Q4 2019 Earnings Call

In a multi-family rental business the portfolio delivered 5% same property noi growth driven by continued improvements and occupancy.

We also completed the disposition of our last non-core us development asset with the sale of the Maxwell in December in total sale of the for non-core developments to on our balance sheet and 2 in our FAQ generated 14% irr over a five-year investment. We thought we did well on these Investments given the pressure of rising construction costs and our role as limited partner.

Meanwhile in the Canadian multi-family portfolio. We achieved 86% lease at the South and we have now fully internalized Property Management in Canada.

And our private funds and advisory business assets under management increased by 41% while fee Revenue increased by 13% year-over-year.

Lastly our Legacy for sale housing business continues to be a significant source of cash flow Distributing 24 million dollars to trikon in the quarter in fifty-two million for the full year.

We generated additional cash subsequently around as we syndicated 50% of our direct investment and Trinity falls to the Asus joint-venture offer financial performance. This quarter is highlighted by strong ffo growth as you can see on slide three.

Try call generated total ffo thirty-four million in Q4 and 35% increase you over a year.

the drivers of ffo included first

hire a single family rental core ffo of $23 million compared to $70 million last year as a portfolio grew in size and delivered higher, NY margin.

This is partly offset by higher interest expense on a larger outstanding debt balance to finance our growth.

Second incremental contribution of seven million of oil from the US multi-family rental portfolio, which was acquired in June 2019.

Sir, lower investment income from residential developments of $10 this quarter compared to thirteen Million last year as a result of the lower contribution from Canadian multi-family developments in the current. And finally hire contractual fees of ten million compared to nine million in the prior year mainly from higher performance fees earned this quarter as well as strong development fees from Johnson. Overall are applicable per share. This quarter was $0.16 which translates a $0.21 in Canadian currency the strong growth in total FL is offset by an increase in shares outstanding job as a result of the US multifamily portfolio acquisition resulting in the same ethical fresh air compared to last year.

Once like for you see that on a full year basis our ffo per share increased by 35% year-over-year to 42 cents, exceeding our target range of 37 to 40 off. This outperformance was driven by higher than expected contribution from single-family rental and higher-than-expected cash distributions from a residential development. Which also let those strong stronger-than-expected performance. He's dead.

Throughout the flight five. We summarize a reported. I for us and non-ifrs results. You can see that tricon generated. I pressed diluted earnings per share of $0.22 this quarter compared to $0.23 last year. We also reported adjusted earnings per share of $0.23 for the quarter and $0.30 for the prior-year the main differences between the IRS and adjusted figures relate to the transaction costs and non-religious items derivative of the evaluation changes and unrealised foreign exchange fluctuations.

Digging deeper into the year of your variance are adjusted ebitda increase by 20% year-over-year 296 million compared to last year.

In addition to the drivers already discussed in slide three, you will know that there is a significant variance and adjusted compensation in G&A expenses. If you look at the table on the right, you can see the steering supposedly attributed to a IP in 2018. We over accrued the IP expense during the first three quarters and book the true of adjustment in Q4. Whereas in 2019. We include the expense more often throughout the year. I would also point out that adjusted ebitda captures fair value gains on our single-family rental portfolio.

without this item

Our adjusted ebitda would have increased by 30% year-over-year.

Bridging from adjusted ebitda to adjusted earnings. We had an increase in interest expense mainly from adding the multi-family rental portfolio and higher tax expense versus last year where we benefited from tax recoveries.

The net result was stable adjusted net income and a decrease in adjusted EPS when you factor in higher share County over here.

Without the flight 6E as a result of us transitioning from an investment entity to an owner and manager of residential real estate properties. We have determined that track on no longer meets all the criteria took my investment entity counseling as such an effective January 1st, 2020. We will consolidate our control subsidiaries and apply relevant IFRS standards to the individual assets liabilities home equity revenue and expense accounts in order to transition to consolidate accounting. We will need to review Our Fair values for the entire portfolio underinvestment and the accounting we fair value of Investments Faith intention of a limited holding. I'm extended to find exit strategy.

the consolidated

Accounting. However, the assumption is we will hold these assets indefinitely as an order an operator. This transition may result in Fair Value changes to certain assets the overall. We don't expect significant impact on our financial statements wage that revaluations the transition to Consolidated accounting is applied on a prospective basis, which means that 2019 comparative results in the financial statements are precluded from being restated. We will however be providing comparative disclosure in our md&a when we report our queue 12020 results in May.

Couples was consolidating accounting and transitioning tricon to be a rental housing company going forward will be focused on IFRS results in Ethel metrics only and therefore we will no longer be disclosing adjusted Faith with that now turn the call over to Gary to discuss highlights of our business verticals and our priorities going forward.

