Q3 2020 Tricon Residential Inc Earnings Call

Now with the syndication of of our us multi-family portfolio coming up We Believe will be able to reduce that by another five hundred basis points and get to the lower end of our long-term Target on Leverage off. Let's move over to slide three and talk about our summary results core ffo per diluted share of $0.11 or $0.15 in Canadian dollars. That's up 38% off over here. This is a very clean f a phone number. We have a full quarter inclusion from us multi-family from 2019. We also have no inclusion of Canadian multi-family fair value in either. And the way I like to think about the ffo is itself about seven million dollars all of that seven million dollars comes from single-family rental contribution and everywhere else. We've been able to contain expenses with slightly higher wage is not lead led to the 38% year-over-year growth earnings per diluted share or 23 cents up 53% year-over-year. This is on the back of strong home price. Yep.

Percent quarter-over-quarter, if you did. Capital expenditures is 1.3% or 5.2% annualized we're going through a period of strong to your organization Trends. We've historically low mortgage rates and we're likely to see many quarters or periods now too strong or what I would call Super home price appreciation which obviously bodes really well for earnings per diluted share on single family home recorded really strong performance with Anna why of 50.2 million that's up 14% year-over-year the way I like to think about not as 6% comes from the same home portfolio about five percent comes from Acquisitions growing our portfolio and the other four percent comes from the non same home portfolio where the joint venture homes are starting to contribute and add to noi all off an outstanding order for single-family rental the businesses firing on all cylinders. Noi growth seems same home. And I know I grow up 6.3% That's an industry-leading metric and a number of our metrics our records birth.

Including our margin at 66.2% occupancy 97.5% and releasing spreads multi-family rental in the u.s. Is the one area where we're seeing some weakness am Noy is down about 12% year-over-year. I like to think of this as our revenues or down 5% Our ffo was also down about 5% and analyze for the for the first three quarters is also down about five or six percent and we're we're we're seeing weaknesses that we have more exposure to Houston and Orlando which have been impacted by the pandemic that's about 30% of our portfolio. We've also accounted for Life numbers quite conservatively bad debt is we take Provisions for bad. After 30 days also concessions or expense not amortized and also we have not yet internalized the portfolio home and we're confident as we move into Q4 that these numbers are starting to get better. We think these are trough fundamentals. The worst is behind us and particularly as we internalize the portfolio next year. We see the the the metrics your particular job.

The economy holds will get better and better on the residential development side. We quietly distributed another six million dollars from our for sale housing funds and we've distributed about 65,000 for the full year. So we're using this cash obviously to do lever and grow a rental housing business. Let's move on a slide for we talked in the past about how friendly business environments and better weather. Well now that may add the pandemic to that.

They're also moving in search of a more a healthy environment and they and they perceive that that Safety and Security that in in suburbs or in Suburbia and in single-family rental homes, and when we pay for residents as to why or new residence as to why they did work from home more and more people are comfortable. We're working from home and if workers Can it can work anywhere and employers are more flexible. Obviously, there's opportunity to work in the Sun.

. Where it's more affordable and the weather's better and that reinforces these migration Trends if we flip over the next page Slide Five you can see how strong the demand is for single family home and how resilient the business is in the midst of a pandemic especially against the backdrop of relatively high unemployment unemployment in the US. This is at the end of September was about eight percent wage is double the pre-code level and our markets. It's about 7% but then take a look on the right-hand side of the releasing spreads through those are all double digits are largely double digits on average. 12.6% Las Vegas is an intriguing Market. This is a market that's been ravaged in the pandemic the tourism Industries. It's been very very top unemployment rates Forty-Eight percent, but the releasing spreads are roughly the same and I I we would say that these leasing spreads largely represent loss to lease in our portfolio. That's really now being driven by these the urbanization friends.

