Strong SFR Fundamentals Drive Tricon's Q3 2022 Results
Tricon Residential Inc. (NYSE: TCN) announced strong Q3 2022 results, highlighting a 3% year-over-year increase in net income to $178.8 million. Earnings per share from continuing operations rose to $0.65 and $0.49, basic and diluted, respectively. Core FFO increased by 21.7% to $46.4 million, driven by a 10.2% same home NOI growth. The company expanded its single-family rental portfolio by 1,988 homes, totaling 35,262 homes. A notable sale of its 20% stake in the U.S. multi-family rental portfolio generated $315 million. Looking ahead, Tricon plans to acquire approximately 850 homes in Q4 2022 due to rising financing costs.
- Net income from continuing operations rose 3% year-over-year to $178.8 million.
- Core FFO increased 21.7% year-over-year to $46.4 million.
- Same home NOI grew by 10.2% year-over-year.
- Single-family rental portfolio expanded by 1,988 homes (5.5% growth).
- Successful sale of 20% stake in U.S. multi-family portfolio generated $315 million.
- 18% increase in weighted average diluted shares outstanding due to prior public offering.
- Property operating expenses increased significantly, up 38% year-over-year.
- Fair value gain on rental properties dropped from $362.3 million in Q3 2021 to $107.2 million.
- Deceleration in home price appreciation due to rising mortgage rates.
All financial information is presented in
The Company reported strong operational and financial results in the third quarter, including the following highlights:
-
Net income from continuing operations increased by
3% year-over-year to compared to$178.8 million in Q3 2021; basic and diluted earnings per share from continuing operations were$174.3 million and$0.65 , respectively;$0.49 -
Core FFO of
increased by$46.4 million 21.7% year-over-year and Core FFO per share of increased by$0.15 7.1% , reflecting growth in the single-family rental home business and strong operating performance, partially offset by an18% increase in weighted average diluted shares outstanding stemming largely from Tricon'sU.S. public offering inOctober 2021 ;1 -
Same home Net Operating Income ("NOI") for the single-family rental portfolio in Q3 grew by
10.2% year-over-year and same home NOI margin increased by1.5% to a record68.5% . Same home occupancy increased by0.3% year-over-year to97.9% , same home turnover remained at a low rate of18.6% and blended rent growth was8.4% (comprised of new lease rent growth of16.3% and renewal rent growth of6.6% ); -
The single-family rental portfolio expanded by
5.5% during the quarter (29.7% year-over-year) through the organic acquisition of 1,988 homes at an average price of per home (including closing and up-front renovation costs) for a total acquisition cost of$352,000 , of which Tricon's proportionate share was$700 million ;$213 million -
Positive trends continued into the fourth quarter, with same home rent growth of
7.6% inOctober 2022 , including13.0% growth on new leases and6.8% growth on renewals, while same home occupancy was stable at98.2% and same home turnover remained low at16.4% . Given significantly higher financing costs, Tricon has elected to reduce its pace of acquisitions further and expects to acquire approximately 850 homes in Q4 and 7,300 homes for the full year; -
On
October 18, 2022 , the Company completed the sale of its remaining20% equity interest in itsU.S. multi-family rental portfolio, generating approximately of gross proceeds, including approximately$315 million of performance fees;$100 million -
On
October 13, 2022 , the Company announced that theToronto Stock Exchange ("TSX") had approved its notice of intention to make a normal course issuer bid to repurchase up to 2,500,000 of its common shares trading on the TSX, theNew York Stock Exchange and/or alternative Canadian trading systems during the twelve-month period ending onOctober 17, 2023 ; and -
On
October 20, 2022 , the Company announced an industry-leading Bill of Rights for residents, the first of its kind among single-family rental housing providers inthe United States . This measure underscores Tricon’s resident-first approach and highlights the Company’s mission to support the well-being of Tricon residents. The Tricon Resident Bill of Rights outlines the Company’s commitment to providing quality, move-in-ready homes with caring and reliable service.
“Tricon delivered another strong quarter of results, underscoring the resilience of the single-family rental business in a much higher rate environment where it’s never been more compelling to rent versus own a home,” said
Financial Highlights
For the periods ended |
Three months |
|
Nine months |
|||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|||||||
Financial highlights on a consolidated basis |
|
|
|
|
|
|||||||
Net income from continuing operations, including: |
$ |
178,786 |
|
$ |
174,347 |
|
$ |
723,491 |
$ |
348,918 |
|
|
Fair value gain on rental properties |
|
107,166 |
|
|
362,285 |
|
|
802,573 |
|
728,899 |
|
|
|
|
|
|
|
|
|||||||
Basic earnings per share attributable to shareholders of Tricon from continuing operations |
|
0.65 |
|
|
0.80 |
|
|
2.63 |
|
1.70 |
|
|
Diluted earnings per share attributable to shareholders of Tricon from continuing operations |
|
0.49 |
|
|
0.80 |
|
|
1.87 |
|
1.69 |
|
|
|
|
|
|
|
|
|||||||
Net (loss) income from discontinued operations |
|
(2,335 |
) |
|
27,539 |
|
|
33,277 |
|
(26,368 |
) |
|
Basic (loss) earnings per share attributable to shareholders of Tricon from discontinued operations |
|
(0.01 |
) |
|
0.13 |
|
|
0.12 |
|
(0.13 |
) |
|
Diluted (loss) earnings per share attributable to shareholders of Tricon from discontinued operations |
|
(0.01 |
) |
|
0.12 |
|
|
0.11 |
|
(0.13 |
) |
|
|
|
|
|
|
|
|||||||
Dividends per share(1) |
$ |
0.058 |
|
$ |
0.055 |
|
$ |
0.174 |
$ |
0.167 |
|
|
|
|
|
|
|
|
|||||||
Weighted average shares outstanding - basic |
|
274,710,065 |
|
|
215,546,550 |
|
|
274,474,675 |
|
203,272,703 |
|
|
Weighted average shares outstanding - diluted |
|
311,910,445 |
|
|
217,768,873 |
|
|
312,023,897 |
|
205,305,513 |
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
For the periods ended |
Three months |
|
Nine months |
||||||||
(in thousands of |
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
||
|
|
|
|
|
|
||||||
Non-IFRS(2) measures on a proportionate basis |
|
|
|
|
|
||||||
Core funds from operations ("Core FFO") |
$ |
46,403 |
$ |
38,143 |
|
$ |
140,447 |
$ |
106,391 |
||
Adjusted funds from operations ("AFFO") |
|
35,182 |
|
31,003 |
|
|
109,570 |
|
85,046 |
||
|
|
|
|
|
|
||||||
Core FFO per share(3) |
|
0.15 |
|
0.14 |
|
|
0.45 |
|
0.42 |
||
AFFO per share(3) |
|
0.11 |
|
0.12 |
|
|
0.35 |
|
0.33 |
||
|
|
|
|
|
|
||||||
(1) Dividends are issued and paid in (2) Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company's performance. For the basis of presentation of the Company’s Non-IFRS measures and reconciliations, refer to the “Non-IFRS Measures” section and Appendix A. For definitions of the Company’s Non-IFRS measures, refer to Section 6 of Tricon's MD&A.
