Tricon Reports Q3 2023 Results as Strong Property Fundamentals Continue
- Net income from continuing operations decreased by $97.7 million year-over-year
- Same home NOI growth for the single-family rental portfolio in Q3 2023 was 6.0% year-over-year
- Tricon acquired 410 homes during the quarter at an average price of $310,000 per home for a total acquisition cost of $127 million
- Positive rent trends continued into the fourth quarter, with same home rent growth of 6.8% in October 2023
- None.
All financial information is presented in
The Company's operational and financial highlights of the quarter include:
-
Net income from continuing operations decreased by
year-over-year from the$97.7 million earned in Q3 2022 (which included$178.8 million of performance fees earned from the sale of Tricon's remaining$99.9 million 20% equity interest in theU.S. multi-family rental portfolio) to in the current period. Correspondingly, basic earnings per share from continuing operations decreased to$81.1 million compared to$0.29 per share in Q3 2022; and diluted earnings per share from continuing operations decreased to$0.65 compared to$0.18 per share in Q3 2022;$0.49
-
Core funds from operations ("Core FFO") was
and Core FFO per share was$42.7 million in Q3 2023, a decrease of$0.14 7.9% and6.7% year-over-year, respectively. Net Operating Income ("NOI") growth of8.6% was offset by higher borrowing costs, the loss of Core FFO from theU.S. multi-family rental portfolio sold in Q4 2022 and lower performance fees;1
-
Same home NOI growth for the single-family rental portfolio in Q3 2023 was
6.0% year-over-year and same home NOI margin was68.5% . Same home operating metrics remained consistently strong, including occupancy of97.4% , annualized turnover of18.8% and blended rent growth of6.8% (comprised of new lease rent growth of6.9% and renewal rent growth of6.7% );1
-
In response to strong resident demand for rental homes across its Sun Belt markets, the Company acquired 410 homes during the quarter at an average price of
per home (including up-front renovations) for a total acquisition cost of$310,000 , of which Tricon's proportionate share was$127 million ;$102 million
-
Positive rent trends continued into the fourth quarter, with same home rent growth of
6.8% in October 2023, including6.6% growth on new leases and6.8% growth on renewals, while same home occupancy was97.1% and same home turnover was at19.4% ; and
-
Tricon has continued to make progress in its Global Real Estate Sustainability Benchmark (GRESB) ratings, marking a
7% increase compared to 2022 and a29% improvement from its inaugural submission in 2021. The ratings improvement underscores Tricon’s commitment to sustainable business practices, environmental stewardship, and focus on resident and employee well-being.
“The operating fundamentals of our single-family rental business remain consistently strong with near-full occupancy, low turnover, and healthy same home NOI growth of
Financial Highlights |
|||||||||||||
For the periods ended September 30 |
Three months |
|
Nine months |
||||||||||
(in thousands of |
2023 |
2022 |
|
|
2023 |
2022 |
|||||||
|
|
|
|
|
|
||||||||
Financial highlights on a consolidated basis |
|
|
|
|
|
||||||||
Net income from continuing operations, including: |
$ |
81,125 |
$ |
178,786 |
|
|
$ |
157,294 |
$ |
723,491 |
|||
Fair value gain on rental properties |
|
73,261 |
|
107,166 |
|
|
|
208,907 |
|
802,573 |
|||
|
|
|
|
|
|
||||||||
Basic earnings per share attributable to shareholders of Tricon from continuing operations |
|
0.29 |
|
0.65 |
|
|
|
0.56 |
|
2.63 |
|||
Diluted earnings per share attributable to shareholders of Tricon from continuing operations |
|
0.18 |
|
0.49 |
|
|
|
0.48 |
|
1.87 |
|||
|
|
|
|
|
|
||||||||
Net (loss) income from discontinued operations |
|
— |
|
(2,335 |
) |
|
|
— |
|
33,277 |
|||
Basic earnings (loss) per share attributable to shareholders of Tricon from discontinued operations |
|
— |
|
(0.01 |
) |
|
|
— |
|
0.12 |
|||
