Good morning and welcome to UMH Properties Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. Please note that this event is being recorded. It is now my pleasure to introduce your host, Ms. Nelli Madden, Vice President of Investor Relations. Thank you. Ms. Madden, you may begin.

Thank you very much, operator. In addition to the 10-Q that we filed with the SEC yesterday, we have filed an unaudited third quarter supplemental information presentation. The supplemental information presentation along with our 10-Q 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 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 third 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 who are 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; Jim 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.

Thank you very much, Nelli. We are pleased to report our results for the third quarter ended September 30, 2020. UMH continues to achieve excellent results despite the COVID-19 pandemic. Our rent collections remain in line with our historical performance. Currently, over 98% of our third quarter rental and related charges have been collected. Demand throughout our communities remains strong as evidenced by our 320 basis point improvement in the same community occupancy and our 54% sales growth compared to the same quarter last year. We further demonstrated the success of our business plan by obtaining $106 million of GSE Financing at 2.62%. This loan pioneered GSE acceptance of up to 60% rental homes in communities. Subsequent to quarter end, this capital was used to redeem our 8% Series B preferred stock. This 500 basis point improvement will result in over $5 million in additional FFO per year, or approximately $0.12 per share. UMH is well positioned to excel in 2021. Normalized FFO for the third quarter was $0.18 per diluted share, compared to $0.15 in the prior year period. This represents an increase of 20%. We are pleased that our $0.18 dividend per quarter is now fully covered by our current operating performance. This is prior to the positive impact that the redemption of our Series B preferred will have on FFO. Our community operating results continued to improve. In accordance with our business plan, the value-add communities that we have acquired over the past few years are now starting to deliver significant revenue growth and are positively impacting our overall performance. Throughout the pandemic, we have continued our capital improvements, expansions, and rental home additions. Our communities look better and are operating more efficiently than ever before. Total income for the quarter is up 16%. Year-to-date, total income is up 11%. Our operating expense ratio has decreased from 47.8% to 44.6%. The combination of income growth and expense ratio reduction resulted in overall NOI growth of 17% for the quarter and 19% for the year. Our same property occupancy rate improved 320 basis points to 86.9% from the same quarter last year. This translates to an increase of 706 revenue-producing sites year-over-year. This occupancy growth has contributed to income growth of 8.6% for the third quarter and 7.8% year-to-date, generating same property NOI growth of 12.9% and 13.7% respectively. This is the fourth quarter in a row that we have delivered double-digit same store NOI growth. The primary driver of our overall occupancy and revenue growth is the rental home program. Through the COVID-19 crisis, rental homes have proven to be a stable income stream as homeowner-occupied sites. We have increased our rental home portfolio by 684 units so far this year. We are on track to add 800 to 900 new rental units this year and now own approximately 8,100 rental homes. At quarter end, our rental home occupancy rate was 95.4%. As a result of our performance through COVID, we are more convinced than ever that rental homes in manufactured housing communities are the best way to provide quality affordable housing. We continue to seek value-add acquisition opportunities in strong markets where we can implement our rental home program. We recently entered into a line of credit with First Bank, secured by our rental homes and the income derived from them. This line allows us to tap into the equity that we have in our rental homes at a reasonable rate of prime plus 25 basis points. Our goal is to continue to increase our rental home program and reduce the cost of capital used for that purpose. Gross sales for the quarter were $6.8 million, representing an increase of 54% over the same period last year. Gross sales for the year are at $15 million, which is now up 8% over the first three quarters of 2019. In spite of the COVID-19 pandemic, we continue to see increasing demand for sales throughout our portfolio. Our sales generated income of approximately $640,000 for the quarter and approximately $450,000 for the year. As we continue to grow our sales volume, we expect to generate meaningful income which will further improve FFO. To ensure that we have the lots available to generate this volume, we are working on developing additional sites at many of our best sales locations. We remain on track to complete the development of 191 sites this year; in 2021, we expect to obtain approvals on approximately 800 sites. We should develop about 400 of these approved sites in the next 18 months. During the quarter, we closed on the acquisition of two communities containing 310 sites for a total purchase price of $7.8 million, or $25,000 per site. These are value-add communities with an in-place occupancy rate of 64%. Over the next few months, we expect to complete our initial turnaround work and begin to infill the communities with rental homes. These communities are both located in markets that we already operate in, creating management efficiencies. We have been able to add to our acquisition pipeline; we've executed letters of intent on four communities in three new states that fit our growth criteria. These communities contain approximately 580 sites, of which 64% are occupied. The total purchase price for these communities is $21 million, or $36,000 per site. In previous calls, we have discussed our plans to improve community operating results, acquire and expand communities, improve sales profitability, refinance our capital stack, and ultimately improve our FFO. During extremely difficult economic circumstances, we have achieved many of these goals and made substantial progress toward achieving the others. We have covered our $0.18 dividend prior to the positive impact of the redemption and refinance of our Series B preferred stock on earnings. This change in our capital stack is expected to add $0.12 of FFO per share annually. We have laid the foundation to deliver excellent FFO growth in 2021 and beyond. Now, Anna will provide you with greater detail on our results for the quarter and for the year.