(3) Core FFO per share and AFFO per share are calculated using the total number of weighted average potential dilutive shares outstanding, including the assumed exchange of preferred units issued by |
Net income from continuing operations in the third quarter of 2022 was
-
Revenue from single-family rental properties of
compared to$170.8 million in the third quarter of 2021, largely as a result of a$115.1 million 29.7% expansion in the single-family rental portfolio to 35,262 homes and an11.4% year-over-year increase in average effective monthly rent (from to$1,539 ).$1,714 -
Direct operating expenses of
compared to$54.5 million in the third quarter of 2021, driven primarily by the increase in size of the rental portfolio, higher property tax expenses associated with increasing property values, as well as general cost and labor market inflationary pressures.$39.4 million -
Revenue from private funds and advisory services of
, which increased significantly from$112.5 million in the third quarter of 2021, primarily driven by the accrual of performance fees earned from the sale of Tricon's remaining$11.0 million 20% equity interests in theU.S. multi-family rental portfolio following quarter-end. -
Fair value gain on rental properties of
compared to$107.2 million in the third quarter of 2021, owing to a year-over-year appreciation of home values within the single-family rental portfolio, albeit at a decelerated rate given the current climate of rising mortgage rates and greater economic uncertainty.$362.3 million
Net income from continuing operations for the nine months ended
-
Revenue from single-family rental properties of
and direct operating expenses of$464.7 million compared to$150.7 million and$321.5 million in the prior year, respectively, which translated to a net operating income ("NOI") increase of$108.9 million , attributable to the expansion of the single-family rental portfolio as well as strong rent growth.$101.4 million -
Revenue from private funds and advisory services of
compared to$145.3 million in the prior year, for the reason discussed above.$33.0 million -
Fair value gain on rental properties of
compared to$802.6 million in the prior year as a result of very strong home price appreciation experienced in the first half of the year.$728.9 million
Core funds from operations ("Core FFO") for the third quarter of 2022 was
Adjusted funds from operations ("AFFO") for the three and nine months ended
Single-Family Rental Operating Highlights
The measures presented in the table below and throughout this press release are on a proportionate basis, reflecting only the portion attributable to Tricon's shareholders based on the Company's ownership percentage of the underlying entities and excludes the percentage associated with non-controlling and limited partners' interests, unless otherwise stated. A list of these measures, together with a description of the information each measure reflects and the reasons why management believes the measure to be useful or relevant in evaluating the underlying performance of the Company’s businesses, is set out in Section 6 of Tricon's MD&A.
