Another Look at this Affordable Housing Stock

I seriously considered Flagship Communities REIT some time ago but passed after my concerns about less-than-arm-length relationships with owners and service providers.

After reviewing this again and looking at the value and market where they do business, I will start to nibble and purchase shares over time.  Here’s why.

The company on its website states:

“Flagship Communities is one of the Midwest region's largest developers of residential manufactured housing communities. Our communities are throughout Kentucky, Ohio, Indiana, Tennessee, Arkansas, Illinois, and Missouri. With 30 years of experience in developing and managing manufactured housing communities, Flagship’s leadership team has a depth of experience in real estate, financing and community management.”

They own mobile home parks. Residents own the trailers; the REIT owns the land and provides sewer and water to the units. Rents are reasonable, as is the cost of purchasing a mobile home compared to a regular home purchase or paying rent on an apartment.

The price-to-book value tells me that the company is selling for about 80 cents on the dollar. This is not as great a cushion as I’d want, but it does reduce some risk.

It currently pays a dividend of 4%, and just 20% of the cash generated is used to pay that dividend. I think it’s safe for now.

I like this company's slow, boring business and cash generation approach. Its stock price is low compared to historical averages.

It likely will continue to issue shares to fund acquisitions; however, if the investments are accretive, this should be fine.

As a real estate company providing affordable housing, it is a timely investment to add to the portfolio.

Risks relate to the complete collapse of the economy; however, the unique nature of tenants owning their homes but paying to rent the space they live in motivates them to maintain regular rental payments.

Although a Canadian Company, it trades for 14.48 when writing this newsletter.

I’ll start with a minimal commitment and gradually watch and learn from this focused affordable housing REIT.