Thank you, Sam. Normalized FFO, which excludes realized gains on the sale of securities and other non-recurring items, was $7.4 million, or $0.18 per diluted share for the third quarter of 2020 compared to $6 million, or $0.15 per diluted share for the prior year period. As we had previously announced, we redeemed all 3.8 million issued and outstanding shares of about 8% Series B cumulative redeemable preferred stock totaling $95 million on October 20. This, together with our recent GSE financing, will generate savings of approximately 500 basis points, or $0.12 per share annually going forward. Rental and related income for the quarter was $36.4 million, compared to $32.9 million a year ago, representing an increase of 10%. Community NOI increased by 17% for the quarter from $17.2 million in 2019 to $20.1 million in 2020. These increases are attributable to our acquisitions, rent increases, the success of our rental home program, and reduction of our operating expense ratio. Our operating expense ratio improved from 47.5% for the third quarter of 2019 to 44.7% for the current quarter. For the nine months, our expense ratio decreased from 47.8% to 44.6%. At quarter end, our portfolio average monthly site rent increased by 2.7% to $455 over the same period last year. Our average monthly home rent increased by 2.8% to $781 over the same period last year. Same property income for the third quarter increased 8.6% over the same period last year, while expenses increased by 3.2%, resulting in same property NOI growth of 12.9%. Sales of manufactured homes increased 54% for the quarter, from $4.4 million in 2019 to $6.8 million in 2020. We sold a total of 108 homes, of which 48 were new home sales and 60 were used home sales. The gross profit percentage improved from 25% for the three months ended September 30, 2019 to 31% for the current quarter. For the nine months, we sold a total of 252 homes, of which 102 were new home sales and 150 were used home sales. The gross profit percentage was 29% and 27% for the nine months ended September 30, 2020 and 2019 respectively. As we turn to our capital structure, at quarter end, we had approximately $507 million in debt, of which $472 million was community-level mortgage debt and $35 million was loans payable; 93% of our total debt is fixed rate. The weighted average interest rate on our mortgage debt was 3.81% at quarter end, compared to 4.14% in the prior year. The weighted average maturity on our mortgage debt was 6.3 years at quarter end compared to 6.2 years a year ago. At quarter end, UMH had a total of $383 million in perpetual preferred equity not including the $95 million of Series B preferred stock, which was redeemed on October 20. Our preferred stock, combined with an equity market capitalization of $564 million and our $507 million in debt, results in a total market capitalization of approximately $1.5 billion at quarter end, representing an increase of 3% over the prior year period. From a credit standpoint, our net debt to total market capitalization was 31%. Our net debt less securities to total market capitalization was 25%. Our net debt to adjusted EBITDA was 5.8 times, our net debt less securities to adjusted EBITDA was 4.7 times, our interest coverage was 4.1 times, and our fixed charge coverage was 1.5 times. From a liquidity standpoint, we ended the quarter with $55 million in cash and cash equivalents, $60 million available on our unsecured credit facility with an additional $50 million potentially available pursuant to an accordion feature, and $29 million available on our revolving lines of credit for the financing of home sales and the purchase of inventory. We also had $85 million unencumbered in our REIT securities portfolio. 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, we are committed to not increasing our investments in the REIT securities portfolio. The company continues to enhance its liquidity position. Through our preferred and common stock ATM programs, we raised net proceeds of $9.8 million during the quarter and $73 million during the nine months. Subsequent to quarter end, we raised an additional $14.2 million through these programs. Additionally, as Sam mentioned, in October, we entered into a $20 million line of credit with First Bank secured by our rental homes and the income derived from them. This line is expandable to $30 million with an accordion feature. In conjunction with the Series B preferred stock redemption subsequent to quarter end, we drew down $30 million on our unsecured credit facility and $26 million on our margin line. And now let me turn it over to Gene before we open it up for questions.

