Q4 2021 Tricon Residential Inc Earnings Call
Good morning, Ladies and gentlemen, my name is Andy and I'll be your conference operator today at this time I would like to welcome everyone to be Tri Con residential for fourth quarter and full year 2021 analyst conference call.
All lines have been placed on mute to prevent any background noise. After.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one once again.
I'd now like to hand, the conference over to your Speaker today, Oh Boy Tech Nowak managing director of capital markets. Thank you and please go ahead.
Thank you Abby good morning, everyone. Thank you for joining us.
To discuss <unk> results for the three and 12 months ended December 31, 2021, which were shared in the news release distributed yesterday I'd like to remind you that our remarks and answers to your questions may contain forward looking statements and information. This information is subject to risks and uncertainties that may cause actual events or results to differ materially.
For more information please refer to our most recent management discussion and analysis and annual information form.
Which are available on SEDAR, Edgar and our company website.
<unk> also include references to non <unk> financial measures, which are explained and reconciled in our MD&A.
I would also like to remind everyone that all figures are being quoted in U S dollars unless otherwise stated. Please note that this call is available by webcast on our website and a replay will be accessible there. Following the call. Lastly, please note that during this call we will be referring to a supplementary presentation that you can follow by joining our webcast or you can access directly to.
Our website.
You can find both the webcast registration in the presentation in the investors section of track on residential dotcom.
Under news and events with that I will turn the call over to Gary Berman, President and CEO After I got it. Thank.
Thank you your voice Ed and good morning, everyone by all accounts 2021 was a breakout year for <unk> residential as we harnessed powerful demand trends to deliver on our business plan and implement bold strategic initiatives. None of this would've been possible without our world class team and their commitment to excellence integrity and teamwork in serving our residents and communities.
Not be proud of the many talented people who make our company such a great place to work.
Let me share with you some of these achievements on slide two.
First we achieved our three year core <unk> per share target one year ahead of schedule with a compounded annual growth rate of 40% over two years compared to the 10% target. We initially set out we did this while reducing our balance sheet leverage by nearly half over the course of two years and during a pandemic and related recession. We also achieved records in <unk>.
Home turnover occupancy rent growth and NOI margin and our single family rental or <unk> business. Our growth plan was supported by over $2 billion of New third party equity capital commitments, making 2021 of the most prolific your fund raising in <unk> history.
From there we completed one of the largest U S real estate Ipos and Canadian follow on offerings of history, raising $570 million of gross proceeds all of this activity culminated in a monster year for our stock with Tc and delivering a 72% total return to common shareholders. Even more impressive is our history of delivering shareholder value over the long term with a 10 year.
Compounded annual return of 20%.
Finally above all else we did this while staying true to who we are at the core of people first company, we prioritize the well being of a residence by continuing to self govern on renewal rent increases and by launching Tracon vantage our market leading program to help our residents achieve their financial goals and facilitate access to homeownership.
Now, let's turn to slide three for a summary of our Q4 2021 results.
Our net income for continuing operations was 127 million, that's up 67% year over year and earnings per diluted share was <unk> 46.
Up 28% year over year.
Our core <unk> increased by 10%, while core <unk> per share was <unk> 15, or 12% lower than the prior year, a big driver of the variance was our deleveraging process, which resulted in diluted share count that's 24% higher than last year last.
Last year's number also benefited from a $7 million tax recovery and without this item <unk> per share would have been up seven 5%, even with the higher share count.
On a full year basis, our core <unk> per share and <unk> per share were up 12% and 18% respectively. In 2021 again, notwithstanding significant deleveraging over the course of the year.
We remain hyper focused on growth acquiring over 2000 single family rental homes and was typically a softer quarter home sales.
<unk> proportionate share of total NOI increased by 18% and same home NOI grew by 10, 3% compared to last year, we achieved a record high same home NOI margin of 68, 3% driven by consistently high occupancy record low turnover, 16% and strong rent growth of eight 8% on a blended basis.
Yes.
We also had stellar results in private funds and advisory as new joint Ventures record Johnson development fees and performance fees from our legacy for sale housing funds all contributed to significant year over year growth in core <unk> from fees.
And with the benefit of our U S. IPO, we reduced leverage to 35% net debt to assets and seven eight times net debt to adjusted EBITDA compared to 43% and $9 eight times in Q3.
