Flagship Communities Real Estate Investment Trust

Hello, ladies and gentlemen. Thank you for standing by. Welcome to the Flagship Communities REIT first quarter 2026 Arnie's Call. At this time, all participants are on 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 Carlisle, Chief Financial Officer. Please note that 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 risk 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 it 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. We've gotten off to a strong start in 2026 as we continue to execute on our strategy of driving growth through both organic initiatives and discipline expansion in our core markets. Our first quarter results reflect solid growth across our portfolio and continued progress on our long-term value creation plan. Our rental revenue increased by 20.6% over the same period last year. Our NOI improved by 17.4% over the last year. And our FFO adjusted and AFFO adjusted increased by 12% and 10.4% respectively over last year. We also continue to see strong growth in SANE community metrics during the quarter. Our SANE community revenue grew by 8.6% over last year, and our SANE community NOI grew by 5.3% versus the first quarter of 2025. In addition to our strong organic performance, we completed a strategic acquisition during the quarter in Cleves, Ohio, which further expands our presence in one of our core markets. This acquisition is consistent with our approach of targeting markets we know well and communities with occupancy upside potential. Nathan will provide more detail on this transaction and how it fits into our broader growth strategy during his remarks. Our financial results provide a sense of the strong fundamentals of our industry and the progress we're making towards our growth strategy. While performance is important, our mission remains our main focus. and that is to provide affordable housing and exceptional residential living experiences in our adult and family-oriented manufactured housing communities while creating value for our shareholders. Sustainability is embedded in what we do, and we've outlined our ESG practices and performance in our sixth annual ESG report, which is available on our website. We are encouraged by the progress we have made in many different areas, including environmental stewardship and community reinvestment, and the corporate governance. With that, I will now turn it over to Nathan for his remarks. Nathan?

Thanks, Kurt. Good morning, everyone. We continue to see strong performance across our existing communities while also completing strategic acquisitions. Strong performance for us begins at the community level. We continue to see positive results from our core initiatives including occupancy growth, lot rent, and additional revenue increases across the portfolio. We also remain focused on enhancing resident experience across our communities. We are very proud of our continued investment in amenities, infrastructure improvements, and community engagement initiatives, all of which support resident satisfaction and long-term retention. In addition to our focus on operational performance, we continue to pursue strategic acquisitions that are located in key markets where we operate. This past quarter, we acquired a 96-lot community in Queens, Ohio, further expanding our vote-on strategy and presence in that market. This transaction builds on our recent acquisition of three communities in greater Cincinnati area and reflects our continued focus on core markets where we can drive operational efficiencies and create long-term value. As with many of our acquisitions, we see the potential to enhance performance through future community expansion that can support an additional 12 lots. The community has also benefited from significant infrastructure upgrades, such as newly paved streets and solar light projects. It also has improvements to its amenities, including a large clubhouse, playground, ball field, and basketball courts. Overall, we remain focused on our operating strategy of combining strong organic growth with disciplined acquisitions. With that, I'll turn it over to Eddie to review our financial results in more detail. Eddie? Thanks, Nathan.

Good morning, everyone. Our first quarter results reflect continued strength across the portfolio driven by organic growth and contributions from recent acquisitions while maintaining a conservative balance sheet. Revenue for the quarter increased by 20.6% over the same period last year due to acquisitions as well as lottery increases across the portfolios. Same community revenue of $26.9 million for the first quarter grew by approximately 8.6% over the comparable period last year. This increase was driven by higher monthly lot rents and insulated revenues combined with a rise in same community occupancy. Net operating income and NOI margin were $19.3 million and 64.5% respectively compared to $16.4 million and 66.2% during the same period last year. Same community NOI margin for the first quarter was 64.2%, a decrease of 2% compared to last year. While NOI saw an increase from amenity fees, NOI margins were negatively impacted due to these services having lower margin than what we have historically achieved. Winter storms during the quarter also had significant impact on costs and decreased margins. FFO adjusted and FFO adjusted per unit for the quarter were $9.6 million dollars, and 38.1 cents respectively, a 12% and 11.4% increase respectively compared to last year. ASFO adjusted and ASFO adjusted per unit for the quarter were $8.6 million and 34.1 cents, a 10.4% and 10% increase respectively compared to last year. Same community occupancy of 84.8% increased 1.4% over the same period last year, which continues to reflect our commitment to resident satisfaction and ensuring our communities are located in desirable locations. Rate collections for the quarter were 99.8%, demonstrating the strength and consistency of the MAC sector. As of March 31, our total lot occupancy was 84.1%, and our average monthly lot rate was $516. We remain focused on maintaining a conservative balance sheet with an emphasis on long-dated fixed-rate debt Our weighted average mortgage interest rate was 4.54%, and our weighted average mortgage term to maturity was eight years. We had no substantial debt maturities until 2030. We had total liquidity of $13.2 million. The REIT currently has 21 unencumbered investment properties with a total fair value of $130.7 million as of March 31, 2026. With that, I'll now turn it back over to Kurt for some final remarks. Kurt?