For the periods ended |
Three months |
|
Nine months |
||||||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
||
|
|
|
|
|
|
||||||||||
Total rental homes managed |
|
|
|
|
35,545 |
|
|
27,248 |
|
||||||
Total proportionate net operating income (NOI)(1) |
$ |
71,321 |
|
$ |
56,617 |
|
|
$ |
201,799 |
|
$ |
162,301 |
|
||
Total proportionate net operating income (NOI) growth(1) |
|
26.0 |
% |
|
12.8 |
% |
|
|
24.3 |
% |
|
10.4 |
% |
||
Same home net operating income (NOI) margin(1) |
|
68.5 |
% |
|
67.0 |
% |
|
|
68.2 |
% |
|
67.1 |
% |
||
Same home net operating income (NOI) growth(1) |
|
10.2 |
% |
|
N/A |
|
|
|
10.7 |
% |
|
N/A |
|
||
Same home occupancy |
|
97.9 |
% |
|
97.6 |
% |
|
|
98.1 |
% |
|
97.5 |
% |
||
Same home annualized turnover |
|
18.6 |
% |
|
20.8 |
% |
|
|
16.2 |
% |
|
22.2 |
% |
||
Same home average quarterly rent growth - renewal |
|
6.6 |
% |
|
5.0 |
% |
|
|
6.5 |
% |
|
4.6 |
% |
||
Same home average quarterly rent growth - new move-in |
|
16.3 |
% |
|
20.5 |
% |
|
|
17.9 |
% |
|
16.5 |
% |
||
Same home average quarterly rent growth - blended |
|
8.4 |
% |
|
9.3 |
% |
|
|
8.4 |
% |
|
8.0 |
% |
||
(1) Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company's performance. For the basis of presentation of the Company’s Non-IFRS measures and reconciliations, refer to the “Non-IFRS Measures” section and Appendix A. For definitions of the Company’s Non-IFRS measures, refer to Section 6 of Tricon's MD&A. |
Single-family rental NOI was
Single-family rental same home NOI growth was
Single-Family Rental Investment Activity
The Company expanded its single-family rental portfolio by acquiring 1,988 homes during the quarter, bringing its total managed portfolio to 35,262 rental homes. The homes were purchased at an average cost per home of
Adjacent Residential Businesses Highlights
Quarterly highlights of the Company's adjacent residential businesses include:
-
On
October 18, 2022 , the Company completed the sale of its remaining20% equity interest in itsU.S. multi-family rental portfolio for gross proceeds of approximately , including approximately$315 million of performance fees (half of which are payable to participants in the Company's Long-Term Incentive Plan and management co-investment plans). The Company used the net proceeds of approximately$100 million primarily to repay outstanding debt on its corporate credit facility and strengthen its balance sheet flexibility to pursue future growth opportunities in its core single-family rental business;$260 million -
In the Canadian multi-family business, The Selby continues to achieve strong leasing activity, with the property reaching record occupancy of
98.6% and blended rent growth of23.0% (reflecting a combination of higher market rents and the removal of substantial leasing concessions prevalent during the COVID-19 pandemic), resulting in year-over-year NOI growth of71.1% ; -
Tricon's investments in
U.S. residential developments generated of distributions to the Company in Q3 2022, including$7.3 million in performance fees;$1.3 million -
In Tricon's Canadian residential development portfolio, the Symington project is on track to commence construction in Q1 2023. Construction at The Ivy and
Canary Landing (WestDon Lands ) - Block 8 continue to progress, with first occupancy anticipated by early to mid-2023. Although the portfolio experienced pressures on construction timelines and costs associated with the current inflationary environment, the Company leveraged its strong trade relationships to minimize construction delays and reduce the impact of cost increases; -
Subsequent to quarter-end, The Taylor welcomed its first residents to the 36-story, 286-unit mixed-use rental community at the heart of
Toronto's entertainment district. Leasing demand has been robust, with23% of the building already pre-leased at average rental rates ofC per square foot per month; and$4.33 -
On
October 27, 2022 , the Company refinancedThe Shops of Summerhill mortgage by entering into a new facility with a total commitment of ($16.0 million C ) and a term to maturity of three years. The loan carries a fixed interest rate of$21.8 million 5.58% and is secured byThe Shops of Summerhill property. The Company used the loan proceeds to pay off the existing facility and repatriated ($5.1 million C ) of excess proceeds.$6.8 million
Change in Net Assets
As at
Balance Sheet and Liquidity
Tricon's liquidity consists of a
As at
On
2022 Guidance Update
As a result of the strong operating results during the third quarter, the Company updated its guidance for the Core FFO per share and same home metrics for the current fiscal year. The Company also updated its acquisitions guidance reflecting a shift in near-term capital allocation towards debt reduction, liquidity preservation and share repurchases in light of rapidly increasing debt financing costs for single-family home acquisitions, and an expectation that better investment opportunities will emerge in the future.
For the year ended
|
Current 2022 Guidance |
Previous 2022 Guidance |
Update Drivers |
|||||||
|
|
|
|
|
|
|
|
|||
Core FFO per share |
|
- |
|
|
- |
|
Inclusion of net performance fee earned from |
|||
|
|
|
|
|
|
|
|
|||
Same home revenue growth |
|
- |
|
|
- |
|
Tightening of prior guidance range |
|||
|
|
|||||||||
Same home expense growth |
|
- |
|
|
- |
|
Lower than expected repairs, maintenance and turnover expenses |
|||
|
|
|||||||||
Same home NOI growth |
|
- |
|
|
- |
|
Driven by lower than expected expenses as noted above |
|||
Single-family rental home acquisitions |
~7,300 |
~8,000 |
Slowing pace of acquisitions to preserve capital for more attractive opportunities in the future |
|||||||
|
|
|
|
|
|
|
|
|||
Note: Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company's performance. Refer to the “Non-IFRS Measures” section and Section 6 of the Company's MD&A for definitions. See also the “Forward-Looking Information” section, as the figures presented above are considered to be “financial outlook” for purposes of applicable securities laws and may not be appropriate for purposes other than to understand management’s current expectations relating to the future of the Company. The reader is cautioned that this information is forward-looking and actual results may vary materially from those reported. Although the Company believes that its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information. The Company reviews its key assumptions regularly and may change its outlook on a going-forward basis if necessary. |
Quarterly Dividend
On
Tricon’s dividends are designated as eligible dividends for Canadian tax purposes in accordance with subsection 89(14) of the Income Tax Act (
Conference Call and Webcast
Management will host a conference call at
This press release should be read in conjunction with the Company’s Interim Financial Statements and Management’s Discussion and Analysis (the "MD&A") for the three and nine months ended
The Company has also made available on its website supplemental information for the three and nine months ended
About
Forward-Looking Information
This news release contains forward-looking statements pertaining to expected future events, financial and operating results, and projections of the Company, including statements related to targeted financial performance and leverage; the Company's growth plans; the pace, availability and pricing of anticipated home acquisitions: anticipated rent growth, fee income and other revenue; development plans, costs and timelines; and the impact of such factors on the Company. Such forward-looking information and statements involve risks and uncertainties and are based on management’s current expectations, intentions and assumptions in light of its understanding of relevant current market conditions, its business plans, and its prospects. If unknown risks arise, or if any of the assumptions underlying the forward-looking statements prove incorrect, actual results may differ materially from management expectations as projected in such forward-looking statements. Examples of such risks include, but are not limited to, the Company's inability to execute its growth strategies; the impact of changing economic and market conditions, increasing competition and the effect of fluctuations and cycles in the Canadian and
Certain statements included in this press release, including with respect to 2022 guidance for Core FFO per share and same home metrics, are considered to be financial outlook for purposes of applicable securities laws, and as such, the financial outlook may not be appropriate for purposes other than to understand management’s current expectations relating to the future of the Company, as disclosed in this press release. These forward-looking statements have been approved by management to be made as at the date of this press release. Although the forward-looking statements contained in this press release are based upon what management currently believes to be reasonable assumptions (including in particular the revenue growth, expense growth and portfolio growth assumptions set out herein which themselves are based on, respectively: assumed ancillary revenue growth and continuing favorable market rent growth; increased internalization of maintenance activities and improved management efficiencies accompanying portfolio growth; and the availability of homes meeting the Company’s single-family rental acquisition objectives), there can be no assurance that actual results, performance or achievements will be consistent with these forward-looking statements. The forward-looking statements contained in this document are expressly qualified in their entirety by this cautionary statement.