Diluted earnings (loss) per share attributable to shareholders of Tricon from discontinued operations |
|
— |
|
(0.01 |
) |
|
|
— |
|
0.11 |
|||
|
|
|
|
|
|
||||||||
Dividends per share |
$ |
0.058 |
$ |
0.058 |
|
|
$ |
0.174 |
$ |
0.174 |
|||
|
|
|
|
|
|
||||||||
Weighted average shares outstanding - basic |
|
273,810,276 |
|
274,710,065 |
|
|
|
273,738,512 |
|
274,474,675 |
|||
Weighted average shares outstanding - diluted |
|
310,497,125 |
|
311,910,445 |
|
|
|
310,341,448 |
|
312,023,897 |
|||
|
|
|
|
|
|
||||||||
Non-IFRS(1) measures on a proportionate basis |
|
|
|
|
|
||||||||
Core funds from operations ("Core FFO") |
$ |
42,737 |
$ |
46,403 |
|
|
$ |
126,946 |
$ |
140,447 |
|||
Adjusted funds from operations ("AFFO") |
|
34,143 |
|
35,182 |
|
|
|
100,951 |
|
109,570 |
|||
|
|
|
|
|
|
||||||||
Core FFO per share(2) |
|
0.14 |
|
0.15 |
|
|
|
0.41 |
|
0.45 |
|||
AFFO per share(2) |
|
0.11 |
|
0.11 |
|
|
|
0.33 |
|
0.35 |
|||
|
|
|
|
|
|
(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) 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 Tricon PIPE LLC, which were 310,497,125 and 310,341,448, for the three and nine months ended September 30, 2023, and 311,910,445 and 312,023,897, for the three and nine months ended September 30, 2022, respectively. |
Net income from continuing operations in the third quarter of 2023 was
-
Fair value gain on rental properties of
compared to$73.3 million in the third quarter of 2022, attributable to a moderation in home price appreciation within the single-family rental portfolio. This moderation is attributed to persistently higher mortgage rates and ongoing economic uncertainty which have introduced a level of caution for homebuyers.$107.2 million
-
Revenue from single-family rental properties of
compared to$202.6 million in the third quarter of 2022, driven primarily by growth of$170.8 million 5.0% in the single-family rental portfolio to 37,024 homes, a6.1% year-over-year increase in average effective monthly rent (from to$1,755 ) and a$1,862 3.6% increase in total portfolio occupancy to94.5% .
-
Direct operating expenses of
compared to$67.3 million in the third quarter of 2022, primarily reflecting an expansion in the rental portfolio and higher property tax expenses associated with increasing property value assessments, as well as general cost and labor market inflationary pressures.$54.5 million
-
Revenue from strategic capital services (previously reported as Revenue from private funds and advisory services) of
compared to$9.0 million in the third quarter of 2022. The comparative period included$112.5 million of performance fees earned from the sale of Tricon's remaining$99.9 million 20% equity interest in theU.S. multi-family rental portfolio in the third quarter of 2022, along with asset management and property management fees earned from the portfolio, which the Company no longer earns following the divestiture.
Net income from continuing operations for the nine months ended September 30, 2023 was
-
Fair value gain on rental properties of
compared to$208.9 million in the prior year for the same reasons discussed above.$802.6 million
-
Revenue from single-family rental properties of
and direct operating expenses of$588.5 million compared to$194.4 million and$464.7 million in the prior year, respectively, which translated to a net operating income ("NOI") increase of$150.7 million , attributable to the continued expansion of the single-family rental portfolio and strong rent growth.$80.2 million
-
Revenue from strategic capital services of
compared to$34.8 million in the prior year, primarily attributable to$145.3 million of performance fees earned from the sale of Tricon's remaining$99.9 million 20% equity interest in theU.S. multi-family rental portfolio in the third quarter of 2022. In addition, the current period saw lower performance fees earned from Tricon's legacy for-sale housing projects, which were partially offset by higher Johnson development fees from large commercial land bulk sales in the first quarter of 2023.
