/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
Community2
|
9,507
|
8,262
|
1,245
|
Revenue,
Acquisitions2
|
2,685
|
42
|
2,643
|
Net Income and
Comprehensive Income, Total Portfolio
|
53,451
|
47,338
|
6,113
|
NOI, Total
Portfolio1
|
8,199
|
5,497
|
2,702
|
NOI, Same Community2
|
6,300
|
5,472
|
828
|
NOI, Acquisitions2
|
1,899
|
25
|
1,874
|
NOI Margin, Total
Portfolio1
|
67.2%
|
66.2%
|
1.0%
|
NOI Margin, Same Community2
|
66.3%
|
66.2%
|
0.1%
|
NOI Margin, Acquisitions2
|
70.7%
|
58.5%
|
12.2%
|
Funds from Operations
("FFO")1
|
4,614
|
2,697
|
1,917
|
FFO Per
Unit1
|
0.263
|
0.220
|
0.043
|
Adjusted Funds from
Operations ("AFFO")1
|
3,920
|
2,227
|
1,693
|
AFFO Per
Unit1
|
0.223
|
0.182
|
0.041
|
AFFO Payout
Ratio1
|
59.8%
|
67.0%
|
(7.2%)
|
1 A
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 $8.2 million.
As of December 31, 2021, the REIT
had 63 total communities and 11,328 lots. The table below
provides a summary of Flagship REIT's portfolio for the three
months ended December 31, 2021
compared to the period of October 7,
2020 through December 31,
2020:
|
|
|
As of
December
31, 2021
|
As of
December
31, 2020
|
Total
communities
|
|
(#)
|
63
|
52
|
Total lots
|
|
(#)
|
11,328
|
8,634
|
Weighted Average Lot
Rent1
|
|
(US$)
|
369
|
352
|
Occupancy1
|
|
(%)
|
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