The history of Equity LifeStyle Properties (NYSE: ELS) dates back to 1969, but it did not go public until 1993, with 41 properties. The number of their properties — including manufactured homes and RV resorts — is now 386. They are distributed across 32 states and British Columbia, with over half in Arizona, California and Florida alone. Given this concentration, it is not surprising that the average ages of new residents living in manufactured homes and RV resorts are 62 and 55 respectively. Indeed, Equity LifeStyle has been perfectly positioned to take advantage of the baby boomer retirement wave.
The business leases individual sites to enable tenants to place factory-built houses, cottages, cabins or RVs. Although some of their revenue is transient and seasonal, the bulk of it is annual. In addition, even though the number of sites has been divided between manufactured houses and RVs, the latter account for fifteen percent of Equity LifeStyle’s annual revenue.
During the first quarter of 2015, dividend per share increased by fifteen percent, but normalized FFO per share increased by a mere five percent. FAD per share also crept up by only one cent, from 74¢ to 75¢. FFO per share went down from 78¢ to 64¢ owing to costs associated with early debt retirement. In fact, debt-to-capitalization underwent a significant decline from 36 to 30 percent. Dividend payout in relation to FAD went up from 44 to 50 percent.
Since Equity’s IPO, the share price has multiplied almost nine fold and now sports a price-to-FFO of about 19× — above its historic norm. The current price-to-FFO resembles that of Sun Communities, its largest manufactured home peer. However, Equity’s dividend yield (2.8 percent) is less attract than the latter’s, which is trading at 4.1 percent. Although industry fundamentals have been strong, and Samuel Zell has been invested in Equity with approximately nine percent of the common shares (he is also board of directors chairman), it looks expensive at present.
Source: Equity LifeStyle, Fast Graphs
Written by Heli Brecailo
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