Moving to slide four and our adjacent residential businesses U S. Multifamily rental continues to perform very well with same property NOI up nearly 21% year over year and now solidly above pre pandemic levels for sale housing had another outstanding quarter distributing over $18 million of cash to Tracon and Canadian multifamily is progressing on its <unk>.
<unk> pipeline with over 1000 apartment units on track to be delivered in 2022.
Lastly, the Selby located in downtown Toronto achieve stabilization in Q4 with 98% occupancy rate.
We're also pleased to introduce full year guidance for the first time.
Our asset for our same home NOI growth for 2022 is expected to be 7% to 9% compared to seven 2% for 2021 and to be driven by same home revenue growth of 7% to 9% and same home expense growth of six 5% to eight 5% or.
Our guidance assumes a combination of strong rent growth trends with new lease growth in the mid teens and renewals around 5% to 6% occupancy in the 97% to 98% range turnover near 20% and ancillary revenue growing by 10% to 15%.
And our guidance, we assume relatively elevated bad debt of one 5% to 2% gradually trending down over the course of the year.
Our operating cost guidance assumes property tax growth in the high single digits as our homes have appreciated in value considerably and mid single digit inflation in other expense items as we continue to navigate in an inflationary environment.
Second we expect to acquire over 8000 homes during the year as we remain focused on growth and squarely on track to reach 50000 homes by 2024.
We assume an average acquisition price of 340000 slightly above Q4 of 335065% financing and our <unk> joint venture vehicles <unk> equity requirement at a one third share is approximately $300 million.
Finally, we expect core <unk> per share to be 60 to 64.
Representing nearly 9% growth year over year at the midpoint I would note that our diluted share count is currently 14% higher than the weighted average in 2021 and so the implied growth in our total core <unk> is about 20% to 30%.
This is driven by the aforementioned growth in our total assets of our portfolio in same home NOI relatively stable fee revenue and overhead cost compared to Q4 levels, albeit with lower projected performance fees and higher interest expenses commensurate with the growth of the overall portfolio.
We are very excited about the year ahead, not only because of the operating trends we are seeing but also because of the tremendous opportunity to positively impact the lives of our residents.
Turning to slide five I'd like to share with you. Some details of our recently announced Tracon Vantage program. This is a suite of programs and resources available to our U S residents to help them achieve their financial goals, including the goal of homeownership if they so choose.
At the core of this program as our long standing practice of self governing on renewal rent increases with annual rent increases for existing residence typically set at rates below market.
In addition, trigon advantage includes educational tools to help residents plan and achieve their financial goals, our credit builder tool that helps residence improve their credit scores. We are pleased to report that over 1200 residents have enrolled in this program so far.
Our resident home purchase program that gives qualifying residents the first opportunity to purchase a home they're renting if tracon Alexa sell it a resident emergency assistance fund, which is awarded over $350000 to over 100 family since inception, and finally, our soon to be launched resident Downpayment assistance program, which will provide qualifying.
Long term residence with a portion of their down payment should they remain in good standing and wish to buy a home.
Triton's ESG strategies heavily focus on the social component with our residents and our people being top priorities when families have the stability necessary to achieve financial freedom entire communities can prosper. We believe that this compassion approach to serving our residents is not only the right thing to do but also the primary reason for our high.
C low turnover rate and leading resident satisfaction scores.
Let's now turn to slide six to delve deeper into our Q4 portfolio growth throughout the course of this year, we accelerated our acquisition program for nearly 800 homes in Q1 to over 2000 homes in the past two quarters, bringing total acquisitions to 6574 for 2021 at the current pace, we are well positioned to acquire over.
8000 homes in 2022 through a resale and new home channels, including deliveries from our build to rent program.
To give you some insight as to where these homes are coming from our largest acquisition channel is buying existing homes through the MLS and Q4, we also acquired resale homes through non MLS channels, such as <unk> buyers.
Youll note that our average acquisition prices trended higher over time. This is a function of significant home price appreciation in all our markets and expanded by box Center <unk> JV to which includes traditionally price your markets such as Austin, Nashville, Las Vegas, and Phoenix, and an acquisition program tilted towards generally newer vintage homes.
Especially with the inclusion of our homebuilder direct JV give.
Given market rents have also been increasing our acquisition cap rates remain healthy and are in line with our JV underwriting.
And finally, we're excited about our active build to rent pipeline, which now has expanded to include over 3000 rental units in 23, new home communities across the U S. Sunbelt, what we really like about both of our new home channels through homebuilder direct and <unk> JV. One is that they provide a resonance with the ability to live in a brand new home at an accessible price point.
