Tricon Residential Inc T.TCN

RBC

[retiredcf]

March 1, 2023

Tricon Residential Inc.
4Q22 $0.01 Beat; 2023 Guidance 4% Below Consensus on Lower Acquisitions

NYSE: TCN | USD 8.00 | Outperform | Price Target USD 10.00

Sentiment: Positive

Overall Thoughts: We think the results are a neutral or slight positive for TCN. The guide is below consensus; we think that is largely a result of a slower acquisition pace and the associated impact on fees, and TCN's same-store guidance suggests the company will outperform AMH/INVH on revenue, opex and NOI growth. New lease spreads also continue to be significantly higher than peers.

Earnings Results: TCN reported 4Q22 core FFO/sh of $0.31, $0.01 above consensus and our estimate of $0.30. Nominal core FFO of $96.8 million was 2% above our estimate, with higher fee income more than offsetting slightly lower NOI.

Release Highlights:

• Guidance: TCN announced 2023 guidance, which includes same home revenue growth of 6.0%-7.5% (RBCCMe 6.0%), same store opex growth of 6.0%-7.5% (RBCCMe 6.0%) and same home NOI growth of 6.0%-7.5% (RBCCMe 5.9%). This results in a 2023 core FFO/sh range between $0.54-$0.59, 4% below consensus and our estimate of $0.59 at the midpoint. Versus our estimate, the main difference is likely fee income, given TCN is guiding to only 2,000-4,000 homes acquired in 2023 (RBCCMe 4,500).

• Operating expenses: TCN's same-home operating expenses were up 0.8% YoY, with HOA costs (+66%), property taxes (+25%) and property management (19%) being offset by a 51% decline in turnover expenses. As with the prior quarter, we think this is due to capitalization of more intensive turns.

• Leasing stats: January same-home rent growth was 7.3%, with 13.9% growth on new leases and 6.6% growth on renewals, roughly in line with 4Q22 blended/new/renewal growth of 7.4%/11.5%/6.8%. Occupancy was down 60 bps in January to 97.4%. Loss to lease is currently estimated at 15%, down from the 15-20% quoted with 3Q22 earnings.

• Acquisitions: TCN acquired 815 homes in 4Q22, slightly below guidance of 888 homes, for a total acquisition cost of $270 million, slightly below our prior estimate of $290 million. TCN expects to slow its acquisition pace further to only 400 homes in 1Q23, before picking up pace again as the year goes on.