Tricon Residential Inc T.TCN

RBC

[retiredcf]

These are USD targets and their upside scenario target is US$14.00. GLTA

October 20, 2022
Tricon Residential Inc.
Updating Estimates For Multi-Family Sale

Our view: Given TCN's recently announced $315 million sale of its remaining U.S. multi-family portfolio interest, we are updating our estimates. Our 4Q22 core FFO/sh estimate is up significantly on the recognition of performance fees from the sale, while our 2023 estimate is down by $0.02 on dilution from the sale and a higher cost of capital.

Key points:
$315 million U.S. multi-family sale recently closed. TCN closed the sale of its remaining 20% stake in the sun belt multi-family portfolio on October 18 for $315 million. The book value of the assets was previously $216 million, consistent with the deal equity value of $215 million. The remaining $100 million represents performance fees, which were previously included in TCN's 3-5 year performance fee outlook. The underlying cap rate is roughly 4.3% on 2Q22 annualized NOI, slightly better than our prior assumption of 4.4%. The assets were generating roughly $9 million per year in FFO, while fee income from TCN's management of the properties was another $5 million in FFO.

4Q22 estimates up significantly, but 2023 down on dilution. Our 4Q22 core FFO/sh estimate is nearly doubling from $0.16 to $0.28, reflecting performance fees flowing through FFO. Our 2023 estimate is down by $0.02/sh, reflecting the FFO sold and a higher cost of capital, partially offset by reduced interest expense from paying down the revolver and the recently announced 2.5 million share repurchase program. Our price target is unchanged at $12/sh.