Thank you with Sam. Let's turn a slide seven. And before we get to the operating highlights, I just want to talk again, but our transformation to a rental housing company, which is essentially complete now with the adoption of Consolidated accounting as of Jan first and as many of you would recall in 2010 when we went public we essentially were an acid manager focused on for sale housing. We managed known no rental property fast forward nine or ten years. You can see we now have thirty two thousand units nearly thirty two thousand units that we own and manage and if you look at our development as a percentage of our life balance sheet, you can see that's also been significantly be emphasized going back to 2013 52% of our balance sheet was invested in development assets today that is 18% off and as we move to consolidate accounting that will drop to 5% and Trend lower. I will remind you though that these developments are illnesses are high quality and cash flowing as with Sam just said we generated over

fifty million of cash flow and 2019

And we expect to generate even more cash flow from our development Assets in twenty-twenty tricon is a Growth Company asked or Executives at our investor day to think about where we would be in ten years. How many units would we own and manage and each executive used different assumptions, but got to about a hundred thousand units Plus in ten years. And so we're going to continue to move towards that longer-term goal. This light also talks about our our Evolution as an innovator and and and and in many cases are first-mover advantages we entered in single-family rental. We were one of the first enter single-family rental a 2012. We were one of the first to raise significant amounts of institutional Capital to invest in single-family rental organically and now in Bill to rent communities and where the first to put single family rental and multi-family rental together in a significant way and we believe this is going to generate operational efficiencies synergies and allow us to raise more and more third-party Capital. Let's move on to slide a wage

And now talk about operational highlights.

Beginning with her single-family rental Consolidated portfolio. This continues to be a story of strong organic growth and operating performance. We increased our managed home account by about thirty six hundred homes a year including 1162 homes down a dispositions in q1 and acquired a a large portfolio in Nashville 708 homes from Invitation Homes. This is a high-quality portfolio that allows us to gain scale and a high growing Market in Nashville, and it would stabilize it about 96% So that's one of the reasons that our occupancy Edge. Year-over-year wage 140 basis points to 93.8% at the close of 2019 rent growth is moderated, but still continues to be very strong at 5.1% the higher larger black portfolio up 23% year-over-year strong rent growth and relatively stable occupancy as that our overall revenues and the portfolio to grow almost 27% expenses are up against George.

The larger lease portfolio, but not as much.

As we continue to contain expenses and overhead and not resulted in our noi margin increasing fifty basis points from 64. 5% to 65% for the quarter as we work our way down at a couple of things to point out overhead is growing. It's up 14% year-over-year, but obviously not as much as the overall portfolio. If you look at overhead for the full year. It's roughly twenty million and a table with what it was in 2018. And this goes to show how we continue to get economies of scale by in this business and that we're really geared up to be much much larger non-recurring items. Really first, two one one time items transaction costs as a result of refinancing our warehouse credit facility in Q4 and the new Morgan Stanley term loans, and and now if and now back to our proportional share of ffo, we deduct a non-controlling interest remember at this time last year our single-family rental joint venture only had two thousand homes in it today. We're at 5600 Holmes. Yep.

for generating more and more income and cats

Hello, and that needs to get deducted as limited partner interest to arrive at our core ffo of 23 million and up 42% year-over-year. Let's move on to slide 9 and talk about our seems to report phone and single-family rental which provides a more pure comparison year-over-year. We continue to have an occupancy bias particularly in the slow releasing months. Thank you for that lock. You can suck. The occupancy is normally three basis points year-over-year rent growth strong. This is industry-leading metric at 5.3% It has moderated 110 basis points year-over-year. The main reason for this is our decision to self-govern on renewals or renewals for last few quarters have been 4.7 or 4.8 per cent compared to 5.6% in Q4 2018. So that's the main reason for the lower-ranked road. Obviously, sequentially. This is a this is a seasonal business in Q4 is a slower quarter. And so the the new rank Road has obviously dropped from where it was in Q2 age.

To 3 and that's what we would have expected.

Overall, we moved down to revenues rental revenues up five-per-cent again, a higher rent and stable occupancy are ancillary feeding comes up 18% year-over-year and now represents about 4% of rental Revenue. We're doing a better job collecting on Administration fees pet these enforcing renter's insurance. We talked about in our investor day how this area will continue to grow as a percentage of revenues. We as we offer more services to our residents including rolling out Smart Home Technology as we move down to expenses on property taxes continue to be the one key item that is negating our margin expansion on these were up 6.7% year-over-year. This is slightly lower than where we guided at 7 to 8 % It's still continues to be ahead with the repairs and maintenance the story continues to be one of internalization and the gains we we get from doing more r&m or sells our turnover is also was also lower year-over-year 25 points. Yep.

Send it back for the entire portfolio.

