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Second Quarter 2023 Results:
- Rental revenue for the three months ended
June 30, 2023 was$17.4 million , an increase of 21.0% compared to$14.4 million for the three months endedJune 30, 2022 - Same Community Revenue1 for the three months ended
June 30, 2023 was$15.1 million , up 9.1% compared to$13.9 million for the three months endedJune 30, 2022 - Net income and comprehensive income for the three months ended
June 30, 2023 was$21.4 million compared to$26.0 million for the three months endedJune 30, 2022 - Adjusted Funds From Operations ("AFFO") per unit (diluted)2 for the three months ended
June 30, 2023 was$0.260 , an increase of 8.3% compared to$0.240 for the three months endedJune 30, 2022 - Net Operating Income ("NOI") for the three months ended
June 30, 2023 was$11.6 million , up 22.4% compared to$9.5 million for the three months endedJune 30 2022 - Same Community NOI1 for the three months ended
June 30, 2023 was$10.0 million , an increase of 9.4%, compared to$9.2 million for the three months endedJune 30, 2022 - NOI Margin1 for the three months ended
June 30, 2023 was 66.6% compared to 65.9% for the three months endedJune 30, 2022 - Same Community NOI Margin1 for the three months ended
June 30, 2023 was 66.3% compared to 66.1% for the three months endedJune 30, 2022 - Debt to Gross Book Value1 as at
June 30, 2023 was 39.3% compared to 42.9% as atDecember 31, 2022 - Total portfolio occupancy was 83.3% as at
June 30, 2023 , no change compared toDecember 31, 2022 Same Community 1 occupancy increased to 84.9% as atJune 30, 2023 , an increase of 1.3% compared to 83.6% as atJune 30, 2022 , demonstrating the REIT's ability to drive occupancy growth utilizing the home ownership model- Rent Collections1 for the three months ended
June 30, 2023 was 98.9%, up from 98.2% for the three months endedJune 30, 2022 - In
May 2023 , Flagship raised gross proceeds of$3.0 million pursuant to the at-the-market Offering announced inMay 2022 and inJune 2023 , the REIT re-established a$50 million at-the-market equity program, which provides additional financing flexibility should it be required in the future - Acquired three Manufactured Housing Communities ("MHC") in
Indiana ,Arkansas andTennessee , for a purchase price of approximatelyUS$21 million - Following the receipt of the three highest national awards for excellence in manufactured housing by
The Manufactured Housing Institute ("MHI"), Flagship received theKentucky Manufactured Housing Institute's ("KMHI") highest award for Community of the Year for the second consecutive year.
1See "Other Real Estate Industry Metrics" |
2See "Non-IFRS Financial Measures" |
"Flagship continued to demonstrate the merits of its business model with another strong quarter of financial and operating results," said
Financial Summary
($000s except per share amounts) | |||||||||||
For the three | For the three months ended | Variance | For the six | For the six | Variance | ||||||
Rental revenue and related income | 17,379 | 14,363 | 3,016 | 34,137 | 28,056 | 6,081 | |||||
Same Community Revenue1 | 15,147 | 13,888 | 1,259 | 29,999 | 27,425 | 2,574 | |||||
Acquisitions Revenue1 | 2,232 | 475 | 1,757 | 4,138 | 631 | 3,507 | |||||
Net income and comprehensive income | 21,391 | 26,024 | (4,633) | 37,606 | 28,456 | 9,150 | |||||
NOI, total portfolio | 11,578 | 9,460 | 2,118 | 22,696 | 18,718 | 3,978 | |||||
Same Community NOI1 | 10,042 | 9,181 | 861 | 19,833 | 18,395 | 1,438 | |||||
Acquisitions NOI1 | 1,536 | 279 | 1,257 | 2,863 | 323 | 2,540 | |||||
NOI Margin1, total portfolio | 66.6 % | 65.9 % | 0.7 % | 66.5 % | 66.7 % | (0.2) % | |||||
Same Community NOI Margin1 | 66.3 % | 66.1 % | 0.2 % | 66.1 % | 67.1 % | (1.0) % | |||||
Acquisitions NOI Margin1 | 68.8 % | 58.7 % | 10.1 % | 69.2 % | 51.2 % | 18.0 % | |||||
FFO2 | 6,233 | 5,434 | 799 | 12,136 | 10,999 | 1,137 | |||||
FFO Per Unit2 | 0.297 | 0.277 | 0.020 | 0.594 | 0.561 | 0.033 | |||||
AFFO2 | 5,468 | 4,716 | 752 | 10,621 | 9,572 | 1,049 | |||||
AFFO Per Unit2 | 0.260 | 0.240 | 0.020 | 0.520 | 0.488 | 0.032 | |||||
AFFOPayout Ratio2 | 53.7 % | 55.7 % | (1.9) % | 53.6 % | 54.8 % | (1.2) % | |||||
Weighted average units (Diluted) | 21,019,096 | 19,631,420 | 1,387,676 | 20,413,979 | 19,619,342 | 794,637 | |||||
1. See "Other Real Estate Industry Metrics" 2. See "Non-IFRS Financial Measures" | |||||||||||
Financial Overview
Rental revenue and related income in the second quarter of 2023 was
Same Community Revenues of
Net income and comprehensive income for the three months ended
NOI for the second quarter of 2023 was
NOI Margins and Same Community NOI Margins were 66.6% and 66.3% in the second quarter of 2023, an increase of 0.7% and 0.2% compared to the three months ended
AFFO for the second quarter of 2023 was
Rent Collections for the second quarter of 2023 were 98.9%, an increase from 98.2% from the three months ended
In
As of
Operations Overview
During the second quarter 2023, Flagship acquired three communities in
After being recognized by The MHI with the three highest national awards for excellence in manufactured housing, in
The 2023 KMHI award recipient, Mosby's Pointe, is a 251-lot community located in Northern Kentucky. The community was recognized for its considerable transformation during the year, in which Flagship added an outdoor recreation center, including a state-of-the-art municipal grade playground and equipment, two basketball courts, soccer field and a paved walking trail.