We have been incredibly pleased with the performance of our portfolio of 124 communities. We believe the favorable performance will continue in the years ahead. Our staff, despite the burden of the pandemic, has continued to serve the housing needs of our communities. UMH has acquired communities, installed and sold homes profitably, completed capital improvements, expanded communities, and financed communities and rental homes at historically low-interest rates. As a result of these accomplishments, UMH is well positioned for productive 2021 and beyond. The shortage of affordable housing is a critical domestic issue facing our nation. The pandemic has caused the population migration from the cities to the suburbs. UMH is now experiencing increased demand for affordable single-family housing. In an age where environmental, social and governance concerns are highly valued, UMH is positioned to become a preferred investment as it provides the nation with much-needed affordable housing. UMH's capital stock includes preferred shares that could be redeemed with lower-cost capital in both 2022 and 2023. Our pathways have become more valuable. They have increased occupancy levels and improved operating metrics. Encumbered property should become eligible for increased GSE financing at low rates. The potential for favorable changes in the capital stock is one important factor. The favorable economics of the housing market provides a pathway for UMH's improved operating results. Housing values are now increasing because of economic fundamentals. In addition, the winds of inflation may also begin to blow across the landscape. We have built a much-needed important housing company over our 53-year history. The years ahead can reflect the prudence of long-term values and visions. We will now be happy to take your questions.

We will now begin the question-and-answer session. Our first question will come from Barry Oxford with D.A. Davidson. Please go ahead.

Sam, when we look at your for-sale portfolio and how that's tracking and then we look at the rental given this economic environment, how do you look at those two businesses over the next six to nine months? Do you see a favoring more of the rentals?

For the next six to nine months, yes, I think we'll always rent out about eight homes for every one we sell. There's work being done nationally on the finance issue to make financing more available for the retail customer to securitize those loans and make financing more available for the resale of homes, which could generate additional and more profitable sales. But at the same time, the rental business solves the problem of the customer who doesn't want to be tied down who's only staying at a place three years or less. So I think rentals will always be about eight to one with sales.

Great thanks. And Sam, you've been fairly active on the acquisition side, or I know that it's hard to find these acquisitions and actually win these deals. As you look out over the horizon again, maybe over the next six to nine months, do you see a continued strong pipeline, or have we just had a flurry of activity in here?

No, Brett is going to give you more detail. But basically, our philosophy is this. We know how hard it is to get approvals to build new communities. It's extremely hard. But you can expand your existing communities and we know expansion sites cost about $70,000 a piece. The acquisitions other people do are 95% occupied communities buying at about a forecast. We can find communities pretty much all over the country, that for various reasons, have declined to 70% occupancy and have deferred maintenance, lack of capital improvements. And so basically, you're buying the bones at a very low price, $25,000 a site; you renovate the community and make it as new relatively quickly for only an additional $10,000 a site, adding rental units, so the community becomes very profitable. It looks just like a brand new community. And we can do this all over. Basically, we've created this river of income coming from 124 communities, which are 124 tributaries, and we can continue to add to that by acquiring communities and sites at low prices, upgrading them and adding rental units. And now Brett will tell you more about our acquisition pipeline.

