Tricon Residential Inc T.TCN

TD

[retiredcf]

Have a $13.00 target. GLTA

Tricon Residential Inc.

(TCN-N, TCN-T) US$8.00 | C$10.87

Q4 First Look: Results Largely In-Line; Acquisition Pace Slows Event

Q4/22 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 $0.31 was +109% y/y and slightly above our estimate/consensus of $0.30, with the y/y growth largely attributable to performance fees received in relation to the sale of the U.S. multi-family portfolio (link).

2023 Guidance (Exhibit): Management's FY2023 guidance calls for Core FFO/ share in the range of $0.54-$0.59, which at the mid-point is 6% below consensus at $0.60 (we are currently street high at $0.64), and roughly flat y/y (excluding gains from U.S. multi-family disposition). We believe the lower-than-expected guidance is priced in to the stock given TCN has underperformed alongside its two peers following their Q4 reports/guidance releases (SFR REITs -9.6% since mid-February vs. RMZ -6%) and actual guidance may be better than feared. SFR SPNOIG is anticipated in the 6.0%-7.5% range, which while down from 2022's +10.4%, is nicely ahead of TCN's peers, which average ~4.4% at the mid-point. Tricon has further decelerated its acquisition pace with a guide towards 2,000-4,000 home acquisitions in 2023 (versus 7,227 in 2022), which also weighs on guidance with each 1,000 homes acquired adding ~$0.01/share in fees. Higher interest costs will also weigh on FFO/share growth with each 50bps on SOFR ~$0.01/share impact to FFO.

Q4 SFR portfolio SPNOI was +9.7% y/y. Same-home occupancy was +20bps y/y to 98.0%. Blended rent growth was +7.4% with new-move-ins at +11.5% and renewals at +6.8%. SPNOI margin was +180bps y/y to 69.8%. Rent growth remained robust in January at +7.3%, while occupancy was slightly lower at 97.4%.

Acquisitions/Developments

 Tricon acquired 815 homes, which was largely in line with management's previously communicated guidance and brought total homes under management to 35,908. Total acquisition costs were $270mm ($84mm at TCN's share) or $331,000/home representing a slight moderation from $352,000/home in Q3.

Balance Sheet/Other

• Tricon reported an ~$56mm SFR FV gain on modest home price appreciation. FY2022 gains totaled $859mm.

• During Q4, repurchased a combined ~678,000 shares on the TSX and NYSE for $5.4mm ($7.97/share average price).

• Net Debt/Assets was -180bps to 34.9%, while Liquidity (proportionate) was ~ $704mm.