Thanks, Eddie. As we look ahead, we remain focused on executing our strategy and continuing to deliver long-term value for our unit holders. During the quarter, we were proud to be recognized by the Manufactured Housing Institute as the 2026 Manufactured Home Community Operator of the Year Award. This marks Flagship's second consecutive Operator of the Year Award, and our fifth National Community Operator of the Year recognition from MHI. This recognition is a direct result of the dedication of our team and their focus on creating safe, amenity-driven, and vibrant communities across our portfolio. We believe this continued focus on operational excellence combined with our disciplined growth strategy positions us well for a year ahead. Thank you for your time today, and I will now open up the line for questions.

Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tom Callaghan with BMO Capital Markets. Your line is now open.

Thanks for that, guys. Let me just start off. Morning. Morning. Maybe just start off on the occupancy side of things. Q1 was quite strong relative to Q4 of last year. Anything specific to call out there in terms of drivers? And I know you kind of point to 200 to 200 basis points of growth per year, but just given how Q1 came in, is it reasonable to expect that there could be some upside there this year?

Yeah, I think that we've still got some runway on the occupancy this year. You know, We had a little seasonality kick in at the end of the year last year. And, you know, sometimes in your home run, hopefully you just have a little turnover, and we had a little bit at the end of the year last year. And we've raised those units up. But, again, I'm pretty optimistic in all of our markets that our occupancy is going to grow in our forecasted range.

Very great. Maybe switching gears to the expense side of things for Eddie, but you did note there kind of the winter storm had an impact in Q1, I guess. Is there a way to quantify kind of the impact on expense growth or maybe said differently, how should we be thinking about saying property expense growth through the balance of this year relative to kind of that Q1 number, the 15% range?

Yeah, so Q1, it was a bit of an anomaly from a couple of standpoints, mostly around kind of snow removal and the labor work and repairs and maintenance that go along with that. You know, as I'm looking at it, I think that was about somewhere between a half a penny and a penny of FFO per unit. So, you know, kind of an impact of $250,000 or so in total year over year increase in cost. So as you think about expenses moving forward and you want to remove that effect, I think that's probably a pretty good range.

Okay, that's great. I'll turn it back and talk to you in the next session. Thank you, Don.

Our next question comes from the line of Mark Rothschild with Canaccord. Your line is now open.

Thanks, and good morning, guys. Good morning, Mark. Hey, can you just talk a little bit about the – homes that you've been buying, how will this impact your growth over the next year? I think there's about 150 or so homes that you've bought in this quarter. Do you expect to do a lot more of this, and how should we think about that?

We were having a little hard time hearing you, Mark, but I think you asked about the rental home fleet that we added in the first quarter. You know, every year, you know, Our commitment is to try to drive the rental home fleet down as a percentage of our overall occupancy. We think it's a necessary tool in the shed, but we think homeownership is a better tool. And we grew our occupancy through releasing rental homes and through home sales in the first quarter. So what we've done with that rental fleet is we're high grading the current rental fleet, and we're looking to sell off those older units. So, you know, again, I don't know that we would put a lot more into the fleet this year, but I'm sure we will, you know, as we're managing the individual sites. And sometimes when you get these sites up to, you know, 98% occupied, you know, right now we've got about 40 of our communities are at historically high occupancy standards, if not, you know, 98 to 100%. And so when you look at that, you know, those last 2%, sometimes you have to put a rental home in to get those up into the full occupancy.

