Q2 2026 Flagship Communities Real Estate Investment Trust Earnings Call

August 6, 2026

Operator: Hello, ladies and gentlemen. Thank you for standing by. Welcome to the Flagship Communities REIT Q2 2026 earnings call. At this time, all participants are in 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 risks 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 SEDAR+. These documents are also available on Flagship's website at flagshipcommunities.com.

Speaker #1: 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.

Speaker #1: 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 risks and uncertainties.

Speaker #1: 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 Cedar Plus.

Speaker #1: 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.

Operator: Flagship has also prepared a corresponding PowerPoint presentation, which it encourages you to follow along with during this call. Now I'll pass the call over to Kurt Keeney. Kurt?

Speaker #1: And now I'll pass the call over to Kurt Keeney. Kurt?

Speaker #2: Thank you, operator. Good morning, everyone. Thank you for joining us today. Flagship delivered another strong quarter of operating and financial results, driven by the continued success of our core business and the MHC industry.

Kurt Keeney: Thank you, operator. Good morning, everyone. Thank you for joining us today. Flagship delivered another strong quarter of operating and financial results, driven by the continued success of our core business and the MHC industry. In Q2, we experienced higher overall occupancy and higher same-community occupancy, as well as increases in our same-community financial metrics. When we see improvements of this nature, it speaks to the strong demand for affordable housing and the overall strength in the MHC sector. In our almost 6 years as a public REIT and over 30 years in the MHC space, we have proven our ability to perform well in all types of economic environments. We drive growth through both organic initiatives and disciplined expansion in our core markets. We completed one strategic acquisition this quarter, which Nathan will speak to in a moment.

Speaker #2: financial metrics. When we see improvements of this nature, it speaks to the strong demand for affordable housing and the overall strength in the MHC sector.

Speaker #2: In our almost six years as a public read and over 30 years in the MHC space, we have proven our ability to perform well in all types of economic environments.

Speaker #2: We drive growth through both organic initiatives and disciplined expansion in our core markets. We completed one strategic acquisition this quarter, which Nathan will speak to in a moment.

Speaker #2: However, our success was largely due to the continued progress of our underlying business, which is how we expect to generate value for unit holders.

Kurt Keeney: However, our success was largely due to the continued progress of our underlying business, which is how we expect to generate value for unitholders. We saw several notable increases in many key metrics, including our rental revenue, which increased 21.4% over the same period last year, our NOI, which improved 18.9% over last year, and our FFO adjusted and AFFO adjusted, which increased by 10.2% and 8.3%, respectively, over last year. We also continued to see strong growth in same-community metrics during the quarter. Same-community revenue grew by 9% over last year, and same-community NOI grew by 6.3% over the same period. Our same-community occupancy of 85.4% increased by 2% relative to the end of last year, which to us is a great sign for the health and stability of the MHC sector.

Speaker #2: We saw several notable increases in many key metrics, including our rental revenue, which increased 21.4% over the same period last year; our NOI, which improved 18.9% over last year; and our FFO adjusted and AFFO adjusted, which increased by 10.2% and 8.3%, respectively, over last year.

Speaker #2: We also continued to see strong growth in same-community metrics during the quarter. Same-community revenue grew by 9% over last year, and same-community NOI grew by 6.3% over the same period.

Speaker #2: Our same-community occupancy of 85.4% increased by 2% relative to the end of last year, which to us is a great sign for the health and stability of the MHC sector.

Kurt Keeney: For over 20 years, the MHC sector has grown approximately 4% per year, outperforming all other real estate sectors. As you can see from slide six in this presentation, NOI growth remained positive during the housing crisis and Great Recession, and more recently, remained resilient during the pandemic. In today's environment, home sales for traditional housing and the condo market are down, primarily due to rising prices, credit tightening, and higher mortgage rates, and general economic uncertainty. In contrast, we have generated stable and recurring rental income streams, mainly due to our large and diverse resident base. We are always looking to improve the resident experience in our communities, and we are always pleased when those efforts are recognized by our industry. This past quarter, we were awarded the 2025 Community of the Year by the Kentucky Manufactured Housing Institute for our Sawyier Pointe community in Georgetown, Kentucky.

Speaker #2: For over 20 years, the MHC sector has grown approximately 4% per year, outperforming all other real estate sectors. As you can see from slide 6 in this presentation, NOI growth remained positive during the housing crisis, and Great Recession, and more recently, remained resilient during the pandemic.

Speaker #2: In today's environment, home sales for traditional housing and the condo market are down, primarily due to rising prices. Credit tightening and higher mortgage rates and general economic uncertainty.

Speaker #2: In contrast, we have generated stable and recurring rental income streams, mainly due to our large and diverse resident base. We are always looking to improve the resident experience in our communities, and we are always pleased when those efforts are recognized by our industry.

Speaker #2: This past quarter, we rewarded the 2025 Community of the Year by the Kentucky Manufactured Housing Institute, for our Sawyer Point Community in Georgetown, Kentucky.

Speaker #2: This is the fifth consecutive year that Flagship has won KMHI's Community of the Year award, and Sawyer Point is a reflection of how new amenities and community programming can create excellent living conditions for our residents.

Kurt Keeney: This is the fifth consecutive year that Flagship has won KMHI's Community of the Year award. Sawyier Pointe is a reflection of how new amenities and community programming can create excellent living conditions for our residents. It's also a reflection of our amazing team that always put our residents first and prioritize safe, amenity-driven, and vibrant communities across our portfolio. I will now turn it over to Nathan for his remarks. Nathan?

Speaker #2: It's also a reflection of our amazing team that always put our residents first and prioritized safe amenity-driven and vibrant communities across our portfolio. I will now turn it over to Nathan for his remarks.

Speaker #2: Nathan?

Speaker #3: Thanks, Kurt. Good morning, everyone. I've always said strong performance begins at the community level, and that is a big reason why we had another great quarter.

