RE:Keystone FinancialFound their narrative. GLTA
Tricon Residential Inc. (TCN:TSX)
Price: $10.59
Market Cap: $2.9 Billion
Dividend yield: 3.00%
Description:
Tricon is a rental housing company focused on serving the middle-market demographic. Tricon owns and operates approximately 36,000 single-family rental homes and multi-family rental units across the United States and Canada, managed with an integrated technology-enabled operating platform.
Slide 2
Tricon is focused on the U.S. Sun Belt, which is home to ~40% of all U.S. households and as you can see in this slide from Tricon’s investor presentation – its NOI primarily comes from these high population growth areas.
Slide 3
Recent Financials (Q3 2022)
| $USD | Q4 22 | Q3 22 | Q2 22 | Q1 21 | Q4 21 | Q3 21 | Q2 21 | Q1 20 |
| Rev. (Single Family) | $180.9M | $170.8M | $155.1M | $138.8M | $124.4M | $115.1M | $107.0M | $99.4M |
| Rev. Private Funds | $14.8 | $112.5M | $20.4M | $12.4M | $17.7M | $11.0M | $13.1M | $8.9M |
| TOTAL REV. | $195.7M | $283.3M | $175.5M | $151.2M | $142.1M | $126.1M | $120.1M | $108.3M |
| Basic EPS (cont. Op.) | $0.19 | $0.65 | $1.51 | $0.59 | $0.37 | $0.80 | $0.73 | $0.21 |
| AFFO | $0.28 | $0.11 | $0.13 | $0.11 | $0.12 | $0.12 | $0.11 | $0.10 |
- NOI for the quarter was $73.7M, an increase of 24% from Q4 2021.
- Revenue from single-family rental properties was up 45% to $180.9 million, driven primarily by 23% growth in the single-family rental portfolio and a 9.4% year-over-year increase in average effective monthly rent (from $1,591 to $1,741).
- Revenue from private funds and advisory services was down slightly to $14.8 million, driven by no performance fees being recognized in the quarter as well as a decrease in property management fees following the sale of Tricon’s remaining interest in the U.S. multi-family rental portfolio during the quarter. On this point if we look at Q3 2022 revenue from private funds and advisory services, it was $112.5 million, which was inflated due to the accrual of performance fees earned from the sale of Tricon’s remaining 20% equity interests in the U.S. multi-family rental portfolio following quarter-end.
- Adjusted Funds from Operation (AFFO) was up 143% to $88.7M or $0.28 per share, from $36.5M or $0.12 per share for Q4 2021.
- As of December 31, 2022, Tricon held $204.3 million in cash and Debt & leases of $5.7 billion, providing a net debt position of $5.5 billion and a trailing net debt to FFO multiple of ~23 times. Looking at the debt, 71% is fixed rate, while 29% is floating rate.
- Valuation metrics – Trades with a trailing price-to-AFFO multiple of 12 times.
Slide 4
Gary Berman, President & CEO of Tricon. “As we look ahead to 2023, we remain focused on growing our single-family rental portfolio so we can serve thousands of more families who are in need of high quality, relatively affordable rental housing. Our guidance for 2023 reflects a gradual acceleration of acquisitions over the course of the year, albeit at a slower pace than 2022, as well as strong same home NOI growth largely offsetting the impact of higher interest expense in our FFO profile. We are encouraged by the resilience in our January operating metrics, the emergence of “green shoots” in the debt markets, and stability in the resale housing market that all point to another year of strong operating performance.”
CONCLUSION
To conclude, I do think that Tricon is an attractive business, operating in high population growth areas, trades with a reasonable P/AFFO multiple, pays a nice dividend yield and has a reasonable balance sheet for a REIT.