Core FFO for the third quarter of 2023 was
AFFO for the three and nine months ended September 30, 2023 was
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 September 30 |
Three months |
|
Nine months |
|||||||||||||
(in thousands of |
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
2022 |
|
|||
|
|
|
|
|
|
|||||||||||
Total rental homes managed |
|
|
|
|
37,478 |
|
|
35,545 |
|
|||||||
Total proportionate net operating income (NOI)(1) |
$ |
77,438 |
|
$ |
71,321 |
|
|
$ |
229,238 |
|
$ |
201,799 |
|
|||
Total proportionate net operating income (NOI) growth(1) |
|
8.6 |
% |
|
26.0 |
% |
|
|
13.6 |
% |
|
24.3 |
% |
|||
Same home net operating income (NOI) margin(1) |
|
68.5 |
% |
|
68.8 |
% |
|
|
68.7 |
% |
|
68.7 |
% |
|||
Same home net operating income (NOI) growth(1) |
|
6.0 |
% |
|
N/A |
|
|
|
6.1 |
% |
|
N/A |
|
|||
Same home occupancy |
|
97.4 |
% |
|
97.6 |
% |
|
|
97.4 |
% |
|
97.8 |
% |
|||
Same home annualized turnover |
|
18.8 |
% |
|
20.0 |
% |
|
|
17.9 |
% |
|
18.4 |
% |
|||
Same home average quarterly rent growth - renewal |
|
6.7 |
% |
|
6.6 |
% |
|
|
6.6 |
% |
|
6.4 |
% |
|||
Same home average quarterly rent growth - new move-in |
|
6.9 |
% |
|
15.1 |
% |
|
|
8.9 |
% |
|
16.7 |
% |
|||
Same home average quarterly rent growth - blended |
|
6.8 |
% |
|
8.3 |
% |
|
|
7.1 |
% |
|
8.4 |
% |
(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 during the quarter by acquiring 410 homes (299 wholly-owned homes for
During the quarter, Tricon also disposed of 175 homes for a total of
Adjacent Residential Businesses Highlights
Quarterly highlights of the Company's adjacent residential businesses include:
-
In the Canadian multi-family business, The Selby's occupancy remained stable at
98.5% , and annualized turnover improved to30.4% compared to39.2% during the same period in the prior year. Blended rent growth was11.2% during the quarter, driven by healthy new-lease and renewal rent growth as the number of leases with pandemic-era rents at the property continue to diminish.
-
In Tricon's Canadian residential development portfolio, The Taylor achieved a stabilized physical occupancy of
98.3% as at September 30, 2023 at an average monthly rent ofC per square foot. Maple House at Canary Landing welcomed its first residents to the 770-unit mixed-use rental community during the quarter, with$4.63 20% of the building already pre-leased, driven by strong market unit demand and an oversubscribed affordable housing lottery.
-
Tricon's investments in
U.S. residential developments generated of distributions to the Company in Q3 2023.$5.5 million
Change in Net Assets
Tricon's net assets were
Balance Sheet and Liquidity
Tricon's liquidity consists of a
As at September 30, 2023, Tricon’s pro-rata net debt (excluding exchangeable instruments) was
2023 Guidance Update
The Company updated its guidance for the current fiscal year, including reiterating the midpoint of Core FFO per share guidance and tightening the range of expected same home metrics. The Company also updated its acquisitions guidance to reflect a smaller number of homes to be acquired in 2023 but with a similar equity contribution as previously expected. Subsequent to quarter end, the Company substantially completed the investment programs of SFR JV-2 and SFR JV-HD with lower leverage parameters, and continues to acquire homes at a moderated pace as part of its capital recycling program.
For the year ended December 31 |
Current 2023 Guidance |
Previous 2023 Guidance |
Update Drivers |
|||||||
|
|
|
|
|
|
|
|
|||
Core FFO per share |
|
- |
|
|
|
- |
|
Reiterating prior guidance to reflect tightening of same home NOI expectations, coupled with continued strength in |
||
|
|
|
|
|
|
|
|
|
||
Same home revenue growth |
|
- |
|
|
|
- |
|
Tightening of prior guidance range to reflect:
|
||
Same home expense growth |
|
- |
|
|
|
- |
|
|||
Same home NOI growth |
|
- |
|
|
|
- |
|
|||
Single-family rental acquisitions (homes)(1) |
~1,850 |
|
~2,000 |
Slower pace of acquisitions to allow for completion of SFR JV-2 and SFR JV-HD investment programs with lower leverage parameters, and focus on acquisitions funded by non-core dispositions as part of a capital recycling program |
||||||
Single-family rental acquisitions ($ in billions)(1) |
|
|
|
(1) Single-family rental acquisition costs include initial purchase price, closing costs and up-front renovation costs. These acquisition home counts and costs are presented on a consolidated basis and Tricon's share represents approximately |
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 of this press release, 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 November 7, 2023, the Board of Directors of the Company declared a dividend of
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 11 a.m. ET on Wednesday, November 8, 2023 to discuss the Company’s results. Please call (888) 550-5422 or (646) 960-0676 (Conference ID #3699415). The conference call will also be accessible via webcast at www.triconresidential.com (Investors - News & Events). A replay of the call will be available from 2 p.m. ET on November 8, 2023 until midnight ET, on December 8, 2023. To access the replay, call (800) 770-2030 or (647) 362-9199, followed by Conference ID #3699415.
