FLAGSHIP COMMUNITIES REAL ESTATE INVESTMENT TRUST ANNOUNCES FOURTH QUARTER AND YEAR-END 2021 RESULTS

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES./

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

• 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

($000s except per share amounts)
	For the three months ended December 31, 2021	For the period  October 7, 2020 through December 31, 2020	Variance
Revenue, Total Portfolio	12,192	8,304	3,888
Revenue, Same Community^2	9,507	8,262	1,245
Revenue, Acquisitions^2	2,685	42	2,643
Net Income and Comprehensive Income, Total Portfolio	53,451	47,338	6,113
NOI, Total Portfolio^1	8,199	5,497	2,702
NOI, Same Community^2	6,300	5,472	828
NOI, Acquisitions^2	1,899	25	1,874
NOI Margin, Total Portfolio^1	67.2%	66.2%	1.0%
NOI Margin, Same Community^2	66.3%	66.2%	0.1%
NOI Margin, Acquisitions^2	70.7%	58.5%	12.2%
Funds from Operations ("FFO")^1	4,614	2,697	1,917
FFO Per Unit^1	0.263	0.220	0.043
Adjusted Funds from Operations ("AFFO")^1	3,920	2,227	1,693
AFFO Per Unit^1	0.223	0.182	0.041
AFFO Payout Ratio^1	59.8%	67.0%	(7.2%)
^1A non-IFRS financial measure.  See "Non-IFRS Financial Measures" for more information. 2 See "Other Real Estate Industry Metrics" for more information.

"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 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 the purchase price of approximately $8.2 million.

As of December 31, 2021, the REIT had 63 total communities and 11,328 lots. The table below provides a summary of Flagship REIT's portfolio for the three months ended December 31, 2021 compared to the period of October 7, 2020 through December 31, 2020:

			As of December 31, 2021	As of December 31, 2020
Total communities		(#)	63	52
Total lots		(#)	11,328	8,634
Weighted Average Lot Rent^1		(US$)	369	352
Occupancy^1		(%)	82.8	79.6
^1See "Other Real Estate Industry Metrics" below

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 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 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 FFO, FFO Per Unit, AFFO, AFFO Per Unit, AFFO Payout Ratio, NOI and NOI Margin 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 Net Income and Comprehensive 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 of Flagship Operating, LLC ("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"). FFO per Unit (diluted) is defined as FFO for the applicable period divided by the diluted weighted average Unit count (including Class B Units and Deferred Trust Units ("DTUs")) during the period. Refer to section "Reconciliation of Non-IFRS Financial Measures" for a reconciliation of FFO to AFFO to Net Income and Comprehensive Income.

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. AFFO Payout Ratio is defined as total cash distributions of the REIT (including distributions on Class B Units) divided by AFFO.  AFFO per Unit (diluted) is defined as AFFO for the applicable period divided by the diluted weighted average Unit count (including Class B Units and DTUs) during the period. Refer to section "Reconciliation of Non-IFRS Financial Measures" for a reconciliation of AFFO to Net Income and Comprehensive Income.

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. NOI Margin is calculated as NOI divided by Revenue. Refer to section "Reconciliation of Non-IFRS Financial Measures" for a reconciliation of NOI to Net Income and Comprehensive Income.

Other Real Estate Industry Metrics

Additionally, this news release contains several other real estate industry metrics that are not disclosed in the REIT's financial statements:

• "Occupancy" is calculated as total occupied lots divided by total lots.
• "Rent Collections" is defined as the total cash collected in a period divided by total revenue charged in that same period.
• "Same Community financial measures are the results of the MHCs owned throughout the applicable period.
• "Acquisitions" financial measures are the results of the MHCs acquired by the REIT following the commencement of the applicable period.
• "Weighted Average Lot Rent" means the lot rent for each individual community multiplied by the total lots in that community summed for all communities divided by the total number of lots for all communities.

Reconciliation of Non-IFRS Financial Measures

		For the three months ended December 31, 2021	For the period October 7, 2020 through December 31, 2020
Net income and comprehensive income		$53,451	$47,338
Adjustments to arrive at FFO
Depreciation		$49	$24
Fair value adjustment - Class B units		$6,520	$(1,195)
Distributions on Class B units		$717	$641
Fair value adjustment - investment properties		$(56,123)	$(2,958)
Transaction costs		$-	$5,306
Bargain purchase gain			$(46,459)
FFO		$4,614	$2,697
FFO Per Unit* (diluted)		$0.263	$0.220
Adjustments to arrive at AFFO
Accretion of mark-to-market adjustment on mortgage payable		$(258)	$(257)
Capital Expenditure Reserves		$(436)	$(213)
AFFO		$3,920	$2,227
AFFO Per Unit* (diluted)		$0.223	$ 0.182

		For the three months ended December 31, 2021	For the period October 7, 2020 through December 31, 2020
Net income and comprehensive income		$53,451	$47,338
Adjustments to arrive at NOI
General and administrative		$1,663	$1,258
Finance costs from operations		$2,214	$1,812
Accretion of mark-to-market adjustment on mortgage payable		$(258)	$(257)
Depreciation		$49	$24
Other (income)		$(38)	$(13)
Fair value adjustment - Class B units		$6,520	$(1,195)
Distributions on Class B units		$717	$641
Fair value adjustment - investment properties		$(56,123)	$(2,958)
Fair value adjustment - unit based compensation		$4	$-
Transaction costs		$-	$5,306
Bargain purchase gain			$(46,459)
NOI		$8,199	$5,497

		For the three months ended December 31, 2021	For the period October 7, 2020 through December 31, 2020
Rental revenue and related income		$12,192	$8,304
Property operating expenses		$3,993	$2,807
NOI		$8,199	$5,497
NOI Margin		67.2%	66.2%

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 and growth strategy, the statements under the heading "Outlook" and the expected performance of acquired properties. 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" in the REIT's Management Discussion and Analysis for the year ended December 31, 2021, as well as risk factors discussed in the REIT's Annual Information Form. 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.

Fourth Quarter and Year-End 2021 Results Conference Call and Webcast

DATE:	Thursday, March 17, 2022
TIME:	8:30 a.m. ET
DIAL-IN NUMBER:	416-764-8650 or 1-888-664-6383
CONFERENCE ID:	11083758
LIVE WEBCAST:	https://flagshipcommunities.com/investor-relations/presentations-and-events/

About Flagship Communities Real Estate Investment Trust

Flagship Communities Real Estate Investment Trust is an 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, Tennessee, Arkansas, Missouri, and Illinois, 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]