EXPANDS FOOTPRINT INTO NASHVILLE, TENNESSEE

ENTERS EIGHTH NEW U.S. STATE OF WEST VIRGINIA

ANNOUNCES US$60 MILLION PUBLIC EQUITY OFFERING

Not for distribution to U.S. newswire services or dissemination in the United States.

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.

Story continues

“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.”

Overview of Acquisitions

Nashville MSA

The Madison, Tennessee acquisition comprises 300 lots across approximately 38 acres and is located 13 miles north of downtown Nashville. It is within close proximity to malls, sports and medical facilities, golf courses, schools and entertainment, and is situated along the Cumberland River. The community is 67% occupied, including 6 rental homes. Community amenities include a playground, basketball court, clubhouse, and a community center. Nearby employers include Epic Systems, American Family Insurance, American Girl, Sub-Zero, Trek Bicycle, Lands’ End, Shopbop, Colony Brands and John Deere. The community sits near the interchange of Interstate 40 and 65 and is approximately a 20-minute drive to downtown Nashville.

The Murfreesboro, Tennessee acquisition comprises 173 lots across approximately 26 acres and is located 35 miles south of downtown Nashville. It is within close proximity to local supermarkets, restaurants, the municipal airport, universities and athletic centers. The community is approximately 99% occupied. Community amenities include a basketball court, clubhouse and greenery surrounded gazebo. Major employers in the community include Nissan Automotive, National Healthcare Corporation, State Farm Insurance, Amazon and St. Thomas Rutherford Hospital. The community sits near the interchange of Interstate 24 and is approximately a 30-minute drive to downtown Nashville.

Morgantown, West Virginia (2 Communities)

The Morgantown, West Virginia acquisitions comprise 2 communities. The first community comprises 187 lots across approximately 33 acres and is 88% occupied including 4 rental homes. The second community comprises 203 lots across approximately 41 acres and is 81% occupied including 102 rental homes. Both communities are centrally located in Morgantown along the Monongahela River, near Morgantown Municipal Airport, as well as nearby attractions including several golf courses, West Virginia University campus and Art Museum, Hazel Ruby McQuain Riverfront Park, Mountaineer Field, and West Virginia Coliseum. The communities are located adjacent to Interstates 79 and 68, providing excellent access to major transportation routes. Major employers include West Virginia University, Target, WVU Medicine, Mylan INC, IBM, Viatris, US Army, AT&T and Wipro.

Milton, West Virginia (Huntington MSA)

The Milton, West Virginia acquisition comprises 213 lots across approximately 33 acres. It is located 15 miles east of Huntington, West Virginia, within a quiet, well-maintained neighborhood near schools, shopping centers, hospitals, entertainment and more. The community is 66% occupied, including 21 rental homes. This community offers residents many amenities including a new playground, a clubhouse equipped with a full kitchen and billiards. The community is located adjacent to Interstate 64, providing excellent access to major transportation routes. Nearby employers include Mountain Health Network, Marshall University, Cabell County Board of Education, University Physicians & Surgeons, Walmart, Huntington Alloys Corp., Alcon Research LLC and Steel of West Virginia Inc.

Beckley, West Virginia (2 Communities)

The Beckley, West Virginia acquisitions comprise 2 communities. The first community comprises 120 lots across approximately 15 acres and is 87% occupied including 12 rental homes. The second community comprises 57 lots across approximately 14 acres and is 68% occupied including 7 rental homes. Both communities are well-maintained offering residents well-lit, paved streets and are centrally located, with easy access to schools, hospitals, post offices, doctors’ offices, shopping malls, movie theaters, restaurants and outdoor activities. The communities are located adjacent to Interstates 64 and 77, providing excellent access to major transportation routes. Nearby employers include Filter Companies, Lowe’s Home Improvement, McDonald’s, US Army, Enterprise, IBEX Global, AT&T and UPS.

Pro Forma Portfolio

The Acquisitions are a targeted and strategic expansion of the REIT’s portfolio, increasing the number of Flagship’s MHCs to 82 from 75 and the number of manufactured housing lots to 15,033 from 13,780. The table below provides a summary of the pending Acquisitions as of April 17, 2024.

Equity Financing

The REIT also announced today that it has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and Canaccord Genuity Corp. (together, the “Lead Underwriters”) to sell, on a bought deal basis, 3,910,000 Units at a price of US$15.35 per Unit for gross proceeds of approximately US$60 million (the “Offering”). The REIT has also granted the underwriters an over-allotment option to purchase up to an additional 15% of the Offering on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering. The Offering is expected to close on or about April 24, 2024 and is subject to customary conditions, including the approval of the Toronto Stock Exchange. The Offering is not conditional upon closing of either of the Acquisitions.