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 September 30, 2023, which are available on Tricon’s website at www.triconresidential.com and have been filed on SEDAR (www.sedar.com) as well as with the SEC as part of the Company’s annual report filed on Form 40-F. The financial information therein is presented in
The Company has also made available on its website supplemental information for the three and nine months ended September 30, 2023. For more information, visit www.triconresidential.com.
About Tricon Residential Inc.
Tricon Residential Inc. (NYSE: TCN, TSX: TCN) is an owner and operator of a growing portfolio of approximately 38,000 single-family rental homes in the
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 2023 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 presentation 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 activity and increased management efficiencies accompanying portfolio growth; and the availability of SFR homes meeting the Company’s 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 September 30 |
Three months |
|
Nine months |
|||||||||||||||||||||
(in thousands of |
|
2023 |
|
|
2022 |
|
Variance |
|
|
2023 |
|
|
2022 |
|
Variance |
|||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income from continuing operations attributable to Tricon's shareholders |
$ |
80,156 |
|
$ |
177,926 |
|
$ |
(97,770 |
) |
|
$ |
152,450 |
|
$ |
720,496 |
|
$ |
(568,046 |
) |
|||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Fair value gain on rental properties |
|
(73,261 |
) |
|
(107,166 |
) |
|
33,905 |
|
|
|
(208,907 |
) |
|
(802,573 |
) |
|
593,666 |
|
|||||
Fair value loss on Canadian development properties |
|
— |
|
|
1,314 |
|
|
(1,314 |
) |
|
|
— |
|
|
440 |
|
|
(440 |
) |
|||||
Unrealized gain on derivative financial instruments |
|
(24,558 |
) |
|
(31,866 |
) |
|
7,308 |
|
|
|
(8,098 |
) |
|
(158,991 |
) |
|
150,893 |
|
|||||
Limited partners' share of FFO adjustments |
|
25,341 |
|
|
37,621 |
|
|
(12,280 |
) |
|
|
95,955 |
|
|
233,504 |
|
|
(137,549 |
) |
|||||
FFO attributable to Tricon's shareholders |
$ |
7,678 |
|
$ |
77,829 |
|
$ |
(70,151 |
) |
|
$ |
31,400 |
|
$ |
(7,124 |
) |
$ |
38,524 |
|
|||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Core FFO from |
|
198 |
|
|
2,479 |
|
|
(2,281 |
) |
|
|
584 |
|
|
7,305 |
|
|
(6,721 |
) |
|||||
Income from equity-accounted investments in multi-family rental properties |
|
(179 |
) |
|
(169 |
) |
|
(10 |
) |
|
|
(529 |
) |
|
(499 |
) |
|
(30 |
) |
|||||
Income from equity-accounted investments in Canadian residential developments |
|
(2,442 |
) |
|
(3,621 |
) |
|
1,179 |
|
|
|
(2,734 |
) |
|
(3,508 |
) |
|
774 |
|
|||||
Performance fees revenue from the sale of |
|
— |
|
|
(99,866 |
) |
|
99,866 |
|
|
|
— |
|
|
(99,866 |
) |
|
99,866 |
|
|||||
Current income tax adjustment |
|
(1,271 |
) |
|
— |
|
|
(1,271 |
) |
|
|
629 |
|
|
— |
|
|
629 |
|
|||||
Deferred income tax expense |
|
9,806 |
|
|
72,087 |
|
|
(62,281 |
) |
|
|
23,930 |
|
|
183,578 |
|
|
(159,648 |
) |
|||||
Current tax impact on sale of |
|
— |
|
|
(29,835 |
) |
|
29,835 |
|
|
|
— |
|
