/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE
SERVICES OR DISSEMINATION IN THE UNITED
STATES./
TORONTO, May 9, 2022
/CNW/ - Flagship Communities Real Estate Investment Trust
("Flagship" or the "REIT") (TSX: MHC.U) today released its results
for the three months ended March 31,
2022 ("Q1"). 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 First Quarter 2022 Results:
Financial Highlights
- Revenue was $13.7 million,
approximately $4.0 million higher
than Q1 2021
- Same Community Revenue[1] was $10.1
million, an increase of $0.6
million from Q1 2021
- Net Income and Comprehensive Income was $2.4 million, a $4.2
million decrease from Q1 2021
- Net Operating Income ("NOI") was $9.3
million, an increase of $2.8
million from Q1 2021
- Same Community NOI1 was $6.9
million, an increase of $0.5
million from Q1 2021
- NOI Margin1 increased to 67.6%, compared to 66.7%
for Q1 2021
- Funds from Operations[2] ("FFO") were $5.6 million or $0.284 per unit, compared to $3.5 million and $0.276 per unit in Q1 2021
- Adjusted Funds from Operations2 ("AFFO") were
$4.9 million or $0.248 per unit, compared to $3.0 million and $0.239 per unit in Q1 2021
- Same Community Occupancy1 was 81.3% as of
March 31, 2022, compared to 80.8% as
of December 31, 2021
- Rent Collections1 for the three months ended
March 31, 2022, were 99.0%, up
slightly compared to 98.8% for the three months ended March 31, 2021, and consistent with prior
periods
Operating Highlights
- On February 15, 2022, the REIT
acquired a 13-acre manufactured housing resort community in
northern Ohio, through its
strategic relationship with Empower Park LLC. The community
consists of 100 lots with 99% occupancy and a 141 boat slip
marina.
- On April 27, 2022, subsequent to
quarter-end, the REIT acquired a manufactured housing community in
southern Illinois. The community
consists of 103 lots and is 89% occupied.
- On April 11, 2022, the REIT's
Waterford Pointe community in Evansville,
Indiana, was named Land-Lease Community of the Year by the
Manufactured Housing Institute.
Financial Summary
($000s except per
share amounts)
|
|
|
For the three
months ended
March 31, 2022
|
For the
three
months
ended
March 31,
2021
|
Variance
|
Revenue, Total
Portfolio
|
13,693
|
9,649
|
4,044
|
Revenue, Same
Community1
|
10,074
|
9,454
|
620
|
Revenue,
Acquisitions1
|
3,619
|
195
|
3,424
|
Net Income and
Comprehensive Income, Total Portfolio
|
2,433
|
6,631
|
(4,198)
|
NOI, Total
Portfolio
|
9,258
|
6,440
|
2,818
|
NOI,
Same Community1
|
6,854
|
6,406
|
448
|
NOI,
Acquisitions1
|
2,404
|
34
|
2,370
|
NOI Margin1,
Total Portfolio
|
67.6%
|
66.7%
|
0.9%
|
NOI
Margin1, Same Community1
|
68.0%
|
67.8%
|
0.2%
|
NOI
Margin1, Acquisitions1
|
66.4%
|
17.7%
|
48.7%
|
FFO2
|
5,563
|
3,498
|
2,065
|
FFO Per
Unit2
|
0.284
|
0.276
|
0.008
|
AFFO2
|
4,854
|
3,028
|
1,826
|
AFFO Per
Unit2
|
0.248
|
0.239
|
0.008
|
AFFO Payout
Ratio2
|
54.0%
|
53.3%
|
0.7%
|
1.
See "Other Real Estate Industry Metrics"
for more information.
2.
A non-IFRS financial measure. See
"Non-IFRS Financial Measures" for more information.
|
"The results of the first quarter of 2022 reflect the continuing
success of our strategy to leverage our expertise and optimize the
operating performance of the portfolio while adding accretive
acquisitions," said Kurt Keeney,
President and CEO of the REIT. "Going forward, we see multiple
opportunities to increase our concentration in our core states
while building a presence in adjacent regions to increase our
diversity."
Financial Performance Overview
Revenue of $13.7 million in the
first quarter of 2022 was approximately $4.0
million higher than the prior period, primarily driven by
acquisitions and lot rent increases and occupancy increases across
the portfolio.
Net Income and Comprehensive Income was $2.4 million, a $4.2
million decrease from the prior period as a result of the
significantly larger fair value gain on investment properties for
the three months ended March 31,
2021, compared to the same period in 2022. In addition, the
fair value loss on class B units of the REIT's subsidiary, Flagship
Operating, LLC ("Class B Units"), was larger in Q1 2022 compared to
the prior period. These variances were somewhat offset by NOI being
$2.8 million higher in 2022.
NOI and NOI Margin for the first quarter of 2022 was
$9.3 million and 67.6%, respectively,
which is $2.8 million and 0.9% higher
than the prior period. These increases were primarily driven by the
REIT's accretive acquisition strategy during 2021, as well as lot
rent growth and occupancy growth.
