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Equity LifeStyle Properties: On My Watchlist But Not A 'Buy' Today


  • ELS is a blue-chip REIT in the manufactured housing and RV park space, boasting 17 consecutive years of strong dividend growth.
  • Investors have continuously shown a willingness to bid up the valuation multiples of ELS further and further into the stratosphere.
  • ELS exhibits impressive growth both organically and (more recently) externally through portfolio expansion.
  • Astonishingly, the REIT's share count has barely risen at all in the last decade.
  • Despite being a solid business, it's hard to pull the trigger on a 35x FFO multiple.
  • Looking for a helping hand in the market? Members of High Yield Landlord get exclusive ideas and guidance to navigate any climate. Learn More »

Camping under the night sky

Larry Crain/iStock via Getty Images

Thesis: Missed The Boat (And The RV) On This One

Equity LifeStyle Properties (NYSE:ELS) is a real estate investment trust that owns manufactured housing / mobile home communities, recreational vehicle ("RV") parks, and marinas primarily in coastal regions of the

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This article was written by

Austin Rogers profile picture

I write about high-quality dividend growth stocks with the goal of generating the safest, largest, and fastest growing passive income stream possible. My style might be called "Quality at a Reasonable Price" (QARP) in service to the larger strategy of low-risk, low-maintenance, low-turnover dividend growth investing. Since my ideal holding period is "lifelong," my focus is on portfolio income growth rather than total returns.

My background and previous work experience is in commercial real estate, which is why I tend to heavily focus on real estate investment trusts ("REITs"). Currently, I write for the investing group, High Yield Landlord.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (32)

@Austin Rogers Your time to pick up some ELS is hopefully coming... I'm going to join. I share your struggle in terms of valuation here. I think one major question to answer is what you see as a dominant reason that the multiple has been going up over the last decade:
1) interest rates decline
2) supply/demand imbalance worsening

If you think it is rather the later and the trend will continue due to demographic trends, you can justify much higher multiple than 5 years ago as the alternatives are even less affordable.
If you find the interest rates argument more relevant, I think you should not pay more than between 2016-2018.

What are your thoughts?
Austin Rogers profile picture
@Long_investing_horizon Good points. I would think it would have to be a combination of the two - lower interest rates and less affordable housing. I've taken advantage of zero commissions and purchased a few shares under $80. I'm keeping a close eye on it.
@Austin Rogers That is what probably most investors who know it a bit will agree on - that it is the combination of the two:) I was curious which one you deem to be the prevailing one. I'm exercising patience and waiting for a better price. I would like to get 26x FFO 2022 as it is 5y average multiple = ~$70 (or 2-3$ higher as I find consensus 2022 FFO a bit too low).
Austin Rogers profile picture
@Long_investing_horizon Difficult to say. In the longer term, I'd say its housing affordability, but interest rates have a bigger effect on short term price swings. I think fear of rapidly rising interest rates brought on by the Fed is spurring most of the selloff right now. I like your target buy price.
Tim Plaehn profile picture
Look at the long term price chart and ask yourself if that is the type of stock you want to own.
Austin Rogers profile picture
@Tim Plaehn My answer is yes. But what is a fair value for this company? The valuation keeps going up and up and up, and has done so over the last roughly 15 years. I guess the solution is just to buy on dips? But how high can the valuation go?
Scarlo profile picture
I bought in a little while back and am content to hold, even at these loftier valuations.

With MHC the land owner usually pays relatively little in capex (compared to other REITs), just maintaining the common areas, roads, signage. Infrastructure is often maintained by the the municipality and tenants maintain their own structures (or lose them to the landlord, if they don't pay rent).

Because of this attribute any increases in revenue, be it from rising rents, decreasing expenses, or increasing tenancy flows heavily to the bottom line. I suggest this is an exceptional trait to have during a period of rising prices & a shortage in affordable housing.

Other favorable attributes include low supply & hard to replicate (not in my back yard!), positive demographics (many are 55+), and very high rent collections in higher quality parks (where structures are real assets; often having granite counters, stainless appliances & tenants with little debt).

ELS also focuses less on marinas & RV parks and more on higher quality MHC parks.

It's true that ELS is not cheap, but you get what you pay for. Just look at the price history to see a long, consistently increasing price & dividend.
Austin Rogers profile picture
@Scarlo Well said. I suppose my plan then is basically just to buy on dips.
Scarlo profile picture
@Austin Rogers If you have some cash getting low returns you could sell puts too, of course.
A great business but extremely rich at this point. In addition, RV facilities are a completely different animal than MH parks. In a recession, the RV parks will perform much worse than MH parks, but will perform better in boom times. Though I would prefer that ELS stick to MH parks and the occasional marina, I would still be interested in the name in a significant pullback. I'll wait.
Austin Rogers profile picture
@Arimnestos That is true about RV parks generally, but even the ones ELS owns tend to favor long-term (annual) leases rather than day passes. They are more for living than vacationing, from what I can tell.
R. Paul Drake profile picture
@Austin Rogers I really like this article as a compliment to the one of mine that you linked and quoted. Thanks. I'm glad I went long when I did, and happy to keep holding. I also think that ELS it even now not a terrible addition to a collection of quality, REITs that will steadily grow income. As you rightly point out, if they ramp up their acquisitions on a sustained basis, this could kick the growth up to really interesting levels.
Austin Rogers profile picture
@R. Paul Drake I really would like to buy a position, but it's hard to figure out what exactly a fair value (or even a remotely fair value) would be for ELS since the multiple has continued to rise and rise over the last 15 years.
R. Paul Drake profile picture
@Austin Rogers My math says ELS is fairly valued today to produce a total return near 10%, if they continue their recent 8% rate of growth of AFFO/share and increase the dividend proportionally. But if they are really going to up their rate of acquisitions, this will mean that add external growth with equity issuance to their business model. It could push the valuation up quite a bit. But if that is the plan, they were not talking about it in the Q3 earnings call.

I guess other than buying on dips, watch for share issuance. If they ramp that up, just buy anyway at anything near the present price.
Austin Rogers profile picture
@R. Paul Drake Thanks. Do you think the big spike in acquisitions in 2021 could have been a one-time or opportunistic thing that won't continue into future years?
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