Yes. We have four deals under Letter of Intent right now. Two of those, we do expect to sign the contract today. I think everybody will be happy to hear that these are in three new states; the two that we're going to sign the contracts on are in Alabama and South Carolina. These are value-add communities, they're in strong demographic markets, which should have very favorable rental demand. Those two have 345 sites, and they're only 40% occupied. But again, they're in strong markets with big populations and very good comparable rental housing in the market. So we think our business plan will work very well there; those two are $8 million or $23,000 per site. We're getting them at a reasonable price where we can go in, implement our business plan, and generate significant value. The other two properties aren't quite as far along, so I can't get into too many specifics, but it is in another new state in the northeast; it's 235 sites, 97% occupied. It's not our typical value-add deal, but there is a value-added component in the fact that there's an old sales center, which we plan to reopen; it's a very strong sales market. We also have the ability to develop some additional sites at the property. So those four deals represent $21 million in total. We're very happy with where the pipeline stands currently, and we look forward to growing it in the near future.

Great. Thanks for that color. And last question, Anna, when we look at G&A, you guys have been running 8% of revenues. Is that good? Are you comfortable with that number? Or is G&A might be moving in 2021 for this reason?

Well, G&A right now is about 6.5% of total income, and we believe that that is a good number. In 2019, it was also about 6.5%; it was 6.4%. But as we grow, we've been growing our G&A but still at a reasonable amount compared to our total income because our total income has been growing just as fast, or if not faster.

Our next question will come from Rob Stevenson with Janney. Please go ahead.

Good morning, guys. Sam, you've been having some big gains at occupancy; that's really been juicing the same store results. At what point do those gains start to slow down that the year-over-year comps become much more challenging, or it's tougher to get the occupancy gains going forward once you get to 88%, 89%?

Well, I believe that the supply of new affordable housing is at something like a 40-year low. So with that in mind, there's a lot of reasons to believe we'll continue to increase occupancy from our 86% into the mid-90s by adding the rental units. So I really don't see a negative change there. I see the costs of building new communities, the difficulties of building affordable housing, and our competitors in apartments, townhouses, condos, costs much more money. We have a fantastic product at a fantastic price, and I really only see revenue and occupancy growth there.

Okay. So I guess another question, a related question is: how much rental unit demand is there beyond what you're already tapping within your existing communities? In other words, you guys added, I think it was 317 rental units in the third quarter. And so, if you added 100 million more rental units last quarter, would you have been able to lease a good chunk of them up, or was demand essentially, plus or minus a bit of the 317 units that you did, and that's why you didn't add 400 or 500 rental units in the quarter?

There are a number of timing issues. One is how long it takes to get the house from the factory; two is how long it takes to set it up. And just like a developer building a housing development, we consider successful to be adding four homes per month. It's usually not realistic to expect to go much faster than that, although we have at some communities. So, we expect managers in communities to fill about four units per month. And so we look at it, speaking to a Vice President of Rentals, who's very on top of demand and on a same-store basis, we expect to add the 800 to 900 units. These new acquisitions with their vacancies give us the opportunity to accelerate that. But again, you have a little bit of a time lag because the first year and a half we have to turn around to the physical asset, improving it and proving the reputation marketing getting personnel who knows how to do what we want to do. But following that, it’s additional vacant sites for us to fill quickly.