|
(29,835 |
) |
|
29,835 |
|
|||||
Interest on Due to Affiliate |
|
4,245 |
|
|
4,245 |
|
|
— |
|
|
|
12,736 |
|
|
12,777 |
|
|
(41 |
) |
|||||
Amortization of deferred financing costs, discounts and lease obligations |
|
6,355 |
|
|
5,058 |
|
|
1,297 |
|
|
|
17,843 |
|
|
13,703 |
|
|
4,140 |
|
|||||
Equity-based, non-cash and non-recurring compensation(1) |
|
4,802 |
|
|
7,539 |
|
|
(2,737 |
) |
|
|
12,019 |
|
|
46,333 |
|
|
(34,314 |
) |
|||||
Other adjustments |
|
13,545 |
|
|
10,657 |
|
|
2,888 |
|
|
|
31,068 |
|
|
17,583 |
|
|
13,485 |
|
|||||
Core FFO attributable to Tricon's shareholders |
$ |
42,737 |
|
$ |
46,403 |
|
$ |
(3,666 |
) |
|
$ |
126,946 |
|
$ |
140,447 |
|
$ |
(13,501 |
) |
|||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Recurring capital expenditures(2) |
|
(8,594 |
) |
|
(11,221 |
) |
|
2,627 |
|
|
|
(25,995 |
) |
|
(30,877 |
) |
|
4,882 |
|
|||||
AFFO attributable to Tricon's shareholders |
$ |
34,143 |
|
$ |
35,182 |
|
$ |
(1,039 |
) |
|
$ |
100,951 |
|
$ |
109,570 |
|
$ |
(8,619 |
) |
(1) 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. |
(2) 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 September 30 |
Three months |
Nine months |
||||||||||
(in thousands of |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
|
|
|
|
||||||||
Net operating income (NOI), proportionate same home portfolio |
$ |
56,438 |
$ |
53,259 |
$ |
166,322 |
$ |
156,759 |
||||
Net operating income (NOI), proportionate non-same home |
|
21,000 |
|
18,062 |
|
62,916 |
|
45,040 |
||||
Net operating income (NOI), proportionate total portfolio |
|
77,438 |
|
71,321 |
|
229,238 |
|
201,799 |
||||
Limited partners' share of NOI(1) |
|
57,835 |
|
44,984 |
|
164,892 |
|
112,175 |
||||
Net operating income from single-family rental properties per financial statements |
$ |
135,273 |
$ |
116,305 |
$ |
394,130 |
$ |
313,974 |
||||
(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 September 30 |
|
|
|
|
||||||||||
(in thousands of |
|
2023 |
|
|
2022 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
116,024 |
|
$ |
105,038 |
|
$ |
10,986 |
10.5 |
% |
||||
Total direct operating expenses |
|
38,586 |
|
|
33,717 |
|
|
4,869 |
14.4 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
77,438 |
|
$ |
71,321 |
|
$ |
6,117 |
8.6 |
% |
||||
Net operating income (NOI) margin(1) |
|
66.7 |
% |
|
67.9 |
% |
|
|
||||||
(1) Non-IFRS measures; refer to Section 6 of the MD&A for definitions. |
For the nine months ended September 30 |
|
|
|
|
||||||||||
(in thousands of |
|
2023 |
|
|
2022 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
340,205 |
|
$ |
299,449 |
|
$ |
40,756 |
13.6 |
% |
||||
Total direct operating expenses |
|
110,967 |
|
|
97,650 |
|
|
13,317 |
13.6 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
229,238 |
|
$ |
201,799 |
|
$ |
27,439 |
13.6 |
% |
||||
Net operating income (NOI) margin(1) |
|
67.4 |
% |
|
67.4 |
% |
|
|
||||||
(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 September 30 |
|
|
|
|
||||||||||
(in thousands of |
|
2023 |
|
|
2022 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
82,357 |
|
$ |
77,366 |
|
$ |