Giving us a maintenance holiday and lower upfront renovation costs.
Now I'd like to pass the presentation over to with Sam to discuss our financial results.
Thank you Gary and good morning, everyone.
Performance in the fourth quarter exceeded our expectations as we capped off with truly was a historical year.
We grew our portfolio significantly while focusing on cost containment and deleveraging.
What makes these results even more remarkable is that our dedicated team delivered day in and day of despite the challenging backdrop of labor shortages in.
Inflation.
Fly chain constraints and a global pandemic.
On slide seven we summarize our key metrics for the quarter.
Net income from continued operation grew by 67% year over year to $127 million.
Our core ethical grew by 10% year over year to $46 million.
Core <unk> per share was <unk> 15 for the quarter.
<unk> per share was <unk> 12 for the quarter, which provides us with ample cushion to support our quarterly dividend and an <unk> payout ratio of 43%.
Let's move to slide and talk about the drivers of core <unk> per share.
On the whole core <unk> grew by 10% year over year.
But on a per share basis, there was a year over year decrease of <unk>.
First off last year's <unk> <unk> per share included <unk> <unk> tax recovery. So our starting point was relatively high.
Second.
Our single family rental portfolio, which makes up over 90% of our real estate assets delivered 18% growth in telecoms proportionate NOI, adding <unk>.
This was driven by a 17% increase in revenues as the number of proportionately owned homes grew by 11% while average monthly rent decreased by 9% over last year and ancillary revenues ramped up.
Our operating expenses on the other hand also grew by similar 17% due to portfolio growth and overall cost inflation.
Our ethical contribution from fees increased by 132% compared to last year.
Adding another <unk> <unk> per share.
This was driven by new investment vehicles record development fees from Johnson subsidiary and strong performance fees from legacy investments.
In our adjacent residential businesses U S multifamily rental <unk> reflected the 80% syndication of the portfolio earlier in 2021.
And as Gary mentioned, the portfolio is performing extremely well.
This was coupled with strong results in our for sale housing business.
On the corporate side, we had lower interest expense offset by higher corporate overhead expenses. Some of this relates to the incremental costs associated with our U S listing.
As well as staffing up for growth.
As we mentioned earlier, our diluted share count this quarter was 24% higher as a result of last year's equity offering to fund growth and reduce our leverage.
Let's turn to slide nine to discuss our operating efficiency.
Our strategy of managing third party capital allows us to scale faster and improve operational efficiency.
Fees, we earned would allow us to offset a large portion of our corporate overhead expenses.
Our recurring fee stream totaled $22 million in the quarter and included asset management fees property management fees and development fees, but.
But excludes performance fees as they tend to be up esodic.
Together these recurring fees covered 71% of our total recurring overhead costs this quarter.
Compared to 30% to 42% coverage.
Prior year period.
Ultimately, we expect our fee revenue to cover the majority of our overhead expenses and allow our shareholders to benefit from strong NOI growth contributing directly to the bottom line.
Let's discuss our balance sheet on slide 10, we have continued to prioritize deleveraging, while driving significant growth all while navigating challenging economic conditions.
We have successfully cut our leverage significantly since the start of 2000 with net debt to adjusted EBITDA down to seven eight times in the current quarter.
And net debt to us it's 35%.
Much of this was achieved with our U S IPO, our prior common equity offering and our preferred equity financing.
I do want to thank our shareholders for their support as we were able to accomplish these equity financings and increasing share prices along the way.
Turning to slide 11 to discuss our debt profile, we will remain focused on addressing near term debt maturities.
We have $225 million of maturities in 2022.
Most of which is our national our term loan, which we expect to refinance later on this year.
Our liquidity position is also very strong with $677 million in available cash and credit facilities to fund our growth.
Okay.
Slide 12 highlights our performance dashboard that we've updated for you every quarter since we introduced in 2019 I'm thrilled to report that we have not only achieved all of these targets will be exceeded the well ahead of schedule.
Our team has worked tirelessly to achieve this important milestone and I'm very proud of all of our efforts.
And you didn't think I'll stop there did you on slide 13, I am pleased to introduce our updated performance dashboard or.
Our team once again is raising the bar and sitting ambitious targets to drive incremental shareholder value for 2024.
First we plan to continue growing our core <unk> per share with a target of 15% compounded annual growth through 2024.
As Gary mentioned earlier in 2022, there is some dilution from U S. IPO, while we expect higher growth in the outer years.
