UMH Properties Inc (UMH) 2016 Q4 法說會逐字稿

Good morning and welcome to UMH Properties' fourth-quarter and year-end 2016 earnings conference call. (Operator Instructions) Please note this event is being recorded.

It is now my pleasure to introduce your host, Ms. Nelli Madden, Director of Investor Relations. Thank you. Ms. Madden, you may begin.

Thank you very much, operator. In addition to the 10-K that we filed with the SEC yesterday, we have filed an unaudited annual and fourth-quarter supplemental information presentation. The supplemental information presentation, along with our 10-K, are available on 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 assumption, 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 annual 2016 earnings release and filings with the Securities and Exchange Commission. The Company disclaims any obligation to update its forward-looking statements.

Having said that, I would like to introduce management with us today: Eugene Landy, Chairman; Samuel Landy, President and Chief Executive Officer; and Anna Chew, Vice President and Chief Financial Officer.

It is now my pleasure to turn the call over to UMH's President and Chief Executive Officer, Samuel Landy.

Thanks very much, Nelli. Good morning, everyone, and thank you for joining us. We are pleased to report our results for the fourth quarter and year ended December 31, 2016.

UMH was one of the top-performing REITs in 2016, with a total shareholder return of 59%. It was an excellent year for UMH, highlighted by our normalized FFO per share growth of 20%. This marks our fourth consecutive year of double-digit earnings-per-share growth. For the fourth quarter, our normalized FFO was $0.18 per diluted share, fully covering our $0.18 per-share quarterly dividend.

UMH has continued to opportunistically acquire value-add communities. In 2016, we purchased a total of 3 communities containing approximately 300 developed homesites situated on 219 acres, for an aggregate cost of approximately $7.3 million. Subsequent to year-end, we completed the acquisition of an additional 5 communities containing approximately 1,300 developed homesites situated on 382 acres, for an aggregate purchase price of approximately $36.5 million.

Our portfolio is now comprised of 106 communities with 19,300 developed homesites located throughout 7 states. We will continue to focus on acquiring communities with significant upside potential and leverage our expertise to build long-term value for shareholders.

Our product is workforce housing. The return of manufacturing jobs to the areas where we operate is what has increased our occupancy and income. Our results are directly tied to the fortunes of the economies in these areas.

Our communities in the energy-rich Marcellus and Utica Shale regions are poised for additional growth, given the new administration's pro-domestic energy initiatives. Additionally, technological advances have reduced the cost of drilling.

Oil and gas companies in the Marcellus and Utica Shale regions are again profitable. We are seeing interest for new oil and gas leases. New drilling will spur the continued growth in the local economies. Lower energy prices reduce the cost of manufacturing in the Northeast and we directly benefit as new jobs are created in our regions.

UMH recognized that vacant lots have significant value when the economy surrounding those vacancies improves. Our 1,000-square-foot, 3-bedroom, 2-bath homes are readily accepted as workforce housing at returns that have made UMH one of the best-performing REITs in 2016. Our 3,500 vacant sites provide us with the opportunity to continue to rapidly improve our results for the next several years.

I will now focus on our performance for the full year, and then Anna will drill down further on our fourth-quarter results. Our metrics across the board continue to improve. In 2016, community net operating income increased by 27.4% and our operating expense ratio has continued to improve, from 49.6% in 2015 to 47% in 2016.

Our same property results have also strengthened, substantially increasing the value of our communities. Same property occupancy increased from 82.9% at year-end 2015 to 84.8% at year-end 2016, representing a gain of 190 basis points.

Year over year, same property revenue increased 12.9%, while expenses only increased 6.1%, resulting in an increase in same property NOI of 18.9%. Our strong same property operating results continue to validate our business plan of acquiring communities in strong geographic locations below replacement cost, making necessary improvements and growing occupancy and revenue by utilizing our rental home and sales programs.