Our turnover was 25.7% for the year, which is a record low for us and points really to our middle-market investment strategy are Billy the screen residents better and really took a focus on customer service other expenses are up 8% year-over-year some of this relates to hire HOA fees. We've also reclassified the renter's insurance used to show this as a net number now we show is a gross number in both revenues and expenses and that explains some of the increased the 8% increase year-over-year overall revenues up on the same store portfolio, 5.3% operating expenses up 3% for seem home noi growth of six and half percent. That's an industry-leading metric up to $39 for the quarter and our margin is expanded seventy-five thousand points from 64.7 to 65 and a half percent. This is a record for us in the fourth quarter. Let's move on to slide 10 and talk about our us multi-family rental operation.

since since

Taking over the portfolio from Starlight in June our Focus again continues to be on occupancy growth. That's 160 basis points year-over-year. It is down slightly sequentially, obviously again, it's just a seasonal business and the winter months are a little slower but overall occupancy up a hundred sixty basis points are longer-term goal is to get occupancy up to 95% We were able to do this with strong religious growth of 4.6% that we sacrificed on new new move in rent in order to drive the occupancy in Q4 overall revenues up 2% This is also a storage Cost Containment property operating costs are down year-over-year. This speaks to Starlights efforts to renegotiate service contracts and Q2 valet trash cable. That's why operating costs have come in lower year-over-year on property taxes. We had some one-time settlements on prior assessments which led to lower property taxes property taxes in general are increasing but yep.

time settlements allowed us to

Record lower taxes year-over-year and reduce our operating expenses year-over-year by 1% that translated to analyze growth on the portfolio of 5% If you strip out the one-time property tax settlement wage closer to 4% and our margin increased from 57.8% to 59% again, very strong performance for the quarter. Let's move on. Let's move on to slide eleven talk about her Canadian multi-family development portfolio. We have 3600 units in the portfolio today under various stages of lease up or development. This is an incredibly high-quality portfolio off. All the properties are located in downtown Toronto or transit-oriented or walkable either the Midtown where the downtown core in a market with with virtually No Vacancy about 1% vacancy in their life and about 5% rent growth in 2019. I'm starting with a cell be at the end of the year. We were to 86% lease up today were above 90% in place rents are $3 off.

Eighty cents this property.

Recorded the fastest lease up of the Year, according to Urban Nation and also earned a number of accolades including the rental development of the Year by the FRP. Oh, so that's something we're really proud of June, as our first rental property in Toronto in terms of products that are under construction. The Taylor King and Spadina is now above grade The Ivy that's that's the glass to project that's been renamed that young and glad we're doing site preparation and demolition the first phase of the West on lands which we call block eight is roughly eight hundred units. That's also we've also commenced Underground Construction there as well. We moved down the page to our last two projects. The chicken Cordon is going to be a mixed ten or building of half condo units half rental. We intend to launch the condo sale month of September and start construction at relatively the same time and the James in Scribner Square Rosedale Summerhill has received its alpat approval and our and our plan right now is to commence demolition of that wage.

the existing project there in Maine

Doing on construction. So if you take it in totality as we look towards the end of this year, we will have five projects and two thousand units under construction. Let's move on a slide 12,000. We look at the at the cost of that construction on completion. I mean, you can see that that's roughly 1.5 billion. I'll just remind everybody that all the figures in this presentation are in US Dollars given are functional currency is USD. So the cost of this portfolio in US dollars is 1.5 billion. We're about 23% complete to date and the cost of complete is 1.1 billion months or 7% to go the the cost of data are essentially Equity the equities and the ground and we'll use construction financing to complete the portfolio on completion. We expect that to generate a conservative amount of Anna live about eighty 1 million dollars. And again when I say conservative we're assuming a 5.25% development yield to calculate that 65% leverage and three and a half percent interest.

I can compare.

So the Selbys an example salvi has has a 6% development yield and we locked in 10-year financing at 2.4% So we think those numbers are relatively conservative. But even at eighty 1 million in our 30% share at 12 a.m. Four million, you can see how much value creation that potentially can create for our shareholders are I press nav of this business is fifty cents. If we're able to receive achieve a good half of 4% valuation on completion that translates into nav growth of three to four times over 3 years. So this is a relatively small part of our business, but you can see can generate significant upside and navigation for us going forward. Let's move to slide thirteen and talk about our private funds and advisory business. We talked about in Q2 that our goal was to raise one and a half billion dollars of incremental third-party Equity with the announcement of the Azores joint-venture. We got about 30% of the way there and that largely explains the increase year-over-year from one point seven billion a month.

3% to 2.4 billion of 30

Capital in terms of contractual fees. Those are up 13% year-over-year. The big story here is Johnson much higher Johnson development fees and higher performance fees Johnson had a record years in 2019 in terms of home sales Lots sales for the quarter were up 75% year-over-year. This is partly explained by weather delays in Q4 of 2018, which led to back-ended lock closings in 2019, but it also points to the much stronger housing market with dramatically lower mortgage rates home by new home buying as being very strong and that spurred object the builders to need to replenish their existing inventory. I would also add that home sales in Q4 home sales and Johnson's nineteen active communities were up 20% year-over-year we've seen that Trend continue into key one with home sales also up another 20% So this business right now is looking very strong as we look at the components of contractual wage.

For sale housing is down.

