/NOT FOR DISTRIBUTION TO
First Quarter 2023 Results:
- Rental revenue for the three months ended
March 31, 2023 was$16.8 million , an increase of 22.4% compared to$13.7 million for the three months endedMarch 31, 2022 - Same Community Revenue1 for the three months ended
March 31, 2023 was$14.9 million , up 9.7% compared to$13.5 million for the three months endedMarch 31, 2022 - Net income and comprehensive income for the three months ended
March 31, 2023 was$16.2 million compared to$2.4 million for the three months endedMarch 31, 2022 - Adjusted Funds From Operations ("AFFO") per unit (diluted)2 for the three months ended
March 31, 2023 was$0.260 , an increase of 4.8% compared to$0.248 for the three months endedMarch 31, 2022 - Net Operating Income ("NOI") for the three months ended
March 31, 2023 was$11.1 million , up 20.1% compared to$9.3 million for the three months endedMarch 31, 2022 - Same Community NOI1 for the three months ended
March 31, 2023 was$9.8 million , an increase of 6.3%, compared to$9.2 million for the three months endedMarch 31, 2022 - NOI Margin1 for the three months ended
March 31, 2023 was 66.3% compared to 67.6% for the three months endedMarch 31, 2022 - Same Community NOI Margin1 for the three months ended
March 31, 2023 was 65.9% compared to 68.1% for the three months endedMarch 31, 2022 - Debt to Gross Book Value1 as at
March 31, 2023 was 40.0% compared to 42.9% as atDecember 31, 2022 - Total portfolio occupancy was 83.4% as at
March 31, 2023 , no change compared toDecember 31, 2022 Same Community 1 occupancy increased to 84.0% as atMarch 31, 2023 , an increase of 1.1% compared to 82.9% as atMarch 31, 2022 , demonstrating the REITs ability to drive occupancy growth utilizing the home ownership model- Rent Collections1 for the three months ended
March 31, 2023 was 99.7%, up from 99.0% for the three months endedMarch 31, 2022 - During the first quarter 2023, Flagship raised gross proceeds of
$20 million through the issuance of 1,176,471 Units at a price of$17.00 per Unit pursuant to the at-the-market Offering ("ATM") announced inMay 2022 . The net proceeds from the exercise of the ATM Issuance will be used by the REIT to fund future acquisitions and for general business purposes - Acquired a 20-acre, high-quality MHC in
Austin, Indiana that included 94 developed lots and 26 lots for additional expansion, totaling 120 MHC homesites for approximately$2.0 million by the issuance of 120,598 Class B units byFlagship Operating, LLC , a subsidiary of the REIT from a related party,Empower Park, LLC - Subsequent to quarter-end, acquired three Manufactured Housing Communities ("MHC") in
Indiana ,Arkansas andTennessee , for a purchase price of approximatelyUS$21 million - Received three of the
Manufactured Housing Institute's highest national awards for excellence in manufactured housing including: Land Lease Community Operator of the Year, Retail Sales Center of the Year for theEastern U.S. and Community Impact of the Year for efforts associated withGrandin Pointe - Published third annual Environmental, Social and Governance ("ESG") report, which outlines Flagship's commitments to its unitholders, employees, and communities through initiatives on renewable energy, education, household amenities, and resident well-being
1See "Other Real Estate Industry Metrics" |
2See "Non-IFRS Financial Measures" |
"The positive momentum that we generated in 2022 has carried into the first quarter of 2023, which saw notable increases in both rental revenue and
Financial Summary
($000s except per share amounts) | |||
For the three | For the three months ended | Variance | |
Rental revenue and related income | 16,758 | 13,693 | 3,065 |
Same Community Revenue1 | 14,852 | 13,537 | 1,315 |
Acquisitions Revenue1 | 1,906 | 156 | 1,750 |
Net income and comprehensive income | 16,215 | 2,433 | 13,782 |
NOI, total portfolio | 11,118 | 9,258 | 1,860 |
Same Community NOI1 | 9,790 | 9,214 | 576 |
Acquisitions NOI1 | 1,328 | 44 | 1,284 |
NOI Margin1, total portfolio | 66.3 % | 67.6 % | (1.3) % |
Same Community NOI Margin1 | 65.9 % | 68.1 % | (2.2) % |
Acquisitions NOI Margin1 | 69.7 % | 28.2 % | 41.5 % |
FFO2 | 5,903 | 5,565 | 338 |
FFO Per Unit2 | 0.298 | 0.284 | 0.014 |
AFFO2 | 5,153 | 4,856 | 297 |
AFFO Per Unit2 | 0.260 | 0.248 | 0.012 |
AFFO Payout Ratio2 | 53.4 % | 54.0 % | (0.6) % |
Weighted average units (Diluted) | 19,802,146 | 19,607,130 | 195,016 |
1. See "Other Real Estate Industry Metrics" 2. See "Non-IFRS Financial Measures" |
Financial Overview
Rental revenue and related income in the first quarter of 2023 was
Same Community Revenues of
Net income and comprehensive income for the three months ended
NOI for the first quarter of 2023 was
The increase in NOI was primarily driven by the REIT's Acquisitions, lot rent growth and cost containment efforts.
NOI Margins and Same Community NOI Margins decreased over the same period due to property tax increases, staffing changes and increased repairs and maintenance pertaining to weather-related events.
