Flagship Communities Real Estate Investment Trust

Hello, ladies and gentlemen. Thank you for standing by. Welcome to the Flagships Community's REIT Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. Following the presentation, we will hold a brief question and answer session for analysts and institutional investors. I would like to remind everyone that this conference call is being recorded. Today's presenters are Kurt Keeney, Flagship's President and Chief Executive Officer, Nathan Smith, Chief Investment Officer, and Eddie Carlyle, Chief Financial Officer. Please note that the comments made on today's call may contain forward-looking information, and this information, by its nature, is subject to risk and uncertainties. Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on CDAR. These documents are also available on Flagship's website at FlagshipCommunities.com. Flagship has also prepared a corresponding PowerPoint presentation, which encourages you to follow along with during this call. And now I'll pass the call over to Kurt Keeney. Kurt?

Thank you, operator. Good morning, everyone. Thank you for joining us today. Our performance in 2024 to date has been strong, and we continue to demonstrate the merits of our business model through the improvement of our key metrics. Rental revenue this quarter increased by 22% over the same period last year. Same community revenue was up nearly 11% over the same period last year. And our FFO and AFFO grew by 27% and 29%, respectively, over last year. In addition to our solid results, the second quarter of 2024 was especially noteworthy because we completed the REIT's largest acquisition in our history during the quarter. We acquired seven MHCs, strengthening our existing footprint in Tennessee by entering Nashville, one of the fastest growing markets in the US. We also formed a foothold in our new market, West Virginia, with five distinct locations within the state. West Virginia is the eighth contiguous US state where we will operate. The integration of these acquisitions has already begun and are within our expectations. Also during the quarter, flagship raised gross proceeds of approximately $60 million, which were used to partially fund this acquisition. We are well positioned to continue executing our growth strategy by strengthening our balance sheet and maintaining a low cost debt profile. Since going public in 2020 of October, the REIT has grown every year. We began with 45 MHCs comprising of 8,255 lots across four states. Today, following the completion of our recent acquisition, the REIT owns 80 MHCs with over 14,000 lots across eight US states, as well as two RV resort communities with 470 lots. The ability to grow annually, complete transformational acquisition and generate strong financial results speaks to the strength of our business model and the fundamentals of the MHC industry, which continues to demonstrate a consistent track record of strong performance, regardless of the economic cycle. Manufactured homes remain a very appealing and cost-effective option for many Americans. Our customers enjoy homes that are detached structures that do not share walls, utilities, air conditioning or heating with any other homes. The homes include two, three and four bedrooms, typically with two bathrooms. They have a deck, yard, driveway and in-home laundry facilities, all for less than the cost of renting an apartment. Our mission is to provide affordable housing and exceptional residential living experiences in our family-oriented manufactured housing communities. We work hard every day to provide our residents with a -in-class living experience, both from an affordability and an environmentally responsible perspective. And we are always pleased when these efforts are recognized by our industry. In June, we were awarded the Retailer of the Year and Retail Salesperson of the Year by the Kentucky Manufactured Housing Institute. We also were honored with the Community of the Year Award for the third consecutive year in Kentucky. This year's award featured our White Pine Point community. A 345-lot community is an amazing turnaround story. In a short span of 15 months, we helped transform the community by installing a brand new clubhouse, a municipal-grade playground, pickleball court, dozens of new homes, along with street paving and new solar lighting. These awards are outstanding achievements and we are thrilled to welcome new and diverse homeowners into the community. I will now turn it over to Nathan to provide more details on our recent acquisitions. Nathan?

Thanks, Kurt. Good morning, everyone. Acquisitions of new communities have always been a big part of flagship success, and this quarter was no exception. As one of the Midwest region's largest MHC operators, we can leverage our nearly 30 years of operating experience to source off-market opportunities through longstanding industry relationships. And that was the case with our recent Tennessee and West Virginia acquisition. While this acquisition was the largest in our history, it is one of many that we have successfully completed in our short time as a public reach. We continue to grow our top line revenue, which reflects how we have successfully ramped up and integrated the acquisitions we have completed over the past number of years. We also continue to perform well on a same community basis, which shows our ability to optimize our existing portfolio. But despite our growth, our approach has remained the same. We are not interested in growth for growth sake, which it comes to acquisitions. We stick to our plan, which is as follows. First, we're looking for opportunities that will be accretive to our AFFO per unit. Second, we are seeking opportunities that will enable us to leverage management synergies and generate economies of scale. And finally, we're seeking acquisition targets within our current markets or adjacent US states where we currently operate with similar regulatory framework and characteristics as existing markets within our portfolio. This framework helps us achieve slow and measured growth, which allows us to establish a platform to acquire adjacent properties within our existing markets, just as we did with Nashville and West Virginia. We have a proven operating strategy and we are well positioned within the MHC industry, which is primarily comprised of local owner operators. The top 50 MHC investors are estimated to control approximately 17% of the 4.3 million manufactured housing lots in the United States. There also continues to be a limited supply of new manufactured housing communities, given the various layers of regulatory restrictions, competing land uses and lack of land zones, which creates high barriers to entry. I'll now turn it over to Eddie, our CFO, to talk about our financial performance for the quarter. Eddie? Thanks, Nathan. Good morning,

