Citi Upgrade In a research report titled Dear Mr. Fantasy – Citi’s 12th Annual Fantasy REIT Draft, analyst Michael Bilerman raised his recommendation for Tricon Residential Inc. to “buy” from “neutral,” seeing shares of the Toronto-based single family rental-focused company as “relatively attractive.”
“We see three potential catalysts for TCN: (1) solid internal growth driven by a sector leading loss-to-lease (20 per cent) and reliance on renewals which are more resilient vs. new lease rate growth, (2) external growth primarily through JVs, and (3) simplification through monetizing/exiting ancillary businesses,” he said. “In addition, we have a favorable view of TCN’s technology platform, which should help both internal and external growth. These are balanced by risks including higher leverage vs. peers in a higher interest rate environment, higher fee income/complexity associated with the fund business model which results in a lower multiple vs. peers, regulatory risks, macroeconomic uncertainty, a slowing transaction and housing market, and the fact that Tricon is not a REIT / RMZ index eligible.”
In the fantasy football themed report, Mr. Bilerman placed Tricon in the “waiver wire” section of his picks, noting: “Claiming the right players off waivers, however, could be the difference between a winning season and a losing season. That said, while these players do not come cheap and may not necessarily be in a prime position to work in all environments, moving forward these players should continue to fight for every yard and find new opportunities to grow and add depth.”
He maintained a US$12.50 target for its shares. The average on the Street is US$14.64.
“We are positive on the SFR sector and favor TCN’s exposure to high growth Sunbelt markets. In addition, we believe that TCN benefits from a strong technology platform that will help drive internal and external growth,” said Mr. Bilerman.