Non-IFRS Measures
The Company has included herein certain non-IFRS financial measures and non-IFRS ratios, including, but not limited to: proportionate metrics, net operating income ("NOI"), NOI margin, funds from operations ("FFO"), core funds from operations ("Core FFO"), adjusted funds from operations ("AFFO"), Core FFO per share, AFFO per share, Adjusted EBITDAre as well as certain key indicators of the performance of our businesses which are supplementary financial measures. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. We utilize these measures in managing our business, including performance measurement and capital allocation. In addition, certain of these measures are used in measuring compliance with our debt covenants. We believe that providing these performance measures on a supplemental basis is helpful to investors and shareholders in assessing the overall performance of the Company’s business. However, these measures are not recognized under and do not have any standardized meaning prescribed by IFRS as issued by the IASB, and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. Because non-IFRS financial measures, non-IFRS ratios and supplementary financial measures do not have standardized meanings prescribed under IFRS, securities regulations require that such measures be clearly defined, identified, and reconciled to their nearest IFRS measure. The calculation and reconciliation of the non-IFRS financial measures and the requisite disclosure for non-IFRS ratios used herein are provided in Appendix A below. The definitions of the Company’s Non-IFRS measures are provided in the "Glossary and Defined Terms" section as well as Section 6 of Tricon's MD&A.
The non-IFRS financial measures, non-IFRS ratios and supplementary financial measures presented herein should not be construed as alternatives to net income (loss) or cash flow from the Company’s activities, determined in accordance with IFRS, as indicators of Tricon’s financial performance. Tricon’s method of calculating these measures may differ from other issuers’ methods and, accordingly, these measures may not be comparable to similar measures presented by other publicly-traded entities.
Appendix A - Reconciliations
RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND AFFO
For the periods ended |
Three months |
|
Nine months |
||||||||||||||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
Variance |
|
|
2022 |
|
|
2021 |
|
Variance |
||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
Net income from continuing operations attributable to Tricon's shareholders |
$ |
177,926 |
|
$ |
173,306 |
|
$ |
4,620 |
|
|
$ |
720,496 |
|
$ |
346,501 |
|
$ |
373,995 |
|
||||
|
|
|
|
|
|
|
|
||||||||||||||||
Fair value gain on rental properties |
|
(107,166 |
) |
|
(362,285 |
) |
|
255,119 |
|
|
|
(802,573 |
) |
|
(728,899 |
) |
|
(73,674 |
) |
||||
Fair value loss on Canadian development properties |
|
1,314 |
|
|
— |
|
|
1,314 |
|
|
|
440 |
|
|
— |
|
|
440 |
|
||||
Fair value (gain) loss on derivative financial instruments and other liabilities |
|
(31,866 |
) |
|
68,747 |
|
|
(100,613 |
) |
|
|
(158,991 |
) |
|
147,394 |
|
|
(306,385 |
) |
||||
Limited partners' share of FFO adjustments |
|
37,621 |
|
|
66,956 |
|
|
(29,335 |
) |
|
|
233,504 |
|
|
129,778 |
|
|
103,726 |
|
||||
FFO attributable to Tricon's shareholders |
$ |
77,829 |
|
$ |
(53,276 |
) |
$ |
131,105 |
|
|
$ |
(7,124 |
) |
$ |
(105,226 |
) |
$ |
98,102 |
|
||||
|
|
|
|
|
|
|
|
||||||||||||||||
Core FFO from |
|
2,479 |
|
|
2,038 |
|
|
441 |
|
|
|
7,305 |
|
|
11,487 |
|
|
(4,182 |
) |
||||
Income from equity-accounted investments in multi-family rental properties |
|
(169 |
) |
|
(18 |
) |
|
(151 |
) |
|
|
(499 |
) |
|
(178 |
) |
|
(321 |
) |
||||
(Income) loss from equity-accounted investments in Canadian residential developments |
|
(3,621 |
) |
|
1,909 |
|
|
(5,530 |
) |
|
|
(3,508 |
) |
|
1,885 |
|
|
(5,393 |
) |
||||
Performance fees from the sale of |
|
(99,866 |
) |
|
— |
|
|
(99,866 |
) |
|
|
(99,866 |
) |
|
— |
|
|
(99,866 |
) |
||||
Deferred income tax expense |
|
72,087 |
|
|
66,745 |
|
|
5,342 |
|
|
|
183,578 |
|
|
180,976 |
|
|
2,602 |
|
||||
Current tax impact on sale of |
|
(29,835 |
