FLAGSHIP COMMUNITIES REIT TO ACQUIRE TWO NORTHERN KENTUCKY MANUFACTURED HOUSING COMMUNITIES FOR US$22.5 MILLION

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TORONTO, May 18, 2022 /CNW/ – Flagship Communities Real Estate Investment Trust ("Flagship" or the "REIT") (TSX: MHC.U) announced today that it will acquire two communities to its portfolio with the acquisition of two properties in Florence Kentucky, (the "Acquisition") for a purchase price of approximately US$22.5 million. The Acquisition is 70% occupied. The Acquisition is subject to customary closing conditions and is expected to close on or about May 18, 2022. 

"This acquisition is located near our corporate headquarters in Northern Kentucky and aligns with our strategy to increase our concentration in our core states to enhance efficiencies and achieve economies of scale," said Kurt Keeney, President and Chief Executive Officer. "These properties are located in highly desirable, high growth areas and are expected to generate above-market growth over time."

The purchase price of US$22.5 million will be funded with cash on the REIT’s balance sheet.

"This bolt-on acquisition of two adjacent properties in Northern Kentucky will benefit from our market connections and regional management structure," added Nathan Smith, Chief Investment Officer. "With 70% occupancy rates at the outset, we have the opportunity to grow and make improvements to the performance of these communities."

Overview of the Acquisition

Florence Kentucky

The two communities located in Florence Kentucky, are adjacent to each other and occupy 70 acres. Florence is the second-largest city in Northern Kentucky, and part of the Greater Cincinnati Metropolitan Area. Bordered by I‑75/71 and I‑275, Florence is minutes from the Greater Cincinnati/Northern Kentucky International Airport, and just a stone’s throw from downtown Cincinnati.

Workforce: The community is near Northern Kentucky Industrial Park, home to dozens of international manufacturers. Major nearby employers include Amazon, GE, St. Elizabeth Healthcare, DHL, UPS, Schwan’s, Fidelity and Boone County School District. Northern Kentucky offers a competitive business climate built on low tax burdens, competitive incentive packages and below-average utility costs.

Education: Including many public and private K-12 school districts, the Acquisition is located near Northern Kentucky University, Thomas More University, Gateway Technical College, and 15 minutes from the University of Cincinnati and Xavier University.

Pro Forma Portfolio

The Acquisition is a targeted and strategic expansion of the REIT’s portfolio, increasing the number of manufactured housing communities from 65 to 67 and the number of manufactured housing lots from 11,531 to 11,876. The table below provides a summary of the pending Acquisition as of May 18, 2022.

 

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, Illinois, and Missouri, 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