TD ReportBarring any unforseen developments, this should pretty much wrap things up.
Obviously there are USD targets. GLTA
Tricon Residential Inc.
(TCN-N, TCN-T) US$11.05 | C$14.86
Moving to TENDER Following Agreement to be Acquired
Event
We are moving Tricon to TENDER from Buy, following Friday's announcement (link)
that it has entered into an agreement to be acquired by Blackstone Real Estate
Partners X and BREIT ("Blackstone") for US$11.25/share or an equity value of US
$3.5bln (fully diluted basis). See our initial thoughts on the announcement here.
Impact: POSITIVE
We believe Blackstone will be successful in its bid. Although the agreement
allows TCN to accept a superior proposal, we believe that TCN's more complex
business structure (a significant Canadian multi-residential development pipeline,
along with a U.S. development pipeline, in addition to its SFR portfolio), along with
Blackstone's size and "right to match" will lead to the deal getting done.
Tricon's share price increased ~28% Friday, and is trading at a level that suggests
to us that the market believes the deal will be done at the offer price. Given the
offer sits slightly below consensus NAV estimates and at the midpoint of the
formal valuation range (US$9.80-US$12.90) used in the transaction, we view
this proposed price as fair, but not overly compelling. We estimate a mid-5%
cap rate on the transaction. Furthermore, we understand that this acquisition was
not a marketed process, and we also see this transaction as an example of foreign
capital being more aggressive on Canada-listed real-estate entities.
Given TCN's exposure to the U.S. sunbelt region, we believe this presents an
opportunity to trade into other U.S. sunbelt names in our coverage universe (e.g.,
H&R REIT for its Lantower portfolio, BSR REIT, and Dream Residential REIT).
Forecasts unchanged. Our earnings forecasts and NAV estimate are unchanged,
but our target price has increased to US$11.25 from US$10.50, which reflects
Blackstone's offer price.
TD Investment Conclusion
Our target price increases to $11.25 from $10.50. We are moving our
recommendation to TENDER from Buy.