Nathan Smith: Thanks, Kurt. Good morning, everyone. I've always said strong performance begins at the community level, and that is a big reason why we had another great quarter. Simply put, if we invest in the resident experience, they are more likely to stay in our communities. We are proud of our continued focus on improving infrastructure and community engagement initiatives, all of which help support a positive experience and a long-term retention of our residents. In addition to our community-level focus, we also continue to pursue strategic acquisitions that are located in key markets where we operate. This past quarter, we expanded our presence in northern Ohio with a strategic acquisition of an MHC that is expected to be immediately accretive to our AFFO. This 28-lot MHC is located in Marblehead, Ohio, and is fully occupied.

Speaker #3: Simply put, if we invest in the resident experience, they are more likely to stay in our communities. We are proud of our continued focus on improving infrastructure and community engagement initiatives.

Speaker #3: All of which help support a positive experience and a long-term retention.

Speaker #2: Of our residents.

Speaker #3: In addition to our community-level focus, we also continue to pursue strategic acquisitions that are located in key markets where we operate. This past quarter, we expanded our presence in Northern Ohio with a strategic acquisition of an MHC that is expected to be immediately accretive to our AFFO.

Speaker #3: This 28-lot MHC is located in Marble Head, Ohio, and is fully occupied. It includes a private beach area and a fishing pier, along with a number of boat slips.

Nathan Smith: It includes a private beach area and a fishing pier, along with a number of boat slips. This is another example of our bolt-on acquisition strategy. This MHC is near another Flagship-owned community in northern Ohio and allows us to continue to generate operational efficiencies by managing nearby properties together. We continue to take a disciplined approach to acquisitions while focusing on strong organic growth and delivering value for our unitholders. With that, I'll turn it over to Eddie to review our financial results for the quarter. Eddie?

Speaker #3: This is another example of our boat-on acquisition strategy. This MHC is near another Flagship-owned community in Northern Ohio, and allows us to continue to generate operational efficiencies by managing nearby properties together.

Speaker #3: We continue to take a disciplined approach to acquisitions, while focusing on strong organic growth and delivering value for our unit holders. With that, I'll turn it over to Eddie to review our financial results for the quarter.

Speaker #3: Eddie?

Speaker #4: Thanks, Nathan. Good morning, everyone. During the second quarter, we continued to generate solid financial results from our organic portfolio, while maintaining a strong and stable balance sheet.

Eddie Carlisle: Thanks, Nathan. Good morning, everyone. During Q2, we continued to generate solid financial results from our organic portfolio while maintaining a strong and stable balance sheet. Revenue for the quarter increased by 21.4% over the same period last year due to acquisitions, as well as lot rent increases across the portfolio. Same-community revenue of $27.3 million for Q2 grew by approximately 9% over the comparable period last year. This increase was driven by higher monthly lot rents and ancillary revenues, combined with a rise in same-community occupancy. Net operating income and NOI margin were $19.8 million and 65.1%, respectively, compared to $16.7 million and 66.6% during the same period last year. Same-community NOI margin for Q2 was 64.9%, a decrease of 1.7% compared to last year.

Speaker #4: Revenue for the quarter increased by 21.4% over the same period last year, due to acquisitions as well as lot rate increases across the portfolio.

Speaker #4: Same-community revenue of 27.3 million dollars for the second quarter grew by approximately 9% over the comparable period last year. This increase was driven by higher monthly lot rents and ancillary revenues, combined with a rise in same-community occupancy.

Speaker #4: Net operating income in NOI margin for 19.8 million dollars and 65.1%, respectively, compared to 16.7 million dollars and 66.6% during the same period last year.

Speaker #4: Same-community NOI margin for the second quarter was 64.9%, a decrease of 1.7% compared to last year. While NOI saw an increase from amenity fees, NOI margins were negatively impacted due to the services having a lower margin than what we have historically achieved.

Eddie Carlisle: While NOI saw an increase from amenity fees, NOI margins were negatively impacted due to the services having a lower margin than what we have historically achieved. Seasonal weather impacts during the quarter also had a significant impact on cost and decreased margins. FFO adjusted and FFO adjusted per unit for the quarter were $9.9 million and $0.389, respectively, a 10.2% and 9% increase, respectively, compared to last year. AFFO adjusted and AFFO adjusted per unit for the quarter were $8.9 million and $0.349, an 8.3% and 7.1% increase, respectively, compared to last year. Same-community occupancy of 85.4% increased 2% from the end of last year, which continues to reflect our resident-level focus, as Nathan mentioned earlier. Rate collections for the quarter were 99%, demonstrating the strength and consistency of the MHC sector.

Speaker #4: Seasonal weather impacts during the quarter also had a significant impact on cost and decreased margins. FFO adjusted and FFO adjusted per unit for the quarter were 9.9 million dollars and 38.9 cents, respectively, a 10.2% and 9% increase respectively compared to last year.

Speaker #4: AFFO adjusted and AFFO adjusted per unit for the quarter were 8.9 million dollars and 34.9 cents, an 8.3% and 7.1% increase respectively compared to last year.

Speaker #4: Same-community occupancy of 85.4% increased 2% from the end of last year, which continues to reflect our resident-level focus as Nathan mentioned earlier. Rent collections for the quarter were 99%, demonstrating the strength and consistency of the MHC sector.

Speaker #4: As at June 30, our total lot occupancy was 84.7%, which also increased relative to the end of last year and our average monthly lot rent was $516.

Eddie Carlisle: As at 30 June, our total lot occupancy was 84.7%, which also increased relative to the end of last year, and our average monthly lot rent was $516.

Speaker #4: We remained focused on maintaining a strong and conservative balance sheet with an emphasis on long-dated fixed-rate debt. During the second quarter, we increased our revolving line of credit to a total capacity of $33 million, extending the term to three years and eliminating the 0.5% spread.

