Flagship Communities Real Estate Investment Trust (TSE:MHC.UN) reported fourth-quarter and full-year 2025 results that management said reflected continued execution on its acquisition-led growth strategy and steady same-community performance, while maintaining what it described as balance sheet strength.
Management highlights “milestone year” and distribution increase
On the call, President and CEO Kurt Keeney said 2025 marked Flagship’s fifth year as a public REIT and the 30th anniversary for Keeney and Chief Investment Officer Nathan Smith in the manufactured housing community (MHC) industry. Keeney said rental revenues, net operating income (NOI), adjusted funds from operations (FFO), and adjusted adjusted funds from operations (AFFO) have increased over the past several years.
Flagship also announced a 5% increase to its monthly cash distribution, which Keeney said marked the fifth consecutive year of distribution growth. He added that since the IPO, the REIT has reduced leverage and maintained what he called a disciplined AFFO payout ratio.
Acquisitions in Indiana and Ohio and continued portfolio investment
Smith said acquisitions were a major driver of 2025’s performance. In the fourth quarter, Flagship acquired a community in Seymour, Indiana that is “over 90% occupied” and includes 85 lots earmarked for future expansion. The REIT also acquired a Greater Cincinnati portfolio consisting of 500 lots across three MHC communities.
Smith emphasized that Flagship targets communities in major metropolitan areas with diverse employment bases, especially in markets where the REIT already operates. He said the company seeks acquisitions that are accretive to AFFO per unit and that can produce operating efficiencies through scale, often within existing markets or adjacent states with similar regulatory frameworks.
In addition to acquisitions, Smith discussed ongoing reinvestment in existing properties, including adding amenities and expanding the company’s Flock camera security system to nearly one quarter of its communities during 2025.
Keeney said Flagship did not renew its at-the-market equity program in mid-2025, citing balance sheet capacity and access to attractively priced debt. He said the REIT remains focused on accretive growth funded primarily through leverage.
Financial results: revenue growth, stable NOI margins, and higher FFO and AFFO
Chief Financial Officer Eddie Carlisle reported fourth-quarter revenue of $27.5 million, up 15.6% from the same period a year earlier, driven primarily by acquisitions and portfolio-wide lot rent increases. Full-year revenue was $103.4 million, up 17.3% on the same factors. Carlisle said same-community revenue growth was 8.2% in the fourth quarter and 10.9% for the year, driven by higher monthly lot rents, increased utility reimbursements, and ancillary revenues such as amenity fees and cable and internet reimbursements.
Fourth-quarter NOI was $18.4 million with a 67% NOI margin, compared with $15.9 million and a 67% margin in the fourth quarter of 2024. For the year, NOI was $68.4 million and the NOI margin was 66.2%, compared with $58.4 million and a 66.3% margin in the prior year. Same-community NOI margins were 66.6% in the fourth quarter and 66.2% for the full year.
Carlisle said NOI margins were pressured by ancillary services, which he noted carry lower margins than the REIT has historically achieved, even though ancillary services contributed to NOI growth.
Adjusted FFO in the fourth quarter was $9.4 million, up 20.3% year over year, and adjusted FFO per unit was $0.37, up 20%. For the full year, adjusted FFO was $36.1 million and adjusted FFO per unit was $1.44, representing increases of 19.7% and 13.4%, respectively, compared with 2024.
Adjusted AFFO in the fourth quarter was $8.5 million, up 12.4% year over year, and adjusted AFFO per unit was $0.34, up 12.3%. For the year, adjusted AFFO was $32.9 million and adjusted AFFO per unit was $1.31, up 20.7% and 14.4%, respectively, from 2024.
Occupancy, collections, leverage, and liquidity
Carlisle said same-community occupancy was 83.9%, down 0.2% from the prior year, attributing the decline to the addition of expansion lots and modest December weather impacts. Excluding those factors, he said occupancy would have been in line with 2024 levels and added that management expects expansion lots to be occupied “in the normal course of business.”
Rent collections were 99.0% for the fourth quarter and 99.2% for the year, slightly higher than comparable periods last year, which Carlisle said demonstrated the “strength and predictability” of the MHC sector.
As of Dec. 31, Carlisle said total lot occupancy was 82.9% and the average monthly lot rent was $483. The weighted average mortgage and note interest rate was 4.54%, with a weighted average term to maturity of 8.2 years. Total liquidity, including cash equivalents and available credit capacity, was about $19.7 million. Carlisle also noted the REIT had 20 unencumbered investment properties with a total fair value of $123.1 million at year-end 2025.
Q&A: cap rates, debt costs, operating expenses, and acquisitions outlook
During the question-and-answer session, Smith said MHC cap rates have historically traded in a 5% to 7% range and that he continues to see deals within that band, adding that higher cap rates can require more operational work. Carlisle added that Flagship evaluates acquisitions on in-place returns and the “levers” available to improve performance, including implementing sub-meter utility strategies, rent-to-market opportunities, and occupancy upside.
Asked about same-property occupancy softness in the quarter, Keeney attributed it to seasonality and weather in December, saying leasing activity was affected by early snow and the holiday period, and that metrics had begun to rebound by February. He said he still expects 1% to 2% occupancy growth through homeownership.
On ancillary services, Carlisle said the program covers roughly 75% of lots and is expected to expand toward 100% where feasible, with about another year of runway. He said those services typically grow more slowly, generally tied to CPI, due to contractual “governors.”
On financing, Carlisle said spreads had widened around the time of a Freddie Mac loan and have since begun to tighten as the 10-year Treasury declined, adding that the REIT is seeing renewed competition from life insurance companies. He said he would expect pricing “sub six” for new debt, around 5.5% to 5.75%, generally for 10-year terms.
Management also discussed weather-related operating expenses, noting higher repairs, maintenance, and payroll impacts from snow and cold, and said it expected similar seasonality in the first quarter before leveling out later in the year. Carlisle said capital expenditures were lower in the fourth quarter due to seasonality and because some repairs were pulled forward earlier in 2025 in connection with large refinancing requirements, and he expects CapEx to normalize at a more sustainable level.
On acquisition capacity, Carlisle said the REIT has balance sheet capacity for an additional $100 million to $150 million of acquisitions, which he said should sustain the REIT through 2026, and he did not see a near-term need for equity financing to fund deals. Smith said he expects Flagship to remain focused on its existing eight-state footprint and indicated the company should be able to grow acquisitions by $30 million to $50 million in 2026, depending on available opportunities.
About Flagship Communities Real Estate Investment Trust (TSE:MHC.UN)
Flagship Communities Real Estate Investment Trust is a leading operator of affordable residential MHCs primarily serving working families seeking affordable home ownership. The REIT owns and operates exceptional residential living experiences and investment opportunities in family-oriented communities in Kentucky, Indiana, Ohio, Tennessee, Arkansas, Missouri, West Virginia, and Illinois.
