Equity LifeStyle Properties, Inc. (ELS), a real estate investment trust (REIT) that owns and operates lifestyle-oriented properties, has recently announced a public offering of approximately 5.3 million shares to fund a part of its property acquisition worth $1.43 billion.
The company has also decided to grant the underwriters an option to purchase an additional 0.8 million shares to cover any over-allotments. The Goldman Sachs Group, Inc. (GS), a full-service global investment banking and securities firm, is acting as the sole book-running manager for the offering.
In concurrence with its corporate strategy to own high-quality resort communities in high barrier-to-entry markets, Equity LifeStyle has acquired a portfolio of 76 manufactured home communities comprising 31,167 sites, spanning approximately 6,500 acres in 16 states (primarily in Florida and the northeastern region of the U.S.).
The properties were acquired from the affiliates of Hometown America L.L.C., a privately held company that owns and operates manufactured housing communities across the U.S.
Besides utilizing the proceeds from the secondary offering, Equity Lifestyle has chalked out a slew of plans to fund the purchase price. These include raising about $300.0 million and $200 million of debt capital through a 10-year secured financing and a six-year unsecured term loan, respectively; issuance of 1.71 million common shares and 1.74 million shares of preferred stock to Hometown totaling approximately $200 million; and the assumption of $524.3 million of fixed-rate, non-recourse mortgage debt (as of March 31, 2011) secured by 34 properties in the acquired portfolio.
The acquisition will enable Equity LifeStyle to increase its scale of operations and swell its kitty of manufactured home communities. The company leases individual developed areas or sites that have access to utilities for the construction of factory-built homes, cottages, cabins or recreational vehicles. A recreational vehicle is usually referred to a motor vehicle equipped with living space and amenities found in a home.
Customers either opt to lease individual sites or sign right-to-use agreements with the company that provide them with access to specific properties for limited stays. As of March 31, 2011, Equity LifeStyle’s portfolio (pro forma for the acquisition) includes 383 total communities located in 32 states, of which 211 are manufactured home communities and 172 are recreational vehicle communities.
We presently have a Neutral recommendation on Equity LifeStyle, which currently has a Zacks #2 Rank that translates into a short-term Buy rating and indicates that the stock is expected to perform well above the overall U.S. equity market for the next 1-3 months.
EQUITY LIFESTYL (ELS): Free Stock Analysis Report
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