Our rental home program continues to be the primary driver of our occupancy and revenue growth. It is the most efficient way to increase our occupancy, thereby increasing the value of our communities, which can then be realized through refinancing. During 2016, we installed and rented approximately 900 homes. At year-end, our rental home portfolio consisted of approximately 4,700 homes, representing 26% of our total homesites.

The demand for our rental homes continues to be strong, demonstrated by our rental home occupancy of 91.5%. This demand is driven by the need for affordable workforce housing in our geographic areas.

In 2016, national home prices increased 5.8%. Upward pressure on existing home prices due to tight supply, rising mortgage rates, and stringent mortgage requirements have steered housing demand to renting. These factors will propel demand to our sector since we can provide quality housing at the lowest cost in any given market.

Our sales of manufactured homes have not yet returned to pre-recession levels. Although this year, we increased home sales by approximately 26% from $6.8 million in gross sales in 2015 to $8.5 million in 2016, this volume is still not enough for our sales operation to be profitable.

At some point, our potential homebuyers will find their ability to access financing improved. When happens, our sales will increase. Further, the 55-and-older buyer who depends on being able to sell their existing single-family home and using the equity for their purchase of a manufactured home has been sidelined while waiting for the value of their existing home to increase.

We are encouraged to see conventional home prices finally rising to pre-recession levels. We are working hard to once again make home sales a major source of income at UMH. And we believe that it will return to its full potential as a major profit center as our nation's economy continues to improve and as lending standards return to normal.

And now, Anna will provide you with greater detail on our results for the quarter.

Thank you, Sam. Core funds from operations, or core FFO, was $5.7 million or $0.20 per diluted share for the fourth quarter of 2016 compared to $3.9 million or $0.14 per diluted share for the prior-year period, representing an increase of 43% on a per-share basis.

Normalized FFO, which excludes realized gains on the sale of securities and other nonrecurring items, was $5.3 million or $0.18 per diluted share for the fourth quarter of 2016 compared to $3.8 million or $0.14 per diluted share for the prior-year period, representing an increase of 29% on a per-share basis.

For the full-year 2016, core FFO was $20.7 million or $0.74 per diluted share compared to $14.3 million or $0.55 per diluted share for 2015. Normalized FFO was $18.4 million or $0.66 per diluted share for 2016 compared to $14.2 million or $0.55 per diluted share for 2015, representing a 20% increase on a per-share basis.

Rental and related income for the quarter was $23.4 million compared to $20.6 million a year ago, representing an increase of 13%, primarily due to community acquisitions, the addition of rental homes, and the growth in occupancy.

Community NOI increased by 17% for the quarter, from $10.9 million in 2015 to $12.7 million in 2016. This is the 10th consecutive quarter that we have delivered double-digit year-over-year NOI growth. Community operating expenses for the quarter were 45.6% of rental and related income, representing a 170-basis-point improvement over the 47.3% expense ratio for the prior-year period.

As Sam mentioned, for the year, our expense ratio was 47% compared to 49.6% for 2015. As we noted in the past, most of the community expenses consist of fixed cost and therefore, as occupancy rates continue to increase and as we upgrade and integrate our acquisitions, these expense ratios will continue to improve.

Our REIT securities portfolio continued to deliver strong results, increasing from $75 million at year-end 2015 to $109 million at year-end 2016, representing 13% of our gross asset value at year-end with an unrealized gain of $16.7 million. Our securities portfolio generated $6.6 million in dividend income and $2.3 million in net realized gains during the year.

As we turn to our capital structure, at year-end, we had approximately $351 million in debt, of which $293 million was community-level mortgage debt at a weighted average interest rate of 4.4% and $58 million were loans payable at a weighted average interest rate of 3.1%. 85% of our total debt is fixed rate.

During the year, we have financed/refinanced 4 communities for a total of $32 million, reducing our overall weighted average interest rate on our mortgage debt from 4.6% to 4.4%. We are currently in the process of renewing our unsecured credit facility, which is set to mature later this year.