) |
|
— |
|
|
(29,835 |
) |
|
|
(29,835 |
) |
|
(44,502 |
) |
|
14,667 |
|
||||
Interest on convertible debentures |
|
— |
|
|
1,804 |
|
|
(1,804 |
) |
|
|
— |
|
|
6,732 |
|
|
(6,732 |
) |
||||
Interest on Due to Affiliate |
|
4,245 |
|
|
4,313 |
|
|
(68 |
) |
|
|
12,777 |
|
|
12,938 |
|
|
(161 |
) |
||||
Amortization of deferred financing costs, discounts and lease obligations |
|
5,058 |
|
|
4,265 |
|
|
793 |
|
|
|
13,703 |
|
|
12,654 |
|
|
1,049 |
|
||||
Equity-based, non-cash and non-recurring compensation(2) |
|
7,539 |
|
|
2,535 |
|
|
5,004 |
|
|
|
46,333 |
|
|
10,212 |
|
|
36,121 |
|
||||
Other adjustments |
|
10,657 |
|
|
7,828 |
|
|
2,829 |
|
|
|
17,583 |
|
|
19,413 |
|
|
(1,830 |
) |
||||
Core FFO attributable to Tricon's shareholders |
$ |
46,403 |
|
$ |
38,143 |
|
$ |
8,260 |
|
|
$ |
140,447 |
|
$ |
106,391 |
|
$ |
34,056 |
|
||||
|
|
|
|
|
|
|
|
||||||||||||||||
Recurring capital expenditures(3) |
|
(11,221 |
) |
|
(7,140 |
) |
|
(4,081 |
) |
|
|
(30,877 |
) |
|
(21,345 |
) |
|
(9,532 |
) |
||||
AFFO attributable to Tricon's shareholders |
$ |
35,182 |
|
$ |
31,003 |
|
$ |
4,179 |
|
|
$ |
109,570 |
|
$ |
85,046 |
|
$ |
24,524 |
|
||||
(1) Performance fees for the three and nine months ended (2) Includes performance fees expense, which is accrued based on changes in the unrealized carried interest liability of the underlying Investment Vehicles and hence is added back to Core FFO as a non-cash expense. Performance fees are paid and deducted in arriving at Core FFO only when the associated fee revenue has been realized. (3) Recurring capital expenditures represent ongoing costs associated with maintaining and preserving the quality of a property after it has been renovated. Capital expenditures related to renovations or value-enhancement are excluded from recurring capital expenditures. |
RECONCILIATION OF SINGLE-FAMILY RENTAL TOTAL AND SAME HOME NOI
For the periods ended |
Three months |
|
Nine months |
||||||||
(in thousands of |
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
||
|
|
|
|
|
|
||||||
Net operating income (NOI), proportionate same home portfolio |
$ |
54,611 |
$ |
49,535 |
|
$ |
160,433 |
$ |
144,887 |
||
Net operating income (NOI), proportionate non-same home |
|
16,710 |
|
7,082 |
|
|
41,366 |
|
17,414 |
||
Net operating income (NOI), proportionate total portfolio |
|
71,321 |
|
56,617 |
|
|
201,799 |
|
162,301 |
||
Limited partners' share of NOI(1) |
|
44,984 |
|
19,087 |
|
|
112,175 |
|
50,319 |
||
Net operating income from single-family rental properties per financial statements |
$ |
116,305 |
$ |
75,704 |
|
$ |
313,974 |
$ |
212,620 |
||
(1) Represents the limited partners' interest in the NOI from SFR JV-1, SFR JV-2 and SFR JV-HD. |
RECONCILIATION OF PROPORTIONATE TOTAL PORTFOLIO GROWTH METRICS
For the three months ended |
|
|
|
|
||||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
105,038 |
|
$ |
85,959 |
|
$ |
19,079 |
22.2 |
% |
||||
Total direct operating expenses |
|
33,717 |
|
|
29,342 |
|
|
4,375 |
14.9 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
71,321 |
|
$ |
56,617 |
|
$ |
14,704 |
26.0 |
% |
||||
Net operating income (NOI) margin(1) |
|
67.9 |
% |
|
65.9 |
% |
|
|
||||||
(1) Non-IFRS measures; refer to Section 6 of the MD&A for definitions. |
For the nine months ended |
|
|
|
|
||||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
299,449 |
|
$ |
245,794 |
|
$ |
53,655 |
21.8 |
% |
||||
Total direct operating expenses |
|
97,650 |
|
|
83,493 |
|
|
14,157 |
17.0 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
201,799 |
|
$ |
162,301 |
|
$ |
39,498 |
24.3 |
% |
||||
Net operating income (NOI) margin(1) |
|
67.4 |
% |
|
66.0 |
% |
|
|
||||||
(1) Non-IFRS measures; refer to Section 6 of the MD&A for definitions. |
RECONCILIATION OF PROPORTIONATE SAME HOME GROWTH METRICS
For the three months ended |
|
|
|
|
||||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
79,667 |
|
$ |
73,878 |
|
$ |
5,789 |
7.8 |
% |
||||
Total direct operating expenses |
|
25,056 |
|
|
24,343 |
|
|
713 |
2.9 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
54,611 |
|
$ |
49,535 |
|
$ |
5,076 |
10.2 |
% |
||||
Net operating income (NOI) margin(1) |
|
68.5 |
% |
|
67.0 |
% |
|
