Launching Coverage on the MH REITs: Expect Valuation Premium to Shrink, Initiating at Underweight

We are initiating coverage on the manufactured housing REIT sector with an Underweight rating relative to the S&P 500. The land-lease model, with resident-owned homes, long resident tenures and constrained supply, supports some of the steadiest rent growth and highest core NOI margins among residential REITs. Even with these defensive benefits, valuation screens as expensive relative to history and residential REIT peers, limiting further upside – particularly against a backdrop of decelerating cash flow growth in 2027 versus acceleration for the apartment and single-family REITs, with convergence to the 3-4% range across all three sectors. While our sector rating is relative to the broader market, our stock ratings for SUI and ELS are relative to each other. We are initiating coverage of SUI at Outperform with a $127.75 fair value target and 5% present value downside, and ELS at Underperform with a $59.25 fair value target and 13% present value downside as we expect the valuation gap between the two companies to narrow.

• Manufactured Housing Rent Growth Driven by Affordability and Supply Scarcity

• Highly Fragmented Ownership Creates Long Runway for Consolidation and Internal Growth

• Best-In-Class Stability and Margins

• RV Mix a Key Swing Factor and Main Source of Recent Volatility

• Expecting More Downside Valuation Support for SUI Following Transformational Disposition

• ELS Valuation More Than Accounting for Strong Historical Performance

• Initiating Sector Coverage at Underweight