Flagship Communities Real Estate Investment Trust Announces First Quarter 2021 Results

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TORONTO, May 10, 2021 /CNW/ - Flagship Communities Real Estate Investment Trust (TSX: MHC.U) ("Flagship REIT" or the "REIT") today released its first quarter 2021 results for the three months ended March 31, 2021. Results are presented in U.S. dollars unless otherwise noted. The results presented are compared to the financial forecast contained in the REIT's initial public offering ("IPO") prospectus dated September 28, 2020 (the "forecast").

Summary of First Quarter 2021 Results:

• Revenue was $9.6 million, approximately $0.7 million higher than the forecast due to the acquisitions completed since the REIT's IPO as well as higher than forecasted utility reimbursements and other revenue sharing agreements
• Same Community Revenue was $9.1 million, which is approximately $0.1 million higher than the forecast
• Net Income and comprehensive income was $6.6 million, which is approximately $4.5 million higher than the forecast
• Net Operating Income ("NOI", see "Non-IFRS Financial Measures" below) was $6.4 million, which is approximately $0.6 million higher than the forecast
• NOI Margin (see "Non-IFRS Financial Measures" below) was 66.7% which exceeded the forecast of 64.9%
• Adjusted Funds from Operations ("AFFO", see "Non-IFRS Financial Measures" below) was $3.0 million, which exceeded the forecast by 23.8%
• Same Community Occupancy (see "Non-IFRS Financial Measures" below) increased by 0.6% as of March 31, 2021, compared to December 31, 2020.
• Rent collections for the three months ended were 99.0%, which was a slight increase quarter-over-quarter and consistent with prior periods
• Partnered with Northern Kentucky Health Department to deploy COVID-19 vaccines to communities
• Subsequent to quarter-end, filed a short form base shelf prospectus to provide the REIT with the flexibility to access the debt and equity markets on a timely basis

"We began the first few months of 2021 much like we ended last year, by continuing to grow our revenues and exceeding many of our financial and operational forecast metrics," said Kurt Keeney, President and Chief Executive Officer. "We are committed to maintaining our solid track record of performance, increasing long-term unitholder value, being good corporate citizens, and increasing the quality of life for our residents in our communities."

Financial Performance Overview

($000s except per share amounts)	For the three months ended March 31, 2021
	Actual Results	Forecast	Variance
Revenue, Total Portfolio	9,649	8,988	661
Revenue, Same Community^1 Properties	9,097	8,988	109
Revenue, acquisitions	552	-	552
Net Income (loss) and comprehensive income (loss)	6,631	2,090	4,541
NOI^1, Total Portfolio	6,440	5,834	606
NOI^1, Same Community^1 properties	6,160	5,834	326
NOI^1, Acquisitions	280	-	280
NOI Margin^1, total portfolio	66.7%	64.9%	1.8%
NOI Margin^1, Same Community^1 properties	67.7%	64.9%	2.8%
NOI Margin^1, Acquisitions	50.7%	-	50.7%
FFO^1	3,498	2,813	685
FFO Per Unit^1(excluding over allotment)	N/A	0.240	N/A
FFO Per Unit^1(including over allotment)	0.276	0.222	0.054
AFFO^1	3,028	2,445	582
AFFO Per Unit^1(excluding over allotment)	N/A	0.209	N/A
AFFO Per Unit^1(including over allotment)	0.239	0.193	0.046
AFFO Payout Ratio^1 (excluding over allotment)	N/A	61.1%	N/A
AFFO Payout Ratio^1 (including over allotment)	53.3%	66.0%	(12.7%)
^1These measures are not recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. See "Non-IFRS Financial Measures" for more information.

Revenue of $9.6 million during the first quarter 2021, was approximately $0.7 million higher than the forecast, primarily due to the acquisitions completed since the REIT's IPO as well as higher than forecasted utility reimbursements and other revenue sharing agreements. NOI and NOI Margin for the first quarter 2021 was $6.4 million and 66.7% respectively, which is $0.6 million and 1.8% higher than the forecast, due in part to the REIT's cost containment initiatives.

AFFO and AFFO per Unit was $3.0 million and $0.239 per unit respectively, both of which exceeded the forecast by 23.8% during the first quarter 2021.

Net income and comprehensive income was $6.6 million, which is approximately $4.5 million higher than the forecast primarily as result of the fair value gain on investment properties partially offset by the fair value loss on class B units of the REIT's subsidiary, Flagship Operating, LLC ("Class B Units"), neither of which were considered in the forecast.

Same Community Occupancy increased by 0.6% as of March 31, 2021 compared to December 31, 2020. The Same Community Occupancy rate remained steady primarily due to the affordability of manufactured housing communities ("MHCs") and in part, by the ongoing COVID-19 pandemic since unlike multi-family apartments, MHCs 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 first quarter 2021 were 99.0%, which was a slight increase quarter-over-quarter and consistent with prior periods, further demonstrating the strength and predictability of the MHC sector.

As at March 31, 2021, Flagship REIT's total cash and cash equivalents were $6.5 million with no near-term debt obligations. 

Operations Overview

As of March 31, 2021, the REIT has 54 MHCs and 8,793 manufactured housing lots. The table below provides a summary of Flagship REIT's portfolio:

MHC Portfolio as of March 31, 2021
Total MHCs	(#)	54
Total Manufactured Housing Lots	(#)	8,793
Total Lot Occupancy	(%)	80.2
Total Lot Average Monthly Revenue	(US$)	361

COVID-19 Update

A sizable number of Flagship REIT residents have been able to maintain their employment through the COVID-19 pandemic or are on fixed incomes from retirement, pensions, or disability income. Overall, the majority of Flagship REIT's residents recently received stimulus checks from the President Biden stimulus bill. For an average family of four, this amount was approximately $5,600, which is a significant amount for residents within Flagship REIT's communities. These stimulus checks are in addition to jobless benefits, child tax credits, health insurance subsidies and rent relief.