Eddie Carlisle: We remain focused on maintaining a strong and conservative balance sheet with an emphasis on long-dated fixed-rate debt. During Q2, we increased our revolving line of credit to a total capacity of $33 million, extending the term to 3 years and eliminating the half percent spread. In early July, we borrowed $6 million as a supplemental borrowing to an existing $10.7 million mortgage. The interest rate was amended to 5.39%, representing a blended rate of 4.98% under the existing mortgage and 6.12% for the supplemental borrowing, with no change to the maturity date. Our weighted average mortgage interest rate was 4.54%, and our weighted average mortgage term to maturity was 7.7 years. We have no substantial debt maturities until 2030.

Speaker #4: And in early July, we borrowed $6 million, as a supplemental borrowing to an existing $10.7 million mortgage. The interest rate was amended to 5.39%, representing a blended rate of 4.98% under the existing mortgage, and 6.12% for the supplemental borrowing, with no change to the maturity date.

Speaker #4: Our weighted average mortgage interest rate was 4.54%, and our weighted average mortgage term to maturity was 7.7 years. We have no substantial debt maturities until 2030.

Speaker #4: We had total liquidity of $25.8 million, the rate currently has 18 unencovered investment properties with a total fair value of $103 million as at June 30, 2026.

Eddie Carlisle: We had total liquidity of $25.8 million, and we currently have 18 unencumbered investment properties with a total fair value of $103 million as at 30 June 2026. With that, I'll now turn it back over to Kurt for some final remarks. Kurt?

Speaker #4: With that, I'll now turn it back over to Kurt for some final remarks. Kurt?

Speaker #2: Thanks, Eddie. Our strong first half of 2026 has positioned us well to have another solid year. We remain confident in the outlook for our business and the MHC industry as housing prices high monthly rental rates for multifamily competitors and mortgage rate increases have the potential to lead more people towards manufactured housing because our homes remain affordable.

Kurt Keeney: Thanks, Eddie. Our strong H1 2026 has positioned us well to have another solid year. We remain confident in the outlook for our business and the MHC industry as housing prices, high monthly rental rates for multi-family competitors, and mortgage rate increases have the potential to lead more people towards manufactured housing because our homes will remain affordable. Looking at the H2 of the year, our priorities remain unchanged. We expect to maintain organic growth by continuing to invest in the resident experience and by maximizing operational efficiencies. We will do it from a position of financial strength with a conservative balance sheet and no substantial debt maturities until 2030. All of this speaks to the strength and the quality of our residents and of the predictability and the consistency of the MHC sector.

Speaker #2: Looking at the second half of the year, our priorities remain unchanged. We expect to maintain organic growth by continuing to invest in the resident experience and by maximizing operational efficiencies.

Speaker #2: And we will do it from a position of financial strength, with a conservative balance sheet and no substantial debt maturities until 2030. All of this speaks to the strength and quality of our residents, and to the predictability and consistency of the MHC sector.

Speaker #2: We certainly thank you for your time today, and I will now open up the line for questions.

Kurt Keeney: We certainly thank you for your time today, and I will now open up the line for questions.

Speaker #1: Thank you. To ask a question, please press star when one of your telephone and wait for your name to be announced. To withdraw your question, please press star when one again.

Operator: Thank you. To ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mark Rothschild with Canaccord. Your line is now open.

Speaker #1: Please stand by while we compile the Q&A roster. Our first question comes from the line of Mark Rothschild with Canaccord. Your line is now open.

Mark Rothschild: Thanks. Good morning, everyone.

Speaker #2: Thanks. Thanks. Good morning, everyone.

Speaker #5: Good morning, Marty.

Kurt Keeney: Morning, Mark.

Operator: Morning.

Eddie Carlisle: Morning.

Mark Rothschild: Hey. Can you just talk a little bit about the acquisition environment? It's been kind of relatively slow and quiet. Are you seeing opportunities? Is it that people are just maybe quieter in the summer? Is it that the pricing is not where you're comfortable with? How do you see that picking up over the remainder of the year?

Speaker #2: Hey, can you just talk a little bit about the acquisition environment? It's been kind of relatively slow and quiet. Are you seeing opportunities? Is it that people are just maybe quieter in the summer?

Speaker #2: Is it that the pricing is not where you're comfortable with? And how do you see that picking up over the remainder of the year?

Speaker #5: Well, Mark, we've done two so far this year, and we have looked at lots of deals. We have not seen the cap rate expand.

Kurt Keeney: Well, Mark, we've done two so far this year, and we have looked at lots of deals. We have not seen the cap rate expand, and many times, in some locations in the country, it's contracted. We've seen very few deals close that we bid on or we were interested in. We continue to look, and we're going to stay very focused on our area, and we're not interested in doing something that's not in our area right now. We continue to look. I looked at a lot of deals, just not many of them have not traded.

Nathan Smith: Well, Mark, we've done two so far this year, and we have looked at lots of deals. We have not seen the cap rate expand, and many times, in some locations in the country, it's contracted. We've seen very few deals close that we bid on or we were interested in. We continue to look, and we're going to stay very focused on our area, and we're not interested in doing something that's not in our area right now. We continue to look. I looked at a lot of deals, just not many of them have not traded.

Speaker #5: And many times, in some locations in the country, it's contracted. So we've seen very few deals close, that we bid on or we were interested in.

Speaker #5: And but we continue to look, and we're going to stay very focused on our area and we're not interested in doing something that's not in our area right now.

Speaker #5: And so we continue to look. I looked at a lot of deals, just not many of them have not traded.

Speaker #2: Okay, great. Maybe just one more. I've seen you guys a little more active and actually buying homes to rent out on your properties. I realize this is kind of unique for certain properties, but how are you finding this program?