Okay, great. Thanks. Let me just follow up on the discussion on expenses. Because Q1 was impacted so much from the weather, should we expect, you know, all those things equal, stronger state property and a wide growth through the rest of 2026?

I mean, yeah, I mean, you know, my thought has always been that we can get to, you know, higher single digits, low double digits on the same property NOI. Some of that's obviously slowing because of the fact that the year-over-year implementation of our cable agreements are now catching up with themselves, right, and at this point for 2026. We don't have any additional agreements that are going in place. So, you know, we're going to continue to pursue that, which could give us some help. But I certainly see, you know, being able to get that back to the higher single-digit numbers moving forward.

Okay, great. Thanks so much.

Thanks. Our next question comes from the line of Kyle Stanley with Day Jordan. Your line is now open.

Thanks. Good morning, guys. Good morning, Kyle. I just wanted to switch over to the home sales side of things. You know, how have home sales gone to start the year? I believe there's typical seasonality and strength towards the beginning of the year, particularly post-tax time. So just curious how that's gone year to date and maybe how that compares to any previous years.

Well, home sales were good in the first quarter. They've also continued even, you know, into April. But what you did see, though, the weather did impact. the homes being able to be shipped. And I think actually we would have had better home sales in the first quarter if we could actually have gotten the houses to the lot. I mean, many times, Kyle, they went 10 days without shipping any homes because you cannot ship homes when you've got snow on the ground in the Midwest. You know, it's not Canada where you guys are familiar with doing that often. You know, in Kentucky we have like three snow plows, and in Tennessee they have zero. So that creates a little bit of a problem. So I was very pleased with the first quarter home sales comparing that we were up against.

Okay. No, thank you for that. And maybe just one more kind of going back to the rental fleet. I did see there was an establishment of a rental fleet maintenance technician team. So just curious, can you elaborate on that a little bit? What is it, you know, was the need for that just given the larger rental fleet? Just want to understand how to think about that.

Yeah, we're just trying to be more efficient. Again, if we have a rental home, we're going to put out a good product, and we've committed staff just to make sure that that happens and to get those units turned faster. It's more efficient on the CapEx side with them because we can do that. It's one of the benefits that we have because, again, we have this bulk on spoken wheel kind of strategy, right? So like in Louisville, there's 15 locations. So you can actually have all within, you know, half an hour of downtime in Louisville. And that's repeated throughout a lot of our markets. So you can really have these efficiency moments, which makes our margins better. And, again, that's just us managing that and being the operators that we are. Okay.

And just to clarify, in the past on turnover of a rental unit, how would that have been managed? Was it, you know, outsourced to someone else or –

Yeah, so traditionally in the past, we'd have a subcontractor that would come in, you know, do whatever work that would need to be done to turn that unit. What we've tried to do is, to Kurt's point, for two reasons. One, for timeliness. You know, sometimes it's hard to get the contractor there and get that turned timely, so we have a vacant rental for a longer period of time. So having our own crew allows that to be done quicker, also allows it to be done more cost-efficient.

Okay. Perfect. That's it for me. I'll turn it back. Thanks, guys.

Thank you. Our next question comes from the line of Himanshi Gupta with Scotiabank. Your line is now open.

Thank you, and good morning.

Good morning, Himanshi.

So just on SIEM Community NOI, it was made single-digit in Q1. And Eddie, I think you mentioned high single-digit. Just want to clarify, is that what you're seeing for the full year, or is that what you're seeing from Q2 to Q4 onwards in that ballpark of high single-digit?

My assumption is kind of Q2 through Q4, we'll start to see that, you know, that momentum pick back up and see that the OPEX is more back in line to what we've seen historically. You know, the fact that we actually have a more full seat from our manager standpoint, we're going to see a little higher OpEx just from a payroll and benefits standpoint because we were able to have more of our seats full. While it does increase your OpEx numbers, it also gives us the ability to drive occupancy, right? part of the reason that some of the things you struggle with on maintaining occupancy or increasing occupancy is when you don't have managers and seats to help us with our home sales or the rental of the units. So I think we'll continue to see the benefits of it, but also from the OpEx standpoint, you're going to see a little bit elevated from apparel benefits because we do have those seats full. So Q2 through Q4, I think we can get back in the higher single digits, full year you know, we're probably kind of in those mid-single digits.