4,991 |
6.5 |
% |
||||
Total direct operating expenses |
|
25,919 |
|
|
24,107 |
|
|
1,812 |
7.5 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
56,438 |
|
$ |
53,259 |
|
$ |
3,179 |
6.0 |
% |
||||
Net operating income (NOI) margin(1) |
|
68.5 |
% |
|
68.8 |
% |
|
|
||||||
(1) Non-IFRS measures; refer to Section 6 of the MD&A for definitions. |
For the nine months ended September 30 |
|
|
|
|
||||||||||
(in thousands of |
|
2023 |
|
|
2022 |
|
Variance |
% Variance |
||||||
|
|
|
|
|
||||||||||
Total revenue from rental properties |
$ |
241,938 |
|
$ |
228,318 |
|
$ |
13,620 |
6.0 |
% |
||||
Total direct operating expenses |
|
75,616 |
|
|
71,559 |
|
|
4,057 |
5.7 |
% |
||||
|
|
|
|
|
||||||||||
Net operating income (NOI)(1) |
$ |
166,322 |
|
$ |
156,759 |
|
$ |
9,563 |
6.1 |
% |
||||
Net operating income (NOI) margin(1) |
|
68.7 |
% |
|
68.7 |
% |
|
|
||||||
(1) Non-IFRS measures; refer to Section 6 of the MD&A for definitions. |
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 |
$ |
7,103,694 |
$ |
— |
$ |
— |
|
$ |
7,103,694 |
$ |
5,018,413 |
$ |
12,122,107 |
||||||
Equity-accounted investments in multi-family rental properties |
|
21,078 |
|
— |
|
— |
|
|
21,078 |
|
— |
|
21,078 |
||||||
Equity-accounted investments in Canadian residential developments |
|
— |
|
118,327 |
|
— |
|
|
118,327 |
|
— |
|
118,327 |
||||||
Canadian development properties |
|
— |
|
159,902 |
|
— |
|
|
159,902 |
|
— |
|
159,902 |
||||||
Investments in |
|
— |
|
154,814 |
|
— |
|
|
154,814 |
|
— |
|
154,814 |
||||||
Restricted cash |
|
70,033 |
|
243 |
|
1,234 |
|
|
71,510 |
|
71,163 |
|
142,673 |
||||||
Goodwill, intangible and other assets |
|
2,084 |
|
— |
|
143,706 |
|
|
145,790 |
|
2,813 |
|
148,603 |
||||||
Deferred income tax assets |
|
41,218 |
|
— |
|
38,799 |
|
|
80,017 |
|
— |
|
80,017 |
||||||
Cash |
|
72,832 |
|
520 |
|
9,282 |
|
|
82,634 |
|
90,153 |
|
172,787 |
||||||
Other working capital items(1) |
|
7,722 |
|
2,157 |
|
47,645 |
|
|
57,524 |
|
4,495 |
|
62,019 |
||||||
Total assets |
$ |
7,318,661 |
$ |
435,963 |
$ |
240,666 |
|
$ |
7,995,290 |
$ |
5,187,037 |
$ |
13,182,327 |
||||||
|
|
|
|
|
|
|
|||||||||||||
Liabilities |
|
|
|
|
|
|
|||||||||||||
Debt |
$ |
2,685,612 |
$ |
41,345 |
$ |
161,811 |
|
$ |
2,888,768 |
$ |
2,798,689 |
$ |
5,687,457 |
||||||
Due to Affiliate |
|
— |
|
— |
|
260,977 |
|
|
260,977 |
|
— |
|
260,977 |
||||||
Other liabilities(2) |
|
184,679 |
|
7,929 |
|
131,166 |
|
|
323,774 |
|
2,388,348 |
|
2,712,122 |
||||||
Deferred income tax liabilities |
|
— |
|
— |
|
622,104 |
|
|
622,104 |
|
— |
|
622,104 |
||||||
Total liabilities |
$ |
2,870,291 |
$ |
49,274 |
$ |
1,176,058 |
|
$ |
4,095,623 |
$ |
5,187,037 |
$ |
9,282,660 |
||||||
|
|
|
|
|
|
|
|||||||||||||
Non-controlling interest |
|
— |
|
— |
|
3,935 |
|
|
3,935 |
|
— |
|
3,935 |
||||||
|
|
|
|
|
|
|
|||||||||||||
Net assets attributable to Tricon's shareholders |
$ |
4,448,370 |
$ |
386,689 |
$ |
(939,327 |
) |
$ |
3,895,732 |
$ |
— |
$ |
3,895,732 |
||||||
|
|
|
|
|
|
|
|||||||||||||
Net assets per share(3) |
$ |
16.33 |
$ |
1.42 |
$ |
(3.45 |
) |
$ |
14.30 |
|
|
||||||||