During the first quarter 2021, Flagship REIT partnered with The Northern Kentucky Health Department to deploy COVID-19 vaccines to residents of several Flagship REIT communities. To date, vaccine clinics have operated at Heartland Pointe in Elsmere, Kentucky, Derby Hills in Alexandria, Kentucky and Mosby's Pointe in Florence, Kentucky. Nearly 700 community residents received their vaccines.

Flagship REIT believes COVID-19 has amplified the benefits of MHCs versus multi-family apartments.

Multi-family apartments typically have smaller living spaces, fewer bedrooms and bathrooms, shared indoor walls, shared laundry facilities, common areas and HVAC systems. Given the current landscape, these conditions, especially the shared facilities and common areas, are sub-optimal when everyone is mindful of social distancing requirements.

Flagship REIT will continue to closely monitor COVID-19 developments and will update health and safety policies as required to ensure the highest level of safety for the REIT's residents and employees.

Outlook

Flagship 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 Flagship's vertically integrated management platform.

The REIT believes the MHC sector to be a prudent investment strategy that will create long-term value for a number of 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.

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

• Increasing household formations;
• Lower housing affordability;
• Declining single-family residential home ownership rates;
• Lack of new manufactured housing supply.

Flagship REIT believes it is well positioned to benefit from these dynamics in the residential real estate and housing industry.

Non-IFRS Financial Measures

The REIT uses certain non-IFRS financial measures, including certain real estate industry metrics such as FFO, FFO Per Unit, AFFO, AFFO Per Unit and Same Community, 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 and NOI is a key input in determining the value of the REIT's properties. 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 comparable to similar measures presented by other publicly traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS.

FFO is defined as IFRS consolidated net income adjusted for items such as distributions on redeemable or exchangeable units recorded as finance cost under IFRS (including distributions on the Class B Units, unrealized fair value adjustments to investment properties, loss on extinguishment of acquired mortgages payable, gain on disposition of investment properties and depreciation. The REIT's method of calculating FFO is substantially in accordance with the recommendations of the Real Property Association of Canada ("REALPAC").

AFFO is defined as FFO adjusted for items such as maintenance capital expenditures, and certain non-cash items such as amortization of intangible assets, premiums and discounts on debt and investments. The REIT's method of calculating AFFO is substantially in accordance with REALPAC's recommendations.  The REIT uses a capital expenditure reserve of $60 (dollars/annual) per lot and $1,000 (dollars/annual) per rental home in the AFFO calculation.  This reserve is based on management's best estimate of the cost that the REIT may incur, related to maintaining the investment properties.

NOI is defined as total revenue from properties (i.e., rental revenue and other property income) less direct property operating expenses in accordance with IFRS.

Same Community results are the results of the MHCs owned throughout the applicable period and such measure is used by management to evaluate period-over-period performance of investment properties. These results remove the impact of dispositions or acquisitions of investment properties.

Please refer to the REIT's Management Discussion and Analysis for the period ended March 31, 2021 for further detail on non-IFRS financial measures, including reconciliations of these measures to standardized IFRS measures.

Forward Looking Statements

This news release contains statements that include forward-looking information (within the meaning of applicable Canadian securities laws). Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "can", "could", "would", "must", "estimate", "target", "objective" and other similar expressions, or negative versions thereof, and include statements herein concerning: the REIT's investment strategy and creation of long-term value; macro characteristics and trends in the United States real estate and housing industry, as well as the MHC industry specifically; and other statements under "Outlook". These statements are based on the REIT's expectations, estimates, forecasts and projections, as well as assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies that could cause actual results to differ materially from those that are disclosed in such forward-looking statements. While considered reasonable by management of the REIT as at the date of this news release, any of these expectations, estimates, forecasts, projections or assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations, estimates, forecasts, projections or assumptions could be incorrect. Material factors and assumptions used by management of the REIT to develop the forward-looking information in this news release include, but are not limited to, the REIT's current expectations about: vacancy and rental growth rates in MHCs and the continued receipt of rental payments in line with historical collections; demographic trends in areas where the MHCs are located; the impact of COVID-19 on the MHCs; further MHC acquisitions by the REIT; the applicability of any government regulation concerning MHCs and other residential accommodations, including as a result of COVID-19; the availability of debt financing and future interest rates; expenditures and fees in connection with the ownership of MHCs; and tax laws. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as they are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under the heading ""Risks and Uncertainties" herein. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, certain forward-looking statements included in this news release may be considered a "financial outlook" for purposes of applicable Canadian securities laws, and as such, the financial outlook may not be appropriate for purposes other than to understand management's current expectations and plans relating to the future, as disclosed in this news release. Forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

First Quarter 2021 Results Conference Call and Webcast

DATE:	Tuesday, May 11, 2021
TIME:	8:30 a.m. ET
DIAL-IN NUMBER:	647-427-7450 or 1-888-231-8191
CONFERENCE ID:	2976425
LIVE WEBCAST:	https://flagshipcommunities.com/investor-relations/presentations-and-events/

About Flagship Communities Real Estate Investment Trust

Flagship Communities Real Estate Investment Trust is a newly-created, internally managed, unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT has been formed to own and operate a portfolio of income-producing manufactured housing communities located in Kentucky, Indiana, Ohio and Tennessee; including a fleet of manufactured homes for lease to residents of such housing communities.

SOURCE Flagship Communities Real Estate Investment Trust

Eddie Carlisle, Chief Financial Officer, Flagship Communities Real Estate Investment Trust, Tel: [phone]