everyone. We generated revenue of $21.2 million during the second quarter, which was up .2% over the same period last year, primarily due to lot rent increases and occupancy increases across the portfolio. Same community revenues of $18.9 million for the second quarter grew by approximately $1.8 million over the comparable period last year. This increase was driven by higher monthly lot rents, as well as growth in same community occupancy and increased utility revenues. Net operating income and NOI margin were $14.1 million and .2% respectively, compared to $11.6 million and .7% during the second quarter of 2023. Same community NOI margin for the second quarter was 65.7%, which was a decrease over the same period last year. The decrease in NOI margins were driven by increased staffing levels in 2024, as well as increased cost related to property taxes and maintenance items. AFFO for the second quarter of 2024 was $7 million, an increase of .5% from the second quarter of 2023. AFFO per unit was 29 cents, an increase of 12% from the same period last year. AFFO adjusted, which is defined as AFFO adjusted for transactions that are not considered recurring measures of economic earnings, was $6.6 million for the second quarter of 2024, a 21% increase compared to the same period last year. AFFO adjusted per unit was 28 cents, a .2% increase compared to the same period in 2023. FFO for the second quarter of 2024 was $7.9 million, an increase of .4% from the second quarter of 2023. FFO per unit was 33 cents, an increase of 11% from the same period last year. FFO adjusted for the second quarter of 2024 was $7.5 million, an increase of approximately 21% from the second quarter of last year. FFO adjusted per unit was 31 cents, a .7% increase compared to the same period in 2023. Same community occupancy of 85% increased over the same period last year, which continues to reflect our commitment to resident satisfaction and ensuring our communities are in desirable locations. As at June 30, our total lot occupancy was 83.9%, and our average monthly lot rent was $447. Both of these metrics were within our expectations. We remain committed to preserving a conservative debt profile. Our weighted average mortgage term to maturity is 9.6 years, and our weighted average mortgage interest rate is 4.4%, as at June 30. We had total liquidity, which is comprised of cash, cash equivalent, and available capacity on our lines of credit of approximately $24 million. The REIT currently has 24 unencumbered investment properties with a total fair value of $115 million, as at June 30, 2024. With that, I'll now turn it back over to Kurt for some final

remarks. Kurt? Thanks, Eddie. The recent acquisitions and our strong financial position following our refinancing measures sets us up well to have a great second half of the year. We expect to continue our growth trajectory as housing prices, high monthly rental rates, and mortgage rate increases have the potential to lead more people towards manufactured housing because our homes remain at an affordable price point. The majority of our residents have steady jobs or they are retired and receiving social security, disability, or pensions. The interest rates of our customers have not changed substantially, and their credit underwriting remains available. We ended the quarter with rent collections of 98.7%, and we continue to grow our monthly lot rents and occupancy. All of these metrics speak to the strength and the quality of our residents and the predictability and consistency of the MHC sector. We certainly thank you for your time today, and I will now open up the line for questions.

Ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star one one again. Once again, if you have a question or comment at this time, please press star one one on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Frank Liu from BMO Capital Markets. Mr. Liu, your line is open.

Thank you all, Peter, and good morning, guys. Thanks for taking my question. Good morning. Good morning, Frank. Good morning, guys. First of all, congrats on the strong quarter. Thank you. Just want to touch on the expansion side. You added additional 81 lots. Are you looking to adding rental homes and gradually get back to the ownership model? And do you see similar expansion opportunities across your portfolio?

