This Manufactured Homes REIT Continues to Impress

chart01Running Equity LifeStyle Properties can be quite appealing, especially when all you have to do is manage the growth. This comes easy since manufactured homes REITs have experienced tailwinds from demographics change. The company was in the leading list in announcing results for the first quarter this year, and, from what I can tell, it had an upper hand as far as the REIT stocks are concerned.

The aging population has been a factor

Apart from the stock, something more interesting cannot be overlooked when it comes to manufactured home REITs. The percentage of aging population goes a long way in determining possible success in this type of property. This is why investors are keen on considering this factor.

With the increasing rate in the percentage of the aging population, the prospect has been positive for manufactures homes, whose average age of new residents is in the upper 50s. With an estimated 10,000 people turning 65 daily, investors are counting on more opportunities out of this shift.

Enterprise achievements

Equity LifeStyle continues to impress on some fundamental aspects, with increase in several fields in a year over year comparison. Normalized FFO has risen by 10%, with normalized FFO per share shooting up 11%; not to forget the dividends, which have stricken a whole 13% increase. Moreover, a consistent decrease in the total debt compared to the total investment has come down to 24%. These come at a time the interest rate has been satisfactorily on high 4’s and a debt maturity schedule well laddered.

Leading the sector

Just to be clear, I’m not recommending the purchase of Equity LifeStyle stocks. With a total market capitalization of $8 billion, there is no doubt this is a leader in the sector. However, the share price has hiked over recent years. Multiples have been sky high, and dividend yield has been one of the lowest among equity REITs.

Multifamily

Multifamily, a sector close to manufactured home, have shown signs of weakness lately. Although asking rents have displayed a significant rise over the past year, vacancies advanced in the fourth quarter of 2015. This has led investors to think that rents reached a peak and any further increases will go overboard.

In fact, there are concerns supply will catch up with demand soon. If this is true in 2016, it will be the end of a six-year period of expansion in which rents have been pushed to new heights in high coveted cities, such as San Francisco, New York, Denver and Houston. This year, more landlords in these cities have increased rental concessions.

Apartment REITs’ share prices have fallen in recent weeks, showing a negative investor sentiment. With the release of Q1, we will see if those suspicions will strengthen or fail.

Source: Equity LifeStyle Properties, I(NYSE:ELS), Fast Graphs, Reis, Wall Street Journal

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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