Mark Rothschild: Okay, great. Maybe just one more. I've seen you guys a little more active in actually buying homes to rent out on your properties. I realize this is kind of unique for certain properties, but how are you finding this program? I know it was something you weren't too excited about a few years ago. Is this more of an opportunity as something you could do on other properties to take advantage of excess land?

Speaker #2: I know it was something you weren't too excited about a few years ago. Is this more of an opportunity, something you could do on other properties, to take advantage of excess land?

Speaker #5: Yeah, hey, Mark. We put $224 rental homes into the fleet. And the first six months of the year, don't really look to continue that at that level.

Kurt Keeney: Yeah. Hey, Mark. We put 224 rental homes into the fleet in H1 of the year. Don't really look to continue that at that level. We bought some really nice locations last year, some of these locations, we have 35% of our locations are at all-time highs on occupancy. Sometimes when you get down to the last part of the community, when you get down to the last lots, the last 5%, you might need a rental home to help make some empty lots economic. On the new acquisitions, you might need a rental home to help change maybe the curb appeal if you're buying a value-add property. Yeah, I don't look for us to be that heavy-handed. We did sell 39 of them. I look for us to continue to sell off the older units.

Speaker #5: We bought some really nice locations last year, and some of these locations, we have 53% of our locations are at all-time highs on occupancy.

Speaker #5: And sometimes when you get down to the last part of the community, right, when you get down to the last lots of last 5%, you might need a rental home to help make some empty lots economic.

Speaker #5: And on the new acquisitions, you might need a rental home to help change maybe the curb appeal, if you're buying a value-add property. Yeah, I don't look for us to be that heavy-handed.

Speaker #5: We did sell 39 of them. I look for us to continue to sell off the older units and so that's it's not a change in strategy at all for us.

Kurt Keeney: It's not a change in strategy at all for us. It's just, I've always said it's a blunt tool in the shed, but it is a tool, we'll use it and try to minimalize it. We're still a homeownership model, we've still got, I think it's 88% of our customers are homeowners. We have 500 lot communities with no rental homes, we think that's a good strategy.

Speaker #5: It's just I've always said it's a blunt tool in the shed. But it is a tool. And we'll use it and try to minimize it.

Speaker #5: We're still a homeownership model, so we've still got I think it's 88% of our customers are homeowners. And we have 500-lot communities with no rental homes.

Speaker #5: And we think that's a good strategy.

Speaker #2: Okay, great. Thanks so much.

Mark Rothschild: Okay, great. Thanks so much.

Speaker #1: Thank you. Our next question comes from the line of Jonathan Kelcher with TD Cowen. Your line is now open.

Operator: Thank you. Our next question comes from the line of Jonathan Kelcher with TD Cowen. Your line is now open.

Speaker #2: Thanks. Good morning. On those same property NOI margin that decreased Eddie, I think you talked a little bit about maybe some seasonal weather impacts and also you guys have more amenities that are eating into it a little bit.

Jonathan Kelcher: Thanks. Good morning.

Kurt Keeney: Morning.

Jonathan Kelcher: On the same property NOI margin, the decrease, Eddie, I think you talked a little bit about maybe some seasonal weather impacts, and also you guys have more amenities that are eating into it a little bit. Can you maybe quantify the difference?

Speaker #2: Can you maybe quantify the difference?

Speaker #5: Yeah. So effectively, when Q1 was a rough quarter and we talked about that pretty extensively, then. But some of that actually led into Q2 when it comes to the water sewer recapture.

Kurt Keeney: Yeah. Effectively, Q1 was a rough quarter, and we talked about that pretty extensively then. Some of that actually bled into Q2 when it comes to the water sewer recapture and water leaks, specifically.

Eddie Carlisle: Yeah. Effectively, Q1 was a rough quarter, and we talked about that pretty extensively then. Some of that actually bled into Q2 when it comes to the water sewer recapture and water leaks, specifically.

Speaker #5: And water leaks, specifically. If you look at year over year, last year, we were in the range of 95 to 97 percent on our water sewer recapture.

Eddie Carlisle: If you look at year-over-year, last year, we were in the range of 95% to 97% on our water sewer recapture. For the first five months of this year, four and a half months of this year, we were below 90%. That really eats into the margin. That's a big number. In the end of May and into the month of June, the first month that we had gotten back over that 90% threshold. That's a big portion of what's driving that. As far as the margins on the ancillary revenue, the cable agreements, those things, it's a pretty thin margin business, but a somewhat large amount of revenue. It does certainly put some pressure on the margin there.

Speaker #5: For the first five months of this year—four and a half months of this year—we were below 90%. And that really eats into the margin.

Speaker #5: That's a big number. And so at the end of May and into the month of June, it was the first month that we had gotten back over that 90% threshold.

Speaker #5: So that's a big portion of what's driving that. As far as the margins on the ancillary revenue, the cable agreements, those things—yeah, I mean, it's a pretty thin margin business, but a somewhat large amount of revenue.

Speaker #5: So it does certainly put some pressure on the margins there. If you take those two items out, we're back over that 65, 65-and-a-half percent margin, which is kind of where I would expect us to trend moving forward.

Eddie Carlisle: If you take those two items out, we're back over that 65%, 65.5% margins, which is kind of where I would expect us to trend moving forward. The impact of that water sewer was the biggest driver of that in Q2.

Speaker #5: But the impact of that water sewer was the biggest driver of that in Q2.

Speaker #2: Okay. So if Q3 has no assuming Q3 has no weather impacts, margins probably down, what, 50 beats?

Jonathan Kelcher: Okay. Assuming Q3 has no weather impacts, margins probably down, what, 50 bps maybe?

Speaker #5: Yeah. Yeah, I think that's correct.

Eddie Carlisle: Yeah. I think that's correct.

Speaker #2: Okay. And then secondly, it might be a little bit early, but how should we be thinking about lot increases for January 1st?

