Tricon Residential Inc.
(TCN-N, TCN-T) US$15.08 | C$19.10
Tricon 2022 Investor Day Highlights
Event
Tricon hosted an investor day.
Impact: NEUTRAL
Although no material updates were provided, we wanted to highlight a few of the key takeaways:
FFO/share Guidance. Tricon reiterated its 2022 and three-year guidance ranges for FFO/share that calls for ~15% compounded annual growth through 2024. We view the unchanged guidance positively in light of the recent sharp increase in interest rates (management noted that rate increases will eat into some of the buffer it left itself). 2022 SPNOI guidance was also maintained (7-9%).
Single-family Rental.
Tricon continues to see very strong demand for rental homes in its target markets and reinforced its strategy of focusing on the acquisition of middle-market homes (purchase price of ~$315k) in high-growth markets.
We are confident that management can comfortably meet its 50,000 home target in 2024. On average, Tricon is sending out ~1,000 offers a week with a 20% acceptance rate, which should allow Tricon to easily exceed its 8,000 annual acquisition target. ~75% of the incremental homes are expected to be acquired through a combination of MLS (~55%) and off-market transactions (20%), while developments of new home communities and the acquisition of newly built homes are expected to account for 10% each.
Ancillary revenue is expected to grow to $850-$950/home from $670/home currently as take-up increases for existing services (smart home, insurance, etc.) and new services are introduced.
SFR JV Equity Commitments. Tricon expects to fund its future equity commitments (total ~$550mm) through incremental NOI (~$300mm expected from 2022-2024) and ~$182mm of distributions from its U.S. residential business over the next five years. The balance can be funded with increased leverage (expected to increase to 8x-9x from 7.8x at present). Management noted that it does not need to issue equity to fund its current capital commitments.
SFR 2022-1 Securitization. Tricon raised $530mm through the securitization of 2,480 homes within SFR JV-2 at 4.24%. This compares with the 2.49% coupon achieved on Tricon's last securitization transaction (November 2021). Although rising interest rates could pose a risk going forward, we note that over two-thirds of Tricon's debt is fixed and that there are no significant maturities until 2024.