for a 10 year loan.
Barry Oxford
Great, right. Absolutely great, thanks. And Sam, could you discuss a little bit about the REIT portfolio in the valuation?
James Lykins
Well, Eugene Landy is here, so let him talk about the REIT portfolio.
Barry Oxford
Perfect, thanks James.
Eugene Landy
Yes. The REIT portfolio is about 80 million now and we have 23,000 sites worth over a $1 billion. So, the REIT portfolio is a small percentage above we’ve been very disappointed at it. But it’s been very volatile. It’s about 80 million now in a few weeks ago or months ago or time goes by.
It was a 124 million and the fluctuations everyday depends on how fast we’re going to get the U.S. economy up and rising. We have a great deal of sympathy for many of the other REITs. They were well run, they were well capitalized and they lost their topline.
And if you lose your topline and have no income, it makes it very difficult to run a REIT. Fortunately UMH topline is strong. The affordable housing crisis is real, our product is in demand and our tenants seem to have the ability to continue to pay rent.
So, we’re not quite near position. But that’s it hurt the REIT portfolio some and we’re going to see how they go. We follow our portfolio stocks very closely and we’ve been hoping to get the portfolio up over 100 million, in which case we could pour our 50 million from our banks at 1%.
So, but today we as we put it, we have to mark these to market and we took a substantial reduction as a scorer.
Barry Oxford
Right, perfect. Thanks for the color.
Operator
And our next question will come from Craig Kucera with B. Riley FBR. Please go ahead.
Craig Kucera
Good morning, guys. I just want to circle back, I know it’s not a big part of your portfolio right now with the tenants are not paying but. Are you basically saying that if someone misses a month, you’re going to charge sort of 25% once they go back to work?
Of incremental rent, so basically if they miss a month or two, you recover all of that rent by year-end. Or how should we think about that?
Samuel Landy
Exactly, so right. To make their cash flow easiest on them. The month they’re back employed, they’ll owe that month rent in full. And whatever they didn’t pay earlier they’ll pay 25% month.
Brett Taft
But you have to realize that many of our tenants who were getting unemployment insurance or grants from the government, actually are getting texts that gives them more in compared to that. Is that they have before the pandemic crisis.
So, we only had how many people?
James Lykins
80 people are in there.
Brett Taft
80 people, I know. How many residents, 18000?
James Lykins
19,000.
Brett Taft
19,000. So yes, it says a slow item. And we found our tenants have a pretty good ability to continue to pay rent even in this crisis.
Eugene Landy
And I’ll just point out, what manufactured housing has proven over decade is that there is no more stable stream of income than resident owned homes in the community. And that’s about an 11,000 of our home. And that’s so stable because the resident has equity in the house.
So, if a resident was not able to pay for a substantial period of time, is that equity in the house which could become ours if things were bad enough. But the other 7000 rental homes, we’ve always anticipate would perform at least as well as apartments and they’re in fact performing as well or better than apartment.
So, and then you add the back that demand greatly exceeds supply so that if someone was unable to pay and the unit became vacant, there’s an immediate tenant to take their place.
Craig Kucera
Got it. Circling back to the acquisitions, I know you mentioned that they were a couple of properties for about $8 million. I think few months ago you guys were talking about maybe looking at doing $25 million in acquisitions for the year. Was the $8 million a component of that or is that on top of that $25 million or have you basically put that $25 million on hold.
Samuel Landy
Yes. So, right now it’s a tough question to answer looking at the $25 million. That $8 million I would say at this point would be included in the $25 million. We are continuing to look at deals this pandemic has basically paused things for a moment but there are some deals out there.
Pricing is similar to where it was. So, we’re waiting to see what happens as this evolves and how the economy begins to reopen. I mean, interest rates are as low as they’ve been. So, sellers think they’re entitled to the same pricing. We will see where it goes.
But at the moment we’ve got that $8 million. We’re looking at some other properties but at this point we don’t have anything to report as being added to the pipeline.
Brett Taft
Yes, I’m not going to repeat what I said on the prepared remarks. We are looking for to do increased acquisitions and do expansions and continue to provide affordable housing and we are being prepared to be very aggressive to continue to grow the company.
We think there’s going to be inflation, we think it’s going to be costs going up and we think that the housing shortage is very real and the demand for our product is tremendous. I always point out to people they can do their own survey. They can go on in the internet and see what our products elsewhere.
Three bedrooms, two bath, rents for $800 a month and then go on a service like Zillow and see what’s available in the area with $800 a month. You’ll find that we exceed in value properties that lend for an $1100, $1200, a month. We provide three bedroom, two bath, and you get three bedrooms and one bathroom for $1200 a month and we charge $800 a month.
So, we’re very competitive and there’s a reason therefore why were you having the excellent results in our rental programs despite the pandemic.