As at
As of | As of | ||
Total communities | (#) | 73 | 69 |
Total lots | (#) | 13,407 | 12,601 |
Weighted Average Lot Rent1 | (US$) | 415 | 388 |
Total Portfolio Occupancy | ( %) | 83.3 | 83.1 |
Same Community Occupancy | ( %) | 84.9 | 83.62 |
Debt to Gross Book Value1 | ( %) | 39.3 | 42.9 |
Weighted Average Mortgage Interest Rate1 | ( %) | 3.78 | 3.78 |
Weighted Average Mortgage Term1 | (Years) | 11.2 | 11.7 |
1. See "Other Real Estate Industry Metrics" 2. As of |
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.
- "Debt to Gross Book Value" is calculated by dividing indebtedness, which consists of the total principal amounts outstanding under mortgages payable and credit facilities, by Gross Book Value (as defined below). Refer to section "Calculation of Other Real Estate Industry Metrics – Debt to Gross Book Value".
- "Gross Book Value" means, at any time, the greater of: (a) the value of the assets of the REIT and its consolidated subsidiaries, as shown on its then most recent consolidated statement of financial position prepared in accordance with IFRS, less the amount of any receivable reflecting interest rate subsidies on any debt assumed by the REIT; and (b) the historical cost of the investment properties, plus (i) the carrying value of cash and cash equivalents, (ii) the carrying value of mortgages receivable; and (iii) the historical cost of other assets and investments used in operations.
- "Liquidity" is defined as (a) cash and cash equivalents, plus (b) borrowing capacity available under any existing credit facilities.
- "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 Interest Rate" is calculated by multiplying each mortgage's interest rate by the mortgage balance and dividing the sum by the total mortgage balance.
- "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 | For the six months | For the six months |
Net income and comprehensive income | 21,391 | 26,024 | 37,606 | 28,456 |
Adjustments to arrive at FFO | ||||
Depreciation | 97 | 66 | 185 | 133 |
Fair value adjustments - Class B units | (4,191) | (24,821) | (241) | (21,637) |
Distributions on Class B units | 784 | 732 | 1,552 | 1,462 |
Fair value adjustment – investment properties | (11,791) | 3,512 | (26,954) | 2,662 |
Fair value adjustment – unit based compensation | (57) | (79) | (12) | (77) |
Funds from Operations ("FFO") | 6,233 | 5,434 | 12,136 | 10,999 |
FFO per Unit (diluted) | 0.297 | 0.277 | 0.594 | 0.561 |
Adjustments to arrive at AFFO | ||||
Accretion of mark-to-market adjustments on mortgage payable | (258) | (258) | (515) | (515) |
Capital Expenditure Reserves | (507) | (460) | (1,000) | (912) |
AFFO | 5,468 | 4,716 | 10,621 | 9,572 |
AFFO per Unit (diluted) | 0.260 | 0.240 | 0.520 | 0.488 |
Calculation of Other Real Estate Industry Metrics
NOI and NOI Margin
($000s) | For the three months | For the three months | For the six months | For the six months |
Rental revenue and related income | 17,379 | 14,363 | 34,137 | 28,056 |
Property operating expenses | 5,801 | 4,903 | 11,441 | 9,338 |
NOI | 11,578 | 9,460 | 22,696 | 18,718 |
NOI Margin | 66.6 % | 65.9 % | 66.5 % | 66.7 % |
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
Second Quarter 2023 Results Conference Call and Webcast
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