Yeah, we were pretty pleased to add the 81 lots. We've always said that we do, we call this build and fill. So this isn't a new strategy for us. We probably over the next year, we'll add about 200 lots total in what we would call build and fill. The first 81 went online. And we'll do this still through, primarily through home ownership. We may have a little bit of increase in the home rental fleet, but I wouldn't think that it's going to be crazy substantial. We're going to continue to sell those rental homes off as well. So you may look at the, I don't think the rental fleet will go down, but I don't look for it to go up by two times or anything like that. Got it. So

stay with the ownership model.

Yes.

Little

slower, but the quality attendance is really good.

I hear. Just on the 400,000 insurance proceeds, I'm just curious with the weather related damage limited to one community, and do you expect additional proceeds coming the following quarters?

I'll answer part of that. It was limited to one community primarily, but Eddie, you want to answer the second part of that question?

Yeah, absolutely. So yes, we do expect some additional proceeds. So we had some damage to one of the resort communities wind damage. You'll see more proceeds coming in Q3. And again, it's really just the cost of replacing some of the structures that were damaged. The IFRS just requires that those proceeds are recorded as other income. So that's why you see it there and why we back it out.

Frank, it was Glacier Lake Resort. And it's fully backed up and running, and people are having a great experience again. So we're just thankful nobody got hurt.

Oh,

that's

good. I mean, is this just cover off the, sorry, just following on the insurance procedures, just cover off a partially loss of income and some infrastructures?

So this isn't the loss of income piece. The loss of income piece runs through just normal revenue. And because that's kind of a normal course of business, obviously we wouldn't back that out. This is generally just the rebuilding of structures, and the proceeds that we receive from that through the insurance company. I see,

thank you. And lastly, on the, just a quick modeling question on the utility recapture. I see the recapture rate came down again slightly to below 100% now. Do you expect this figure to continue to trend down to call it like low 90% range through 2025?

I don't, I expect it to stay closer to 100%. We had some of the results from the, from weather where we had worked with some utility companies and tried to get some recapture that didn't quite come through in Q2. So that was the biggest piece of the issue, but I'll say you will see that recover kind of through the second half of the year. Great,

thanks guys. I'll turn it back. Thanks very much. Have a good weekend. Thanks, nice talking to you.

Thank you. Our next question or comment comes from the line of Mark Rosschild from Canaccord. Mr. Rosschild, your line is open.

Thanks, and good morning. Maybe, hey, following up on it, just a comment regarding the site you bring online. Now this is separate from the 15% or so vacancy that you have from the existing portfolio, which you've been chipping away at over the past couple of years. Can you maybe just talk about the sites we're bringing sites online? How much can you move that over the next few years and how do they relate to each other maybe?

Yeah, I think our build and fill expansion is just where we have the opportunities and as we get into the high 90% of the community that we're talking about, that's kind of the gating item. So if the community that we're talking about is 90% or greater and we have the ability to expand, and we've got about 300 acres that we can do this on over the course of time, we just don't wanna get over our skis and put too many lots on the ground. So again, I think that that'll be, that's kind of the gating item on it and we don't wanna change the business model, but if we're 90, 95% and we can expand, we will start to do build and fill expansions, typically in 50 lot increments. This one was 81 because that's what the site kind of dictated. You couldn't just bring 50 lots on, you had to bring all 81 on at one time. And we were glad to do it. This is a nice way to build shareholder value over time, give us some additional juice.

Good, I understand, fine, good. So I guess for some of the sites, you'll be bringing our new communities, you'll bring our new sites and then for some of them, you will just continue to chip away at the vacancy.

So it just gives you more room for growth.

Correct,

right, right. No, we'll

chip

away at the vacancy and push them up to the mid 90s and be glad to do it.

Fine, I assume you're still busy integrating and working on the recently acquired properties, but you did issue more equity than you needed and brought leverage down. How do you think about what your comfort level is with using the balance sheet now to grow with additional acquisitions and will use that capacity over the next year or maybe just connected with this? You had spoken about terming out the financing or fixing the financing on the recently acquired properties with the moving rates. Is that something that you would maybe push on sooner or is that the later this year?

I'll answer the first half and then I'll turn the data back over to Eddie. But I think right now we've got plenty of dry powder. We don't have any reason to issue additional equity. In the foreseeable future, we've got nice leverage profile. So I think here again, first work of order is exactly what you said, which is fix the small amount of debt that we have floating. So Eddie, you wanna talk to that and then we can finish the question.

