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As at September 30, 2024

• NAV¹ and NAV per Unit¹ as at September 30, 2024 was $648.2 million and $25.83, respectively, compared to $525.1 million and $24.84 as at December 31, 2023, respectively

• Debt to Gross Book Value¹ as at September 30, 2024 was 38.7% compared to 40.3% as at December 31, 2023

• Total portfolio occupancy was 84.4% as at September 30, 2024, a 0.9% increase from September 30, 2023

• Same Community¹ Occupancy was 85.7% as at September 30, 2024, a 1.1% increase from September 30, 2023

¹See “Other Real Estate Industry Metrics”
²See “Non-IFRS Financial Measures”

“Our business continues to perform well with notable improvements in Rental revenue, NOI and Same Community metrics compared to last year,” said Kurt Keeney, President and CEO. “On the heels of our strong operating and financial results, our Board approved a 5% increase in our monthly cash distribution to unitholders, the fourth consecutive year we have raised cash distributions. We also look forward to continuing the integration process from the acquisitions we made earlier this year and advancing our organic lot expansion strategy.”

Financial Summary

Financial Overview

Rental revenue and related income in the third quarter of 2024 was $23.2 million, up 27.9% compared to the same period last year. This increase was primarily driven by Acquisitions as well as lot rent increases and occupancy increases across the portfolio.

Same Community Revenues for the third quarter of 2024 were $19.7 million, approximately $2.2 million higher than the same period last year. This increase was a result of increasing monthly lot rent year over year, growth in Same Community Occupancy, and increased utility and ancillary revenues.

Net income and comprehensive income for the three months ended September 30, 2024 was $23.8 million, which was $(5.2) million less than the same period last year, as a result of the fair value adjustments on investment properties and Class B Units of Flagship Operating, LLC (“Class B Units”) being $7.5 million less than in the same period in 2023.

NOI and NOI Margin for the third quarter of 2024 were $15.1 million and 65.0%, respectively, compared to $11.8 million and 65.2% during the third quarter of 2023. Same Community NOI Margin for the third quarter ended September 30, 2024 was 66.0%, which was an increase of 0.6% over the same period last year.

Same Community Occupancy was 85.7% as at September 30, 2024. Two communities completed an expansion that resulted in an addition of 81 and 31 lots, respectively, with capacity for more lots as opportunities allow. The addition of these 112 lots decreased Same Community Occupancy by approximately (0.8)%, as at September 30, 2024, but the REIT expects to have these lots occupied, and to add additional lots to meet demand, in the normal course of business.

Adjusted for the impact of this expansion, total portfolio occupancy and Same Community Occupancy would have been 85.0% and 86.5% as at September 30, 2024.

AFFO for the third quarter of 2024 was $7.9 million, an increase of 43.6% from the third quarter of 2023. AFFO per unit for the three months ended September 30, 2024 was $0.314, an increase of 20.7% from the same period last year.

AFFO adjusted, which adjusts for transactions that are not considered recurring measures of economic earnings with the goal of presenting AFFO in a normalized manner, was $7.0 million for the third quarter of 2024, a 27.9% increase compared to the same period last year. AFFO adjusted per unit for the third quarter of 2024 was $0.280, a 7.7% increase compared to the same period in 2023.

Rent Collections for the third quarter of 2024 remained stable at 98.7%.

As at September 30, 2024 the REIT’s Weighted Average Mortgage and Note Interest Rate (see “Other Real Estate Industry Metrics” for more information) was 4.41%. The REIT’s Weighted Average Mortgage and Note Term (see “Other Real Estate Industry Metrics” for more information) to maturity was 9.2 years. Flagship has no substantial debt maturities until 2030.

Flagship’s Liquidity (see “Other Real Estate Industry Metrics” for more information) as at September 30, 2024 was approximately $21.2 million consisting of cash, cash equivalents, and available capacity on lines of credit.

Subsequent to quarter-end, Flagship increased its monthly cash distribution to unitholders for the fourth consecutive year. The monthly cash distribution to unitholders increased by approximately 5.0% to $0.0517 per REIT unit or $0.62 per REIT unit on an annualized basis.

Operations Overview

The integration process of the seven new Manufactured Housing Communities (“MHC”) Flagship acquired in Tennessee and West Virginia earlier in 2024, have exceeded management’s expectations. Flagship also continues to advance its lot expansion strategy. The REIT has the potential to add additional housing opportunities within certain existing communities for a modest capital investment. During the second and third quarters, Flagship added an additional 112 lots to its portfolio and has the ability to add 638 additional lots on approximately 300 acres over the next few years.

