Flagship Communities Real Estate Investment Trust Announces Largest Acquisition in the REIT’s History

EXPANDS FOOTPRINT INTO NASHVILLE, TENNESSEE

ENTERS EIGHTH NEW U.S. STATE OF WEST VIRGINIA

ANNOUNCES US$60 MILLION PUBLIC EQUITY OFFERING

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TORONTO, April 17, 2024 (GLOBE NEWSWIRE) -- Flagship Communities Real Estate Investment Trust (“Flagship” or the “REIT”) (TSX: MHC.U; MHC.UN) today announced that it has entered into agreements to acquire (the “Acquisitions”) a total of seven manufactured housing communities (“MHCs”), comprising 1,253 lots, for an aggregate purchase price of approximately US$93.0 million (the “Purchase Price”). The Acquisitions are expected to close on or about May 15, 2024, subject to customary closing conditions.  

The Purchase Price, along with approximately US$10 million of upfront capital expenditures, will be funded with the net proceeds from the REIT’s US$60 million offering of trust units (“Units”) (see “Equity Financing” below) and the remainder funded with new debt financing. The Purchase Price represents an attractive capitalization rate of 5.6% on Year 1 forecasted net operating income (“NOI”), and is expected to be accretive to the REIT’s adjusted funds from operations per Unit (diluted) (“AFFO”, see “Non-IFRS Financial Measures” below) on a leverage neutral and stabilized basis.

“These acquisitions are the largest in the REIT’s history to date and represent a milestone for our business as we continue to execute on our stated growth strategy,” said Kurt Keeney, President and CEO. “This is a generational opportunity to strategically expand our footprint into the adjacent Nashville market, as well as establish a presence in West Virginia, both markets that enable us to maximize existing synergies and leverage economies of scale.”

Transaction Highlights

• Increased Size and Scale: Enhances Flagship’s scale, with the REIT’s pro forma portfolio consisting of 82 communities comprising 15,033 lots
• Expansion into New Markets: The Acquisitions strengthen the REIT’s presence in Tennessee while entering the core Nashville market, which is one of the fastest growing markets in the U.S. The Acquisitions also expand the REIT’s operations into West Virginia, which represents the REIT’s eighth contiguous U.S. state, and provide significant growth opportunities to become a market leading owner in these markets
• Organic Growth Potential: Organic cash flow growth generated by the REIT’s active lot leasing and home sales strategy, along with the implementation of expense optimization initiatives, are expected to generate stable, recurring and above market organic growth
• Attractive Cost Basis: The Purchase Price represents a 5.6% capitalization rate based on year 1 NOI and a price per lot of approximately US$74,000
• Operating Platform Synergies & Economies of Scale: The REIT continues to expand its portfolio without material incremental corporate level expenses and is well-positioned to further benefit from its scalable platform going forward. The REIT intends to continue its growth by sourcing acquisitions in existing and adjacent markets which are expected to generate economies of scale and operational synergies
• Accretion & Leverage Profile: The completion of the Acquisitions is expected to be accretive on a stabilized and leverage neutral basis to the REIT’s long-term leverage target. Additionally, following the completion of the Acquisitions and the Offering, the REIT’s Debt to Gross Book Value Ratio (see “Other Real Estate Industry Metrics” below) is expected to be 39.4% (prior to any exercise of the over-allotment option) compared to 49.6% following completion of the IPO.

“We are excited to have sourced more off-market acquisitions through our long-standing industry relationships, providing the ability to establish a presence in Nashville, as well as West Virginia,” said Nathan Smith, Chief Investment Officer. “The Acquisitions are comprised of high-quality properties that adhere to our acquisition criteria and also provide the opportunity to expand our presence into Nashville, one of the fastest growing cities in the U.S., strategically located along the I-40 and I-65 Interstate corridors, within easy driving distance to employment opportunities, hospitals, schools, shopping and recreational facilities.”