Yes, yeah, absolutely. I mean, that was always kind of the thought process when we did the bridge note at time of acquisition was that we'd come back and we'd exceed some help in Q4 or maybe Q1 next year on the rates. So I've actually already started discussions about fixing the debt on that additional $40 million. Rates and spreads have certainly started to move our way. I'd look for probably that to get done sometime, maybe during Q4 and maybe early in the Q1 next year. But I think that if rates do what we expect them to do, Q3 and into Q4, we'll probably get something locked in Q4. Certainly, that's been our strategy and will always be our strategy, which is long-term fixed rate debt because of the timeline of the closing of the last acquisition, we weren't able to do that. But I think it's actually gonna play to our advantage because I think the rates are surely moving in a way that we want to see them and we'll be able to lock it in at a better rate.

So maybe just lastly, clarifying that point, the transaction carried with it a decent amount of vacancy, which meant that it wouldn't be accretive right away. Does the move in rates, how much of that would that impact your return that you expect or maybe the timing of this transaction becoming more accretive? Do you have any numbers on that?

Yeah, so what I'd tell you is, obviously depending on where we lock in. So right now rates haven't moved enough to move that significantly from where we had modeled it. But it'll really just depend on if we see the rate cuts, if the bed cuts start in Q3, Q4 and how deep those go. I'll tell you that any kind of rate that we're able to lock in, kind of below 6%, certainly will increase how fast we can get the deals accretive. So yes, I do think it will have an impact and I think we'll certainly be able to get that deal more accretive sooner based on the rates moving in our direction. Okay, great, thanks so much.

Thanks, Mark. Good talk again. Thank

you. Our next question or comment comes from the line of Brad Sturgis from Raymond James. Mr. Sturgis, your line is now open.

Hey, good morning. Morning, Brad.

Morning, Brad.

Just following up on Mark's line of questions there, just on integrating the new portfolios that you've acquired and particularly focused on the lease up potential, I guess you're a few months into the integration process now, but how are new home sales trending? And I think you had potentially set aside some capex to add some rental homes. I guess at this point, where do you stand on using that budget for rental homes to maybe help push occupancy or are you feeling more confident, I guess, about new home sales that maybe you don't need as much of a budget for the rental home fleet?

You know, we just got there. We're about two months in. And so the good news is the homes have arrived, which is a feat within itself to be that far in front of it. So we've actually got homes on site. So I would look for the, and Nathan has secured the licenses that are needed, which we were very proud of that timeline too. So I think right now it's kind of as planned. And again, we'll do a balance. We'd always love to sell the home first. A couple of the locations we needed to put some rental homes in to change some curb appeal because we needed to move the curb appeal up a little faster and kind of turn the asset a little bit. So, you know, again, I think all of that's underway right now. I'm optimistic that we won't need as much in the capex on the rental homes right now, given what we're seeing over time. But it's really pretty early. We're in the first inning. But right now what I'd say is the game's going really well. We're really pleased.

Okay, and

maybe to circle back to the expansion discussion there, you know, obviously it's at a park that had pretty high occupancy. I'm just, I'm curious if, you know, what would be the assumed kind of occupancy lease up potential or timeline. And how do you think about when you are executing on an expansion, is there a return profile that you're expecting to achieve by making that incremental investment?

You know, this particular one, Brad, was a pretty low barrier to entry. We had most of the infrastructure work done here, and we had had it done for a while. And so this one has very low, it has very low expenditure to turn these lots on. So I think the truth is we turned 81 lots on, and, you know, we think that we'd probably do on average, you know, one and a half, two units a month until they're leased up. We normally wouldn't have put 81 on a build and fill all online at one time. But again, this particular site kind of dictated that. But we've got really low incremental development costs to turn these lots on. So it's really gonna be pretty creative from just from a fill perspective, even though it takes two or three years to kind of fully fill it up.

Is there any challenges, I guess, because of the infrastructure in place, you would have already have the zoning in place as well. I'm just, I'm curious if there's any nuances around, you know, getting incremental density in terms of from a zoning perspective on the build and fill strategy.

Yeah, no, that's kind of the gift of the build and fill strategy is the zoning entitlements are normally already there. We do have a couple of sites within the portfolio that we're working on some entitlement issues and we look to have some nice news to results from that. But again, it's not gonna be anything different than what I've already talked about that, you know, over the next year, you know, I think there's probably a couple hundred lots we can put on the ground. And, you know, we can put a lot on the ground for about $20,000. And it was much lower than that in the case of the 81 lots. But when you can put a lot on the ground, when you're hitting 90, 95%, you can put a lot on the ground for 20,000 bucks. That's an accretive moment for the shareholders.