The REIT intends to use the net proceeds from the Offering to fund (i) the Purchase Price (ii) capital expenditures, which are expected to be approximately US$10 million, in connection with the Acquisitions and (iii) for general business purposes. In the event the REIT is unable to consummate one or both of the Acquisitions and the Offering is completed, the REIT intends to use the net proceeds of the Offering to fund future acquisitions and for general business purposes.

The Offering is being made pursuant to the REIT’s base shelf prospectus dated June 7, 2023. The terms of the Offering will be described in a prospectus supplement to be filed with Canadian securities regulators.

The Units have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the “1933 Act”) and may not be offered, sold or delivered, directly or indirectly, in the United States, except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Units in the United States.

Forward-Looking Statements

This press 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 terms of, timing for completion of and source of funding for the Acquisitions, the expected synergies from the Acquisitions, the expected impact of the Acquisitions and the Offering on the REIT’s Debt-to-Gross Book Value Ratio, the expected impact of the Acquisitions on the REIT’s AFFO per Unit (diluted), the expected impact of the Acquisitions on the REIT’s long-term leverage target, the REIT’s pro forma portfolio, the REIT’s growth opportunities (including organic growth potential), the scalability of the REIT’s platform, the REIT’s acquisitions strategy and expectations regarding economies of scale and operational synergies, the terms of and timing for completion of the Offering and the intended use of the net proceeds of the Offering.

These statements are based on the REIT’s expectations, estimates, forecasts, and projections, as well as assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies that could cause actual results to differ materially from those that are disclosed in such forward-looking statements. While considered reasonable by management of the REIT as at the date of this news release, any of these expectations, estimates, forecasts, projections, or assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations, estimates, forecasts, projections, or assumptions could be incorrect. Material factors and assumptions used by management of the REIT to develop the forward-looking information in this news release include, but are not limited to, that the conditions to closing of the Acquisitions will be met or waived in a timely manner and that both of the Acquisitions will be completed on the current agreed upon terms. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as they are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, such as the risks identified in the REIT’s management’s discussion and analysis for the year ended December 31, 2023 available on the REIT’s profile on SEDAR+ at www.sedarplus.com, including, but not limited to, the factors discussed under the heading “Risks and Uncertainties” therein and the risk of the REIT’s plans with respect to debt bridge financing for the Acquisitions not being achieved as anticipated. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Forward-looking statements are made as of the date of this press release and, except as expressly required by applicable Canadian securities laws, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-IFRS Financial Measures

In this press release, the REIT uses certain financial measures that are not defined under International Financial Reporting Standards (“IFRS”) including certain non-IFRS ratios. 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. 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.

Adjusted Funds from Operations

Adjusted funds from operations (“AFFO”) is calculated in accordance with the definition provided by the Real Property Association of Canada (“REALPAC”). AFFO is defined as Funds From Operations (being IFRS consolidated net income (loss) adjusted for items such as distributions on redeemable or exchangeable units (including distributions on class B units of the REIT’s subsidiary, Flagship Operating, LLC (“Class B Units”)), unrealized fair value adjustments to Class B Units, unrealized fair value adjustments to investment properties, unrealized fair value adjustments to unit based compensation, loss on extinguishment of acquired mortgages payable, gain on disposition of investment properties, and depreciation) 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 $60 per lot per year and $1,000 per rental home per year 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. The REIT uses AFFO in assessing its distribution paying capacity.

“AFFO per Unit (diluted)” is defined as AFFO for the applicable period divided by the diluted weighted average Unit count (including Class B Units, vested restricted units and vested deferred trust units) during the period.

Please refer to the REIT’s management’s discussion and analysis for the year ended December 31, 2023 at “Non-IFRS Financial Measures – Funds from Operations and Adjusted Funds from Operations” for further detail on this non-IFRS financial measure and at “Reconciliation of FFO, FFO per Unit, AFFO and AFFO per Unit” for a reconciliation of historical AFFO to consolidated net income (loss), which disclosures are incorporated by reference into this press release.

Other Real Estate Industry Metrics

Debt to Gross Book Value Ratio

Debt to Gross Book Value Ratio is calculated by dividing indebtedness, which consists of the total principal amounts outstanding under mortgages payable and credit facilities, by Gross Book Value (being, 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).

About Flagship Communities Real Estate Investment Trust

Flagship Communities Real Estate Investment Trust is a leading operator of affordable residential Manufactured Housing Communities primarily serving working families seeking affordable home ownership. The REIT owns and operates exceptional residential living experiences and investment opportunities in family-oriented communities in Kentucky, Indiana, Ohio, Tennessee, Arkansas, Missouri, and Illinois. To learn more about Flagship, visit www.flagshipcommunities.com.

For further information, please contact:

Eddie Carlisle, Chief Financial Officer
Flagship Communities Real Estate Investment Trust
Tel: +1 (859) 568-3390