Jonathan Kelcher: Okay. Secondly, it might be a little bit early, but how should we be thinking about lot increases for 1 January?

Eddie Carlisle: You are right. It's a little early for the conversation. Historically, we've always guided 4% or 5%, something in that range. We're still in that range. What we're seeing in our markets in the Midwest is very stable environments economically. People in the competing products, mainly apartments. Apartment rents are still going up 5% annually, and we've still got a great disparity, $300 to $500 typically, if not more, between us and apartment rents all in, if you own a home. I think we're in the same general range. This is just a crazy stable time, actually. I don't see anything driving us out of our guidance.

Kurt Keeney: You are right. It's a little early for the conversation. Historically, we've always guided 4% or 5%, something in that range. We're still in that range. What we're seeing in our markets in the Midwest is very stable environments economically. People in the competing products, mainly apartments. Apartment rents are still going up 5% annually, and we've still got a great disparity, $300 to $500 typically, if not more, between us and apartment rents all in, if you own a home. I think we're in the same general range. This is just a crazy stable time, actually. I don't see anything driving us out of our guidance.

Speaker #5: You are right. It's a little early for the conversation. Historically, we've always guided 4, 5 percent, something in that range. We're still in that range.

Speaker #5: What we're seeing in our markets in the Midwest is a very stable economic environment. People in the competing products, mainly apartments—apartment rents are still going up, 5% annually.

Speaker #5: And we still got a great disparity, 3 to 5 hundred dollars typically, if not more, between us and apartment rents all in. If you own a home.

Speaker #5: So I think we're in the same general range. This is just a crazy stable time, actually. So I don't see anything driving us out of our guidance.

Speaker #2: Okay. That's helpful. I'll turn it back. Thank you.

Jonathan Kelcher: Okay. That's helpful. I'll turn it back. Thank you.

Speaker #5: Sure. Thanks, John.

Eddie Carlisle: Sure. Thanks, John.

Kurt Keeney: Sure. Thanks, John.

Operator: Our next question comes from the line of Kyle Stanley with Desjardins. Your line is now open.

Speaker #1: Our next question comes from the line of Kyle Stanley with Dejardin. Your line is now open.

Speaker #5: Thanks. Morning, guys.

Kyle Stanley: Thanks. Morning, guys.

Speaker #2: Morning, Kyle.

Eddie Carlisle: Morning, Kyle.

Kurt Keeney: Morning, Kyle.

Speaker #3: Morning.

Nathan Smith: Morning.

Eddie Carlisle: Morning.

Speaker #2: Just on the occupancy side—obviously, you've had, I think, a really strong start to the year. It does seem like, obviously, some of that was tied to a strong home sales season, which I think you've mentioned in the past.

Kyle Stanley: Just on the occupancy side, obviously you've had, I think, a really strong start to the year. It does seem like obviously some of that was tied to a strong home sales season, which I think you've mentioned in the past. How are you feeling about, I guess, further occupancy growth into the balance of the year, maybe as home sale season starts to slow a little bit, just from a seasonal perspective?

Speaker #2: How are you feeling about, I guess, further occupancy growth into the balance of the year, maybe as home sale season starts to slow a little bit, just from a seasonal perspective?

Speaker #5: Yeah, I think when you look at the seasonality of the business, it's great. When you into second quarter and you're up 2% year over year, that's a good place to be.

Kurt Keeney: Yeah. I think when you look at the seasonality of the business, it's great. When you end a Q2 and you're up 2% year-over-year, that's a good place to be. Especially, as you head into Q4 with the holiday schedule, you just don't move occupancy a lot in Q4. I think if we can hold onto our occupancy gains throughout the rest of the year, I'll be very pleased with it. Again, we've always guided 1% to 2% same community operator or occupancy gains year-over-year. I think we're going to be right in there, probably towards the high end of it as we march forward. Again, there's no problem with demand. There's just a little cyclicality as you head into Q4 with the holiday schedule.

Speaker #5: And especially as you head into the fourth quarter, the fourth quarter with the holiday schedule, you just don't move occupancy a lot. In the fourth quarter.

Speaker #5: So you really just I think if we can end the if we can hold on to our occupancy gains throughout the rest of the year, I'll be very pleased with it.

Speaker #5: Again, we've always guided 1 to 2 percent same community operator or occupancy gains year over year. And I think we're going to be right.

Speaker #5: Right in there, probably towards the high end of it, as we march forward. Again, there's no problem with demand. There's just a little cyclicality as you head into the fourth quarter with the holiday schedule.

Speaker #2: Right. Okay. That makes sense. So looking to kind of hold the gains is probably the target at this point.

Kyle Stanley: Right. Okay. That makes sense. Looking to kind of hold the gains is probably-

Eddie Carlisle: Yeah

Kurt Keeney: Yeah

Kyle Stanley: the target at this point.

Kyle Stanley: -the target at this point.

Speaker #5: Yeah. I think that's a reasonable thought.

Kurt Keeney: Yeah.

Kurt Keeney: Okay.

Kyle Stanley: Okay.

Kurt Keeney: I think that's a reasonable thought.

Speaker #2: Okay. Fair enough. Nathan, in your comments, obviously, you mentioned looking to continue growing, obviously, in your existing markets, but while we've been talking, I was just looking at Marblehead and looking at where it's located relative to some larger markets in Michigan.

Kyle Stanley: Okay. Fair enough. Nathan, in your comments, obviously you mentioned looking to continue growing, obviously in your existing markets. While we've been talking, I was just looking at Marblehead and looking at where it's located relative to some larger markets in Michigan. Is Michigan a state you'd consider expanding into at any point?

Speaker #2: Is Michigan a state you'd consider expanding into at any point?

Speaker #4: It is not right now. I would not put it on the radar at all right now.

Nathan Smith: It is not right now. I would not put it on the radar at all right now.

Speaker #2: Okay. Fair enough.