Okay, great, I'll turn it back, thank you.

Thank you. Our next question or comment comes from the line of Alexander Leon from Desjardins Capital Markets. Mr. Leon, your line is open.

Good morning, gents, and congrats on a solid quarter. Thank you. My first question is on this 81 lot. So just curious if you can maybe identify the community in Kentucky that this is relating to. It was in southern Indiana, it was Amberley Point. Okay, great, thanks for that. Just curious on the theme that you're talking about, the 15% same property off-ex growth this quarter, was there anything non-recurring included in that? And maybe also the repairs associated with the insurance, 400,000 insurance proceeds that you guys received this quarter? I'm just wondering if that impacted the RNM, included in that figure. Eddie, you wanna jump in?

Yeah, absolutely. So Alex, the biggest part of that off-ex growth, and again, it was kind of two components, first being property taxes. So when we do acquisitions, depending on what state the acquisitions are in, really depends on the rate at which it gets reassessed and revalued, and then it's the increase in property taxes. In the case of a few of the acquisitions that were completed in 2022, they were on a cycle to get reassessed in 2024. So we saw some pretty good property tax increases in a few of those communities. Now, they were all within our expectations. When we modeled it, when we were doing the accretion modeling and trying to make sure that we wanted to do the acquisition, we pretty much know what that increase is going to be at time of purchase. So it wasn't a surprise, but certainly it did affect when you look at year over year because they hadn't been reassessed when you could look at the comparable periods in the prior year. The other piece was really in staffing. As everyone knows, it's been a challenge, certainly through 2023, just getting staffing levels back where we need them to go. And so we've kind of got staffing back at a good level. Hiring is, I think, kind of back to somewhat normal in our markets. So we've been able to do that. So those are two kind of the bigger components. But yes, there were some repairs and maintenance expenses at the Glacier Hill points location where we had to use additional labor as part of the cleanup from the storm. Certainly the 400,000 is non-recurring. I say non-recurring. We'll see some additional in Q3 and maybe even into Q4, but wouldn't expect that, I just think, to continue beyond that.

I appreciate that commentary. That was great. Maybe the last one, a little bit of a nitpicky question, but it was just on the rent collections. Those were down 20 basis points year over year. I realize that's not a big movement, but just curious, given the economic backdrop is softening, if there's anything to maybe read into there or maybe said differently, if you have any thoughts on the expectations for any near term changes to maybe your bad debt expense or bad debt reserve.

Sure. Yeah, I mean, it's something we monitor very closely. And what I'll tell you is, I don't think the economic backdrop really had anything to do with it. So anytime you bring especially a large acquisition like we had, new community online, just getting the payment process set up, right? So getting the online payments, getting people used to using that takes a bit. If you actually look at total bad debt for the quarter and the amount we wrote off, it was no higher than normal. We just had a little bit higher balance of accounts receivable at quarter end because people were still struggling with getting onto our payment system at the new acquisitions was the biggest place we saw the increase. So it's something we monitor very close. We look at delinquency every kind of month in and go through it on a part by part basis. Certainly no trends that concern us at this point.

Awesome. That was it for me. Thanks guys.

Thanks Alex.

Thank you. Our next question or comment comes from a line of David Crystal from Ventum Capital Markets. Mr. Crystal, your line is open.

Thanks. Good morning guys. Maybe just building on the off-packs and maybe looking at your forecast either for the back half of the year or the year ahead. Do you expect to see any relief or if we look out a year, do you expect that that 15% year over year comp at least will come down meaningfully?

Yeah, I certainly expect it'll come down somewhat. Again, summertime is our kind of place where we spend the most time doing repairs and maintenance, doing cleanups, doing cutting grass and those things. So the wage piece of it, I certainly expect to kind of to come back in line from a property stock standpoint. That's probably ongoing. Now, what I'll tell you is as we start looking at our next year and look at re-increases and how we kind of recapture some of that property taxes, I do think we'll be able to see some recapture there. And it may show up in the top line in revenue, just recapturing the property taxes, but I think there's an opportunity to do some of that.

And in that vein, have you started to look at your 2025 rent increases, whether in the context of kind of inflation, broad inflation, social security cost allowance, or just your kind of unique inflation pressures?