In keeping with our growth strategy, this year saw us closing in on a $1 billion total enterprise value. During the year, we issued 2 million shares of our 8% Series B cumulative redeemable preferred stock, resulting in $49 million in net proceeds. This combined with our additional Series B preferred shares and our Series A preferred shares, resulted in a total of approximately $187 million in perpetual preferred equity at year-end.

Our total preferred stock, combined with an equity market capitalization of $442 million and our $351 million in debt, results in a total market capitalization of approximately $980 million at year-end, representing a 30% increase year over year.

From a credit standpoint, our net debt to total market capitalization was 35%. Our net debt less securities to total market capitalization was 24%. Our fixed charge coverage was 1.7 times, our net debt to EBITDA was 6.9 times, and our net debt less securities to EBITDA was 4.7 times.

From a liquidity standpoint, we ended the year with $4 million in cash and cash equivalents, $109 million in our securities portfolio, encumbered by $23 million in margin loans, and $15 million available on our credit facility, which was drawn down subsequent to year-end for the funding of the acquisition of 5 communities. We also had $28 million available on our revolving lines of credit for the financing of home sales and the purchase of inventory.

And now, let me turn it over to Gene before we open it up for questions.

Thank you, Anna. As founder and Chairman of the Board of Directors, I am pleased with the substantial progress UMH has made in its long-term strategic business plan. Our double-digit annual earnings growth over each of the past four years is an achievement to be proud of.

UMH is part of the housing market. We see numerous demand tailwinds propelling our industry. For a decade, the US has been building fewer homes than the 1.5 million homes needed to provide for new family formation and the replacement of older homes. Today, the available home inventory is shrinking. The deficit in housing starts ultimately needs to be filled.

The demographic picture is very favorable. The unemployment rate has continued to drop and is now under 5%. Wages have begun to rise. These factors enhance household formations by millennials, the largest segment of the US population. With rising demand comes rising prices. The affordability of our homes becomes more and more apparent.

The future housing and business prospects for UMH Properties are excellent. As Sam stated, we have reached the point where our dividends are now once again covered by our normalized FFO. The free cash flow above and beyond our dividend requirement is the path that ultimately leads to dividend growth. We continue to be focused on our business plan and have positioned ourselves for strong growth in 2017 and beyond.

We would now be happy to take questions.

(Operator Instructions) Craig Kucera, Wunderlich.

Wanted to talk about the acquisitions you closed on earlier this year. Can you talk about the going-in cap rates on those acquisitions? And just give us some color on maybe how we should think about the incremental expense to clean those communities up maybe this year and even next year?

Well, firstly, instead of going-in cap rates, the thing we focus on most is the real estate. We are very focused on buying parks that have substantial vacancies and that we can fill those vacancies by purchasing new manufactured homes to use as rental units.

We, of course, are conscious when we buy these parks that we want a return on our investment and we want a return our investment of between 6% and 7%. But that return is not the critical factor, because the critical factor is the return on our investment after we purchase additional rental units and when we fill the parks. And those numbers, I believe in the 10-K and annual report Sam will cover, is the kind of returns we get with all the factors placed in.

It would be an overstatement to say that we are buying a substantial number of units for nothing, but the lots are very valuable. The empty spaces are very valuable and they are particularly valuable if we are enabled to put in homes, rent them, and do that over a process of two or three years.

As we always point out, there are costs involved. For some reasons, we have to expense the cost of upgrading the park we bought. We have to expense a lot of the costs. We're getting the lots ready for the rental units. And the first year or two, the returns we report are not substantial and neither are they significant.

The returns that we get when we fill these parks with the rental units are very substantial, and we're very pleased with our program for buying new communities. We've gone from 7,000 units to 29,000 -- to 18,000 -- what?

19,300.