This is to be expected as we continue to to distribute cash. And in many of these investment vehicles are Harvest mode investment balance is declining and that obviously translates into lower contractual fees, but wage for those vehicles that are in the money. We're seeing higher performance fees on our performances for the quarter or two point six million in about 7 and 1/2 million for the for the year. So that trans those were the main reasons higher Johnson fees and performance fees that led to the beat on our contractual fees. Let's move on to slide Fourteen and really talk about our our our key five priorities, which we introduced in Q2 2019. Our first priority is to continue tricon's transformation into a rental housing company providing our shareholders with stable predictable income to measure performance. We adopted a papaya shares a key metric and set a target of a 10% compounded annual growth rate through 2022. We tend to achieve this by simply completing what we've started off.

fully investing our single-family rental joint

Center building at our Canadian multifamily projects growing single family and a wide by 4 to 4 to 5 % and multi-family and Allied by 3% per annum through 22. Our special priority is to raise third-party capital and all our business verticals. We see raising third-party Capital as a pathway to enhance scale improve our operational efficiency and drive or return on Equity. Our third priority is to continue growing our book value per share by reinvesting the majority of free cash flows into creative growth opportunities and Rental housing. Our fourth priority is to reduce leverage. Our goal is to pursue look through leveraging at the assets of fifty-two 55% of the next three years, excluding the convertible debentures. And finally we want to improve and simplify our financial reporting to make our performance comparable to other real estate companies. We believe the move to consolidate accounting will be a big step towards the school. We will also be revamping our md&a and key one to include more disclosure rent such items as cash flow segment and Thursday.

an overhead allocation

Okay, let's talk. Let's move over to slide fifteen and go through our performance dashboard. Let's see how we're power doing. So starting with f o 4 share as with Sam mentioned. We're up 35% year-over-year very strong growth admittedly though off of a low base our prior your target out to twenty-two is 5255 sense given that we beat our 2019 guidance by two pennies wage also revised R22 Target top two pennies to $0.52 to $0.57. And if you take the top end of the guidance that represents more than 10% annual compounding growth 2022 third-party A. No tangible progress here in the quarter, but we are working on two major fundraisers and multi-family want to further our Canadian built a strategy and also the syndication of our us multi-family business and we're hoping for closings of those major major vehicles in Q3.

Our book value for sure.

Just going by 18% per annum since entering single-family rental in 2012. Is this something that we're going to continue to track as a reminder? Our book value per share does not take into account or private funds in business or anything embedded growth and our underlying investments in terms of Leverage. We've stated about sixty to 61% look through leverage, but the major Catalyst here is going to be over us multi-family portfolio that will help us get closer to fifty five to fifty to fifty 5% So that is tied to the third-party AUM third-party A. Um, so we're still working on that and again a subsequent to quarter-end. We we were able to Syndicate a 50% interest in Trinity Falls and that capital is being used to repay that and finally in terms of improving reporting. We check the box in Q3 when we formally adopted ffo per share. We launched resp plan this year. We've checked that box and we will be checking the financial disclosure practices. Yep.

simplification on

Next quarter when we formally adopt consolidate accounting and we update our md&a and in many cases of reporting.

I'd like to close our Q4 earnings presentation with a summary of our key priorities unveiled in r e s t road map on page sixteen. Although we only recently bought a house or ESP framework. ESP is always guided our investment and asset management practices over the past three one years when we develop this framework last year. It wasn't just a simple checking the boxes exercise. We spent several months thinking through what really matters to us and our stakeholders and we summarize our findings to five key priorities that we will focus on in the next three years. Our first priority is our people. I tried calling we believe that our people our most important asset we make it our top priority to foster a culture of diversity inclusiveness inclusiveness and service so that our team and turn can enrich lives were at stake holders are second priorities are residents. We believe a person's home is where they experience their most important life events and all our rental offerings. We focus on quality housing and excellent customer service.

To reach our residents lives in the communities. They live in our third priorities are Innovation. We view ourselves as a tech enabled rental housing company managing a disparate Foley of single-family rental homes. Only be possible.

And with the use of technology, and now we intend to apply the Innovations from this business to multi-family rental and harness our culture of innovation to improve the resident experience and operations are Ford priorities off impact. We've used our mission to consume fewer resources and reduce our carbon footprint. We're dedicated to building developments to lead standards and protecting wildlife and biodiversity by creating Parks green spaces and natural ecosystems where appropriate and our last priorities are governance and trichome. We believe in conducting ourselves with Integrity trust and transparency and everything. We do we're also committed to fostering culture of inclusion and not within our board management team and employees. We believe this is gyro. Will guide us in achieving measurable results over the next three years and provide a framework for robust data collection reporting tricon's ongoing progress of performance. The full roadmap is available on our website and on Cedar and I would encourage you to read it with that. I will pass the call back to Suzanne to take questions and log

Joined by other members of our senior management team including John Allen swag any, DeAndre Joyner and Kevin Baldridge?

Our first question comes a lot of Jonathan culture of t Security please go ahead to your line is open. Thanks. Good morning, Erin. Jahn First Choice question just on a single family rental. You guys had a big a big portfolio acquisition National and do you expect that to impact the pace of Acquisitions at Los beginning part of twenty-twenty own little bit. I mean, we've got it that we're you know, and we've been very specific about this that on average we're trying to buy 800 homes per quarter wage is what we've agreed to with our joint venture partners that will Evan flow a little bit based on the season seasonality and and opportunities and and obviously this opportunity with imitation homes came up with thank you for which exceeded our Target will will essentially just rebalance this year. So it's probably going to mean that our acquisition pays will be below $800 in q1 dead.

