Tricon Residential Inc.
(TCN-N, TCN-T) US$8.24 | C$11.13
Q3/22 First Look: Results Largely In Line; SFR SPNOI +10.2% Event
Q3/22 results. Conference call this morning at 11:00 a.m. ET (1-888-550-5422; conference ID: #3699415).
Impact: NEUTRAL
FFO/share (f.d.) of $0.149 was +3% y/y, slightly below our estimate of $0.162 (several puts and takes), but in line with consensus at $0.15.
2022 Guidance Update. On the back of dislocation in the debt markets and higher interest costs, Tricon has "elected to reduce its pace of acquisitions" and lowered its 2022 home acquisition target to 7,300 from 8,000. Management also pointed to a shift in near term capital allocation to debt reduction. SFR SPNOI guidance was raised 10.0%-11.0% from 8.5%-10.0% previously on lower expenses (lower R&M and turnover expenses). This is in contrast to its two U.S. SFR peers who both lowered 2022 SPNOI guidance (by ~140bps). Core FFO/share also increased to $0.75-$0.77 from $0.60-$0.64. Excluding a net ~$0.15/share in performance fees from the Q4 sale of the U.S. multi-family portfolio, the mid-point of guidance was essentially lowered by $0.01/share to $0.61 owing largely to higher interest costs.
SFR portfolio SPNOI was +10.2% y/y. Same-home occupancy was +30bps y/y to 97.9%. Blended rent growth was +8.4% with new-move-ins at +16.3% and renewals at +6.6%. SPNOI margin was +150bps y/y to 68.5%. Fundamentals remained strong in October with rent growth of +7.6% and occupancy of 98.2%.
Acquisitions/Developments
SFR acquisition volumes moderated to 1,988 homes (portfolio +5.5% q/q) from 2,489 in Q2. Total acquisition costs were $700mm ($213mm at TCN's share) or $352,000/home, slightly down from $364,000/home in Q2/22. Homes managed now total 32,262. Following the lowered guidance for home acquisitions, Tricon expects to purchase ~850 homes in Q4.
Balance Sheet/Other
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Tricon reported an ~$107mm SFR FV gain on y/y home price appreciation, with YTD FV gains now totaling $803mm.
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Post Q3, completed the sale of its 20% interest in its U.S. multi-family rental portfolio (23 sun-belt properties), generating proceeds of $315mm, inclusive of $100mm in gross performance fees (link).
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Post-Q3, entered into a 3-year (with two one-year extensions) $500mm term loan facility (at one month SOFR +2.1%) secured by 1,962 homes.
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Net Debt/Assets was +70bps to 36.7%, while Liquidity (proportionate) was ~ $460mm.