19,300. We've added about 12,000 units to our portfolio, and we are very pleased with the results of this accretive acquisition program.

Okay. So I guess let me ask it a bit differently then, because I agree. I do see the value on the backend. But in the near term, it was a fairly large -- at least from a unit purchase size relative to the portfolio.

So somewhere -- asking it a different way -- have you seen cap rates move up since the election? I know last year, you guys were -- you didn't acquire as much as you had maybe in the prior year or two. And just trying to get a sense of what you are seeing in the market.

Yes, the cap rates continue to go down. I mean, you have to pay more for the properties. It's Sam Landy here. Now you are closer to a 5 cap, 6 cap on what people are asking on acquisitions.

But the acquisitions we did in 2016 were exactly what we're looking for and usually doing. You know, 3 communities, 289 sites with 215 lots occupied, 74% occupancy, that we look at the employers surrounding those communities and we look at the area. And we are sure that because we have the money to invest in upgrading the properties and adding rental units, we'll do better than the prior owner.

The later acquisitions that are 2017 include Boardwalk and Park Place, which that's kind of a rather unusual acquisition for us because those were first-class communities. Boardwalk is 195 sites, 98% occupied. Park Place is 364 sites, 76% occupied. Both first-class communities with a swimming pool, clubhouse. They are 6.5% to 7.5% cap rates going in.

But the most important thing to know, they adjoin -- those two communities are adjoining and they adjoin one of our communities, giving us approximately 900 sites in one location in Indiana. And when you expand the number of sites, you know, if we take a 160-lot community, make it 320, every lot is more valuable because of the efficiencies of running all those sites from one office.

So Boardwalk, Park Place, plus the community we already own there, Highland, will all have top-notch management. They will be better able to generate sales income, rental income. And the value of our existing sites plus those sites will now go up because they are all together.

Got it. Looking at your CapEx for this next year, I think in 2016, you expected to maybe spend $15 million on CapEx. Can you talk about what your CapEx plan is for the next year, and how many rental units you think you will likely put into the ground?

Sure. So the CapEx is $8 million, with $4 million being the CapEx for our existing properties and $4 million for the upgrades to the acquisitions that we just announced and are doing. On top of that, we hope to add 900 rental units with the cost of the rental unit plus the setups $40,000 a site. So $36 million. So we'll generate $7.2 million a year in new income.

Our other capital need, if sales increase, we finance home sales and we need the money to finance those home sales. And, you know, we are hoping to improve sales in excess of $10 million, with $5 million of that being financed by us. And those are your capital needs.

Got it. And it looks like post these acquisitions, your line of credit is more or less maxed out. But you do have room to use the margin or use your borrow on margin against securities.

Is that how we should think about you funding yourself this year? And as far as the mortgages rolling off this year, is there likely a positive spread between those coming off maybe somewhere in the 6% range and being able to refi maybe in the low- to mid-4s%?

This is Anna. Regarding our line of credit, yes, it does mature this year, but we are in the process of renewing it and expanding it. That's number one. Number two, we do have availability on our securities portfolio, but we want to be conservative with that. So we never take it up to the full availability.

The third question that you had was regarding the mortgages that are coming off this year. And we believe that we will be able to refinance those at approximately, I would say, between 4.5% to 5%. Maybe a little lower than the 5%. And also obtain money -- additional funds from that because some of those are -- have been mortgaged for 10 years and we've had built-in gains on those.

Got it. And one more from me and I'll jump back in the queue. When you talk -- I guess looking at your rental unit occupancy over the past few quarters, it does look like it has dropped a bit year over year. And can you give us some color on traffic and maybe how renewals have been trending?

Traffic is better than ever. Renewals are better than ever. The number 91% factors in new homes set up but not yet occupied. Factors in acquisition of communities that have rental units that may need upgrading to our standard.