AFFO for the first quarter of 2023 was
Rent Collections for the first quarter of 2023 were 99.7%, an increase from 99.0% from the three months ended
During the first quarter 2023, Flagship raised gross proceeds of
As of
Operations Overview
During the first quarter 2023, Flagship agreed to acquire a 20-acre, high-quality MHC in
Located just 35 miles from the
As a testament to the REIT's mission of bringing high quality, affordable communities to market, coupled with the dedication of its team, Flagship was the recent recipient of three of the
Flagship also recently published its third ESG Report (the "Report"), which is available on its website at https://flagshipcommunities.com/investor-relations/sustainability-report/. The Report highlights Flagship's commitments to its unitholders, employees, and communities through initiatives on renewable energy, education, household amenities, and resident well-being. The Report also includes details on Flagship's water conservation and renewable energy solar programs, its diversified staff and
As at
As of | As of | ||
Total communities | (#) | 70 | 69 |
Total lots | (#) | 12,743 | 12,601 |
Weighted Average Lot Rent1 | (US$) | 418 | 388 |
Total Portfolio Occupancy | ( %) | 83.4 | 83.1 |
Same Community Occupancy | ( %) | 84.0 | 82.9 |
Debt to Gross Book Value1 | ( %) | 40.0 | 42.9 |
Weighted Average Mortgage Interest Rate1 | ( %) | 3.78 | 3.78 |
Weighted Average Mortgage Term1 | (Years) | 11.4 | 11.7 |
1. See "Other Real Estate Industry Metrics" |
Subsequent to quarter-end, Flagship acquired three communities in
Outlook
Flagship believes the REIT is well positioned amidst the current inflationary economic environment, higher rental rates and rising mortgage rates that are making traditional, stick-built homes more difficult to obtain in the
Flagship maintains a positive outlook for the MHC industry and believes it offers significant upside potential to investors. This is primarily due to the MHC industry's consistent track record of historical outperformance relative to other real estate classes and the lack of supply of new manufactured housing communities given the various layers of regulatory restrictions, competing land uses and scarcity of land zoned, which has created high barriers to entry for new market entrants.
Other macro and MHC industry-specific characteristics and trends that support Flagship's positive outlook include:
- Increasing household formations;
- Lower housing and rental affordability;
- Declining single-family residential homeownership rates;
Non-IFRS Financial Measures
In this news release, The REIT uses certain financial measures that are not defined under International Financial Reporting Standards ("IFRS") including certain non-IFRS ratios, to measure, compare and explain the operating results, financial performance and cash flows of the REIT. 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.
Funds from Operations and Adjusted Funds from Operations
Funds from operations ("FFO") and adjusted funds from operations ("AFFO") are calculated in accordance with the definition provided by the
FFO is defined as IFRS consolidated net income (loss) adjusted for items such as distributions on redeemable or exchangeable units recorded as finance cost under IFRS (including distributions on the Class
Refer to section "Reconciliation of FFO, FFO per Unit, AFFO and AFFO per Unit" for a reconciliation of FFO to AFFO to consolidated net income (loss).
"FFO per Unit (diluted)" is defined as FFO for the applicable period divided by the diluted weighted average Unit count (including Class
AFFO is defined as FFO adjusted for items such as maintenance capital expenditures, and certain non-cash items such as amortization of intangible assets, and premiums and discounts on debt and investments. AFFO should not be construed as an alternative to consolidated net income (loss) or consolidated cash flows provided by (used in) operating activities determined in accordance with IFRS. The REIT's method of calculating AFFO is substantially in accordance with REALPAC's recommendations. The REIT uses a capital expenditure reserve of
"AFFO Payout Ratio" is defined as total cash distributions of the REIT (including distributions on Class
The REIT believes these non-IFRS financial measures and ratios provide useful supplemental information to both management and investors in measuring the operating performance, financial performance and financial condition of the REIT. The REIT also uses AFFO in assessing its distribution paying capacity.
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 sinceJanuary 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 ; andSame 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
- "Weighted Average Mortgage Term" is calculated by multiplying each mortgage's remaining term by the mortgage balance and dividing by the sum by the total mortgage balance.
Reconciliation of Non-IFRS Financial Measures
FFO, FFO Per Unit, AFFO and AFFO per Unit
($000s, except per unit amounts) | For the three months | For the three months |
Net income and comprehensive income | 16,215 | 2,433 |
Adjustments to arrive at FFO | ||
Depreciation | 88 | 67 |
Fair value adjustments - Class B units | 3,950 | 3,184 |
Distributions on Class B units | 768 | 730 |
Fair value adjustment – investment properties | (15,163) | (851) |
Fair value adjustment – unit based compensation | 45 | 2 |
Funds from Operations ("FFO") | 5,903 | 5,565 |
FFO per Unit (diluted) | 0.298 | 0.284 |
Adjustments to arrive at AFFO | ||
Accretion of mark-to-market adjustments on mortgage payable | (257) | (257) |
Capital Expenditure Reserves | (493) | (452) |
AFFO | 5,153 | 4,856 |
AFFO per Unit (diluted) | 0.260 | 0.248 |
Calculation of Other Real Estate Industry Metrics
NOI and NOI Margin
($000s) | For the three months | For the three months |
Rental revenue and related income | 16,758 | 13,693 |
Property operating expenses | 5,640 | 4,435 |
NOI | 11,118 | 9,258 |
NOI Margin | 66.3 % | 67.6 % |
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 strategy and creation of long-term value; the REIT's intention to continue to expand, including on a clustered basis and newly-entered geographies, and to convert rental homes to tenant owned homes as opportunities allow; expected sources of funding for future acquisitions; macro characteristics and trends in
First Quarter 2023 Results Conference Call and Webcast
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