And then we'll probably go back to 800 in Q2. Okay, any portfolios you're looking at now?

We're always looking at you know, small portfolios, you know, nothing. There's there's no major portfolios that are being marketed right now, but we're always looking at smaller portfolios could be, you know fifty or a couple of hundred homes. We don't depend on it. The the whole acquisition program is really built around organic Acquisitions onesie twosies through the MLS and through I buyers and so if I if any portfolios come out, we really view it as gravy.

Thank you, and just a reminder in order to ask a question. Simply, press star. Then the number one on your telephone keypad.

Okay, and then just secondly.

At ffo going forward the tlr Canada. It's some pretty good fair value gains in there that that you guys account in the ffo. What's what's a good run rate or best way to model that going going forward into twenty-twenty? Yeah. So, you know in terms of ffo from developments, you know, there's there's probably different ways to think about it. Uh, if you wanted to look at it for example is a return on an average invested Capital the way I think about it. Is it it, you know, it could be 5% Let's say on the for sale housing peace and maybe 10% on the Canadian multi-family development piece. If you work through that map, you'll probably get to a run-rate. It's very similar to 2019 John. So I I think that phone numbers, you know, maybe just shy of twenty million for the full year, but that that's probably where where we would guide you.

Okay. Thanks. I'll I'll turn it back. Thank you. Thank you. And our next question comes line is Steven cloud of Capital Market is open wage. Thank you morning guys. Good morning Steve morning. I just just wanted to follow up quickly on the portfolio was sort of acquisition pace for for the business. You know, I'm still seeing, you know, very strong demand or opportunities on the MLS side of things like like just thinking about how things will evolve over the next couple of years. Do you think you'll eventually have to have more of a Reliance on perfect positions when you think about growing up business know I mean if if anything in a sense where Capital constrained by the by the joint venture and the guidelines of that joint venture which has been very productive if we if we had if we could deploy more Capital if we could expand our bibox. We absolutely could buy more homes on the MLS and through I buyers. So this is very much being governor.

ourselves and and and we really view it as a long long term opportunity and if you

Think about it this way, you know roughly 5 and 1/2 is six million homes are being traded on the secondary Market through the MLS every year in the US and 40% Let's say of those are in the Sun Belt. We're not trying to get you know, three thousand right now $3,200, you know with more Capital over time. We could easily expand our bibox and go to $5,000. But for today, we're focusing on eight hundred thousand then, you know down the road when we think about creating a new joint-venture. Well, we'll determine whether it makes sense to grow faster.

Okay, that's that's great. And then just coming back to the Outlook any any change I assume the answer is no but any change to the f fol look on the multifamily side in the US money, you know, I mean our long-term the long term goals that we're setting over three years though the the parameters to to achieve that growth at 10% per annum growth haven't changed. I mean, we we opt our our Target our guidance, you know, essentially because the 2019 numbers moved up and we've used that as a base to move forward. But otherwise, the underlying growth assumptions are the same we continue to believe that over time a single family rental and generate 45% same-store growth and our multifamily asked about the multi-family that we over time. We think it'll be that 3% right there is there will be you know some pressure I think in the short term as I talked about in my prepared remarks regarding, you know, property taxes and insurance. Um, but yep.

so, um over a longer period of time

We feel good about three percent growth from multi-family. Okay, that's that's great. And then maybe just finally you syndicated. I guess 50% of Trinity Falls. How do you expect those syndication to roll out over the future?

Well, we're we've been pretty clear that we want to emphasize our exposure to for sale housing on the balance sheet and we're going to continue to do that. So we feel great about about syndicating a 50% interest in 20 Falls. We're now looking um, we have another master planned community on our on our balance sheet called Bryson. We're now talking to the joint venture about that opportunity as well. I'm so hopeful we're hopeful that we can Syndicate that and then we've got some other larger assets which may be owned and funds which were also really we're we're looking to expedite those business plans wage instead of letting them kind of build out in the or in the in the normal course of operations. We're evaluating some cases whether we choose just bulk sell those those portfolios or Investments wage. So you should expect us to continue to look for asset sales to reduce our exposure to for sale housing and to generate cash for the for delivery J.

Okay, that's that's great.

Thank you. And our next question comes in the line of Matt Logan of RBC Capital markets. And your line is open. Thank you and good morning. Good morning Matt as we think about the internalization of the Canadian property management and asset management. You give us a couple of examples on things that you plan to do differently or perhaps alternatively maybe some opportunities for potential Revenue growth or expense savings.