1.7

The other thing I would point out here is that if you look at our new movies over the last twelve months, the average household income is pushing $85,000. So in some ways we are being insulated because you can see that the unemployment is largely concentrated in lower-income bants. Let's move to slide six and talk about the big news in the corridor, which was the three hundred million dollar preferred Equity financing. That was led by Blackstone and wanted to give you a little bit of color on this. We were not seeking out this type of transaction. We've been approached several times by different investors or Brokers over the last year or two in a private placement. And the latest Overture came came this summer and we decided to run a formal process where we thought it would be great. If we could raise Capital to deliver improve our liquidity position took advantage of great fundamentals, but also find validation Capital support our story and we ran a process it was short and extremely competitive and Blackstone emerges the natural winter dead.

And is the best bet not Blackstone has the most experience in our business and Rental housing both single-family rental and US multi-family that have absolute conviction in what we're doing in terms of our rental a strategy on both sides of the borders lowest cost of capital and are investing in their open-ended be refund which creates better alignment for us. And so we're really excited about this partnership. We should be seeing a number of ways to blackstone's going to be a great partner for us and we're delighted to add Franco into our board.

Let's move on to slide seven and talk about an ESG update and our commitment to social causes and I would say that ESG for us is not a check the box item off. Our commitment to diversity is not one and done. This is a continuous program. It's a living breathing program that we will continually improve and refine and learn from and in this quarter wage hosted Founders Day. And for the first time virtually we had about seven hundred employees participate and we used this opportunity to talk about our commitment and our approach to diversity inclusion and quality check also had a number of different organizations join us where we partner to help combat anti-black systemic racism or to help other disadvantaged groups. We had West Hall's or keynote speaker West home. I started the Block North initiative. We along with a number of companies have signed onto the Blackmore CEO pledge, which commits us to certain diversity thresholds. I think a very proud of our overall wage.

City within the company, but at the senior level there's more work to be done West West talk to our team about what it was like to come from Jamaica to Canada as a

Young and and poor boy and gave us a gave us a window into hidden racism. But I think most importantly it was a very inspiring talked and talked about what's possible through mentorship community. And then we heard from Isis Miller who's the founder of black girls code there are doing terrific work helping young black girls in the US learn about computer science preparing them for future careers in the stem fields, and we're delighted life partner with black girl black girls code and who knows maybe one day we can even recruit from their alumni and we also heard from Red Door shelter. This is a toronto-based emergency shelter that helps with women and children from domestic abuse and other families at risk and refugees and during this pandemic. We're seeing obviously the impact on mental health and obviously big increases and took abuse and suicide and overdoses. And so these type of organizations are extremely important and we're very very happy and and and to be partnering and partnering them to allow them to do all the great wage.

They're doing and lastly. We also heard from our Founders David and Jeff who talked talked to us about their own personal experience with racism coming from apartheid South Africa. And that was extremely impactful team. We're trying to show everyone both our team and our investors that we really do genuinely care about diversity and we're going to do everything we can to make it better and use our platform to do good. And so with that. I'm going to pass it on to a Sam to talk about her key financial priorities. Great. Thank you, Gary and good morning everyone. Let me start with slide eight and reiterate the five key priorities, which we introduced last month lease include growing our core ffo per share on a compounded annual rate of 10% over three years raising approximately 1 billion of third-party Capital over three years growing book value per share by faith in our free cash flows into a creative growth opportunities.

Reducing our leverage and also improving our reporting.

You can see these priorities on slide 9 in a graphical dashboard.

Let's start off with our three-year up a full Target another strong quarter for us continue to advance the process of syndication of our us multi-family portfolio with to investors and we believe

We are on track to Syndicate two-thirds of this portfolio by early next year.

Also, we're on track to complete the investment phase of rsfr joint venture in mid 2021.

We aim to raise an additional third-party capital for a second joint venture as we continue our group another one you'll notice is that key priority is reducing our leverage and our Target 11:50 to 55%

In Q3 with the proceeds from our preferred Equity raised we were able to lower Consolidated net debt process to 57% looking forward. We believe the proceeds from the syndication of the US multi-family portfolio can reduce this leverage by another 5% even though our near-term