FLAGSHIP COMMUNITIES REAL ESTATE INVESTMENT TRUST ANNOUNCES THIRD QUARTER RESULTS

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

TORONTO, Nov. 14, 2022 /CNW/ - Flagship Communities Real Estate Investment Trust ("Flagship" or the "REIT") (TSX: MHC.U) (TSX: MHC.UN) today released its results for the three and nine months ended September 30, 2022. 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 Third Quarter 2022 Results:

Financial and Operating Highlights

• Strengthened portfolio with the acquisition of two manufactured housing communities ("MHCs") in the REIT's existing footprint of Louisville, Kentucky and Bloomington, Illinois for an aggregate purchase price of approximately $32.3 million
• Rental revenue and related income was $15.0 million, an increase of approximately $3.6 million from the third quarter of 2021
• Same Community Revenue¹ was $10.3 million, an increase of $0.8 million from the third quarter of 2021
• Net income and comprehensive income was $14.9 million, compared to $1.9 million during the third quarter of 2021
• Net Operating Income ("NOI") was $9.8 million, an increase of $2.3 million from the third quarter of 2021
• Same Community NOI¹ was $6.8 million, compared to $6.2 million in the third quarter of 2021, an increase of $0.6 million and 9.7%
• NOI Margin¹ was 65.5%, compared to 66.6% in the third quarter of 2021
• Adjusted Funds from Operations² ("AFFO") were $4.6 million or $0.235 per unit, compared to $3.8 million and $0.218 per unit in the third quarter of 2021
• Same Community Occupancy¹ increased to 82.2% as at September 30, 2022, from 81.0% as of September 30, 2021
• Debt to Gross Book Value¹ as at September 30, 2022 was 41.3% compared to 42.0% as at September 30, 2021
• Rent Collections¹ for the three months ended September 30, 2022, were 98.2%, a slight decrease from 99.2% for the three months ended September 30, 2021
• Subsequent to quarter-end, Flagship's Board of Trustees approved an approximately 5% increase to its monthly cash distribution to unitholders to $0.0468 per REIT unit or $0.562 per REIT unit on an annualized basis payable on or about December 15, 2022 to unitholders of record as of the close of business on November 30, 2022

¹See "Other Real Estate Industry Metrics" for more information.

2A non-IFRS financial measure.  See "Non-IFRS Financial Measures" for more information

"During the third quarter of 2022 we continued to demonstrate the solid fundamentals of the MHC sector, while also further strengthening our portfolio with two acquisitions in our existing footprint," said Kurt Keeney, President and CEO. "Having established a strategy that includes long-term fixed rate debt with stacked maturities, we are in a strong financial position poised to execute on future opportunities and our next leg of growth. Our outlook for the MHC industry remains positive even in the current inflationary economic environment and rising mortgage rates in the United States. Over the past 20 years, the MHC industry has consistently outperformed other real estate classes during similar economic conditions."

Financial Summary

($000s except per share amounts)
	For the three months ended Sept. 30, 2022	For the three months ended Sept. 30, 2021	Variance	For the nine months ended Sept. 30, 2022	For the nine months ended Sept. 30, 2021	Variance
Rental revenue and related income	15,042	11,399	3,643	43,098	30,883	12,215
Revenue, Same Community^1	10,283	9,488	795	30,371	28,324	2,047
Revenue, Acquisitions^1	4,759	1,911	2,848	12,727	2,559	10,168
Net income and comprehensive income	14,910	1,870	13,040	43,366	6,556	36,810
NOI, total portfolio	9,848	7,592	2,256	28,566	20,462	8,104
NOI, Same Community^1	6,812	6,207	605	20,318	18,801	1,517
NOI, Acquisitions^1	3,036	1,385	1,651	8,248	1,661	6,587
NOI Margin^1, Total Portfolio	65.5 %	66.6 %	(1.1) %	66.3 %	66.3 %	0.0 %
NOI Margin^1, Same Community^1	66.2 %	65.4 %	0.8 %	66.9 %	66.4 %	0.5 %
NOI Margin^1, Acquisitions^1	63.8 %	72.5 %	(8.7) %	64.8 %	64.9 %	(0.1) %
FFO^2	5,337	4,412	925	16,336	11,250	5,086
FFO Per Unit^2	0.272	0.257	0.015	0.832	0.778	0.053
AFFO^2	4,616	3,751	865	14,187	9,532	4,655
AFFO Per Unit^2	0.235	0.218	0.017	0.723	0.659	0.063
AFFO Payout Ratio^2	56.8 %	58.5 %	(1.7) %	55.5 %	56.8 %	(1.4) %
Weighted average units (Diluted)	19,637,962	17,165,547	2,472,415	19,625,617	14,454,621	5,170,996
1.  See "Other Real Estate Industry Metrics" for more information. 2.  A non-IFRS financial measure.  See "Non-IFRS Financial Measures" for more information.