So, you know, everybody I talk to out in the field -- our managers, regional managers -- all say demand is as strong or stronger than ever. I know that the rate of our views on our website and the traffic we are generating are higher than ever.

All right. Thanks, guys.

Brian Hollenden, Sidoti.

Thanks for taking my call. To follow-up on the last question, are you seeing specific pockets of strength in rentals or is the demand broad-based?

Well, it's broad-based, but the important point there: everything UMH did is intentional. So first of all, our capital structure is intentional, which gives us $1 billion worth of assets with only 30 million shares outstanding.

Second of all, the location of our properties is intentional. The Marcellus and Utica Shale area, the Nashville market, the Memphis market, Indiana. Right now, we are told that they need 50,000 people to come to Elkhart, Indiana, to fill the jobs and they don't know where they are going to house them.

So every location we went to -- first of all, we know the difficulties and the expense of trying to obtain approved lots. That's a near impossibility. And then we found that these communities were for sale with vacant site due to -- I go back to NAFTA, that when we sent manufacturing overseas, these jobs left these areas. And these communities that were once 100% occupancy -- occupied fell down to 65% occupancy.

So we were able to purchase these communities. And the reason we did it was visiting our own communities that had the same problems, we found that the extended-stay hotels were 100% full. And we were looking into what was going on. And this is 7, 8, 10 years ago.

And we found out about Marcellus and Utica Shale and the fact that there is natural gas and oil in the ground there. And that pipelines are being built to bring the natural gas to our ports, that pipelines are being built to run the natural gas to the Panda plants that generate electricity and the gas is being run to our cities.

All of this is still in its infancy and the demand for natural gas increases every year. The building of factories that will convert natural gas to plastics. All of these things are just beginning.

So this region of the country, which had a devastated economy for the past 10 years, may now be one of the fastest-growing areas of the country. And UMH was very fortunate and acted very opportunistically to acquire these communities. And we're only starting to show you what's going to happen here.

Thanks for the --

This is Gene Landy, Chairman. If I can answer what I think is implicit in your question, the apartment REITs in the United States are doing a wonderful job. They've been building 200,000, 400,000 units. They have been building units for a cost of $250,000 to $300,000 a unit.

They are satisfying the demand in the urban areas. They are building studios and one-bedrooms, maybe 15% of that amount two bedrooms. So when you read about what's happening in the apartment REIT area, do not transpose that over to the affordable housing area that UMH is in.

We are in a different market. We produce 1,000-square feet of home, two bedrooms, three bedrooms, and we rent them for $800 a month. And the demand is very strong and it is remaining strong. So I just wanted to make sure that when you see apartment REITs reporting some softness, they are in a completely different market than we are.

Thanks for the color. And just have one additional question. Can you talk about the financing environment for individuals? Has there been any change in 2016? What specifically could happen in 2017 to improve home sales for individuals?

UMH was able to obtain a higher rate of approvals in 2016 working with Triad, so we were very happy with that. But things can still get way better. Dodd-Frank, the SAFE Act, and Truth in Lending come together to prevent waiters and waitresses from buying houses.

They prevent -- a person could be coming from a $300,000 house they couldn't afford. Now they want to buy a $40,000 house, but they have bad credit from the $300,000 house. They are prevented from buying a house. People with student loans -- somebody can graduate Harvard Law School and they have their debt. And they can't buy a $40,000 manufactured home.

So the laws come together to absolutely stop us from financing the people who could benefit the most from owning our houses. You know, we've spoken directly with both the Democratic and the Republican leaders of the House and the Senate. Everybody agrees there needs to be change. They weren't able to do it before the election, and hopefully it will get done after the election.

All right. Thank you for the color.

Michael Boulegeris, Boulegeris Investments, Inc.

Congratulations on an outstanding year. Sam, Hillcrest Crossing northeast of Pittsburgh has I guess an occupancy of about 40% according to your, I think, supplemental. Can you share with us your expectations of this newly acquired community in the context of the Shell petrochemical complex that are currently being built in Beaver County?