Craig Kucera
Right, great. Sam, you mentioned that you saw you were going to do 750 to 800 rentals this year. Just to double check, is that what you hope the cumulative amount it’s for the year of is that incremental to the 150 you did in the first quarter?
Samuel Landy
Well, that’s cumulative for the year. We expect — we were hoping to do better, we got slow down for probably four-to-six weeks but we still think we’ll do 750-to-800 rental units for the year.
Craig Kucera
Okay great. And then circling to your same store results which were obviously very strong, again very limited operating expenses as we saw last quarter which I believe was after some tree removal cost had been removed. Just to remind, were those tree removal expenses fairly ratable throughout the first three quarters of the year.
Or were they incurred primarily in the first half?
Samuel Landy
Well, I’ll let Anne answer that but before you have.
Anna Chew
Yes, they were –.
Samuel Landy
Yes.
Anna Chew
Sorry. They were incurred in the first half, the 375,000 was in the first quarter. And that actually wanted to do this –.
Samuel Landy
But I want to point out at this time because it’s a good time to point it out. You’ve been following our story all these years and we’ve known that we have to hit 80% occupancy for communities to become efficient. After you hit that 80%, communities with unseperately metered water and sewer will operate at a 50% expense ratio.
And if it’s separately metered and the residents are paying the water and sewer, performed at a 30% expense ratio. We’re not up to 84.6% occupancy so that this is working. And as we go to 94% occupancy that next 10% are efficiencies are really there so that higher percentages just like you just saw this quarter but it’s going to happen throughout the future.
Higher percentages of the growth will go to net because we’ve got in over that 80% occupancy. And we pointed out last year on the call that approximately $3 million in last year’s operating expenses were related to the turnaround of properties that we had purchased during the past three years, so that those properties had the additional tree removal, additional repairs and maintenance.
Looking forward, the next thing that will increase expenses is relatively minor. It’s the expansions opening. So, as you open expansion, you have upfront cost before you get adequate sales and occupancies to pay from. But when I look at the number of lots and how many sites there are, I don’t think it’s going to stop our progress.
I think that this was the first real taste we gave everybody of how well our plan is working. We knew it would work but now we could show you our work and I think that we’ll continuously go forward. It has to do with the installation of separate meters, it has to with our website.
All the efficiencies coming into place as we hit the 80% occupancy and everything we’ve been working on for 7-years plus coming together.
Eugene Landy
And just to add some numbers what Sam was saying there. Our 2015 group of acquisitions during the quarter, grew income by 12% and NOI by 27%. That’s basically got it from the time of acquisition, it was 64%, now it’s 70%. 2016, 16% to 17% income growth, 37% NOI growth, 74% occupancy at the time of acquisition.
92% occupancy now. 2017, acquisitions were 13% income growth, 27% NOI growth. They were 65% occupied at the time of acquisition and 80% now. And 2018’s acquisitions, an 11% income growth, 16% NOI growth and we’re still working on the occupancy there but they’ve gone from 79% to 81%.
So, these numbers just really demonstrate the strength of the value-added business plan.
Craig Kucera
Great, that’s good color. And one more from me, Anna you mentioned you guys were looking at a credit facility with rental homes with collateral. Is the pricing that’s in discussion right now reasonably comparable to what you’re seeing on your other unsecured line of credit or other floating summary of that?
Anna Chew
Well, before I answer that, I did want to clarify this. 375,000 that was in the first quarter, that was for a utility billing dispute. That were one over 10 years. So, we settled it for 375,000 in the first quarter of last year. There were some additional fee removal toward throughout the rest of the year.
But as we said, was Sam and Brett said, these were primarily for the newer acquisition. Now regarding the line of credit, what we’re working on is rates will be I’m going to say a little bit higher than what our below line of credit is now. But it’s pretty much in line with the rates that we’re pinning on our notes receivable line of credit.
So, it’s our time for — it’s a little over time, I would say. We are in discussions with a few banks on this and they seem very receptive. This will be a real breakthrough because in the past, the loans on our rentals. If we wanted to obtain them, we’re at 6% 7% and we did not obtain those roles, instead we had issued preferred stock to purchase our rental units.
Craig Kucera
Okay, great. Thank you.
Anna Chew
Thank you.
Operator
This concludes our question and answer session. I would like to turn the conference back over to Samuel Landy for any closing remarks.
Samuel Landy
Thank you, operator. I would like to thank the participants of this call for their continued support and interest in our company. As always Eugene and Brett and I are available for any follow-up questions.
We will be participating in NAREIT’s week in June, which will be a virtual event this year. And hope you’ll be able to join us. We look forward to reporting back to you in August with our second quarter 2020 results.
Thank you, and stay safe.
Operator
The conference has now concluded. Thank you, for attending today’s presentation. The teleconference replay will be available at approximately one hour. To access this replay, please dial U.S. toll-free 1-877-344-7529 or international 1-412-317-0088. The conference ID number is 10140407. Thank you and please disconnect your line.
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