Flagship Communities REIT To Acquire a Manufactured Housing Community for US$5.3 Million

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TORONTO, May 12, 2021 /CNW/ - Flagship Communities Real Estate Investment Trust ("Flagship" or the "REIT") (TSX: MHC.U) announced today that it has completed the acquisition of a manufactured housing community in Little Rock, AR (the "Acquisition") for a purchase price of approximately US$5.3 million. The Acquisition is 76.6% leased currently and is expected to be immediately accretive to the REIT's adjusted funds from operations ("AFFO") on a per unit basis. 

The purchase price of US$5.3 million will be funded with cash on the REIT's balance sheet. The REIT's pro forma debt to gross book value ("GBV" – see "Non-IFRS Financial Measures" below) following the Acquisition is expected to be ~47.1%.

"Building on our active pipeline of accretive acquisitions (seven new communities in December 2020 and three in February 2021), the Little Rock acquisition is another great addition to our portfolio and expands the REIT's footprint in our core markets," said Kurt Keeney, President and Chief Executive Officer. "Adhering to our stated acquisition strategy, the Acquisition enables the REIT to expand its presence into the attractive market of Little Rock, AR and is immediately accretive to the REIT's AFFO per unit with additional above market growth over time."

"We are pleased to source and successfully execute another off-market acquisition through our long-standing industry relationships," commented Nathan Smith, Chief Investment Officer. "This acquisition provides an entry opportunity into Arkansas while creating management synergies with nearby existing communities in southwestern Kentucky."

Overview of the Acquisition

• Little Rock, AR: The suburban Little Rock acquisition comprises 167 lots and provides access to top-rated schools in the Pulaski County Special School District and features walkable neighborhoods with easy access to Highway 107, parks, playgrounds, sports courts, a swimming pool, and community center. Adjacent to Lake Pickthorne, the community is located within five minutes of Holland Bottoms State Wildlife Preserve which provides camping, hiking, and fishing opportunities. As the capital and most populous city of Arkansas, Little Rock is a cultural, economic, government, and transportation center. Little Rock sits on the banks of the Arkansas River at the crossroads of Interstate 30 and Interstate 40. Large national corporations such as Dillard's (fashion apparel and home furnishing retailer) and Windstream (cloud-optimized network solution provider) are headquartered in Little Rock, AR.

Pro Forma PortfolioThe Acquisition is a targeted and strategic expansion of the REIT's portfolio, increasing the number of manufactured housing communities from 54 to 55 and the number of manufactured housing lots from 8,793 to 8,960. The table below provides a summary of the Acquisition as of May 12,2021.

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, Tennessee and Arkansas; including a fleet of manufactured homes for lease to residents of such housing communities.

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 press release contains statements that include forward-looking information within the meaning of Canadian securities laws. These forward-looking statements reflect the current expectations of the REIT regarding future events, including statements concerning the intended monthly distributions of the REIT. In some cases, forward-looking statements can be identified by terms such as "may", "will", "could", "occur", "expect", "anticipate", "believe", "intend", "estimate", "target", "project", "predict", "forecast", "continue", or the negative thereof or other similar expressions concerning matters that are not historical facts. Material factors and assumptions used by management of the REIT to develop the forward-looking information include, but are not limited to, the REIT having sufficient cash to pay its distributions. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.

Although management believes the expectations reflected in such forward-looking statements are reasonable and represent the REIT's internal expectations and beliefs at this time, such statements involve known and unknown risks and uncertainties and may not prove to be accurate and certain objectives and strategic goals may not be achieved. A variety of factors, many of which are beyond the REIT's control, could cause actual results in future periods to differ materially from current expectations of events or results expressed or implied by such forward-looking statements, such as the risks identified in the REIT's final prospectus available under the REIT's profile at www.sedar.com, including under the heading "Risk Factors" therein. Readers are cautioned against placing undue reliance on forward-looking statements. Except as required by applicable Canadian securities laws, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made.

SOURCE Flagship Communities Real Estate Investment Trust