Tricon Residential Inc.
(TCN-N, TCN-T) US$8.96 | C$12.00
Q2/23 First Look: Results In Line; Home Acquisitions to Slow Event
Q2/23 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 $0.136 was -17% y/y (lower FFO from fees/higher interest expense), but largely in line our estimate/consensus at $0.134/$0.14. AFFO/share was $0.11 and 8% ahead of our estimate due to lower maintenance capex.
Management lowered its prior 2,000-4,000 home acquisition range to ~2,000 homes (consensus: 3,006 homes) amid elevated financing conditions and steady home prices. Management now aims to complete its SFR JV-2 and JV-HD programs with a similar equity contribution but lower leverage. Same home NOI growth was lowered slightly to 6.0%-7.0% from 6.0%-7.5% previously, while the Core FFO per share guidance was tightened to $0.55-$0.58 from $0.54-$0.59.
Q2 SFR portfolio SPNOI was +6.3% y/y and ahead of the +4.2% Q2/23 peer average (INVH & AMH). Same-home occupancy was -50bps y/y to 97.5%, while blended rent growth was +7.4%, with new-move-ins at +9.8% and renewals at +6.6%. SPNOI margin was 20bps lower y/y to 68.2%. Turnover was 19.2% versus 18.9% y/y. Same home rent growth in July was +7.2% (+8.2% on new leases/+6.8% on renewals), while occupancy remained relatively stable at 97.2%.
Core FFO from fees of $16.7mm compared to $30.6mm in Q2/22, with the decline attributable to lower performance fees (Q2/22 included fees related to Tricon's legacy for-sale housing investments) and lower property management fees which reflected fewer home acquisitions and the divestiture of the U.S. multi-family portfolio in Q4/22. This was offset by core FFO from the U.S. residential business (+144% y/y), which benefited from continued strength in the for sale market.
Acquisitions/Developments
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Q2 SFR acquisitions were in line with management's guidance at 805 homes. The price/home was slightly higher q/q at $326,000/home (+2.5% q/q) due to a tight housing market. Total acquisition costs were $263mm ($137mm at Tricon's share).
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Disposed of 201 homes in Q2 at an average price of $349,000/home.
Balance Sheet/Other
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Post-Q2 Tricon closed its $416mm 5.86% coupon 2023-SFR1 securitization (link).
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Q2/23 fair value gains of $123.8mm on home price appreciation. Net Debt/Assets (proportionate) was +70bps to 36.2%, while liquidity was ~$462mm.