MHC.U Flagship Communities Real Estate Investment Trust

Flagship Communities Real Estate Investment Trust (the “REIT” or “Flagship”) (TSX:MHC.U) announced today that it has waived conditions on the acquisition of three high-quality manufactured housing communities (“MHCs”) from two separate vendor groups comprising 957 lots for an aggregate purchase price of approximately US$56.8 million (collectively, the “Acquisitions”). The Acquisitions are subject to customary closing conditions and are expected to close in December 2021.

The purchase price of approximately US$56.8 million is expected to be funded primarily with the net proceeds from the REIT’s US$40.4 million offering of trust units (“Units”) (see “Equity Financing” below), with the balance to be funded with cash on hand. The REIT's pro forma Debt to Gross Book Value Ratio (see “Non-IFRS Financial Measures” below) following the Acquisitions and the Offering is expected to be approximately 40.0% (prior to any exercise of the over-allotment option). The Acquisitions, together with the Offering, are expected to be immediately accretive to the REIT’s adjusted funds from operations ("AFFO") per Unit on a leverage neutral basis.

“We are continuing to grow our geographic footprint near existing communities, applying our successful business model with new strategic acquisitions,” said Kurt Keeney, President and Chief Executive Officer. “These acquisitions are in line with our disciplined growth strategy and have significantly enhanced our portfolio and presence in key markets. The Acquisitions allow Flagship to continue to consolidate existing markets, providing the REIT with above market growth opportunities over time.”

Highlights of the Acquisitions

• Increased Size and Scale: The Acquisitions add three communities and 957 lots to our portfolio. Together with the other acquisitions completed since the REIT’s initial public offering (the “IPO”), the REIT’s pro forma portfolio totals 63 communities comprising 11,328 lots, representing an approximate 37% increase in the number of lots.
• Further Consolidation of Existing Markets: The Acquisitions are indicative of the REIT’s ability to continue consolidating its operating footprint within existing markets. The REIT intends to continue sourcing acquisitions in Arkansas and Kentucky as well as other adjacent markets with a focus on strategically expanding the REIT’s contiguous portfolio.
• Operating Platform Synergies and Economies of Scale: The REIT has successfully expanded its portfolio and is well-positioned to further benefit from its scalable management platform going forward. The REIT intends to continue its growth by sourcing acquisitions in existing and adjacent markets which are expected to generate significant economies of scale and operational synergies.
• Improved Leverage Profile: Following the completion of the Acquisitions and the Offering, the REIT’s Debt to Gross Book Value Ratio is expected to be approximately 40.0% (prior to any exercise of the over-allotment option) compared to 49.6% following completion of the IPO and 42.0% as at September 30, 2021.
• Accretive to AFFO per Unit: The Acquisitions, together with the Offering, are expected to be immediately accretive to the REIT’s AFFO per unit on a leverage neutral basis.

"These stable, high performing communities are an excellent addition to our portfolio, and we are excited to have sourced them off-market through our long-standing industry relationships," commented Nathan Smith, Chief Investment Officer. "Furthermore, we are strengthening our existing footprint in Lexington and Little Rock, where Flagship already has a meaningful and growing presence. These new properties are in great locations in highly desirable areas within our target markets and provide the REIT with operating economies of scale."

Overview of the Acquisitions

• Lexington, KY: The Lexington acquisition comprises 546 lots across approximately 71 acres and is within close proximity to two post-secondary institutions (University of Kentucky and Transylvania University), state parks, popular eateries and major entertainment attractions including the Kentucky Horse Park. The community is currently 92.6% occupied, with no rental homes in the community. The community is approximately 10 minutes away from North Park Marketplace which features a Walmart Supercenter, popular restaurants and numerous retailers. Local attractions, such as the Explorium of Lexington, State Botanical Garden of Kentucky and Waveland State Historic Site, are located within ~8 miles of the community. The community sits near both Interstate 64 and Highway 421 and is minutes away from downtown Lexington. The acquisition is in the heart of the REIT’s prominent Kentucky footprint, near other existing communities (Adams Pointe, Cherry Hill Pointe and Bradbury Pointe).
• Bryant, AR: The Bryant acquisition comprises 327 lots across approximately 97 acres and is located ~20 miles southwest of downtown Little Rock, AR. The community is within close proximity to the Bryant public school district, necessity-based retailers including Walmart and Dollar Tree and two hospitals (Saline Memorial Hospital and Arkansas Heart Hospital). The community is currently 98.0% occupied, including 31 rental homes. The community is located adjacent to Interstate 30, providing excellent access to major transportation routes which connect with major regional metropolitan areas and is also within close proximity to recreational areas including state parks. The Bryant acquisition is within a 20-minute drive to the REIT’s existing community, Lakeside Estates, in Little Rock, AR.
• Bald Knob, AR: The Bald Knob acquisition comprises 84 lots across approximately 29 acres and is within close proximity to Harding University, Bald Knob High School and H L Lubker Elementary School. The community is currently 56.0% occupied, including 8 rental homes with the potential for abundant occupancy growth supported by significant employment opportunities and strong demographic drivers. The community sits near Highways 167 and 67, which conveniently connect the community to Bald Knob sports complex and two nearby shopping centers among other local retail destinations.

Summary of Recent Investment Activity

Following the IPO in October 2020, the REIT has completed or announced the acquisition of 18 communities, including the Acquisitions, for an aggregate purchase price of approximately US$172.5 million, increasing Flagship’s portfolio from 45 communities, comprising 8,255 lots to 63 communities, comprising 11,328 lots. The table below provides a summary of completed and announced acquisitions as of November 11, 2021.

	Type	Purchase Price (US$mm)		# of Communities	# of Lots
Evansville, Paducah, Cincinnati	MHCs	$12.9		7	379
Shepherdsville, Bowling Green	MHCs & Land	$6.1		2	159
Little Rock	MHC	$5.3		1	167
Anderson	MHC	$13.9		1	175
St. Louis	MHC	$52.5		1	502
Evansville	Land	$0.3		n.a.	n.a.
Springfield	MHC	$16.3		1	231
Northern Kentucky, Central Ohio	RV Resorts	$8.4		2	467
Lexington	MHC	$36.0		1	546
Bryant	MHC	$20.4		1	327
Bald Knob	MHC	$0.4		1	84
Total		$172.5		18	3,037

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, 2,100,000 Units at a price of US$19.25 per Unit for gross proceeds of approximately US$40.4 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 November 18, 2021 and is subject to customary conditions, including the approval of the Toronto Stock Exchange. The Offering is not conditional upon closing of the Acquisitions.

The REIT intends to use the net proceeds from the Offering to fund the purchase price of the Acquisitions and for general business purposes. In the event the REIT is unable to consummate any of the Acquisitions and the Offering is completed, the REIT would 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 May 7, 2021. 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.

About Flagship Communities Real Estate Investment Trust

Flagship Communities Real Estate Investment Trust is a newly created, 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, Illinois, Arkansas, 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.

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 September 30, 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 Acquisitions, including the closing and timing thereof, as well as the expected impact of the Acquisitions on the REIT and potential for further acquisitions and the location thereof. 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 that the closing conditions to the Acquisitions are met or waived in a timely manner and that the anticipated impacts of the Acquisition are realized. 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 annual information form 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.

For further information, please contact:

Eddie Carlisle, Chief Financial OfficerFlagship Communities Real Estate Investment TrustTel: +1 (859) 568-3390