Okay. And then lastly, for me, if I'm doing my math right, you guys sold 108 homes for around $6.8 million in the quarter, which boils down to sort of $62,000 to $63,000. Is that reflecting similar homes that you were doing over the last few quarters and just reflecting cost inflation on homes? Or is that reflecting more expensive homes that you sold, either double wides or improvements, et cetera, or add-ons and stuff like that? The $63,000 seems higher than what you guys have been selling the last year or so.

So Brett will help me with the exact numbers. But before December 31, we're going to complete how many lots it's approximately…

191 lots.

And next year, we expect to complete...

So through the spring of 2021, it's 324 lots.

Okay. And all of those new lots are going to be primarily used for multi-section sales, which can range from $120,000 to over $200,000. So you should, in the future, have a higher average price per home sale. And they're on the same general markup of 30%. So that should improve the demand for the multi-section houses has been good. And there's also the learning curve as we acquire new communities teaching the people to sell and add homes. And that's all going in the right direction. So there's a lot of reason to believe we're going to continue to increase sales at higher prices, higher total revenue, and higher profits.

The margin overall was about $60,000, $62,000. But on the new homes, the average price on the new homes was $93,000 versus about $88,000 last year. And then on the used, it was about $37,000 for both last year and this year; that's for the total for the year-to-date.

Okay. How much more square footage are the bigger ones or the nicer ones having versus the stuff that you're buying for rentals, et cetera?

Rentals are generally 100 square foot 16 by 62 homes could be 68, could be 70. And sales homes are generally multi-section; the used homes are single section, but the new homes are 28 by 60, 28 by 70. It can even be 32, but most of ours are 28.

Our next question will come from an unidentified analyst. Please go ahead.

You've got almost as many used homes as new homes. I’m just wondering where all the used home inventory is coming from. Are you picking those up when you're buying new parks, or are people foreclosing on the newer homes that were in previous quarters? Where is all of that coming from?

Yes. So a lot of different places. We have 8,100 rentals, and a lot of those used homes are going to be used rental home sales. Certainly, there are some foreclosures but nothing significant; nothing outside of the norm. So yes, it's going to be a combination of rentals and some of those older foreclosures. But again, it’s nothing outside the norm, and it's about where we would expect it to be.

I see about what percentage is selling a rental home?

We had total sales of used homes of about, I guess it would be about 140, 150 units. So if you think of 150 units, most of those being rental homes, we have 1,000 rental homes. So it's really a minimal amount that is being sold on an annual basis.

But the percentage of what you sold was repossessed homes; is that like 3% or 30% or…

It's a minimal number. I don't have the exact number, but I would think it would be under 5%.

That percentage of number goes up and down with the economy, and today with things very good there's very few repos.

Our next question will come from Keegan Carl with Berenberg. Please go ahead.

So first, I know you haven't issued formal guidance, but maybe can you give us some color on what your rental increases are looking like going into next year? Are they kind of on par with what you've done so far this year?

So it's 4% on any communities with over 80% occupancy; if they have less, they won't get a rent increase at all. This year, there was a delay; when COVID began, there were no rent increases for approximately three months. So that actually decreased our revenue from rent increases, although revenue growth was very strong.

And that was because of occupancy too, because the occupancy went up. So that made up for the delay in our rent increases.

Okay, that's helpful. And then I know you guys have mentioned about how you expanded into several new states; maybe give us some color on particular states you're looking at and what pipelines could look like several years down the road. Do you think there's more opportunity in some newer states where you're currently at?

The best thing to do is to duplicate what we did in Nashville. And what we found in Nashville was neglected communities just outside of the center of the city. And it appears there's more opportunities like that, predominantly in the south, but probably in other places. And the higher the population is, the better we will do. And that's what we're looking for. And what COVID made us recognize, pre-COVID, people would always ask: how would we do in a downturn with the rental homes? We always assumed we would do as well as apartments. But that could generate vacancies in a decline. But in fact, we maintained 95.7% rental home occupancy and 98% rent collection, so it really doesn't get any better than that. So with that in mind, we knew there's no reason not to grow this business. And so, we actively started searching new markets. And fortunately, we've already found deals that we can do, and we are sure there are more of them. We will continue looking and doing them.