I'm going to turn that over to John and then and then perhaps Kevin Mitchell maybe you could start with that. Yeah, sure and and that we appreciate the the question and you know, really is Gary talk to it as we as we transition to a rental housing company. One of the core competence core competencies that we built over time especially in our Orange County. Operating Hub is proptech right and some of the ways we've been able to leverage technology in our single-family rental business and you know a handful of examples that will be able to roll out in multi-family over time is self showing so single-family rental. We've been very successful with having residents, you know show up the homes and allows us to access those homes after providing us, you know, their drivers license and a credit card. We think there are you know, select opportunities in multifamily to leverage that as well. Maybe they show up at a leasing Center but then can tour them through the properties after they provided us some information. So we're very excited about about that opportunity. We've also developed great 362 or technology. So someone can you know, using their smartphone in the comfort of their own home tour one of birth.

Homes, and we think that can be rolled out across multi multi family to enhance the online experience but also to allow us to inventory some of the components of each individual unit and our multifamily portfolio. We've always build a fantastic operating Hub, you know call center accounting team in Orange County that we think we can leverage across multi-family. So

We're calls can come into a centralized state-of-the-art call center be handled their purses at the property similarly where you know, anything accounting-related can come into our large and very sophisticated accounting team versus being handled locally. So those are a handful of other ideas. We also you know, we've also built up, you know, great buying program and procurement Department through our single-family rental business that we think can be leveraged across multi-family to make sure that we're really buying all components whether it's appliances, uh, you know, washer dryers flooring at the best possible price. So, you know, I think a couple of those will hit us on the revenue side or we can drive incremental Revenue get a couple of those kind of summit, you know, expense savings signs and overall. We think there's a number of things none of these will be dramatic in and of themselves, but when you add them all together, we think there's a number of areas that we're going to be able to make incremental, you know and drive incremental growth.

Appreciate the colors. The only thing I would add is, you know operated a large portfolio apartment communities in my past and Thursday, we created the call center. One of the things benefits we found just to add a little color to it is when we have a call center and all the calls whether they're maintenance calls vendor calls off even leasing College you take those off of the office. It really brings a much calmer Pace, you know in the in the rental community and in a leasing office. So the the people that are there can really focus on the customer that's in front of them or the residents when they come in as opposed. They're trying to negotiate phones that are ringing and somebody in front of them and that that more relaxed pace off really helps and and how we you know correspond with our residence. And so it makes it pretty big difference. It's hard to explain kind of in the numbers and then lastly what we've already done is we've been working with our asset managers.

my

As our resident underwriting platform, which will help us with, you know, delinquencies and evictions going forward.

Thank you. I appreciate the call around that and maybe just changing gears a tad in terms of the demographic composition of your tenant base wage. You tell us the average age of the tenant in your portfolio and maybe what impact you think host information might have over the next two or three years.

Sure. So the average head of household in our single-family rental business is 38 or multi-family business is is younger than that. This is increasingly becoming um, a Democrat Millennial demographic. It's it's it's not that our residents and so that that's just going to continue and so, you know Matt can I speak to you know household formation specifically over the next few years and I we don't have a crystal ball. I mean us household formations been growing in a million plus per year. It's it's hard to know that, you know have that breaks down between ownership and Renner ship but what we would say is that we are focused on on really essential middle-market housing. This is affordable housing and jobs because of a number of factors including the you know, the ballooning of of of student debt tighter underwriting on the mortgage side compared to pre financial crisis. There's a dead

A lot of people, you know with household formation.

And then are really shut out for different reasons of the new housing or the existing housing market and need any shelter need a need a quality place to live and so we're uniquely positioned I think to take advantage of that and I and I think the other thing is is our focus on the Sunbelt in particular. We're going to continue to see lots of growth you can think about it this way 40% of the US population lives in the Sunbelt, but they're going sixty to seventy percent of the growth. And so a lot of that house formation it household formation is going to be focused on the Sunbelt because look Americans are are are focused on moving to places with better weather wage taxes newer infrastructure where there's more jobs and we we believe although we don't have a crystal ball. We believe that those son. Markets are going to continue to grow faster than the national average and will continue to have the wit behind your back.

Appreciate that and maybe one last question for me. Maybe you could just outline your top three priorities for 2020.

Yeah, so the top three very similar to what we talked about on our prepared remarks is the first one is driving growth. We'd like to see that grow by 10% per month. We've talked about that over three years. We haven't given any kind of specific or hard guidance for giving year. It might have been flow, you know from year to year. But we we would like to see 10% growth. Let's say 4:20. We are our second key priority would be raising a third-party capital in a significant amount of third-party Capital. We talked about two major fundraises that are in the war or multi-family getting further our Canadian multi-family build a core program also to Syndicate our us multi-family portfolio. We love to have these, you know down by q38 takes time. It's not not like the public markets, but we'd love to have those closed by Q3 and that really dovetails I think to the third priority which is deleveraging and if we can raise a significant

amount of

Money in in the syndication of our us multi-family portfolio. We can apply those proceeds to deliver and get closer to our longer-term Target of fifty to fifty 5% debt-to-assets. So I hope that helps wage appreciate the only that's all for me. I'll turn the call back. Thank you.