Net assets per share (CAD)(3) |
$ |
22.08 |
$ |
1.92 |
$ |
(4.67 |
) |
$ |
19.33 |
|
|
(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 September 30, 2023, common shares outstanding were 272,356,982 and the USD/CAD exchange rate was 1.3520. |
TOTAL AUM |
||||||||||||
|
September 30, 2023 |
|
December 31, 2022 |
|||||||||
(in thousands of |
Balance |
% of total AUM |
|
Balance |
% of total AUM |
|||||||
|
|
|
|
|
|
|||||||
Third-party AUM |
$ |
8,124,882 |
50.1 |
% |
|
$ |
8,120,344 |
50.7 |
% |
|||
Principal AUM |
|
8,078,867 |
49.9 |
% |
|
|
7,882,908 |
49.3 |
% |
|||
Total AUM |
$ |
16,203,749 |
100.0 |
% |
|
$ |
16,003,252 |
100.0 |
% |
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDAre |
||||||||||||
(in thousands of |
Total proportionate results |
IFRS reconciliation |
Consolidated results/Total |
|||||||||
|
|
|
|
|||||||||
For the three months ended September 30, 2023 |
|
|
|
|||||||||
Net income attributable to Tricon's shareholders from continuing operations |
$ |
80,156 |
|
$ |
— |
|
$ |
80,156 |
|
|||
Interest expense |
|
41,642 |
|
|
38,833 |
|
|
80,475 |
|
|||
Current income tax recovery |
|
(163 |
) |
|
— |
|
|
(163 |
) |
|||
Deferred income tax expense |
|
9,806 |
|
|
— |
|
|
9,806 |
|
|||
Amortization and depreciation expense |
|
4,359 |
|
|
— |
|
|
4,359 |
|
|||
Fair value gain on rental properties |
|
(45,759 |
) |
|
(27,502 |
) |
|
(73,261 |
) |
|||
Unrealized gain on derivative financial instruments |
|
(26,719 |
) |
|
2,161 |
|
|
(24,558 |
) |
|||
Look-through EBITDAre adjustments from non-consolidated affiliates |
|
(2,398 |
) |
|
— |
|
|
(2,398 |
) |
|||
EBITDAre, consolidated |
$ |
60,924 |
|
$ |
13,492 |
|
$ |
74,416 |
|
|||
|
|
|
|
|||||||||
Equity-based, non-cash and non-recurring compensation |
|
4,802 |
|
|
— |
|
|
4,802 |
|
|||
Other adjustments(1) |
|
12,131 |
|
|
(2,375 |
) |
|
9,756 |
|
|||
Limited partners' share of EBITDAre adjustments |
|
— |
|
|
(11,117 |
) |
|
(11,117 |
) |
|||
Non-controlling interest's share of EBITDAre adjustments |
|
(149 |
) |
|
— |
|
|
(149 |
) |
|||
Adjusted EBITDAre |
$ |
77,708 |
|
$ |
— |
|
$ |
77,708 |
|
|||
|
|
|
|
|||||||||
Adjusted EBITDAre (annualized) |
|
|
$ |
310,832 |
|
(1) Includes the following adjustments: |
||||||||||||||
(in thousands of |
Proportionate |
IFRS reconciliation |
Consolidated |
|||||||||||
|
|
|
|
|||||||||||
Transaction costs |
$ |
7,551 |
|
$ |
(2,375 |
) |
$ |
5,176 |
|
|||||
Realized and unrealized foreign exchange loss |
|
62 |
|
|
— |
|
|
62 |
|
|||||
Lease payments on right-of-use assets |
|
(1,496 |
) |
|
— |
|
|
(1,496 |
) |
|||||
Gain on debt modification and extinguishment |
|
(1,326 |
) |
|
— |
|
|
(1,326 |
) |
|||||
Other EBITDAre adjustments |
|
7,340 |
|
|
— |
|
|
7,340 |
|
|||||
Total other adjustments |
$ |
12,131 |
|
$ |
(2,375 |
) |
$ |
9,756 |
|
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 |
September 30, 2023 |
||
|
|
||
Pro-rata assets of consolidated entities(1) |
$ |
7,855,885 |
|
|
|
||
Canadian multi-family rental properties |
|
39,253 |
|
Canadian residential developments(2) |
|
305,296 |
|
Pro-rata assets of non-consolidated entities |
