Tricon Residential Inc T.TCN

RBC

[retiredcf]

They like what they see. Last target I have for them is $11.00 so it's possible they may raise that in the next few days. GLTA

August 6, 2020

Tricon Residential Inc

Strong Q2 results underpinned by accelerating single-family demand

Impact: Positive

Benefiting from accelerating single-family demand—both for-sale and for- rent—Tricon Residential Inc. ("TCN") delivered strong Q2 results.

Highlights (all amounts in U.S. dollars)

• FFO/share: $0.11, vs. $0.04 in Q2/19 and RBC/Street at $0.08E/$0.09E • SP-NOI growth: 2.2%, comprised of +5.1% for SFR and -4.9% for MFR • IFRS NAV (pre-tax): $8.48, +$0.08 QoQ (+1%) and +$0.08 YoY (+1%).

First impression

Our view: While the for-sale housing business materially outperformed our draconian forecast, we were more impressed by same-property NOI growth of 5% from the single-family rental ("SFR") portfolio, which makes up ~70% of our NAV. Looking ahead, we suspect there may be some element of pent-up demand in the for-sale housing results. Conversely, we believe SFR growth potential is stronger than meets the eye—as TCN elected to forego rent increases on renewals during the quarter. To this end, rent growth on new move-ins has accelerated each month, from 6% in April to an all-time-high of 12% in July.

Robust for-sale housing results drove better-than-expected FFO/share.

FFO/share of $0.11 was $0.03 ahead of our $0.08 forecast, driven by robust for-sale housing results and split roughly equally between the Residential Development and Private Funds & Advisory segments. Notably, rental housing NOI of $64.9MM was ~1.5% (0.5¢/share) ahead of our $64.0MM estimate, driven entirely by the SFR portfolio.

Q2 results underscore resilient single-family rental portfolio. Supported by average monthly rents that are $200–450 below SFR peers, TCN's affordable SFR portfolio delivered blended rent growth of 4.7%, on a same-property basis, comprised of a 3.2% lift on renewals and an 8.3% increase on move-ins. Bad debt remains low, but ticked incrementally higher to 166 bps, from 81 bps in Q2/19. On balance, TCN's SFR portfolio delivered SP-NOI growth of 5.1% vs. 5.5% in Q1 and peers at ~2%.

Multi-family rental ("MFR") remains challenging, as expected. With ~37% of MFR the portfolio located in Orlando, Houston, and Las Vegas, SP- NOI (-4.9%) was weak, as expected. While rent growth has shown signs of improvement (-3.4% in April vs. -1.4% in July), this appears to be coming at the expense of occupancy (93.6% in April vs. 92.5% in July). While MFR represents ~17% of our NAV, we believe this will shrink over the next 12 months as TCN looks to syndicate a 50% interest in the portfolio.

Conference call Thursday, August 6, at 10:00 a.m. ET. Dial-in: [phone]; toll-free: [phone], passcode: 7087334.