Got it. Okay. Okay, that's pretty strong thinking. My last question is, I mean, you got the Operator of the Year award. What are you doing on the operational side that, you know, differentiates you from the others? Like, why do you think you got this recognition?

Well, that's a secret that we're not sharing on this call. If we do that, We'd be telling our competitors what they're doing wrong. But I would say that one of the things that the industry looks at us is how we have integrated home sales into our communities because, you know, we're a one-stop shop, and you can only do that when you have communities that are very close together. As I always say, you can't have one in Houston, Texas, one in San Francisco, and one in Baltimore, and then you're going to have really great home sales. What you really need is 15 in Louisville and 12 in Evansville and 7 in Paducah. That's what you really got to have.

And I think our commitment to investment in our amenities is really powerful and something that the industry looks at as a positive, right? So Kurt says it all the time, but, you know, people move in because it's affordable and they stay because they like it. And I think that's the key. That second part is more important than the first, right? We invest in the communities. We're putting in playgrounds and basketball courts and dog parks and walking trails and fishing lakes. All those things make the quality of the community and make it feel like a community, right? It's not just a place to live. It's a community. And I think that that is what people see when they look at how we operate our company.

Thank you, and thanks for that. Thank you.

Our next question comes from the line of Matt Cornack with National Bank Capital Markets. Your line is now open.

Hey, guys. Hi, Eddie. Just quickly on R&M, like just the $250,000 additional cost, is that in your R&M line? Just so I know where that is.

The majority of it. So in total, we spent about $250,000 on just snow removal in general. But if you look at year over year, that's only up about $150,000. The remaining portion of that, yes, is in the R&M line and the increase in payroll. We had a considerable amount of overtime during that period. helping plow the snow, helping, you know, do any repairs, do water lines and those type of things. So the majority of it, I'd say 200,000 is going to show up in the repairs and maintenance and another 50 in the repair or benefits line.

You know, one of the things our team did was, you know, we had to go help our residents. And that does make overtime happen. But you're going to send that maintenance person to help Mrs. Jones get her water line unfrozen because it's the right thing to do.

Yeah, and I think what's interesting about this is that I'm really pleased with our first quarter of results because when you really add up the, because we had multiple winter storms hit us, and I'm not making any excuses, but when you have 89 locations get hit by one storm, it shut down our home sales operations for weeks. I mean, we were literally shut down because we were helping, to Nathan's point, we were helping the residents, you know, plow the streets, plow their driveways on streets, their water lines, and just trying to be, you know, good neighbors. And so I'm really pleased with it because, you know, our home sales were up, and we basically took three weeks off to do, you know, snow and winter weather issues.

I know for us it was January and February that were particularly bad. Would that have impacted kind of a cadence of your occupancy gain as well? Would the occupancy have been mostly in March, or did you gain occupancy –

No, we gained in February and March. What's funny is there was a couple of brief moments, and I think people were pretty pent up. So when they came out, they came out. And, you know, it's such an affordability play for us right now, you know, that they came out and, you know, this was tax refund season, and that started, you know, mid to late January. And so they were ready to commit to their new home. But, yeah, it was fun. It wasn't the ideal sale season, and we still came through it and came through it well. So I'm very proud of the team.

That's good to hear. Last one for me, again, back to Eddie, just on the utilities and the utilities recoveries. You mentioned that there's no new kind of additive contracts, but the margin there, it was off quite a bit relative to last year. Is that kind of a new normal, or is there anything one time in nature in terms of how kind of the expense versus the recovery will trend?

Yeah, so I don't think I wouldn't call it one time. What I would say is that what we saw in Q1, so last year Q1, our actual water sewer recapture report, exceeded 96%, which for us is kind of best in class. This year, that was closer to 90, 91%. Some of that related to the winter storm. Just to keep going back to that, but part of it's related to that. But then, yeah, I mean, there is certainly a new normal when it comes to the lower margins on the cable piece of it as well. So, We were slightly impacted by the winter weather, but for the most part, it is kind of a new norm there on that recapture.