As at September 30, 2024, the REIT owned a 100% interest in a portfolio of 80 MHCs with 14,668 lots as well as two recreational vehicle (“RV”) resort communities with 470 sites. The table below provides a summary of the REIT’s portfolio as of September 30, 2024, compared to December 31, 2023:

Outlook

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. Additionally, the lack of supply of new manufactured housing communities given the various layers of regulatory restrictions, competing land uses and scarcity of land zoned 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

In this news release, the REIT uses certain financial measures that are not defined under IFRS including certain non-IFRS ratios, to measure, compare and explain the operating results, financial performance and cash flows of the REIT. 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.

Funds from Operations and Adjusted Funds from Operations

Funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) are calculated in accordance with the definition provided by the Real Property Association of Canada (“REALPAC”).

FFO is defined as IFRS consolidated net income (loss) adjusted for items such as distributions on redeemable or exchangeable units (including distributions on the Class B Units), unrealized fair value adjustments to Class B Units, unrealized fair value adjustments to investment properties, unrealized fair value adjustments to unit based compensation, loss on extinguishment of acquired mortgages payable, gain on disposition of investment properties, and depreciation. FFO should not be construed as an alternative to consolidated net income (loss) or consolidated cash flows provided by (used in) operating activities determined in accordance with IFRS. The REIT’s method of calculating FFO is substantially in accordance with REALPAC’s recommendations but may differ from other issuers’ methods and, accordingly, may not be comparable to FFO reported by other issuers. Refer to section “Reconciliation of FFO, FFO per unit, FFO adjusted, FFO adjusted per unit, AFFO, AFFO per unit, AFFO adjusted and AFFO adjusted per unit” for a reconciliation of FFO to FFO adjusted to consolidated net income (loss).

“FFO per unit (diluted)” is defined as FFO for the applicable period divided by the diluted weighted average unit count (including Class B Units, vested Restricted Units (“RUs”) and vested Deferred Trust Units (“DTUs”)) during the period.

“FFO adjusted” is defined as FFO adjusted for non-real estate industry specific operating transactions. FFO adjusted presents FFO in a normalized manner that is substantially in accordance with REALPAC’s recommendations. FFO adjusted may, as transactions occur, include adjustments that were not included in the definition of FFO adjusted in a previous period but are included in the current period to present FFO in a normalized manner that is substantially in accordance with REALPAC’s recommendations. For the three and nine months ended September 30, 2024 adjustments include mortgages payable settlement expense, which is comprised of prepayment penalties, defeasance, amortization of financing costs, and other costs associated with the refinance and payoff of certain mortgages payable prior to maturity. Adjustments also include insurance proceeds related to covered damage of investment property which was not an adjustment included in FFO adjusted in the previous period. Additionally, adjustments include non-recurring general and administrative expenses related to non-real estate industry specific operating transactions.

“FFO adjusted per unit (diluted)” is defined as FFO adjusted for the applicable period divided by the diluted weighted average unit count (including Class B Units, vested RUs and vested DTUs) during the period.

AFFO is defined as FFO adjusted for items such as maintenance capital expenditures, and certain non-cash items such as amortization of intangible assets, and premiums and discounts on debt and investments. AFFO should not be construed as an alternative to consolidated net income (loss) or consolidated cash flows provided by (used in) operating activities determined in accordance with IFRS. The REIT’s method of calculating AFFO is substantially in accordance with REALPAC’s recommendations. The REIT uses a capital expenditure reserve of $75 per lot per year and $1,100 per rental home per year, for the year ending December 31, 2024, ($60 per lot per year and $1,000 per rental home per year, for the year ended December 31, 2023) 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 FFO, FFO per unit, FFO adjusted, FFO adjusted per unit, AFFO, AFFO per unit, AFFO adjusted and AFFO adjusted per unit” for a reconciliation of AFFO to AFFO adjusted to consolidated 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, vested RUs and vested DTUs) during the period.

“AFFO adjusted” is defined as AFFO adjusted for transactions that are not considered recurring measures of economic earnings with the goal of presenting AFFO in a normalized manner that is substantially in accordance with REALPAC’s recommendations. AFFO adjusted may, as transactions occur, include adjustments that were not included in the definition of AFFO adjusted in a previous period but are included in the current period to present AFFO in a normalized manner that is substantially in accordance with REALPAC’s recommendations. For the three and nine months ended September 30, 2024 adjustments include mortgages payable settlement expense, which is comprised of prepayment penalties, defeasance, amortization of financing costs, and other costs associated with the refinance and payoff of certain mortgages payable prior to maturity. Adjustments also include insurance proceeds related to covered damage of investment property which was not an adjustment included in AFFO adjusted in the previous period. Additionally, adjustments include non-recurring general and administrative expenses that are not considered recurring measures of economic earnings.

“AFFO adjusted Payout Ratio” is defined as total cash distributions of the REIT (including distributions on Class B Units) divided by AFFO adjusted.

“AFFO adjusted per unit (diluted)” is defined as AFFO adjusted for the applicable period divided by the diluted weighted average unit count (including Class B Units, vested RUs and vested DTUs) during the period.