AFFO and AFFO per Unit were $4.9
million and $0.248 per unit, a
60.3% and 3.8% increase, respectively, from the prior period. The
increase was primarily driven by the REIT's accretive acquisition
strategy during 2021 and continued Same Community NOI growth. Same
Community Revenues in Q1 2022 exceeded Q1 2021 by $0.6 million. This increase was driven by lot
rent increases implemented during the period and occupancy growth
throughout the year. Cost containment efforts also helped
contribute to the positive results. Continued focus on labor
efficiencies throughout the communities and water and sewer savings
positively impacted property operating expenses.
Same Community Occupancy of 81.3% increased by 0.5% as of
March 31, 2022, compared to
December 31, 2021. The consistent and
growing occupancy rate reflects the REIT's commitment to resident
satisfaction and ensuring its communities are desirable
locations.
Rent Collections for Q1 2022 were 99.0%, which was a slight
increase from 98.8% in Q1 2021 and consistent with prior periods,
further demonstrating the strength and predictability of the MHC
sector.
On March 24, 2022, the REIT
borrowed $9.3 million, for which one
MHC was the collateral. The interest rate on the note is 4.37%,
fixed for 30 years, with the first 180 monthly payments being
interest only.
On April 13, 2022, subsequent to
quarter end, the REIT borrowed $18.0
million, for which one MHC was the collateral. The interest
rate on the note is 3.80%, fixed for 20 years, with the first 60
monthly payments being interest only. These funds will be used to
fund future acquisitions and for general business
purposes.
As of December 31, 2021, Flagship
REIT's total cash and cash equivalents were $15.1 million with no near-term debt
obligations.
Operations Overview
In the first quarter of 2022, the REIT added 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 approximately $8.2 million.
Subsequent to quarter-end, the REIT added a second Illinois community in suburban
Springfield, Illinois, for a
purchase price of approximately $6.25
million. The community has 103 lots and 74 rental homes with
89% occupancy.
As at March 31, 2022, the REIT
owned a 100% interest in a portfolio of 64 MHCs with 11,454 lots.
The table below provides a summary of the REIT's portfolio for the
three months ended March 31, 2022,
compared to the period of March 31,
2021:
|
|
As of March 31,
2022
|
As of March 31,
2021
|
Total
communities
|
(#)
|
64
|
54
|
Total lots
|
(#)
|
11,454
|
8,793
|
Weighted Average Lot
Rent1
|
(US$)
|
385
|
361
|
Occupancy
|
(%)
|
83.1
|
80.2
|
1.
See "Other Real Estate Industry Metrics"
below
|
Outlook
The 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 the following
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.
The REIT believes that macro characteristics and trends in
the United States real estate and
housing industry and the MHC industry specifically offer investors
significant upside potential. These characteristics and trends
include:
- Increasing household formations;
- Lower housing affordability;
- Declining single-family residential homeownership rates;
- Lack of new manufactured housing supply.
- The REIT believes it is well-positioned to benefit from these
residential real estate and housing industry dynamics.
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, 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 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 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, AFFO per Unit
($000s, except per
unit amounts)
|
For the three months
ended
March 31, 2022
|
For the three months
ended
March 31, 2021
|
Net income and
comprehensive income
|
2,433
|
6,631
|
Adjustments to
arrive at FFO
|
|
|
Depreciation
|
67
|
33
|
Fair value
adjustments-Class B units
|
3,184
|
2,282
|
Distributions on Class B units
|
730
|
693
|
Fair value
adjustment – investment properties
|
(851)
|
(6,193)
|
Transaction costs
|
-
|
52
|
FFO
|
5,563
|
3,498
|
FFO per Unit
(diluted)
|
0.284
|
0.276
|
Adjustments to
arrive at AFFO
|
|
|
Accretion
of mark-to-market adjustments on
mortgage payable
|
(257)
|
(257)
|
Capital
Expenditure Reserves
|
(452)
|
(213)
|
AFFO
|
4,854
|
3,028
|
AFFO per Unit
(diluted)
|
0.248
|
0.239
|
Calculation of Other Real Estate Industry Metrics
NOI and NOI Margin
($000s)
|
For the three months
ended
March 31, 2022
|
For the three months
ended
March 31, 2021
|
Rental revenue and
related income
|
13,693
|
9,649
|
Property operating
expenses
|
4,435
|
3,209
|
NOI
|
9,258
|
6,440
|
NOI
Margin
|
67.6%
|
66.7%
|
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 under "Outlook" and plans for acquisitions. 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 and that the items listed under "Outlook" continue to
be true. 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 annual information form and
management's discussion and analysis ("MD&A") for the year
ended December 31, 2021 or any
subsequently filed interim MD&A, in each case available under
the REIT's profile at www.sedar.com, including under the heading
"Risk Factors" or "Risk and Uncertainties" 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.
First Quarter 2022 Results Conference Call and
Webcast
DATE:
|
Tuesday, May 10,
2022
|
TIME:
|
8:30 a.m. ET
|
DIAL-IN
NUMBER:
|
647-427-7450 or
1-888-231-8191
|
CONFERENCE
ID:
|
2976425
|
LIVE
WEBCAST:
|
https://flagshipcommunities.com/investor-relations/presentations-and-events/
|
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, Arkansas, Illinois and Missouri, including a fleet of manufactured
homes for lease to residents of such housing communities.
_________________________
|
1 See "Other
Real Estate Industry Metrics" for more information.
|
2 A non-IFRS
financial measure. See "Non-IFRS Financial Measures" for more
information.
|
SOURCE Flagship Communities Real Estate Investment Trust