Okay, cool. And just one final one for me. How should we think about the funding mix going forward, especially now that you have utilized your preferred ATM?

So the most important thing here is that we've redeemed the $98 million in 8% preferred using the new debt at 2.62%. So that benefits us forever and it benefits us at the rate of $0.12 per share. So that is incredible, and there's going to be further opportunities to do the exact same thing. We'll continue to issue preferred and potentially common through the ATM to keep a strong balance sheet, but Anna will give you more color on redeeming the future preferred as they come due, using mortgage debt.

Well, we have our Series C, which is about $250 million right now, that's at six and three-quarters, and that comes due in July of 2022 or is redeemable in July of 2022. And LD is at about $135 million, six and three-eighths percent redeemable January of 2023. So over the next few years, we have about $100 million of mortgages which will be coming due, and because of the value we've created and because of the increased occupancy and increased income, we believe that those communities will generate maybe approximately $200 million in mortgages. So we'll have another $100 million right there. Also, we have been working with First Bank and with the GSEs to try to and with First Bank, we've already succeeded in that we are able to tap into our rental homes, the equity in our rental homes. In the past, we had purchased these rental homes using preferred stock. And now we have been able to get a $20 million line of credit, which is expandable to $30 million. And since it's a new program, it's probably even expandable further. But the interest rates on those loans are going to be about prime plus a quarter, which is about 4.5%. I'm sorry, 3.5%. So the savings that we'll have there and the additional rental homes that we will be able to finance is another avenue of capital.

When we first started offering rental units in 2011, we had to gain acceptance from our community residents, homeowners, bankers, and investors. Over time, the communities have embraced rental units, acknowledging the arrival of new homes, improved neighborhoods, and an enhancement in the value of their own properties. Securing this loan was a significant achievement because Fannie Mae has recognized the value of rental units by providing us with a 2.62% mortgage. We are actively collaborating with the GSE to develop a program focused on financing rental homes at competitive rates, although this initiative has not yet been launched. The final group that needs to recognize this is the investors, who haven't fully acknowledged our advancements. We have various rates for apartments, rental homes, and manufactured homes, but our capabilities in the rental manufactured home and community sector remain underappreciated. This approach is essential for creating affordable housing, fulfilling a social need, as we are the leading low-cost provider of quality affordable housing. UMH has the expertise, including professional engineers, vice presidents, and sales staff, to continue our efforts and expand our reach.

Our next question will come from Craig Kucera with B. Riley FBR. Please go ahead.

I want to start out talking about your sales. Given the pickup in pace here this quarter, do you anticipate any inventory issues over the next several quarters if demand remains this high?

It is a problem; we're pushing the manufacturers that they have to find a way to produce more houses. And I believe that's doable. You have issues with setup companies; you need more setup crews. There are issues that the factories have with getting materials. So there are issues out there that may slow down our growth. But we've continued to replace anything we sell with new homes. And to an extent, we'd like to go faster. And I know there are some delays out there. Brett can be more specific.

Yes. So backlogs all of a sudden at the factories ramped up to about five to six months. So it certainly is an issue. And to Sam's point, we've always kept a good amount of inventory, knowing that this could happen. So right now, we do have inventory in stock. But our orders that we're placing now are going to be delivered in March and in some cases, April, so we are proactively ordering inventory. So that if these backlogs continue, we won't have this issue.

Got it. And when you're selling used homes, do you have to complete any meaningful CapEx on those homes before you put them up for sale? Or is it pretty low cost?

Pretty low cost. I mean, we always maintain our rental homes, so therefore, there's very minimal costs involved when we sell.

Okay, got it. I want to circle to the dividend policy. I think you've been at about $0.18 a quarter since 2009. With a strength in operations, mid double-digit same-store NOI, you've got the reduction of your cost of capital here in the fourth quarter going forward and a few things coming up over the next several years. Can you talk about how the board would view the dividend if your payout ratio drops significantly in 2021? And maybe beyond?