|
||||||
(1) Non-IFRS measures; refer to Section 6 of the MD&A for definitions. |
For the nine months ended |
|
|
|
|
||||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
235,177 |
|
$ |
216,071 |
|
$ |
19,106 |
8.8 |
% |
||||
Total direct operating expenses |
|
74,744 |
|
|
71,184 |
|
|
3,560 |
5.0 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
160,433 |
|
$ |
144,887 |
|
$ |
15,546 |
10.7 |
% |
||||
Net operating income (NOI) margin(1) |
|
68.2 |
% |
|
67.1 |
% |
|
|
||||||
(1) Non-IFRS measures; refer to Section 6 of the MD&A for definitions. |
RECONCILIATION OF
For the periods ended |
Three months |
|
Nine months |
||||||||||||
(in thousands of |
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
||
|
|
|
|
|
|
||||||||||
Net operating income (NOI), proportionate portfolio |
$ |
4,159 |
|
$ |
3,634 |
|
|
$ |
12,010 |
|
$ |
10,350 |
|
||
Net operating income (NOI), IFRS reconciliation(1) |
|
— |
|
|
— |
|
|
|
— |
|
|
12,979 |
|
||
Interest expense |
|
(1,558 |
) |
|
(1,388 |
) |
|
|
(4,356 |
) |
|
(10,607 |
) |
||
Other expenses |
|
(324 |
) |
|
(464 |
) |
|
|
(967 |
) |
|
(2,755 |
) |
||
Fair value gain on multi-family rental properties, proportionate portfolio |
|
— |
|
|
25,757 |
|
|
|
31,202 |
|
|
38,430 |
|
||
Loss on sale(2) |
$ |
— |
|
$ |
— |
|
|
|
— |
|
|
(84,427 |
) |
||
Total income (loss) before income taxes from discontinued operations |
$ |
2,277 |
|
$ |
27,539 |
|
|
$ |
37,889 |
|
$ |
(36,030 |
) |
||
(1) The total NOI from discontinued operations includes
(2) On |
PROPORTIONATE BALANCE SHEET
(in thousands of |
Rental portfolio |
Development portfolio |
Corporate assets and liabilities |
Tricon proportionate results |
IFRS reconciliation |
Consolidated results/Total |
||||||
A |
B |
C |
D = A+B+C |
E |
D+E |
|||||||
|
|
|
|
|
|
|
||||||
Assets |
|
|
|
|
|
|
||||||
Rental properties |
$ |
6,705,605 |
$ |
— |
$ |
— |
$ |
6,705,605 |
$ |
4,398,365 |
$ |
11,103,970 |
Equity-accounted investments in multi-family rental properties |
|
19,655 |
|
— |
|
— |
|
19,655 |
|
— |
|
19,655 |
Equity-accounted investments in Canadian residential developments |
|
— |
|
95,967 |
|
— |
|
95,967 |
|
— |
|
95,967 |
Canadian development properties |
|
— |
|
130,978 |
|
— |
|
130,978 |
|
— |
|
130,978 |
Investments in |
|
— |
|
134,406 |
|
— |
|
134,406 |
|
— |
|
134,406 |
Restricted cash |
|
108,016 |
|
240 |
|
1,216 |
|
109,472 |
|
84,585 |
|
194,057 |
|
|
2,885 |
|
— |
|
130,493 |
|
133,378 |
|
4,703 |
|
138,081 |
Deferred income tax assets |
|
— |
|
— |
|
78,847 |
|
78,847 |
|
— |
|
78,847 |
Cash |
|
48,118 |
|
715 |
|
16,595 |
|
65,428 |
|
76,491 |
|
141,919 |
Other working capital items(1) |
|
11,045 |
|
1,797 |
|
126,576 |
|
139,418 |
|
16,260 |
|
155,678 |
Assets held for sale |
|
212,788 |
|
— |
|
— |
|
212,788 |
|
— |
|
212,788 |
Total assets |
$ |
7,108,112 |
$ |
364,103 |
$ |
353,727 |
$ |
7,825,942 |
$ |
4,580,404 |
$ |
12,406,346 |
|
|
|
|
|
|
|
||||||
Liabilities |
|
|
|
|
|
|
||||||
Debt |
|
2,608,568 |
|
11,207 |
|
193,658 |
|
2,813,433 |
|
2,840,267 |
|
5,653,700 |
Due to Affiliate |
|
— |
|
— |
|
255,498 |
|
255,498 |
|
— |
|
255,498 |
Other liabilities(2) |
|
166,073 |
|
4,114 |
|
238,183 |
|
408,370 |
|
1,740,137 |
|
2,148,507 |
Deferred income tax liabilities |
|
— |
|
— |
|
589,592 |
|
589,592 |
|
— |
|
589,592 |
Total liabilities |
$ |
2,774,641 |
$ |
15,321 |
$ |
1,276,931 |
$ |
4,066,893 |
$ |
4,580,404 |
$ |
8,647,297 |
|
|
|
|
|
|
|
||||||
Non-controlling interest |
|
— |
|
— |
|
5,230 |
|
5,230 |
|
— |
|
5,230 |
|
|
|
|
|
|
|
||||||
Net assets attributable to Tricon's shareholders |
$ |
4,333,471 |
$ |
348,782 |
$ |
(928,434) |
$ |
3,753,819 |
$ |
— |
$ |
3,753,819 |
|
|
|
|
|
|
|
||||||
Net assets per share(3) |
$ |
15.86 |
$ |
1.28 |
$ |
(3.40) |
$ |
13.74 |
|
|
||
Net assets per share (CAD)(3) |
$ |
21.74 |
$ |
1.75 |
$ |
(4.66) |
$ |
18.83 |
|
|
||
(1) Other working capital items include amounts receivable and prepaid expenses and deposits. (2) Other liabilities include long-term incentive plan, performance fees liability, derivative financial instruments, other liabilities, limited partners' interests, dividends payable, resident security deposits and amounts payable and accrued liabilities.