Okay. I appreciate that. I mean, it's a cold spring here, but hopefully you guys have no more snow in stores. So we'll talk to you. All right.

Thanks a lot.

Our next question comes from the line of Jimmy Shan with RBC Capital Markets. Your line is now open.

Thank you. Just a couple for me. So the lot rent growth, was increased by about 6.8% on a quarter of a quarter. And I recall you had said something about raising by 5.7. I was curious about what changed there. And then I wanted to know if you could elaborate on sort of what's going on in the investment market, what does that look like, any incremental change in terms of opportunity and pricing?

Yeah, I'll take the first part on the lottery growth and let Nathan talk about the investment opportunities. So the lottery, there's a couple of things there. Again, this is another play where when you see some property taxes that grow, we have to pass those on. So there's some portion that wasn't a part of what we call lot rate growth. I'm thinking just our lot rate increases that we send out in November that take place in January 1st. There was some additional property tax increases that were added throughout the first quarter. The other thing is the Acquisitions that we took over in Q4 of last year, the large acquisition in Timor, Indiana, and then the three in the Cincinnati markets, those were not considered as being part of the 5.7% growth. All of those assets had higher lot rent. than our overall average. So it drug up, when you're looking at quarter over quarter, it drug up that average. And I'll let Nathan talk to the... Yeah.

You know, the fourth quarter of last year and even the first quarter this year, it has been pretty light on acquisitions deals out there. And I have not seen cap rates change on what deals are out there. So we continue to look at deals as we say. But we're going to look for deals that are in our footprint. And if they're not in our footprint, we're not really interested in expanding right now into other markets.

Okay. Just a quick follow-up on the lot rent. So the lot rent that you quote then is it would be inclusive of any property tax recoveries that you would have.

That's correct, yes. Okay. Yeah, that's right.

Yeah, we made guidance that we raised the rent 5.7% on average, and most of that started January 1st. But due to those other factors, it actually drove up that on a quarter-over-quarter basis.

Yeah, okay. That makes sense. Thank you. Thank you.

As a reminder, to ask a question at this time, please press star-1-1 or your touch-tone telephone. Our next question comes from the line of Dean Wilkinson with CIBC. Your line is now open.

Morning, guys. Morning. I just want to circle back on the acquisition conversation. I look at a market like Nashville, and you're seeing some pretty significant corporate commitments to go into that market. Is this an area where you think that there's a lot of growth? I think historically it's been sort of a tight rental market in MHCs, and you've got some occupancy gains you can make there, but What are your thoughts around sort of that market or the sub-market surrounding Nashville as, you know, looking to build up, you know, some more scale there?

Yeah, we're always looking in markets that we're already in, especially Nashville. You know, we went into Nashville and went sort of with two properties there, and we continue to reposition the one, and it's going excellent there. Would we like to buy more in Nashville? Of course. Would we like to also be in other places in Tennessee? We are out particularly looking all the time. in the eight states that we're doing it in. But, you know, again, we're not going to buy a three cap. It's just not something we're going to do. But we haven't seen an expansion of cap rates either. And so they've been staying somewhere between four and a half and seven, and they haven't changed much at all. And so, you know, we're still out there looking every day. It just has been, you know, it does seem to be competitive, There just doesn't seem – there does seem to be some sellers that are maybe starting to have some problems here and there.

I also think some of the selling opportunities, Dean, in national or in any market is really going to be, I think, driven by – you have a lot of folks that during the COVID – around COVID, you know, rates were really good. And people were putting five-year debt on those assets. So that debt's now, we're starting to come around to where that debt's coming due. So I do think that there will be some opportunities, I mean, not particularly national, just in general in our business, that will start popping up in the near future. That's great. Thank you. I appreciate it. Thank you.

Thank you. And I'm currently showing no further questions at this time. I'd now like to hand the call back over to Kurt Keeney for closing remarks.

Thank you, Operator. And thank you, everyone, for participating today. Please feel free to reach out to our investor relations team at ir at flagshipcommunities.com if you have any further questions. Have a great day.

This concludes today's conference. Thank you for your participation. You may now disconnect.