Kyle Stanley: Okay. Fair enough.

Kurt Keeney: Kyle, we think our runway in the current eight states could be $1 billion. Every time you enter a new market, there's tuition to be paid. You just sometimes don't know what it is. We're real comfortable in our markets, and we think we could deploy capital basically in our backyard.

Speaker #5: Kyle, we think we've got a we think our runway in the current eight states could be a billion dollars. So every time you enter a new market, there's tuition to be paid.

Speaker #5: So you just sometimes don't know what it is. So we're real comfortable in our markets, and we think we could deploy capital basically in our backyard.

Speaker #2: Okay. That makes sense. And then just the last one, obviously, there's been a lot of kind of media attention on the road to housing act.

Kyle Stanley: Okay. That makes sense. Just the last one, obviously, there's been a lot of kind of media attention on the ROAD to Housing Act. I've seen some changes in there as it relates to manufactured housing. Just wondering.

Speaker #2: I've seen some changes in there as it relates to manufactured housing. Just wondering, kind of what your thoughts are on that and maybe the impacts that may have on the market more broadly.

Nathan Smith: Yeah

Kyle Stanley: Kind of what your thoughts are on that and maybe the impact that may have on the market more broadly?

Speaker #4: Well, we were the biggest issue with that deal was that were we going to be put in the bill? And they were going to address some affordable housing.

Nathan Smith: Well, the biggest issue with that bill was that were we going to be put in the bill, and they were going to address some affordable housing. We were removed from the bill and the communities. Really what we're talking about, this is more of a manufacturing bill than it is a community bill. I think it'll have actually little to no impact on the community business. Now, it may have some on the manufacturing business, removing the chassis. I don't know that there's a huge savings as other people think. I will have to say, cleaning the bill up and putting all of the regulations at HUD instead of being spread out throughout the governments could be beneficial to the manufacturers because they're dealing with one agency now.

Speaker #4: We were removed from the bill, and the communities. So really, what we're talking about this is more of a manufacturing bill than it is a community bill.

Speaker #4: And I think it'll actually have little to no impact on the community business. Now, it may have some impact on the manufacturing business, removing the chassis.

Speaker #4: I'm not I don't know that there's a huge savings as other people think. I will have to say, cleaning the bill up and putting all of the regulations at HUD instead of being spread out throughout the government could be beneficial to the manufacturers because they're dealing with one agency now.

Speaker #4: That's the only difference.

Kurt Keeney: That's the only difference.

Nathan Smith: That's the only difference.

Speaker #2: Okay. Okay. Thank you. I will turn it back.

Kyle Stanley: Okay. Thank you. I will turn it back.

Operator: Thank you. Our next question comes from the line of Brad Sturges with Raymond James. Your line is now open.

Speaker #1: next question comes from the line of Brad Sturgis with Raymond James. Your line is now open.

Speaker #5: Hey, guys.

Brad Sturges: Hey, guys.

Kurt Keeney: Morning, Brad.

Speaker #2: Morning, Brad.

Speaker #5: Morning.

Kurt Keeney: Morning. Circling back to the conversation around rental homes. I think you're running at 11% or 12% of lots. I think that's higher than what you've typically talked about in terms of a threshold of what kind of exposure you want to have. I'm curious of how much comfort you have in terms of pushing out a bit more just to drive occupancy, or really, we should be thinking about that number in terms of percentage coming down over the next few quarters.

Brad Sturges: Morning. Circling back to the conversation around rental homes. I think you're running at 11% or 12% of lots. I think that's higher than what you've typically talked about in terms of a threshold of what kind of exposure you want to have. I'm curious of how much comfort you have in terms of pushing out a bit more just to drive occupancy, or really, we should be thinking about that number in terms of percentage coming down over the next few quarters.

Speaker #2: Circling back to the, I guess, the conversation around rental homes, I think you're running at 11 or 12 percent of lots. I think that's higher than what you've typically talked about in terms of a threshold of what kind of exposure you want to have.

Speaker #2: I'm curious of how much comfort you have in terms of pushing out a bit more just to drive occupancy or really we should be thinking about that number in terms of percentage coming down over the next few quarters.

Kurt Keeney: Yeah. My personal preference would be for that to come down. That takes time to get it to come down. We need to high grade some of the rental fleet, and we're selling off the older ones, and I think that's a great strategy. Like I said, for the H1 of the year, earlier I said, we put 224 in and we sold 39. Okay. The math means that the % was going to go up. We'd like to drive it back closer to 10. That's just a long-term strategy, and it's also a little dependent on what you buy, right? Nathan did a great job. We bought $75 million worth of stuff in the Q4 last year.

Speaker #5: Yeah, my personal preference would be for that to come down. That takes time to get it to come down. We need to high-grade some of the rental fleet, and we're selling off the older ones.

Speaker #5: And I think that's a great strategy. But like I said, for the first half of the year earlier, I said, we put 224 in and we sold 39.

Speaker #5: Okay. The math means that the percentage was going to go up. So we'd like to drive it back closer to 10. But that's just a long-term strategy.

Speaker #5: And it's also a little dependent on what you buy, right? I mean, Nathan did a great job. We bought 75 million dollars' worth of stuff in the fourth quarter last year.

Speaker #5: And when you buy some of those, we bought three particular communities in Ohio, and you had to change some of the curb appeal and put some rental homes into the fleet.

Kurt Keeney: When you buy some of those, we bought three particular communities in Ohio, and you had to change some of the curb appeal and put some rental homes into the fleet. It's a strategy that hasn't changed. We'd like it to be closer to 10. We're a little over it right now, probably 11 and a half, something like that. We still think it would be better to have more homeowners than renters, but we want to make sure that we're taking care of the new assets that we purchase, too.

Speaker #5: So it's a it's a strategy that hasn't changed. We'd like it to be closer to 10. We're a little over it right now, probably 11 and a half, something like that.

