FLAGSHIP COMMUNITIES REAL ESTATE INVESTMENT TRUST ANNOUNCES FOURTH QUARTER AND YEAR-END

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TORONTO, March 16, 2022 /CNW/ – Flagship Communities Real Estate Investment Trust (TSX: MHC.U) (“Flagship REIT” or the “REIT”) today released its fourth quarter 2021 results for the three months and year ended December 31, 2021. The results presented are compared to the period from August 12, 2020 (date of formation) to December 31, 2020. Results are presented in U.S. dollars unless otherwise noted.

The financial results of the REIT are presented below in accordance with International Financial Reporting Standards (“IFRS”), except where otherwise noted. The financial performance and financial condition of the REIT for the year ended December 31, 2021 are not directly comparable to the period from August 12, 2020 to December 31, 2020. The primary reason is the difference in the number of days being presented in year over year comparisons as the REIT was established August 12, 2020 and had no material operations prior to October 7, 2020, when the REIT acquired the initial portfolio.

Summary of Fourth Quarter 2021 Results:

Financial Highlights

• Revenue was $12.2 million, approximately $3.9 million higher than the period of October 7, 2020 – December 31, 2020

• Same Community Revenue (see “Other Real Estate Industry Metrics” below) was $9.5 million, an increase of $1.2 million from the period of October 7, 2020 – December 31, 2020

• Net Income and Comprehensive Income was $53.5 million, which was $6.1 million more than the period October 7, 2020 – December 31, 2020

• Net Operating Income (“NOI”, a non-IFRS financial measure, see “Non-IFRS Financial Measures” below) was $8.2 million, compared to $5.5 million for the period of October 7, 2020 – December 31, 2020

• Same Community NOI (a non-IFRS financial measure, see “Non-IFRS Financial Measures” below) was $6.3 million, compared to $5.5 million for the period of October 7, 2020 – December 31, 2020

• NOI Margin (a non-IFRS financial measure, see “Non-IFRS Financial Measures” below) increased to 67.2%, compared to 66.2% for the period of October 7, 2020 – December 31, 2020

• Same Community Occupancy (see “Other Real Estate Industry Metrics” below) of 80.6% increased by 1.4% as of December 31, 2021, compared to December 31, 2020

• Rent Collections (see “Other Real Estate Industry Metrics” below) for the three months ended were 98.6%, which was a slight increase from 98.5% for the period of October 7, 2020 – December 31, 2020 and consistent with prior periods

Operating Highlights

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• Acquired three high-quality manufactured housing communities (“MHCs”), comprising 957 lots in the REIT’s core markets of Kentucky and Arkansas for an aggregate purchase price of approximately $56.8 million

• Acquired two RV Resort communities in Northern Kentucky and Central Ohio for an aggregate purchase price of $8.35 million

• Subsequent to quarter-end, acquired a 13-acre, high quality resort community in Northern Ohio that includes 100 MHC homesites and a 141-boat slip marina for approximately $8.2 million

Capital Markets Highlights

• Completed equity offering of trust units at a price of $19.25 per unit for total gross proceeds of $46.5 million

• Increased monthly distributions to unitholders by 5% to $0.0446 per REIT unit or $0.5355 per REIT unit on an annual basis

“Our first full year as a publicly traded REIT was highly successful as we demonstrated our operating expertise, our ability to enter new U.S. states and the stability of the MHC sector,” said Kurt Keeney, President and Chief Executive Officer. “In the year ahead, we will continue to focus on the markets where we have an established presence, while continuing to seek opportunities in new markets that adhere to our disciplined growth strategy.”

Financial Performance Overview

Revenue of $12.2 million during the fourth quarter 2021, was approximately $3.9 million higher compared to the prior period, primarily due to the acquisitions completed as well as the three months ending December 31, 2021 having six more days in the period.

Net Income and Comprehensive Income was $53.5 million, which is approximately $6.1 million more than the period October 7, 2020 – December 31, 2020 as a result of the fair value gain on investment properties in 2021 which was largely offset by the bargain purchase gain during the period October 7, 2020 through December 31, 2020.

NOI and NOI Margin for the fourth quarter 2021 was $8.2 million and 67.2% respectively, which is $2.7 million and 1.0% higher than the prior period. These increases were primarily driven by the REIT’s accretive acquisition strategy during 2021, continued Same Community NOI growth, as well as the three months ending December 31, 2021 having six more days.

AFFO and AFFO per Unit was $3.9 million and $0.223 per unit respectively, both of which exceeded the period of October 7, 2020 – December 31, 2020 by 76.0% and 22.5% respectively, for the same reasons listed above. Cost containment efforts also helped contribute to the positive results. Continued focus on labor efficiencies throughout the communities as well as water and sewer savings had a positive impact on property operating expenses.

Same Community Occupancy of 80.6% increased by 1.4% as of December 31, 2021 compared to December 31, 2020. The Same Community Occupancy rate remained steady primarily due to the affordability of MHCs, the high level of home ownership within Flagship REIT’s communities and in part, by rising housing prices in the REIT’s core markets as well as the ongoing COVID-19 pandemic. Unlike multi-family apartments, manufactured homes are detached structures that do not share walls, utilities, air conditioning or heating with any other homes and typically have a deck, yard, driveway and in-home laundry.

Rent Collections for the third quarter 2021 were 98.6%, which was a slight increase from 98.5% for the period of October 7, 2020 – December 31, 2020 and consistent with prior periods, further demonstrating the strength and predictability of the MHC sector.

As of December 31, 2021, Flagship REIT’s total cash and cash equivalents were $15.5 million with no near-term debt obligations.

Operations Overview

During the fourth quarter 2021, Flagship REIT continued to grow its presence in existing markets.

Flagship REIT acquired three high-quality MHCs, comprising 957 lots in Kentucky and Arkansas, which were immediately accretive to the REIT’s AFFO per unit on a leverage neutral basis.

The Lexington, Kentucky acquisition comprises 546 lots across approximately 71 acres and is within close proximity to two post-secondary institutions (University of Kentucky and Transylvania University), state parks, popular eateries and major entertainment attractions including the Kentucky Horse Park. The community was 92.6% occupied as of December 31, 2021, with no rental homes in the community.

The Bryant, Arkansas acquisition comprises 327 lots across approximately 97 acres and is located approximately 20 miles southwest of downtown Little Rock, Arkansas. The community is within close proximity to the Bryant public school district, necessity-based retailers including Walmart and Dollar Tree and two hospitals (Saline Memorial Hospital and Arkansas Heart Hospital). The community was 98.0% occupied as of December 31, 2021 and includes 31 rental homes.

The Bald Knob, Arkansas acquisition comprises 84 lots across approximately 29 acres and is within close proximity to Harding University, Bald Knob High School and H L Lubker Elementary School. The community was 56.0% occupied as of December 31, 2021, including eight rental homes with the potential for abundant occupancy growth supported by significant employment opportunities and strong demographic drivers.

During the quarter, the REIT also acquired two RV Resort communities in highly desirable areas in Northern Kentucky and Central Ohio, which were both immediately accretive to the REIT’s AFFO on a per unit basis with additional above market growth over time.

Subsequent to quarter-end, the REIT continued to strengthen its Ohio presence with the purchase of a…