Stock Wars: Equity LifeStyle Properties Vs. Sun Communities

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector with the goal of determining which company is the better investment.

This week, the duel is between two real estate investment trusts (REITs) focused on the manufactured housing space: Equity LifeStyle Properties, Inc. ELS and Sun Communities Inc. SUI.

The Case For Equity LifeStyle Properties: This Chicago-headquartered REIT was launched in 1992 and went public in 1993. The company focuses on manufactured housing communities, recreational vehicle resorts and marinas, and either owns or has an interest in 423 properties on 161,229 sites in 33 states and the Canadian province of British Columbia.

This has been a relatively quiet year for Equity LifeStyle Properties. Its one major corporate announcement in 2021 came in April concerning a sponsorship and partnership with Loggerhead Marinelife Center, the Florida-based nonprofit scientific destination focusing on ocean and sea turtle conservation.

In its most recent earnings report, the third quarter data published Oct. 18, Equity LifeStyle Properties recorded total revenues of $332.9 million compared to $285 million for the same period one year earlier. Net income available for common stockholders was $70.6 million, or 38 cents per common share, compared to $50.6 million or 28 cents per common share in the same 2020 period.

Total manufactured housing and annual RV occupancy was 94.8%, a minuscule dip from 94.9% in the third quarter of 2020. Home sales volume totaled 338 properties in the quarter, compared to 133 in the same period in 2020.

Marguerite Nader, the REIT’s president and CEO, attributed the third-quarter results to a “heightened interest in owning new and resale homes in our communities. The quality of the community and the elevated home ownership base contributes to the demand for our properties. Homeownership transfers were 28% higher than last year, indicating strong demand for the homes owned by our residents.”

Equity LifeStyle Properties opened for trading on Wednesday at $85.64, closer to its 52-week high of $88.47 than to its 52-week low of $57.93.

Related Link: The complete Stock Wars series

The Case For Sun Communities: This REIT was founded in 1975 and is headquartered in Southfield, Michigan. Not unlike Equity LifeStyle Properties, it focuses on manufactured housing communities, recreational vehicle resorts and marinas. The company owns or has an interest in 569 properties comprising more than 153,300 developed sites and nearly 41,300 wet slips and dry storage spaces in 39 states and the Canadian province of Ontario.

The company went public in 1993 and in 1996 it commenced on a 14-year acquisition spree that grew its property portfolio, concluding in September 2020 with the $2.1 billion acquisition of Safe Harbor Marinas.

As with Equity Lifestyle Properties, Sun Communities has been mostly quiet this year in terms of corporate developments. Its biggest 2021 news stories occurred earlier in the month with the appointment of Aaron Weiss, former managing director in Citigroup Inc.'s C Real Estate & Lodging Investment Banking Group, in the newly created position of executive vice president of corporate strategy and business development, and in February with the appointment of Tonya Allen, president and CEO of the Detroit-based philanthropic organization The Skillman Foundation, to its board of directors.

In its most recent earnings report, the third-quarter data published Oct. 25, Sun Communities recorded total revenues of $684.3 million, compared to $400.5 million for the same period one year earlier. Net income attributable to common stockholders was approximately $231.8 million, or $2 per diluted common share, compared to net income attributable to common stockholders of $81.2 million, or 83 cents per diluted common share, one year earlier.

Total manufactured housing and annual RV occupancy for the quarter was 97.4%, a very slight increase from 97.2% one year before. Home sales volume totaled 1,162 homes in the quarter, compared to 710 homes in the same period in 2020.

“We have remained active in the capital markets to support this growth including completing our second bond offering of the year,” said CEO Gary Shiffman. “Our talented team will continue to execute on opportunities across operations, acquisitions, expansions and ground-up developments, providing us with a confident outlook.”

Sun Communities opened for trading on Wednesday at $197.94, closer to its 52-week high of $209.98 than to its 52-week low of $135.01.

The Verdict: Longtime Benzinga readers who’ve gotten this far into the article may be wondering why this article is considering REITS focused on manufactured housing sector — where’s Elon Musk and his Dogecoin DOGE/USD trip to the moon?

Well, consider a few things: REITs are celebrated for their quarterly dividends and at the moment the average dividend yield for equity REITs is around 4.3%. It may not be a trip to the moon, but you can get a few nice weekends at the seashore.

Also, the manufactured housing sector is an often-overlooked sector of the residential real estate industry. According to the Manufactured Housing Institute, a trade organization, this sector produced almost 95,000 new homes in 2020 or approximately 9% of new single-family home starts, and the average sales price of a new manufactured home without land is $81,900. Those numbers are rather significant when one considers the inventory shortage and the evaporation of affordable homeownership opportunities that plagued the housing market for the past few years.

Both companies showed excellent financial performances during the third quarter and investors might find it beneficial to pay closer attention to these REITs.

For the purpose of this Stock Wars analysis, Sun Communities displayed more robust numbers in terms of occupancy and home sales volume during the third quarter — and with that slight edge, this Stock Wars duel is tipped in Sun Communities’ favor.

Photo: Freddie Mac