Speaker #5: And we still think it would be better to have more homeowners than renters and but we want to make sure that we're taking care of the new assets that we purchase too.

Eddie Carlisle: In terms of acquisitions going forward, I understand you guys will be opportunistic in terms of what comes available. In an ideal world, you've done quite a bit of value add, and you've done a lot of that in the portfolio. Would you be still comfortable doing more at this point and taking on more value add exposure, or would you have a preference more towards something a bit more stabilized, more core?

Brad Sturges: In terms of acquisitions going forward, I understand you guys will be opportunistic in terms of what comes available. In an ideal world, you've done quite a bit of value add, and you've done a lot of that in the portfolio. Would you be still comfortable doing more at this point and taking on more value add exposure, or would you have a preference more towards something a bit more stabilized, more core?

Speaker #2: In terms of acquisitions, going forward, I understand you guys will be opportunistic in terms of what comes available, but in an ideal world, you've done quite a bit of value add and you've got a lot of that in the portfolio.

Speaker #2: Would you be still comfortable doing more at this point and taking on more value add exposure, or would you have a preference more towards something a bit more stabilized, more core?

Speaker #5: I think it'd be per market is what we'd be at in the value add. There are some markets that we might not be interested in any more value add.

Kurt Keeney: I think it'd be per market, is where we be at in the value add. There are some markets that we might not be interested in any more value add. There are other markets that we'd be very interested in value add. It's just really by the market in that question.

Nathan Smith: I think it'd be per market, is where we be at in the value add. There are some markets that we might not be interested in any more value add. There are other markets that we'd be very interested in value add. It's just really by the market in that question.

Speaker #5: There are other markets that we'd be very interested in value add. So it's just really by the market in that question. And to be fair, specific markets, you don't get a lot of optionality sometimes.

Brad Sturges: Is there a big market that makes more sense for Flagship?

Kurt Keeney: You don't get a lot of optionality sometimes.

Speaker #4: Yeah, that's true. Fair comment.

Brad Sturges: Yeah, that's true. Very common occurrence.

Speaker #5: You can't control when these deals come to market, right? They're so sporadic. So sometimes you got to be a little uncomfortable when you're going into the value add just because you're not going to get another shot at it.

Kurt Keeney: You can't control when these deals come to market, right? They're so sporadic. Sometimes you got to be a little uncomfortable when you're going into the value add, just because you're not going to get another shot at it.

Speaker #2: I guess, are there markets that make more sense for value-add for Flagship today? Is it more the existing markets you already have larger exposure to, or is it...?

Brad Sturges: I guess, is there markets that make more sense for value add for Flagship today? Is it more of the existing markets you already got a larger exposure to?

Kurt Keeney: We're very happy in the markets we are on. There's many people that listen to this call, and maybe we don't want to share what market we'd be interested in doing that in.

Nathan Smith: We're very happy in the markets we are on. There's many people that listen to this call, and maybe we don't want to share what market we'd be interested in doing that in.

Speaker #4: We're very happy in the markets we are on. And there's many people that listen to this call, and maybe we don't want to share what market we'd be interested in doing that in.

Brad Sturges: Sure. Okay. I'll turn it back. Thank you.

Speaker #2: Sure. Okay. I'll turn it back. Thank you.

Speaker #1: Thank you. As a reminder, to ask a question at this time, please press star 11 on your touchdown telephone. Our next question comes from the line of Himanshu Gupta with Scotiabank.

Operator: Thank you. As a reminder, to ask a question at this time, please press star one-one on your touchtone telephone. Our next question comes from the line of Himanshu Gupta with Scotiabank. Your line is now open.

Speaker #1: Your line is now open.

Speaker #6: Thank you and good morning.

Himanshu Gupta: Thank you. Good morning.

Speaker #2: Hi, Mark Himanshu. How are you?

Kurt Keeney: Hi Himanshu. How are you?

Himanshu Gupta: Very good. Just looking at the IFRS NAV. Your cap rate is just under five. US Treasury 10-year is around mid-four or maybe slightly higher than mid-four here. At what point of time we start seeing cap rate expansion here? I know, Nathan, you, in your prepared remarks, you mentioned you haven't seen much expansion in cap rates yet, so any color there?

Speaker #6: Very good. Very good. So just looking at the IFRS NAV, I mean, you are cap rated just under 5. US Treasury 10-year is around mid 4 or maybe slightly higher than mid 4 here.

Speaker #6: At what point in time do we start seeing cap rate expansion here? And I know, Nathan, in your prepared remarks, you mentioned you haven't seen much expansion in cap rates yet.

Speaker #6: So any color there?

Speaker #2: Well, I mean, what I would say is most manufactured housing communities in my 31 years have normally I would say have always traded between 5 and a 7 cap at high interest rates, low interest rates.

Kurt Keeney: What I would say is most manufactured housing communities in my 31 years have normally, I would say, have always traded between five and a seven cap. At high interest rates, low interest rates. Have I seen an eight and nine cap? Yep. I have seen it many times. Sometimes that's a really heavy lift. You could see it, but historically, I have seen higher interest rates, lower interest rates, and they kind of trade inside that box.

Nathan Smith: What I would say is most manufactured housing communities in my 31 years have normally, I would say, have always traded between five and a seven cap. At high interest rates, low interest rates. Have I seen an eight and nine cap? Yep. I have seen it many times. Sometimes that's a really heavy lift. You could see it, but historically, I have seen higher interest rates, lower interest rates, and they kind of trade inside that box.

Speaker #2: Have I seen an 8 and 9 cap? Yep. I've seen it many times. Sometimes that's a really heavy lift. And so you could see it, but historically, we've seen I've seen higher interest rates, lower interest rates, and they kind of trade inside that box.