And thank you very much. And our next question comes to mind is Mario Sonic of Scotiabank. Your line is open. Hi, good morning. Good morning may be starting off with gear York guidance for the same home in Hawaii growth within th of four to five percent given your kind of self-regulating on on lease renewals and you know some of the peers or talking about expenses kind of inching up how much of that 45% is predicated on continued margin expansion going forward.

It's you know, it's not it's really not. I mean, we're not guiding, you know, we're being careful with this but we're not guiding the higher margins. We're we're a 65% I mean think about how far we've gone. We were you know, it literally 53% you know, 5 year 325 years ago was Silver Bay we were at 57% and now we're up to sixty five sixty five and half for the quarter. We're not guiding beyond that Mario because I think that you know, we will see we we we will see expenses growth and we can't we don't we again we don't have a crystal ball, but I will say that, you know, one of the reasons rental I grow seems to rent analyze growth has been so strong and it's it's moderated a little bit long is because of the internalization of of R and M. And and for us that in some cases has going to catch up compared to our our larger peers, and so now that that's largely in place. We're not going to be

Able to really drive, you know.

Actions in in r&m that that would probably more likely increase with inflation. I think we'll continue to see incremental process improvements and we'll get the benefit of economies of scale and a better Prestige program, but the market shouldn't expect us to have lower RNN expense going forward. So I think the the 45% is largely predicated on both music expenses growing. Okay, and then you know, you mentioned that your tent turnover was an all-time low. I just shy of 26% is is that a is that a flag structural go for your portfolio or can I go lower? I mean, I'm going to turn that over to cabin like to get his views on that. Yeah, I think much much like Gary just talked about on off an improvement or expansion. I think that where we are I can see it staying in the 25% 26 percent. We you know, we drove a lot of that just by optimizing wage.

the quality of our portfolio

We integrated poor logic. We got very purposeful about our Collections and and all of that, you know, and how we how we working with residents wage. I think really drove the retention rates and we've got good, you know quality people that are staying longer with us. Well, we're we're buying homes are in places where we have families are getting an integrated into the schools and they're staying longer with us. So I think that you know in our culture, you know of you know, really Pure service and enriching lives or Gary talked about at the beginning off. All of that is taken hold and is is really brought the improvements that we've seen I two years ago. I didn't know that we would get to 25.7% or below 96% I think this is I want to be careful. Could we get lower? Yeah, but I I wouldn't message it at this point. I think we're close to to what we're going to we're going off.

Okay.

And and just just the building them are I mean to get down to 25% I mean that that means that on average residents are staying in our home for four years is you know, right in an environment that's not rent control of that. That's very very good. And and so I I would agree with that. I don't think we're going to see anything below 25% but you never know. Okay, in terms of the wage reason initiatives for 2020, you mentioned a couple one in the US and one Canada the the expansion in Canada on the build build to rent would that would bring in a raise a plan to bring in through pretty capital and to further syndicator 30% interest in existing projects or is the plan to substantially increase the number of projects that you're looking at going forward. Yeah. It's the latter. It's the latter. We're we're you know an existing portfolio. We we own 30% and and we're not looking to Syndicate that any further if anything we want to give ourselves the opportunity.

in the future if any of our

Existing Partners, whether their financial strategic contacts that we can we can buy their interest so we can increase our share in those properties the real the main intent and bringing in third-party Capital into development is obviously as you know, what to drag on our balance sheet with no real cash earnings until until stabilisation or completion. So we're going to continue to use third-party Capital to grow our development business. It just makes a lot of sense we can essentially a balance sheet. And so this new capital is really just a further it's just to grow the existing portfolio. If in fact we we'd love to double the existing portfolio. We're in about thirty six hundred units Slash new sleeve a capital could you know over time do that? And we'd also probably look to to co-invest roughly 30% And what would what would the primary governor in terms of the planned total amount of funds raised? Is it under the available opportunities? Is it the amount of capital that the investors are looking to to put Into the Dead?

in Canada

Yeah, I know. I mean, I can't get into the specifics but the the group that we're working with is extremely large. So it's it's not the capital. We I think the governor will ultimately be the opportunities which you know, as you know in Toronto our our topic on by you have you have to be creative and also I I think within development you never want to get too far over your skis. You've got a you've got a long road and it natural, you know, and and and you know a speed that it makes sense. And so even if all the opportunities were there, let's say they're not today we we we would never want to go too fast. So we we've currently been doing you know, two or three, you know projects per year and that feels like a comfortable Pace. Okay, and then just on on the Starlight portfolio presumably the partner that you could just indicate an interest in is is someone that you plan to grow with over time in terms of future Capital deployment or acquisition opportunities. Is that kind of free Pub?

Seems store number that you're thinking about for the existing Starlight portfolio of a good number to use for 4.

You put on quiring within that JV going forward. Yes. I think that's fair and and and you're right. I think that in in whoever we're going to you know, took like The Syndicate this portfolio to and we we you know, we're we're we seen a lot of investor we've seen some significant enthusiasm for you know, not just not only the the the asset class but certainly this specific Port Folio. We are taking a long-term view with them or not. Just looking to sindicate we're also saying look, this is a partnership. You know, how can we grow together in the future? And how can we acquire, you know more wage facets? So so the the, you know, the the the capital raising exercise here is is syndication plus looking for growth capital.