We've done incredibly well in this area. Anything near Pittsburgh, including one of the communities is six miles from the Pittsburgh airport. So this particular community, it's not far from shopping malls. It's not far from highways, and it looks like it's had 15-plus really bad years. And it is definitely going to take us three full years to turn this around.

But we bought it for less than the cost of having the land and getting the approvals. $12,500 per site we purchased it for. We're going to fix that up, add rental units, generate home sales, and we'll easily make it worth $30,000, $40,000 a site.

And the -- I should take a moment to thank the entire UMH staff for the incredible job they did getting us here. And we have a vice president and a regional manager out there, they've done a tremendous job. We just closed on this particular community. They are removing homes every day. They are bringing in the new homes and renting them out. They are going incredibly fast.

But I would still say it's going to take three years to turn it around. But we are doing an incredible job there. Part of the reason it takes three years, we have to change the reputation of communities, and that's probably actually the hardest part. You make your changes the first year, the second year, people start to see them, and it's only the third year that it has a new reputation and the occupancy really starts to increase quickly.

And if we could go south a bit, you had some challenges with I think the utility company in some of your Tennessee expansion. Can you provide us an update there?

I'm very happy to tell you that Memphis Blues is now officially open. 6 homes are already rented. There's 15 homes fully set up with another 15 homes being set up in the next 4 weeks. And we expect at the next call, we'll have most of those occupied.

This is a pioneering project. I was actually pleased to hear that one of the largest homebuilders is also doing a similar project. We're doing a housing development, a conventional housing development, except for the fact that we are not going to sell the homes. We're going to rent them.

And one of the conventional homebuilders in Reno is doing 250 homes and is not putting them up for sale, but is going to rent 250 homes. And we in Memphis with Memphis Blues will have a brand-new community and we will not sell the homes. We will rent the homes.

And we think the -- and it's right in Memphis itself. It's a great location, and we are very optimistic that we can build a community, put the homes in, and have an all-rental community.

Thank you for that color. Anna, can you break out our home sales for the quarter and give us some sense as to your outlook for the current year in this -- in-home sales?

Sure. For the quarter, quarter by quarter, in the first quarter, we had about $1.7 million in home sales. In the second quarter, it was about $2.8 million. In the third quarter, it was about $2.3 million, and in the fourth quarter, it was $1.8 million for a total of $8.5 million in home sales.

Of course, this is still not up to where it was in pre-recession levels, where we had $16 million in home sales for one year and we made once $2 million. We would like it to go up. It all depends on a lot of things: the economy, it depends on the regulations. Hopefully the regulations will ease, as Sam has mentioned, and that we will go back to the pre-recession levels.

Don't forget also that we have more than doubled the size of our portfolio. We had -- when we had the $16 million in sales, we only had 28 communities. Now we have 106 communities. So we believe that if home sales go back up, we will really make this a profitable center for UMH.

Okay. Finally, Sam, perhaps you can speak to the overall momentum of the business heading into 2017 and some of your goals that you have. Maybe you or Gene, I know, I think congratulations is in order. You said you would grow into the dividend and you did. But looking forward, can you provide us some guidance as to the criteria that the Board might employ when considering a dividend boost?

Starting at the beginning, first, national shipments for the year are up 35%. And, you know, we really have to thank the manufacturers, all the manufacturers we work with: Clayton, Cavco, Skyline, Eagle River. All the manufacturers.

They produce a fantastic product. The three bedroom, two bath, beautiful kitchen homes, shingle roof, vinyl sided. It's a great house. And our customer -- no common wall neighbor above them, below them. They get a yard. They have everything.

So the demand for the product -- it goes all the way back to 1999 when the recession in manufactured housing started. Eventually, we lost our distribution network of independent dealers. So a lot of people don't really know about the manufactured home product.