Eddie Carlisle: The other thing that I would add there is, certainly this asset class seems to be less sensitive to interest rates. In so far as the rates have continued to increase. Frankly, we look at this very closely. We do it quarterly. We want to be conservative when it comes to our IFRS NAV and our cap rate. We evaluate it quarterly. We talk to third parties. We see, obviously, the transactions that are trading in the market. As of right now, there just hasn't been much of a movement at all. To Nathan's point, maybe at some point that starts to happen because there's not a lot of actual transactions that are trading right now. Maybe we see that break loose, but as of now, it just really hasn't moved much.

Speaker #5: Yeah. The other thing that I would add there is certainly this asset class seems to be less sensitive to interest rates. And so far as the rates have continued to increase, frankly, I mean, we look at this very closely.

Speaker #5: We do a quarterly. We don't we want to be conservative when it comes to our IFRS NAV and our cap rate. But we evaluate it quarterly.

Speaker #5: We talk to third parties. We see, obviously, the transactions that are trading in the market. And as of right now, they're just hasn't been much of a movement at all.

Speaker #5: Maybe to Nathan's point, maybe at some point that starts to happen. Because there's not a lot of actual transactions that are trading right now.

Speaker #5: So maybe we see that break loose, but as of now, it just really hasn't moved much.

Himanshu Gupta: Got it. Obviously transaction market is slow. I think you mentioned as well, you have been quiet also. Is that the disconnect between buyer and seller expectations here, which is leading to lack of transactions?

Speaker #6: Got it. And then obviously, transaction market is slow. I think you mentioned as well. You have been quite also is that the disconnect between buyer and seller expectations here, which is leading to lack of transactions?

Kurt Keeney: Maybe a little bit. I think that

Nathan Smith: Maybe a little bit. I think that Sometimes it's a slower quarter. We've done two, so it's not like we haven't. We've seen deals, but they're just not closing. Maybe that is a disconnect. I can't say what's going through a family's head, but I definitely would say that it's not a hurry up and sell under that situation. It's a kind of a slow roll, even on the communities we're talking with people.

Speaker #2: Maybe a little bit. I think that sometimes you just it just it's a slower quarter. I mean, we've done two. So it's not like we haven't.

Nathan Smith: Sometimes it's a slower quarter. We've done two, so it's not like we haven't. We've seen deals, but they're just not closing. Maybe that is a disconnect. I can't say what's going through a family's head, but I definitely would say that it's not a hurry up and sell under that situation. It's a kind of a slow roll, even on the communities we're talking with people.

Speaker #2: And so and we've seen deals, but they're just not closing. And maybe that is a disconnect. I can't say what's going through a family's head, but I definitely would say that it's not a hurry up and sale under that situation.

Speaker #2: It's a kind of a slow roll, even on the sales that we on the communities we're talking with people.

Speaker #6: Got it. And maybe the last question, for you to close 100 million dollars of acquisitions in any given year, how much typical volume you need to see?

Himanshu Gupta: Got it. Maybe the last question. For you to close $100 million of acquisitions in any given year, how much typical volume you need to see? What's your pipeline which gets to $100 million of closing for the year?

Speaker #6: What's your pipeline, which gets to 100 million dollars of closing for the year?

Nathan Smith: It's not that way at all. It's not that I need to see 49 properties to buy 10. It's normally this person's issue has changed, and they need to sell. It's just not that way, Himanshu. It's not like apartment buildings. Apartment buildings are everywhere, and you say, Oh, we got to look at 58 of them to get seven. We don't think of it that way. Last year, we were in the middle of three deals, and we closed two of them. There's some deals we come in, they'll come in my door, and I never even look at them. I'm like, We don't want that.

Speaker #2: It's not that way at all. It's not that I need to see 49 properties to buy 10. It's normally this person's issue has changed and they need to sell.

Speaker #2: It's just not that way how much it's not like apartment buildings. Apartment buildings are everywhere. And you can kind of you say, "Oh, we got to look at 40 58 of them to get 7." We don't think of it that way.

Speaker #2: Last year, we bid on we were in the middle of three deals, and we closed two of them. So I mean, there's some deals that we come in, they'll come in my door, and I never even look at them.

Speaker #2: I'm like, "We don't want that."

Speaker #5: Right. I think the interesting thing is, Nathan, really, we do get a lot of what I call the soft calls, right? They don't hit them open market.

Kurt Keeney: I think the interesting thing is, Nathan, really, we do get a lot of what I call the soft calls, right? They don't hit the open market, and that's because Nathan's been networking for 31 years. When you look at that, I think people have confidence in us, and partly because of this call, that we can close. We have a history and a reputation for if we sign a deal with somebody, we close, and we don't re-trade people. I think that means we can look at fewer deals, and they know they're going to get to the end with us.

Speaker #5: And that's because, Nathan's been networking for 31 years. And so when you look at that, I think people have confidence in us, partly because of this call that we can close.

Speaker #5: So we're we have a history and a reputation for if we sign the deal with somebody, we close. And we don't retrade people. And I think that means we can look at fewer deals and they know they're going to get to the end.

Speaker #2: With us.

Speaker #6: Thank you for the color, and I'll turn it back. Thank you guys.

Himanshu Gupta: Thank you for the color. I'll turn it back. Thank you, guys.

Speaker #1: Thank you. And I'm currently showing no further questions at this time. I now like to hand the call back over to Kurt Keeney for closing remarks.

Operator: Thank you. 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.

Speaker #5: Thank you, operator. And we certainly thank everybody for participating today. Please feel free to reach out to our investor relations team at ir@flagshipcommunities.com if you have any further questions.

Kurt Keeney: Thank you, operator. We certainly thank everybody for participating today. Please feel free to reach out to our investor relations team at ir@flagshipcommunities.com if you have any further questions. Happy Thursday.

Speaker #5: Happy Thursday.

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

Q2 2026 Flagship Communities Real Estate Investment Trust Earnings Call

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