Financial Overview

Rental revenue and related income in the third quarter of 2022 was $15.0 million, approximately $3.6 million higher compared to the same period last year primarily due to acquisitions, lot rent increases and occupancy increases across the portfolio. Rental revenue and related income for the nine months ended September 30, 2022 was $43.1 million, which was an increase of approximately $12.2 million compared to the same period last year for the same reasons.

Net income and comprehensive income for the three months ended September 30, 2022 was $14.9 million, approximately $13.0 million more compared to the same period last year, as a result of the fair value gain on Class B Units being significantly larger than in the same period in 2021. Net income and comprehensive income for the nine months ended September 30, 2022 was $43.4 million, an increase of $36.8 million from the prior period for the same reason.

NOI and NOI Margin for the third quarter of 2022 were $9.8 million and 65.5% respectively, compared to $7.6 million and 66.6% during the third quarter of 2021. NOI and NOI Margin for the nine months ended September 30, 2022 were $28.6 million and 66.3%, respectively, compared to $20.5 million and 66.3% for the nine months ended September 30, 2021. These NOI increases were primarily driven by the REIT's accretive acquisitions, lot rent growth and cost containment efforts.

FFO and FFO Per Unit for the third quarter of 2022 were $5.3 million and $0.272 per unit, a 21.0% and 5.8% increase respectively, from the third quarter of 2021.

FFO and FFO Per Unit for the nine months ended September 30, 2022 were $16.3 million and $0.832 per unit, a 45.2% and 6.8% increase respectively, compared to the nine months ended September 30, 2021.

AFFO and AFFO per Unit for the third quarter of 2022 were $4.6 million and $0.235 per unit, a 23.1% and 7.8% increase respectively, from the third quarter of 2021. AFFO and AFFO per Unit for the nine months ended September 30, 2022 were 14.2 million and $0.723, a 48.8% and 9.6% increase, respectively, compared to the nine months ended September 30, 2021. These increases were primarily driven by the REIT's accretive acquisitions and continued Same Community NOI growth. FFO and FFO Per Unit in any particular quarter may vary due to the scheduling of maintenance events, seasonal requirements, such as lawn maintenance and other factors.

Same Community Revenues for the three and nine months ended September 30, 2022, exceeded the three and nine months ended September 30, 2021 by $0.8 million and $2.0 million, respectively. These increases were driven by lot rent increases implemented during the period, occupancy growth throughout the year and increases in utility revenues.

Same Community NOI for the third quarter of 2022 was $6.8 million, an increase of 9.7% compared to the third quarter of 2021. Same Community NOI for the nine months ended September 30, 2022 was $20.3 million, an increase of 8.1% compared to the nine months ended September 30, 2021.

Same Community Occupancy of 82.2% increased by 1.1% as of September 30, 2022, compared to the same period last year. The consistent and growing occupancy rate reflects Flagship's commitment to resident satisfaction and ensuring its communities are desirable locations.

Rent Collections for the third quarter of 2022 were 98.2%, a slight decrease from 99.2% from the three months ended September 30, 2021.

As of September 30, 2022, Flagship's total cash and cash equivalents were $4.8 million with $4 million available on the REIT's operating line of credit. Flagship also has 20 unencumbered assets with a value of approximately $50 million.

Flagship's Weighted Average Mortgage Term to maturity was 11.7 years, with the REIT's first maturity due in 5.5 years. Flagship's Weighted Average Mortgage Interest Rate was 3.68% as at September 30, 2022.

Operations Overview

During the third quarter 2022, Flagship acquired two MHCs in the REIT's existing footprint of Louisville, Kentucky and Bloomington, Illinois, which included 584 lots and 97 rental homes for $32.3 million.

Flagship manages and monitors water usage at all of its MHCs. The REIT has ongoing sub-metering and water re-capture programs to help conserve water and detect leaks. Historically, sub-metering has resulted in a 25% reduction in water consumption compared to previously un-monitored water usage. Flagship continues to implement sub-metering and water re-capture programs across all of its MHCs.

Flagship is also focused on energy conservation across all of its MHCs through a solar lighting program. The REIT's solar lighting installation program is underway and Flagship's goal is to transform its community street lighting into a 100% solar-powered system.

As at September 30, 2022, the REIT owned a 100% interest in a portfolio of 68 MHCs with 12,500 lots. The table below provides a summary of the REIT's portfolio as of September 30, 2022, compared to December 30, 2021:

		As of September 30, 2022	As of September 30, 2021
Total communities	(#)	68	58
Total lots	(#)	12,500	9,904
Weighted Average Lot Rent^1	(US$)	385	365
Occupancy	( %)	83.1	81.9
^1See "Other Real Estate Industry Metrics" below

Outlook

Flagship believes the REIT is well positioned amidst the current inflationary economic environment, higher rental rates and rising mortgage rates that are making stick-built homes more difficult to obtain in the United States. Flagship maintains a positive outlook for the MHC industry and believes it offers significant upside potential to investors. This is primarily due to the MHC industry's consistent track record of historical outperformance relative to other real estate classes and the lack of supply of new manufactured housing communities given the various layers of regulatory restrictions, competing land uses and scarcity of land zoned, which has created high barriers to entry for new market entrants.  