Got it. And with the plan kind of Q3 closing or announcement. Is that is that simply the syndication of the Starlight portfolio long? Do you think you'd be in a position to kind of highlight what that growth Capital may look like in terms of magnitude. I think we would do both at the same time.

Okay, my last question just on the the sale attorney falls into into the JV from an ethical standpoint the gear you mentioned that we should think about, you know Land Development in terms of 5% on invested Capital. Would that be similar to Trinity Falls in terms of what the f f o you know the kind of the lost ffo on the sale versus kind of the cost of debt that you'd be using the process to pay down if you kind of F1, I you know that I I think that's a question mark and we take off line. We I I'd have to, we have to work through that I think to be more specific but we are I mean in in our kind of go forward. Well, let me let me put it to you this way. I think in our goal Ford place of growing asset oil pressure by 10% per annum we are taking into account two things one is the reduction of the for sale housing business wage.

As we continue just through.

Not ordinary course, and also through more accelerated dispositions like Trinity Falls, and we're also assuming, you know investment income of roughly 5% off. So, I don't know if that I don't know if that answers your question, but we're not we're not getting more. We're not using an aggressive number there to drive the longer-term growth of the overall that that works out. Great. Thank you.

Thank you. And our next question comes Johanna Rodriguez of Raymond. James is open. Hi, everyone. Most of my questions have been answered just a few modeling ones. What's the expectation for for sale cash flow in twenty-twenty. I think it'll be higher than 2019. How about that? We we generate 52 million and 2019 we have now, you know syndicated, you know, uh, you know Trinity 50% interest in trading Falls. That's that's generated, you know again a roughly fifty million of cash right there. So we're definitely going to be head of of 2019. I can't give you specific number, but it's going to be fifty million plus.

Okay.

And then do you have a do you have a sense as to what the Selby rents would be on average on a sweet basis and maybe with the expectation 8800. Yeah, I would I would I would I would say about $2,800 per person sweet and and the expectation if for 20 28 or maybe just the margin there. Yeah. Yeah. So the so the the average what the average rents about 380 and that that is moving 380 per foot per Suite that's coming out that translates to probably about $2,800 per sweet, um, you know off the top of my head and you know, we're looking at renewal. We're probably looking at renewal growth. There's been very little uh, you know, very few renewals. I think there's only been a couple, you know, people love the building they're staying put um, so we've been able to capture

You know the back door.

Essentially closed as we continue to drive the complete the lease up but I I would I would assume that a renewals were probably be around 3% again. We're not rent controlled under these new building and and in the margin and and then in the margin we're you know, we're currently we're currently at about 65% But you know, let's say 90% lease. So I think as we get the full stabilization of around what ninety seven ninety-seven percent will probably get to a margin of that 70% Is that helped? Yes, that's helpful. And then lathers question what what percentage of the Starlight portfolio are you hoping? It's indicate.

Yeah. That one's easier 50% Okay. Thanks. I'll turn back.

And just reminder it is star one on your telephone keypad. If you'd like to ask a question. Our next question comes up your line is open. Oh, hi team. Good morning. Hi guys, just to go back to the ffo discussion and the fair value gains from the development projects. You said to expect something around twenty million dollars in games on an annual basis just to be clear. Is that so when you talk about 10% growth for ffo per share is that the assumption that you guys they use in in that drug metric twenty million of fair value gains? Yes, it is. Okay, and then just relating to that with the potential with the change in the office closures. I'm going forward and there was commentary around there could be some movement around those fair value numbers. Is that still like is that are you fairly confident that that's the number to go by post the Dead?

the reporting changes

Or could there be some changes to that 20 million? No, I don't think there will not see any kind of meaningful changes on the p&l or ffo. So yeah that that that changed the adoption Consolidated wage will not impact that so that that that remains true whether we're under investment entity or Consolidated accounting appreciate appreciate that clarification there and just Switching gears to the page single-family portfolio. So after the portfolio acquisition and Nashville, and and the way things have been turning in the existing port phone know, where do you look in terms of geographic exposure? I mean, I know the cities like Phoenix Atlanta been performing really well, so can we expect to see more deployment and areas you already located in or would it be potential new areas? And I'm kind of wary thing the best demographic would play out. Well, I mean, yep.

We've seen the short-term. Let's say, you know over the next six to twelve months. We're going to continue to largely.

Focus on on taxes and the southeast that's where you know this great underlying growth economic fundamentals and we're continue to Able we're continue to be able in our JV by box to buy it, you know high five, you know, six percent cap rates. So just I would just expect us to continue to do that. But I think as we look further ahead May twenty one particularly, we think about creating a new joint venture or maybe creating, you know, various different products or buy boxes. There's going there is certainly an opportunity available there to log into other markets or to grow in other markets where we initially where we currently have a presence life Venus or Vegas or even California. Those are markets where there's great buying opportunities today.