The REIT believes these non-IFRS financial measures and ratios provide useful supplemental information to both management and investors in measuring the operating performance, financial performance and financial condition of the REIT. The REIT also uses AFFO and AFFO adjusted in assessing its distribution paying capacity.

Other Real Estate Industry Metrics

Additionally, this news release contains several other real estate industry financial metrics:

• “Acquisitions” means the REIT’s properties, excluding Same Community (as defined below) (i.e., Acquisitions Revenue, as well as Acquisitions net operating income (“NOI”), and Acquisitions NOI Margin (as defined below)), and such measure is 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.

• “Debt to Gross Book Value” is calculated by dividing indebtedness, which consists of the total principal amounts outstanding under mortgages payable, net and credit facilities, by Gross Book Value (as defined below). Refer to section “Calculation of Other Real Estate Industry Metrics – Debt to Gross Book Value.”

• “Gross Book Value” means, at any time, the greater of: (a) the value of the assets of the REIT and its consolidated subsidiaries, as shown on its then most recent consolidated statement of financial position prepared in accordance with IFRS, less the amount of any receivable reflecting interest rate subsidies on any debt assumed by the REIT; and (b) the historical cost of the investment properties, plus (i) the carrying value of cash and cash equivalents, (ii) the carrying value of mortgages receivable; and (iii) the historical cost of other assets and investments used in operations.

• “Liquidity” is defined as (a) cash and cash equivalents, plus (b) borrowing capacity available under any existing credit facilities.

• “Net Asset Value” or “NAV” is calculated by taking unitholders’ equity plus Class B Units. NAV provides an indication of the total value of the REIT's investment properties, after accounting for outstanding mortgages and notes payable. NAV also provides an indication of the changes in the REIT’s overall value resulting from the performance of its assets.

• “Net Asset Value per Unit” or “NAV per Unit” is defined as NAV divided by the total number of units (including Units, Class B Units, vested RUs and vested DTUs) outstanding.

• “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 the first day of the preceding calendar year by the REIT and such measures (i.e., Same Community Revenue, as well as Same Community NOI, Same Community NOI Margin, and Same Community Occupancy) are used by management to evaluate period-over-period performance.

• “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.

• “Weighted Average Mortgage and Note Interest Rate” is calculated by multiplying each mortgages and note’s interest rate by the mortgage and note balance and dividing the sum by the total mortgage and note balance.

• “Weighted Average Mortgage and Note Term” is calculated by multiplying each mortgages and note’s remaining term by the mortgage and note balance and dividing by the sum by the total mortgage balance.

Reconciliation of FFO, FFO per unit, FFO adjusted, FFO adjusted per unit, AFFO, AFFO per unit, AFFO adjusted and AFFO adjusted per unit

Calculation of Other Real Estate Industry Metrics

NOI and NOI Margin

NAV and NAV per Unit

Debt to Gross Book Value

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, objectives and creation of long-term value; the REIT’s intention to continue to expand in its existing operational footprint, increasing its presence in core markets to enhance efficiencies and achieve economies of scale, and target growth markets, the REIT’s intention to convert rental homes to tenant owned homes as opportunities allow; expected sources of funding for future acquisitions and the expected performance of acquisitions; macro characteristics and trends in the United States real estate and housing industry, as well as the manufactured housing community (“MHC”) industry specifically; the REIT’s distribution policy and intended sources of cash therefor; the REIT’s target indebtedness as a percentage of Gross Book Value; the REIT’s intentions with respect to the May 2024 Bridge Note (as defined herein); and the expectations regarding occupancy of added lots and the addition of further lots. 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; further MHC acquisitions by the REIT; the applicability of any government regulation concerning MHCs and other residential accommodations; the availability of debt financing and future interest rates, which continue to be volatile but could see decreases resulting from future Federal Reserve changes; increasing expenditures and fees, in connection with the ownership of MHCs, driven by inflation; 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 or referenced under the heading “Risks and Uncertainties” in the REIT’s most recent annual or interim Management’s Discussion & Analysis. 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. Further, certain forward-looking statements included in this news release may be considered as “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.

Third Quarter 2024 Results Conference Call and Webcast

About Flagship Communities Real Estate Investment Trust

Flagship Communities Real Estate Investment Trust is a leading operator of affordable residential Manufactured Housing Communities primarily serving working families seeking affordable home ownership. The REIT owns and operates exceptional residential living experiences and investment opportunities in family-oriented communities in Kentucky, Indiana, Ohio, West Virginia, Tennessee, Arkansas, Missouri, and Illinois. To learn more about Flagship, visit www.flagshipcommunities.com.

For further information, please contact:

Eddie Carlisle, Chief Financial Officer
Flagship Communities Real Estate Investment Trust
Tel: +1 (859) 568-3390