Other macro and MHC industry-specific characteristics and trends that support Flagship's positive outlook include:

• Increasing household formations;
• Lower housing and rental affordability;
• Declining single-family residential homeownership rates;

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 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 the REIT's subsidiary,  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 – FFO, FFO per Unit, AFFO and AFFO per Unit" 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. This may differ from other issuers' methods and, accordingly, may not be comparable to AFFO reported by other issuers. Refer to section "Reconciliation of Non-IFRS Financial Measures – FFO, FFO per Unit, AFFO and AFFO per Unit" for a reconciliation of AFFO to net income (loss).

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.

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:

• "Acquisitions" means the REIT's properties, excluding Same Communities (as defined below) and such measures (i.e.: Revenue, Acquisitions; NOI, Acquisitions; and NOI Margin, Acquisitions) are used by management to evaluate period-over-period performance of such investment properties throughout both respective periods. These results reflect the impact of acquisitions of investment properties.
• "NOI margin" is defined as NOI divided by total revenue. Refer to section "Calculation of Other Real Estate Industry Metrics – NOI and NOI Margin".
• "Rent Collections" is defined as the total cash collected in a period divided by total revenue charged in that same period.
• "Same Community" means all properties which have been owned and operated continuously since January 1, 2021, by the REIT and such measures (i.e.: Same Community Revenue or Revenue, Same Community; Same Community NOI or NOI, Same Community; NOI Margin, Same Community; and Same Community Occupancy) are used by management to evaluate period-over-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

FFO, FFO Per Unit, AFFO and AFFO per Unit

($000s, except per unit amounts)	For the three months ended September 30, 2022	For the three months ended September 30, 2021	For the nine months ended September 30, 2022	For the nine months ended September 30, 2021
Net income and comprehensive income	14,910	1,870	43,366	6,556
Adjustments to arrive at FFO
Depreciation	76	53	209	125
Fair value adjustments-Class B units	(1,915)	10,200	(23,552)	24,937
Distributions on Class B units	732	692	2,194	2,077
Fair value adjustment – investment properties	(8,458)	(8,412)	(5,796)	(22,690)
Fair value adjustment – unit based compensation	(8)	9	(85)	9
Transaction costs	-	-	-	236
Funds from Operations ("FFO")	5,337	4,412	16,336	11,250
FFO per Unit (diluted)	0.272	0.257	0.832	0.778
Adjustments to arrive at AFFO
Accretion of mark-to-market adjustments on mortgage payable	(257)	(257)	(772)	(771)
Capital Expenditure Reserves	(464)	(404)	(1,377)	(947)
Adjusted Funds From Operations ("AFFO")	4,616	3,751	14,187	9,532
AFFO per Unit (diluted)	0.235	0.218	0.723	0.659

Calculation of Other Real Estate Industry Metrics

NOI and NOI Margin

($000s)	For the three months ended September 30, 2022	For the three months ended September 30, 2021	For the nine months ended September 30, 2022	For the nine months ended September 30, 2021
Rental revenue and related income	15,042	11,399	43,098	30,883
Property operating expenses	5,194	3,807	14,532	10,421
NOI	9,848	7,592	28,566	20,462
NOI Margin	65.5 %	66.6 %	66.3 %	66.3 %

Forward-Looking Statements

This press 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; the REIT's intention to continue to expand, including on a clustered basis and newly-entered geographies, and to shrink its rental fleet; expected sources of funding for future acquisitions; macro characteristics and trends in the United States real estate and housing industry, as well as the manufactured housing communities ("MHC") industry specifically; the continued ability of the REIT's MHCs to be stable or strengthen in the foreseeable future and over the longer term and the REIT's target indebtedness as a percentage of Gross Book Value.

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 press 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 press 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, as well as risk factors discussed in the 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 press 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 press release. Forward-looking statements are made as of the date of this press 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.

Third Quarter 2022 Results Conference Call and Webcast

DATE:	Tuesday, November 15, 2022
TIME:	8:30 a.m. ET
DIAL-IN NUMBER:	416-764-8650 or 1-888-664-6383
INSTANT JOIN BY PHONE:	https://connectnow1.accutel.com/EventMeet/rest/users/login?password=mlt7r267l3us5 (Click the URL to join the conference call by phone)
CONFERENCE ID:	87176176
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 owns and operates 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.

For further information, please contact:

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

SOURCE Flagship Communities Real Estate Investment Trust