The manufactured homes REIT sector was one of the few that managed well during the capital market storm that swept the REIT space during H1 2015. Needless to say that the entry point into this sector is somewhat far-fetched considering the historic price-to-FFO. On top of that, the positive second-quarter results of Equity LifeStyle Properties (NYSE:ELS) were well-received by the market, which bumped the share price by 0.5 percent on the day of the announcement.
Equity LifeStyle continues to enjoy strong fundamentals from the retirements of baby boomers. Normalized FFO-per-share during Q2 2015 has increased by 11.1 percent compared with the same period last year. Occupancy increased 40 basis points, from 92 to 92.4 percent, the highest in years, but management still thinks they can advance to 95 percent. The core NOI is up 5 percent, and base rental income increase from resorts was more pronounced that that from community centers.
The company saw no major change in its debt profile this year, which is better compared to last year’s figures. Dividend yield is at 2.6 percent, and there are signs of increase anytime soon, though payout ratio is in the mere 50s. Sun Communities, the closest peer, is trading at 3.9 percent. The share price is currently trading $57.40, and given its $58.11 peak during the last 52 weeks, there is no reason to expect it to rally anytime soon. ELS is a good company with good fundamentals but an unfavorable point of entry.
Source: Equity LifeStyle, Fast Graphs
Written by Heli Brecailo
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