And every day, we get that message out more and more. And more and more people see our houses for the first time. And as they get to know the product, they readily accept the product. And because society has changed from wanting to own to wanting to rent, they really accepted the rental product very quickly. We rent 900 homes in a year.

As for sales, the higher-end homes, the 55 and older, those people need to be able to sell their existing house and have equity to buy a home. And because home prices are rising, we really see that happening.

In addition to opening Memphis Blues, we are also in the next month opening up the Brookview expansion, which is in Greenfield just outside Saratoga. And that's 54 lots of houses that are going to sell for well over $100,000. So we believe that we have a lot of opportunity to increase the sales income.

Now looking strictly at without the sales income, adding 900 rental units adds $7.2 million. The current expense ratio is 47%. But what I see is that the expense ratio on the new revenue is even lower than that.

But however you factor it in, between the 4% rent increase, which you've got almost $100 million in revenue, so let's round that down to $3 million. And you have $7 million in new rentals. So you have $10 million in same-store new revenue that is at somewhere around a 47% expense ratio.

So we should be able to bring plenty of new income to the bottom line. And then as a Board, we'll have to discuss do you believe you need a cushion in FFO over your dividend or can your dividend be the same as your FFO? But to me there's no question: the FFO per share is going to increase. And we're going to be able to make that choice.

And I'd add to that fact, UMH substantially increases the value of properties we own. And we have almost $1 billion in assets with only 30 million shares outstanding. So the increased value and the appreciation -- I mean, something's got to be done with that and that's got to go somewhere. So that's all something to discuss.

Thank you for that color and I'll jump back into queue.

Chris Reynolds, Neuberger Berman.

I have a general question about the acquisitions that you've made. You've been very proactive and grown the Company rapidly. But I would think that there might be some or a surplus real estate that perhaps could be monetized that might be more suitable to another developer or -- and you could free up some cash.

I think I'm wondering if that's a possibility or whether everything that you've acquired will be put in operation as you envisioned.

I seldom sell anything. And over the years, we've seen that we hold onto the parks and that they go up in value tremendously. We take a much longer-term view than most companies. We see that the population of the United States is growing maybe by as much as 3 million a year. There is inflation. The areas we are in our excellent and I really don't know of any parks that we would consider selling.

On top of that, you have to understand we have an excellent business plan to monetize the increase in value. As long as we have this Freddie Mac program or have the private investors with the collateralized mortgages, we are able if we can increase the value of our parks go back in three, four, five years later and refinance our parks.

And we've done that successfully, and Anna has done a wonderful job of that. And our relationship with the lenders are excellent and some of the lending programs are tremendous programs.

But it does take a while. You have to fill the park, turn the income around, increase the income, and then go back in and get a new mortgage. And when you get the new mortgage, you have an awful lot of cash.

We are buying our rental units. We've invested as much as over $150 million in rental units, and we've done that through the preferred stock, through refinancing. And as we see it, two, three years from now, we are going to refinance a lot of our parks and generate an awful lot of cash. So we see no reason to try to generate cash by selling off our assets.

I just want to point out, we are in the process of -- we are being approached about Marcellus Shale leases again, where people will pay us per acre for drilling rights and then you get a percentage. We are getting approvals for additional self-storage units on our vacant land and expect to increase our number of self-storage units to 1,000 units in the next 3 years.

And we do look at the vacant land constantly to look at the best vacant land in terms of its highest and best use. And, you know, we wouldn't be opposed to -- we have a piece across from a hospital that might be a good piece to build a medical office. So we look at that and we consider what to do with it. But at this time, the vacant land is sitting there.

Okay. Well, terrific. Keep up the good work, and very impressive results.

(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Samuel Landy for any closing remarks.

Thank you, operator. I would like to thank the participants on this call for their continued support and interest in our Company. As always, Gene, Anna, and I are available for any follow-up questions. We look forward to reporting back to you after our first quarter. Thank you.

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