Market Overview

2015's Top-Performing REIT Sector May Surprise You

2015's Top-Performing REIT Sector May Surprise You

Investment bank MLV & Co. published its Weekly REIT Beat on March 16, which includes varies updates on the U.S. REIT Sector and its component subsectors.

The most well-known commercial real estate asset classes which are familiar to most investors, include: Retail, Office, Industrial, Healthcare, Lodging and Multifamily REITs.


However, first place honors so far this year go to Manufactured Housing REITs, which include: Equity Lifestyle Properties, Inc. (NYSE: ELS), Sun Communities, Inc. (NYSE: SUN) and UMH Properties, Inc. (NYSE: UMH) leading the way through mid-March with a 9.4 percent average.

Related Link: Morgan Stanley's 'Realistic REIT Bull Case' For MGM

While manufactured homes are often viewed as a depreciating asset, the land underneath these modular homes, trailers and RV vehicles is the major source of NOI for this REIT sector.

Tale Of The Tape - YTD Performance


Not A Fluke - Past Year Performance


The Vanguard REIT Index ETF (NYSEMKT: VNQ) is a good proxy for the overall REIT sector.

While REITs as an asset class outperformed the S&P 500 during the same period, $3.7 billion cap Sun Communities and $4.8 billion cap Equity Lifestyle, outperformed by a considerable margin.

Mr. Market hasn't been as kind to $247 million small-cap UMH Properties; which is also reflected by the UMH outsized dividend yield of ~7.3 percent.

Sun Communities - Deeper Dive

Sun Communities owns and operates 242 manufactured housing and RV communities, with an aggregate 88,900 lot located across 29 states.


Secret Sauce


The most of the revenue is derived from tenant land rent payments, which in turn reduces the amount of cap-ex required to fund the same store communities.

Steady Accretive Growth


The recently closed "ALL" portfolio acquisition totaled 19,500 lots for over $1.3 billion, while the pending "Berger" acquisition of 7 MH communities located near Orlando, FL will be 3,150 sites at a price of $256.7 million.

Organic Growth - Existing Portfolio



SUI Five Year - Relative Outperformance



Sun Communities leading the pack is consistent with SUI's history of outperformance.

Equity Lifestyle Properties - Deeper Dive

Equity Lifestyle is the largest player in this sector with more than 370 communities and resorts, with over 143,000 sites, spread across 32 states and British Columbia.


Low Cap-Ex Business Model


Predictable land rents are the main source of revenues, which can also be adjusted annually.

Growth & Performance


A history of long-term outperformance by Equity Lifestyle Properties to back up recent strong performance.

Industry - Secret Syrup


Demographic tailwinds bode well for this entire sector moving forward.

Bottom Line

Manufactured home REITs currently benefit from a growing U.S. economy and low interest rates as well as aging Baby Boomers.

However, this sector is also somewhat recession resistant, due to being a low cost provider vs. conventional rental communities, and other housing options.

Image credit: WoodleyWonderworks, Flickr


Related Articles (ELS + SUI)

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Posted-In: MLV & Co.Analyst Color Long Ideas REIT Trading Ideas General Real Estate Best of Benzinga

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