Yeah, so David, we really do that budgeting in the fourth quarter, but I'm not worried about the affordability gap between us and the multifamily rents, it's still there. I think from a modeling perspective, 5% is still what we would advise on the modeling side. I don't see many barrier there, but I will make one more comment on the OBEX, is that we are in our climates, we really do our seasonal work from about April 1st or the end of March until about the end of October. And so in the fourth quarter, you do see relief from that because the weather turns against you and you can't do certain things anymore. So there is a little seasonality to the repairs and maintenance and things.

Okay, fair.

And as far as the revenue side, again, you still expect somewhere in the kind of 150 basis point, year over year occupancy gains? Yeah, we do. Okay, perfect, that's it for me, I'll turn it back, thanks. Thanks David, good talking to you.

Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. Our next question or comment comes from a line of Himanshu Gupta from Scotiabank. Mr. Gupta, your line is open.

Thank you and good morning. And sorry, I joined the call a bit late, so I don't know if it's been already covered. My question is more around the NOI margins. Obviously we saw some pressure in Q2 and how should we think about it next year? And especially in the context of as you grow your occupancy, let's say 100 to 200 basis point, do you see that translating into opportunity for margin expansion?

Yeah, so the punchline for the margin decline and some of the off-ex pressures really was around property taxes. And just reassessment of some of the properties that we had bought during 2022, that was where the biggest piece of the pressure comes. And again, they were within our model and we knew that we were going to get those increases when we did the acquisition. So it was certainly within expectations, just when you compare it to prior year 2023, that wasn't there. I don't expect to then see a commiserate increase again next year, right? So that should flatten and we won't see reassessments for those in the following year because of the cycle that they're on. From an occupancy standpoint, I mean, Kurt, you feel free to jump in, but yes, because here's the beautiful thing. As we fill up our communities and through the way we do it through our home ownership model, that absolutely helps our margin because we're now not cutting grass there. As we sell more rental homes, we're not having to do the repairs and maintenance on those homes, it's being done by the owner. And that's why one of the reasons that the home ownership model is important to us is because it does drive incremental margin. So yeah, we'll see some help there, I would say as we continue to grow the occupancy.

Thank you, thank you, Adi there. And then just on the balance sheet, on the bridge financing, like what rate are you expecting or what are you looking in the market right now?

Yeah, so at the time of acquisition, the expectation was we were gonna be kind of around that 6% level. I think we've already fallen below that just based on where the treasury has gone over the past couple of weeks. And I've been in very close contact with our lenders on what the spreads are doing and the spreads are coming in as well. So if we locked it in today, we'd be probably closer to five and a half. But I do feel good that we'll be at least there or maybe even a little better when we start seeing rate cuts, hopefully by the Fed and Q3 and Q4, if those happen. So my expectation is we're gonna certainly be better than the original acquisition model, which is going to be a very positive thing and help us get to accretion of those assets sooner.

Got it, and this mid 5%, 5.5, are we talking like 10 years fixed? And is it like insurance money or FANY, FANY?

Yeah, that'll be the discussion. As of now, yes, insurance money has kind of come back online and they are very hungry to do the deal. Five and a half, right now I can go get five and a half on 20 or fixed rate deals with LIFO. We're looking at some CNBS potentially as well. So again, we're still in the early stages of the refinance conversation, but the rates that five and a half, whatever we end up, it could be done in a number of different ways.

Okay, okay, thank you. Last question on this expansion of 81 lots. What was the cost associated with this expansion?

It was low, Homatsu, it was only about $80,000. It was low. It was like in

total, you mean $80,000. In total,

yeah, $100,000. Okay. Under $100,000 to turn them on and just had some incremental work to do as we had to get them ready. Again, most of the infrastructure was all done here. So we were very pleased with the accretive moment there.

And how long do you take to lease up these lots?

Yeah, again, this one's a little, you had to turn on all 81 lots at one time. We normally would only do 50 at a time, but that's not what this site dictated to do all 81. And so yeah, I think this will take us two years, three years to fill up under the home ownership model

primarily. Okay, got it. Thank you guys and I'll come back. Thanks Homatsu, good talking to

you. Thank you. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Kirk Keeney for any closing remarks.

We certainly thank everybody for joining us today and thank our team and our residents as well. You have any information that you additionally like, please contact us at IR at flagshipcommunities.com. Thanks, have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day. Speakers.