FLAGSHIP COMMUNITIES REAL ESTATE INVESTMENT TRUST ANNOUNCES FIRST QUARTER RESULTS

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TORONTO, May 9, 2022 /CNW/ – Flagship Communities Real Estate Investment Trust (“Flagship” or the “REIT”) (TSX: MHC.U) today released its results for the three months ended March 31, 2022 (“Q1”). The financial results of the REIT are presented below in accordance with International Financial Reporting Standards (“IFRS”), except where otherwise noted. Results are shown in U.S. dollars unless otherwise noted.

Summary of First Quarter 2022 Results:

Financial Highlights

• Revenue was $13.7 million, approximately $4.0 million higher than Q1 2021

• Same Community Revenue[1] was $10.1 million, an increase of $0.6 million from Q1 2021

• Net Income and Comprehensive Income was $2.4 million, a $4.2 million decrease from Q1 2021

• Net Operating Income (“NOI”) was $9.3 million, an increase of $2.8 million from Q1 2021

• Same Community NOI¹ was $6.9 million, an increase of $0.5 million from Q1 2021

• NOI Margin¹ increased to 67.6%, compared to 66.7% for Q1 2021

• Funds from Operations[2] (“FFO”) were $5.6 million or $0.284 per unit, compared to $3.5 million and $0.276 per unit in Q1 2021

• Adjusted Funds from Operations² (“AFFO”) were $4.9 million or $0.248 per unit, compared to $3.0 million and $0.239 per unit in Q1 2021

• Same Community Occupancy¹ was 81.3% as of March 31, 2022, compared to 80.8% as of December 31, 2021

• Rent Collections¹ for the three months ended March 31, 2022, were 99.0%, up slightly compared to 98.8% for the three months ended March 31, 2021, and consistent with prior periods

Operating Highlights

• On February 15, 2022, the REIT acquired a 13-acre manufactured housing resort community in northern Ohio, through its strategic relationship with Empower Park LLC. The community consists of 100 lots with 99% occupancy and a 141 boat slip marina.

• On April 27, 2022, subsequent to quarter-end, the REIT acquired a manufactured housing community in southern Illinois. The community consists of 103 lots and is 89% occupied.

• On April 11, 2022, the REIT’s Waterford Pointe community in Evansville, Indiana, was named Land-Lease Community of the Year by the Manufactured Housing Institute.

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Financial Summary

“The results of the first quarter of 2022 reflect the continuing success of our strategy to leverage our expertise and optimize the operating performance of the portfolio while adding accretive acquisitions,” said Kurt Keeney, President and CEO of the REIT. “Going forward, we see multiple opportunities to increase our concentration in our core states while building a presence in adjacent regions to increase our diversity.”

Financial Performance Overview

Revenue of $13.7 million in the first quarter of 2022 was approximately $4.0 million higher than the prior period, primarily driven by acquisitions and lot rent increases and occupancy increases across the portfolio.

Net Income and Comprehensive Income was $2.4 million, a $4.2 million decrease from the prior period as a result of the significantly larger fair value gain on investment properties for the three months ended March 31, 2021, compared to the same period in 2022. In addition, the fair value loss on class B units of the REIT’s subsidiary, Flagship Operating, LLC (“Class B Units”), was larger in Q1 2022 compared to the prior period. These variances were somewhat offset by NOI being $2.8 million higher in 2022.

NOI and NOI Margin for the first quarter of 2022 was $9.3 million and 67.6%, respectively, which is $2.8 million and 0.9% higher than the prior period. These increases were primarily driven by the REIT’s accretive acquisition strategy during 2021, as well as lot rent growth and occupancy growth.

AFFO and AFFO per Unit were $4.9 million and $0.248 per unit, a 60.3% and 3.8% increase, respectively, from the prior period. The increase was primarily driven by the REIT’s accretive acquisition strategy during 2021 and continued Same Community NOI growth. Same Community Revenues in Q1 2022 exceeded Q1 2021 by $0.6 million. This increase was driven by lot rent increases implemented during the period and occupancy growth throughout the year. Cost containment efforts also helped contribute to the positive results. Continued focus on labor efficiencies throughout the communities and water and sewer savings positively impacted property operating expenses.

Same Community Occupancy of 81.3% increased by 0.5% as of March 31, 2022, compared to December 31, 2021. The consistent and growing occupancy rate reflects the REIT’s commitment to resident satisfaction and ensuring its communities are desirable locations.

Rent Collections for Q1 2022 were 99.0%, which was a slight increase from 98.8% in Q1 2021 and consistent with prior periods, further demonstrating the strength and predictability of the MHC sector.

On March 24, 2022, the REIT borrowed $9.3 million, for which one MHC was the collateral. The interest rate on the note is 4.37%, fixed for 30 years, with the first 180 monthly payments being interest only.

On April 13, 2022, subsequent to quarter end, the REIT borrowed $18.0 million, for which one MHC was the collateral. The interest rate on the note is 3.80%, fixed for 20 years, with the first 60 monthly payments being interest only. These funds will be used to fund future acquisitions and for general business purposes.

As of December 31, 2021, Flagship REIT’s total cash and cash equivalents were $15.1 million with no near-term debt obligations.

Operations Overview

In the first quarter of 2022, the REIT added a 13-acre high-quality resort community in Northern Ohio that includes 100 MHC homesites with a 99% occupancy rate and a 141-boat slip marina for approximately $8.2 million.

Subsequent to quarter-end, the REIT added a second Illinois community in suburban Springfield, Illinois, for a purchase price of approximately $6.25 million. The community has 103 lots and 74 rental homes with 89% occupancy.

As at March 31, 2022, the REIT owned a 100% interest in a portfolio of 64 MHCs with 11,454 lots. The table below provides a summary of the REIT’s portfolio for the three months ended March 31, 2022, compared to the period of March 31, 2021:

Outlook

The REIT was formed to provide investors with the opportunity to invest in the MHC industry in the United States while benefiting from the investment and operational expertise of the REIT’s vertically integrated management platform.

The REIT believes the MHC sector to be a prudent investment strategy that will create long-term value for the following reasons:

• Defensive investment characteristics relative to other real estate asset classes;

• Consistent track record of outperformance irrespective of economic cycles;

• High barriers to entry for any competitors and new supply;

• Stable occupancy and growing rents;

• Lower capital expenditure requirements than many other real estate asset classes;

• Growing public sentiment toward a detached home relative to a multi-family apartment.

The REIT believes that macro characteristics and trends in the United States real estate and housing industry and the MHC industry specifically offer investors significant upside potential. These characteristics and trends include:

• Increasing household formations;

• Lower housing affordability;

• Declining single-family residential homeownership rates;

• Lack of new manufactured housing supply.

• The REIT believes it is well-positioned to benefit from these residential real estate and housing industry dynamics.

Non-IFRS Financial Measures

The REIT uses certain non-IFRS financial measures (including ratios), including FFO, FFO Per Unit, AFFO, AFFO Per Unit, AFFO Payout Ratio to measure, compare and explain the operating results, financial performance and financial condition of the REIT. The REIT also uses AFFO in assessing its distribution paying capacity. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. However, they do not have any standardized meaning prescribed by IFRS and are not necessarily…