(3) As at |
TOTAL AUM
|
|
|
|
||||
(in thousands of |
Balance |
% of total AUM |
|
Balance |
% of total AUM |
||
|
|
|
|
|
|
||
Third-party AUM |
$ |
9,387,496 |
|
|
$ |
6,816,668 |
|
Principal AUM |
|
8,213,965 |
|
|
|
6,919,664 |
|
Total AUM |
$ |
17,601,461 |
|
|
$ |
13,736,332 |
|
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDAre
(in thousands of |
Total proportionate results |
IFRS
|
Consolidated results/Total |
||||||
|
|
|
|
||||||
For the three months ended |
|
|
|
||||||
Net income attributable to Tricon's shareholders from continuing operations |
$ |
177,926 |
|
$ |
— |
|
$ |
177,926 |
|
Interest expense |
|
30,869 |
|
|
29,225 |
|
|
60,094 |
|
Current income tax recovery |
|
(29,860 |
) |
|
— |
|
|
(29,860 |
) |
Deferred income tax expense |
|
72,087 |
|
|
— |
|
|
72,087 |
|
Amortization and depreciation expense |
|
3,853 |
|
|
— |
|
|
3,853 |
|
Fair value gain on rental properties |
|
(72,720 |
) |
|
(34,446 |
) |
|
(107,166 |
) |
Fair value loss on Canadian development properties |
|
1,314 |
|
|
— |
|
|
1,314 |
|
Fair value gain on derivative financial instruments and other liabilities |
|
(28,691 |
) |
|
(3,175 |
) |
|
(31,866 |
) |
Look-through EBITDAre adjustments from non-consolidated affiliates |
|
156 |
|
|
— |
|
|
156 |
|
EBITDAre, consolidated |
$ |
154,934 |
|
$ |
(8,396 |
) |
$ |
146,538 |
|
|
|
|
|
||||||
Equity-based, non-cash and non-recurring compensation |
|
7,539 |
|
|
— |
|
|
7,539 |
|
Other adjustments(1) |
|
(90,766 |
) |
|
83 |
|
|
(90,683 |
) |
Limited partners' share of EBITDAre adjustments |
|
— |
|
|
8,313 |
|
|
8,313 |
|
Non-controlling interest's share of EBITDAre adjustments |
|
(196 |
) |
|
— |
|
|
(196 |
) |
Adjusted EBITDAre |
$ |
71,511 |
|
$ |
— |
|
$ |
71,511 |
|
|
|
|
|
||||||
Adjusted EBITDAre (annualized) |
|
|
$ |
286,044 |
|
||||
(1) Includes the following adjustments: |
(in thousands of |
Proportionate |
IFRS
|
Consolidated |
||||||
|
|
|
|
||||||
Transaction costs |
$ |
3,575 |
|
$ |
83 |
$ |
3,658 |
|
|
Realized and unrealized foreign exchange gain |
|
(623 |
) |
|
— |
|
(623 |
) |
|
Loss on debt extinguishment |
|
6,816 |
|
|
— |
|
6,816 |
|
|
Look-through other adjustments from non-consolidated affiliates |
|
8 |
|
|
— |
|
8 |
|
|
Lease payments on right-of-use assets |
|
(676 |
) |
|
— |
|
(676 |
) |
|
Performance fees to be earned on the sale of the |
|
(99,866 |
) |
|
— |
|
(99,866 |
) |
|
Total other adjustments |
$ |
(90,766 |
) |
$ |
83 |
$ |
(90,683 |
) |
PRO-RATA ASSETS
Tricon's pro-rata assets include its share of total assets of non-consolidated entities on a look-through basis, which are shown as equity-accounted investments on its proportionate balance sheet.
(in thousands of |
|
|
|
|
|
Pro-rata assets of consolidated entities(1) |
$ |
7,497,532 |
|
|
|
|
|
377,160 |
Canadian multi-family rental properties |
|
37,694 |
Canadian residential developments(2) |
|
223,804 |
Pro-rata assets of non-consolidated entities |
|
638,658 |
|
|
|
Pro-rata assets, total |
$ |
8,136,190 |
Pro-rata assets (net of cash), total(3) |
$ |
7,948,666 |
(1) Includes proportionate total assets presented in the proportionate balance sheet table above excluding equity-accounted investments in multi-family rental properties and equity-accounted investments in Canadian residential developments.