|
344,549 |
|
|
|
||
Pro-rata assets, total |
$ |
8,200,434 |
|
Pro-rata assets (net of cash), total(3) |
$ |
8,040,119 |
(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 |
September 30, 2023 |
|||
|
|
|||
Pro-rata debt of consolidated entities |
$ |
2,888,768 |
|
|
|
|
|||
Canadian multi-family rental properties |
|
17,155 |
|
|
Canadian residential developments(1) |
|
174,451 |
|
|
Pro-rata debt of non-consolidated entities |
|
191,606 |
|
|
|
|
|||
Pro-rata debt, total |
$ |
3,080,374 |
|
|
Pro-rata net debt, total(2) |
$ |
2,920,059 |
|
|
|
|
|||
Pro-rata net debt to assets |
|
36.3 |
% |
(1) Excludes lease obligations under ground leases of |
(2) Reflects proportionate cash and restricted cash of |
RECONCILIATION OF PRO-RATA DEBT AND ASSETS OF NON-CONSOLIDATED ENTITIES TO CONSOLIDATED BALANCE SHEET |
||||
(in thousands of |
September 30, 2023 |
|||
|
|
|||
Equity-accounted investments in Canadian multi-family rental properties |
|
|||
Tricon's pro-rata share of assets |
$ |
39,253 |
|
|
Tricon's pro-rata share of debt |
|
(17,155 |
) |
|
Tricon's pro-rata share of working capital and other |
|
(1,020 |
) |
|
Equity-accounted investments in Canadian multi-family rental properties |
|
21,078 |
|
|
|
|
|||
Equity-accounted investments in multi-family rental properties |
$ |
21,078 |
|
|
|
|
|||
Equity-accounted investments in Canadian residential developments |
|
|||
Tricon's pro-rata share of assets(1) |
$ |
305,296 |
|
|
Tricon's pro-rata share of debt(1) |
|
(174,451 |
) |
|
Tricon's pro-rata share of working capital and other |
|
(12,518 |
) |
|
Equity-accounted investments in Canadian residential developments |
$ |
118,327 |
|
|
(1) Excludes right-of-use assets and lease obligations under ground leases of |
PRO-RATA NET DEBT TO ADJUSTED EBITDAre |
|||
(in thousands of |
September 30, 2023 |
||
|
|
||
Pro-rata debt of consolidated entities, excluding facilities related to non-income generating assets(1) |
$ |
2,643,586 |
|
|
|
||
Canadian multi-family rental properties debt |
|
17,155 |
|
Pro-rata debt of non-consolidated entities (stabilized properties) |
|
17,155 |
|
|
|
||
Pro-rata debt (stabilized properties), total |
$ |
2,660,741 |
|
Pro-rata net debt (stabilized properties), total(2) |
$ |
2,544,715 |
|
|
|
||
Adjusted EBITDAre (annualized)(3) |
$ |
310,832 |
|
Pro-rata net debt to Adjusted EBITDAre (annualized) |
8.2x |
(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 National Association of Real Estate Investment Trusts (“NAREIT”). In addition to the adjustments prescribed by NAREIT, Tricon excludes fair value gains that arise as a result of reporting under IFRS.
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231107769062/en/
For further information:
Wissam Francis
EVP & Chief Financial Officer
Wojtek Nowak
Managing Director, Capital Markets
Email: IR@triconresidential.com
Source: Tricon Residential Inc.
FAQ
What were Tricon Residential Inc.'s Q3 2023 financial results?
What was the same home NOI growth for the single-family rental portfolio in Q3 2023?
How many homes did Tricon acquire during the quarter and at what cost?