Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Flagship Communities REIT (MHCUF) Q3 2024 Earnings Call Highlights: Strong Revenue Growth and ...

Published 2024-11-14, 08:19 p/m
Flagship Communities REIT (MHCUF) Q3 2024 Earnings Call Highlights: Strong Revenue Growth and ...
ETH/USD
-

GuruFocus -

  • Revenue: $23.2 million, up nearly 28% year-over-year.
  • Same Community Revenue: $19.7 million, increased by approximately $2.2 million from the previous year.
  • Net Operating Income (NOI): $15.1 million, compared to $11.8 million last year.
  • NOI Margin: 65%, compared to 65.2% in the previous year.
  • Same Community NOI Margin: 66%, a slight decrease from last year.
  • AFFO: $7.9 million, a 43.6% increase from the previous year.
  • AFFO per Unit: $0.31, up 20.7% year-over-year.
  • AFFO Adjusted: $7 million, a 28% increase from last year.
  • AFFO Adjusted per Unit: $0.28, a 7.7% increase from last year.
  • FFO: $8.8 million, a 40.9% increase from last year.
  • FFO per Unit: $0.35, up 18% year-over-year.
  • FFO Adjusted: Approximately $8 million, a 27% increase from last year.
  • FFO Adjusted per Unit: $0.32, an increase of just over 7% from last year.
  • Same Community Occupancy: 85.7%, an increase from last year.
  • Total (EPA:TTEF) Lot Occupancy: 84.4% as of September 30.
  • Average Monthly Lot Rate: $447.
  • Total Liquidity: Approximately $21 million.
  • Unencumbered Investment Properties: 18 properties with a total fair value of $43.7 million.
Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Flagship Communities REIT (MHCUF) reported a 28% increase in revenue for the third quarter, driven by lot rent and occupancy increases.
  • The company achieved a 12% increase in same community revenue and a 13% increase in same community NOI over the previous year.
  • Flagship completed its largest acquisition to date, adding 7 MHCs to its portfolio, expanding its presence in Tennessee and entering West Virginia.
  • The REIT announced a 5% increase in its monthly cash distribution for the fourth consecutive year, highlighting strong financial performance.
  • The company successfully refinanced near-term debt at lower fixed interest rates, with no substantial debt maturities until 2030, improving its financial position.
Negative Points
  • Same community NOI margin slightly decreased to 66% compared to the previous year.
  • The company faces high barriers to entry in the manufactured housing market due to regulatory restrictions and limited zoned land.
  • There was a noted occupancy slippage in newly acquired properties in West Virginia and Nashville, attributed to repositioning efforts.
  • CapEx spending was elevated due to refinancing requirements and home purchases, impacting short-term financials.
  • Interest rate volatility has delayed the refinancing of a bridge loan, with current rates higher than initially anticipated.
Q & A Highlights Q: In the press release, you noted that integration of the portfolio acquisition is exceeding your expectations. Can you maybe talk a little bit more about how that is? And if you can quantify any numbers on that, whether it's on leasing occupancy, filling vacant sites?

A: Kurtis Keeney, President and CEO: Yes. At this point, when you close on an acquisition, you see if your assumptions are true, right? That's what really happens. And at the end of the day, what we know today is that all the assumptions we were on point on and our NOI is ahead of budget, and we've got our homes there to set up to rent and sell. And so we're very happy with where we are. Nathan got us the appropriate licenses timely, which was a little bit of an effort to say the least. And so we're in really good shape there. So I think we're really pleased with where we're at. NOI is ahead and stands by.

Q: The rent growth that we're seeing this year seems to be a little bit better than what we saw in the past couple of years. Am I reading that correctly? And is that something that you can see continuing in 2025?

A: Kurtis Keeney, President and CEO: I think the answer is absolutely. The rent growth has been strong. Some of the ancillary income has been strong and the most important thing that I would say there is it's recurring.

Q: Just on the I think usually around this time of the year, you're contemplating what your lot rent increase will be for the next year. I was wondering if you could give us any update as to how you're thinking about that right now?

A: Kurtis Keeney, President and CEO: You have a good memory, Mark. Yes. We have already given the appropriate notices, so it is essentially public information because we've disclosed it to our residents. So on average, it's about 6% across the portfolio, which is roughly $30 or something per lot, something right in there.

Q: Just maybe you give us a sense of what's going on in the utilities reimbursement has been something in the past couple of quarters that has been very elevated. I guess you're recapturing more than 100% of your expenses. So if you could just give us a sense of what's going on there would be number one. And then number two, it looks like and I don't think you break it down the utilities on a same-property expense basis. But if we just look at it and the expense on weighted by average lots owned, there's been a lot of inflation there. So maybe you can just give us a sense of what's happening?

A: Eddie Carlisle, CFO: Perfect. Sorry. Yes. So when you look at utility recapture, specifically as you look at water sewer, that's the biggest piece of what we do. Our bogey, what we've tried to accomplish is to be 90%. You're correct. We've been now over 90% for the last 2 quarters, which is a huge accomplishment and says a lot of what our team is doing in that area. The other area that we're getting, we're able to get some amenity fees that we've been able to collect that kind of rolls into the water sewer. And it's actually an opportunity for us to save our residents the money as far as some ancillary services, cable and Internet. And you're actually making money through saving the residents some money. So we've been able to drive that. But that's what you're seeing within the utilities line, the reason your recapture looks to be elevated there.

Q: Just following up on that question, just in terms of CapEx spend you've got, I guess you've added a little over 100 lots now through expansion. How much CapEx would be related to those projects?

A: Kurtis Keeney, President and CEO: It's interesting. So we've got the total runway there, including the first ones we put online is about 750 lots, Brad. The first lots that we put online had very low CapEx. So I think on average, it's probably under $10,000 a lot to bring them online. Again, all of our organic lot expansion is what we call build infill. It's when you get a property into the mid-90s and you just have some excess land and you have the entitlements to build infill. So I think right now, about $10,000 a lot is a good number on the first 112, probably even a little bit less than that. But going forward, as we march down this road towards adding the $750, $20,000 to $25,000 per lot is a good number to model as far as just getting them completely online.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This content was originally published on Gurufocus.com

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.