(2) Excludes right-of-use assets under ground leases of
(3) Reflects proportionate cash and restricted cash of |
PRO-RATA NET DEBT TO ASSETS
(in thousands of |
|
||
|
|
||
Pro-rata debt of consolidated entities |
$ |
2,813,433 |
|
|
|
||
|
|
159,426 |
|
Canadian multi-family rental properties |
|
17,165 |
|
Canadian residential developments(2) |
|
112,566 |
|
Pro-rata debt of non-consolidated entities |
|
289,157 |
|
|
|
||
Pro-rata debt, total |
$ |
3,102,590 |
|
Pro-rata net debt, total(1) |
$ |
2,915,066 |
|
|
|
||
Pro-rata net debt to assets |
|
36.7 |
% |
(1) Reflects proportionate cash and restricted cash of
(2) Excludes lease obligations under ground leases of |
RECONCILIATION OF PRO-RATA DEBT AND ASSETS OF NON-CONSOLIDATED ENTITIES TO CONSOLIDATED BALANCE SHEET
(in thousands of |
|
||
|
|
||
Assets held for sale |
|
||
Tricon's pro-rata share of assets |
$ |
377,160 |
|
Tricon's pro-rata share of debt |
|
(159,426 |
) |
Tricon's pro-rata share of working capital and other |
|
(4,946 |
) |
Assets held for sale |
|
212,788 |
|
|
|
||
Equity-accounted investments in Canadian multi-family rental properties |
|
||
Tricon's pro-rata share of assets |
$ |
37,694 |
|
Tricon's pro-rata share of debt |
|
(17,165 |
) |
Tricon's pro-rata share of working capital and other |
|
(874 |
) |
Equity-accounted investments in Canadian multi-family rental properties |
|
19,655 |
|
|
|
||
Equity-accounted investments in multi-family rental properties |
$ |
232,443 |
|
|
|
||
Equity-accounted investments in Canadian residential developments |
|
||
Tricon's pro-rata share of assets(1) |
$ |
223,804 |
|
Tricon's pro-rata share of debt(1) |
|
(112,566 |
) |
Tricon's pro-rata share of working capital and other |
|
(15,271 |
) |
Equity-accounted investments in Canadian residential developments |
$ |
95,967 |
|
(1) Excludes right-of-use assets and lease obligations under ground leases of |
PRO-RATA NET DEBT TO ADJUSTED EBITDAre
(in thousands of |
|
|
|
|
|
Pro-rata debt of consolidated entities, excluding facilities related to non-income generating assets(1) |
$ |
2,329,400 |
|
|
|
|
|
159,426 |
Canadian multi-family rental properties debt |
|
17,165 |
Pro-rata debt of non-consolidated entities (stabilized properties) |
|
176,591 |
|
|
|
Pro-rata debt (stabilized properties), total |
$ |
2,505,991 |
Pro-rata net debt (stabilized properties), total(2) |
$ |
2,376,561 |
|
|
|
Adjusted EBITDAre (annualized)(3) |
$ |
286,044 |
Pro-rata net debt to Adjusted EBITDAre (annualized) |
8.3x |
|
(1) Excludes
(2) Reflects proportionate cash and restricted cash (excluding cash held at development entities and excess cash held at single-family rental joint venture entities) of (3) Adjusted EBITDAre is a non-IFRS measure. Refer to the "Glossary and Defined Terms" section for definition and the Reconciliation of net income to Adjusted EBITDAre table above. |
Glossary and Defined Terms
The non-IFRS financial measures, non-IFRS ratios, and KPI supplementary financial measures discussed throughout this press release for each of the Company’s business segments are calculated based on Tricon's proportionate share of each portfolio or business and are defined and discussed below and in Section 6 of the MD&A, which definitions and discussion are incorporated herein by reference. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance; however, they do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly-traded entities. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS. See Appendix A for a reconciliation to IFRS financial measures where applicable.
Adjusted EBITDAre is a metric that management believes to be helpful in evaluating the Company’s operating performance across and within the real estate industry. Further, management considers it to be a more accurate reflection of the Company’s leverage ratio, especially as it adjusts for and negates non-recurring and non-cash items. The Company’s definition of EBITDAre reflects all adjustments that are specified by the
EBITDAre represents net income from continuing operations, excluding the impact of interest expense, income tax expense, amortization and depreciation expense, fair value changes on rental properties, fair value changes on derivative financial instruments and adjustments to reflect the entity’s share of EBITDAre of unconsolidated entities. Adjusted EBITDAre is a normalized figure and is defined as EBITDAre before stock-based compensation, unrealized and realized foreign exchange gains and losses, transaction costs and other non-recurring items, and reflects only Tricon’s share of results from consolidated entities (by removing non-controlling interests’ and limited partners’ share of reconciling items).
The Company also discloses its Net Debt to Adjusted EBITDAre ratio to assist investors in accounting for the Company’s unconsolidated joint ventures and equity-accounted investments, in both debt and Adjusted EBITDAre, by calculating pro-rata leverage on a look-through basis (excluding debt directly related to the Canadian development portfolio as well as warehouse and subscription facilities related to acquisitions of vacant single-family homes, which do not fully contribute to Adjusted EBITDAre).
Cost to maintain is defined as the annualized repairs and maintenance expense, turnover expense net of applicable resident recoveries and recurring capital expenditures per home in service. The metric provides insight into the costs needed to maintain a property's current condition and is indicative of a portfolio's operational efficiency.
Pro-rata net assets represents the Company's proportionate share of total consolidated assets as well as assets of non-consolidated entities on a look-through basis (which are shown as equity-accounted investments on its proportionate balance sheet), less its cash and restricted cash.
Pro-rata net debt represents the Company's total current and long-term debt per its consolidated financial statements, less its cash and restricted cash (excluding debt directly related to the Canadian development portfolio as well as warehouse and subscription facilities related to acquisitions of vacant single-family homes, which do not fully contribute to Adjusted EBITDAre).
____________________ 1 Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company's performance. For the basis of presentation of the Company’s Non-IFRS measures and reconciliations, refer to the “Non-IFRS Measures” section and Appendix A. For definitions of the Company’s Non-IFRS measures, refer to Section 6 of Tricon's MD&A. |
2 Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company's performance. For the basis of presentation of the Company’s Non-IFRS measures and reconciliations, refer to the “Non-IFRS Measures” section and Appendix A. For definitions of the Company’s Non-IFRS measures, refer to Section 6 of Tricon's MD&A. |
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EVP & Chief Financial Officer
Managing Director, Capital Markets
Email: investorsupport@triconresidential.com
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