FLAGSHIP COMMUNITIES REIT TO ACQUIRE TWO MANUFACTURED HOUSING COMMUNITIES IN NORTHERN KENTUCKY FOR US$22.5 MILLION

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TORONTO, May 18, 2022 /CNW/ – Flagship Communities Real Estate Investment Trust (“Flagship” or the “REIT”) (TSX: MHC.U) announced today that it will add two communities to its portfolio with the acquisition of two properties in Florence Kentucky(the “Acquisition”) for a purchase price of approximately $22.5 million. The acquisition is 70% occupied. The acquisition is subject to customary closing conditions and is expected to close on or about May 18, 2022.

“This acquisition is located near our head office in Northern Kentucky and aligns with our strategy to increase our focus in our core states to improve efficiencies and achieve economies of scale,” said Kurt Keney, President and CEO. “These properties are located in highly desirable, high-growth areas and are expected to generate above-market growth over time.”

The purchase price of $22.5 million will be funded by cash on the REIT’s balance sheet.

“This targeted acquisition of two properties adjacent to Northern Kentucky will benefit from our market relationships and our regional management structure,” added Nathan Smith, Director of Investments. “With occupancy rates of 70% to start, we have the opportunity to grow and improve the performance of these communities.”

Overview of the acquisition

Florence Kentucky

The two municipalities located at Florence Kentuckyare adjacent to each other and occupy 70 acres. Florence is the second largest city in Northern Kentuckyand part of the Greater Cincinnati Metropolitan area. Bordered by I‑75/71 and I‑275, Florence is a few minutes from the Greater Cincinnati/Northern Kentucky International Airportand close to the city center Cincinnati.

Workforce: the community is close Northern Kentucky Industrial Park, which is home to dozens of international manufacturers. Major nearby employers include Amazon, GE, St. Elizabeth Health CareDHL, UPSSchwan’s, Fidelity and Boone County School District. Northern Kentucky offers a competitive business climate based on low tax burdens, competitive incentive programs and below average utility costs.

Education: Comprising many public and private K-12 school districts, the acquisition is located nearby University of Northern Kentucky, Thomas More University, Gateway Technical Collegeand 15 minutes from University of Cincinnati and Xavier University.

Pro forma portfolio

The acquisition is a focused and strategic expansion of the REIT’s portfolio, increasing the number of manufactured home communities from 65 to 67 and the number of manufactured home lots from 11,531 to 11,876. The table below provides a summary of the acquisition in progress May 18, 2022.

Acquisition portfolio

# of lots

(#)

345

Land use

(%)

70

AMR Batch

(US DOLLARS$)

$477

On Flagship Communities Real Estate Investment Trust

Flagship Communities Real Estate Investment Trust is an open-ended, unincorporated, internally managed real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT was formed to own and operate a portfolio of income-generating manufactured home communities located in Kentucky, Indiana, Ohio, Tennessee, Arkansas, Illinoisand Missouriincluding a park of prefabricated houses for rent to residents of these housing communities.

Non-IFRS Financial Measures

The REIT uses certain non-IFRS financial measures, including certain real estate industry measures such as FFO, FFO per unit, AFFO, AFFO per unit and Same community, to measure, compare and explain the results of operations, financial performance and financial condition of the REIT. The REIT also uses AFFO to assess its ability to pay for distribution and the REIT 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 to measure 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 supplemental in nature and not a substitute for related financial information prepared in accordance with IFRS.

FFO is defined as consolidated net income under IFRS adjusted for items such as distributions on redeemable or exchangeable units recognized as finance costs under IFRS (including distributions on the B-units, unrealized fair value adjustments to investment properties, loss on extinguishment of acquired mortgages, gain on disposal of investment properties and amortization. The REIT’s FFO calculation method essentially complies 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 AFFO calculation method essentially complies with REALPAC recommendations. The REIT uses a capital expenditure reserve of $60 (dollars/annual) per batch and $1,000 (dollars/annual) per rental unit in the AFFO calculation. This reserve is based on management’s best estimate of the cost that the REIT could incur in connection with the maintenance of the investment properties.

NOI is defined as the total property income (i.e. rental income and other property income) minus the direct operating expenses of the property in accordance with IFRS.

Same community results are the results of MHCs held throughout the applicable period and this measure is used by management to assess the period-over-period performance of investment properties. These results eliminate the impact of disposals or acquisitions of investment properties.

Please refer to the REIT’s MD&A for the period ended March 31, 2021 for details on non-IFRS financial measures, including reconciliations of these measures to normalized 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 REIT’s current expectations regarding future events, including statements regarding the REIT’s expected monthly distributions. In some cases, forward-looking statements may be identified by words such as “may”, “will”, “could”, “occur”, “expect”, “anticipate”, “believe”, “have the ‘intend’, ‘estimate’, ‘target’, ‘plan’, ‘predict’, ‘plan’, ‘continue’, or their negative form or other similar expressions relating to matters which are not historical facts. Important factors and assumptions used by management of the REIT in developing forward-looking information include, but are not limited to, that the REIT will have sufficient liquidity to pay its distributions. Although management considers these assumptions to be reasonable based on information currently available, they may prove to be incorrect.

Although management believes that the expectations reflected in these forward-looking statements are reasonable and represent the REIT’s internal expectations and beliefs at the current time, such statements involve known and unknown risks and uncertainties and may not prove to be accurate. and some strategic objectives and goals may not be achieved. A variety of factors, many of which are beyond the control of the REIT, 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 final prospectus report available under the REIT’s profile at www.sedar.com, including under “Risk Factors”. Readers are cautioned not to place undue reliance on forward-looking statements. Except as required by applicable Canadian securities laws, the REIT undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. after the date on which the statements are made.

THE SOURCE Flagship Communities Real Estate Investment Trust

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