This is Eugene Landy, the Chairman. We are always considering whether we can increase the dividend, and we're not tied as much to convention of FFO. You look at our quarterly reports or other reports as the value of our communities rising rapidly, and these values can be realized by financing the communities. We're not over-leveraged at all. And so, if you think your company is going ahead $50 million a year in value and you talk about a 40-some million shares, increasing the dividend by $0.05 or $0.10, you're talking about $2 million, $4 million. That's not significant. And we want the investment committees to realize how well the company is doing and how much the value of the company is going up each year. So we will consider increasing the dividend. But really, because we don't want to be too unconventional, but as we go over the $0.72 that we pick up the additional $0.12 on the refinancing of the 8% preferred as we approach $1 per share FFO, you can be sure that we will seriously consider increasing the dividend to reflect the real values that are occurring and the increased value of the companies, and of course, the potential for the company growing as we go to full occupancy and have our events, approach to competitors' events and the additional efficiencies caused as you get to be fully occupied. So yes, we are going to consider that, but let's have a couple of good quarters first, and then we'll take that step.

But my math is, if you increase the dividend $0.01 per quarter during 2021, at the end of the year, you might wind up at an $0.80 payout ratio with a $0.04 dividend increase. So we'll play that day by day. But if things work out, that's where we could be.

So I don't want to touch on that too much. But I would say it's much more likely that they close in the first quarter of 2021. We're not under contract yet, so timing-wise diligence, etc., they are unencumbered. So that does help us, but first quarter is more likely.

Got it. And can you talk about the pricing differential from a cap rate perspective between buying these 40% occupied assets in the south versus the 95% ones in the northeast?

Sure. So the Northeast properties are in that 5.5% range, which I think is actually a pretty good price, given what we see in other areas of the market. Properties, high-quality communities in our markets are trading at 4%, 4.5% cap rate. So we're very pleased with where we are there. The deals in the south, it's tough to put a cap rate on them. I mean, I would be giving you a projection because at 40% occupancy, it's really not a cap rate play. We're buying them at a cost per site that we think is reasonable; we can get in there and make the improvements at our $50,000 rental home and earn a return that we're very comfortable with. So those, I wouldn't put a cap rate on it only because we're going to go in there, we're going to do some significant capital improvements or it will be home removal. Those properties will go backward before they go forward. But after two or three years, you're going to be seeing the significant NOI growth that you've seen in our other previous acquisitions.

And we've taken a look at what's the percentage return on properties we've owned, say, 10 years.

Yes. So it's between 40% and 100%, depending on what year you look at. And that's even less than 10 years. That's five or six years in some cases. So we certainly generate a solid total return after we're able to get in there, clean these properties up, stabilize them, and ultimately increase occupancy and reduce our expenses.

And because they're 40% occupied, does that extend sort of the period in which you would get stabilized? Traditionally, you've been buying closer to 60% or 70% and get it stabilized inside of three years, let's say, does this become maybe four or five years? Or do you think it's still pretty much on target for your normal, kind of two or three-year stabilization period?

I'd say it's probably three years. I mean, based on what we see in the market, it's a strong rental demand market. We've had properties this year, for instance, one of our 2018 acquisitions went forward 100 rental homes. So assuming strong demand of 25 to 50 homes per year, it's a three-year process. For whatever reason, it lags behind, sure it could certainly drag on a little bit. But the good thing is we're looking for markets where based on the in-place demographics, we think we can execute based on what we've done in our Northeastern portfolio. So the plan is the two to three-year turnaround.

This concludes our question-and-answer session. I would like to turn the conference back over to Samuel Landy for any closing remarks. Please go ahead.

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 and Brett and I are available for any follow-up questions. We look forward to reporting back to you in March with our fourth quarter and year-end 2020 results. Thank you.

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