Second as we have mentioned many many many times already we plan to expand our <unk> portfolio to 50000 homes and.
And we have the people the operations and the capital all in place to do so.
Next as we embark on a period of hyper growth over the next three years, we plan to stay disciplined and maintain our leverage within a range of eight to nine times EBITDA.
And finally, we have continued to improve our overhead efficiency with a target of 90% of recurring overhead costs to be covered by fee revenue excluding performance fees.
As we set our sights on the future. We are we have tremendous opportunities ahead, and we are very excited for 2022 and beyond.
One of the most excited people certainly Kevin So let me pass the call over to him to discuss the operational highlights.
Thank you Saf.
Good morning, everyone.
When I take a moment to reflect on this past year again, an overwhelming sense of pride to what has been accomplished for.
For me personally these results speak to the strength and dedication of our team who continue to put our residents first while navigating our rapid pace of growth.
Things, just keep getting better and better and I could not be more excited for what's ahead.
Let's talk about the components of our same home NOI growth of 10, 3% this quarter starting on slide 14.
Our same home total revenue growth of eight 9% was driven by rental revenue increasing seven 9%. This was made up of six 7% increase in average rent at 30 basis point uptick in occupancy as well as an 80 basis point decrease in bad debt from $2 seven.
Of revenue to one 9%.
Even at one 9% it is more elevated than we'd like and as a result of our resin friendly approach throughout the pandemic.
Our rent growth profile remains strong with blended rents increasing eight 8% during the quarter supported by an impressive 19, 1% increase on new move ins and five 7% increase on renewals.
Since we've been self governing on renewals for the past few years, we estimate that we have accumulated at least 15% to 20% loss to lease in our portfolio, creating a runway for significant rent growth ahead.
Our other revenue line, which includes ancillary fees also grew meaningfully up 42% from last year as we resumed collection of late fees and rolled out smart home and renters insurance programs.
We see a path to increasing this number by over 30% per home compared to current levels as we continue to rollout these and other ancillary services over the next few years.
Let's turn to slide 15 to discuss the key same home expense variances.
Property taxes, which account for almost 70% of operating expenses continued to trend higher tracking a significant home price appreciation, we are witnessing in our markets.
With the benefit of successful Appeals, we have managed to keep property tax growth to five 6% this quarter and four 6% for the full year.
And maintenance expenses were also elevated this quarter as we return to a higher level of maintenance calls post COVID-19 . Our work order volume was up 5%, while labor and materials inflation added about 8% of the cost of each work order, even with the benefit of bulk purchase discounts.
On the other hand turnover that was flat as our turnover rate decreased by 630 basis points from last year, largely offsetting the underlying inflation pressures in this line item.
And the property management side, we're seeing the benefits of scale as we are managing 28% more homes compared to last year, using a centralized and tech enabled operating platform, which results in a lower cost per home.
Property insurance costs have also increased driven by rising premiums across the industry, which we hope to mitigate over time greater scale and diversification.
And marketing and leasing is down meaningfully due to strong demand higher physical occupancy and lower resident turnover.
As we look ahead, we expect inflationary pressures to continue in our business and we remain focused on what we can control harvesting operating efficiencies through technology and process improvements providing.
Providing superior resident service and driving economies of scale.
Let's now turn to slide 16 for an update on more recent leasing trends.
Continue to be amazed by the strong demand for our product with a level of interest from prospective residents continues to vastly exceed the number of homes, we have available for rent.
The substantial demand coupled with our loss to lease allowed us to continue pushing rents on new move ins by over 19% in January .
Meanwhile, rent growth on renewals is inching up over 6% and our overall blended rent growth has remained at a healthy eight 3% in January .
At the same time occupancy remains at a record high of 97, 9%.
On the whole the robust trends would have carried us through the past year remain in place and set us up well for great results in 2022.
Now I will turn the call back over to Gary for closing remarks.
Thank you Kevin let's conclude on slide 17, if Theres one thing you should take away from our story today is that the factors that have driven our performance and value creation over the past year continue to be in place.
First and foremost is our focus on growth by partnering with leading global real estate investors Tracon has a clear path to increasing its asset for our portfolio at a 50000 homes by the end of 2024, we have the balance sheet operating platform and third party capital in place to achieve this target with confidence and we believe that favorable tailwind in our industry should drive.
Strong operating performance for years to come our growing portfolio, coupled with strong same home results should also translate into meaningful NAV appreciation for shareholders and second let's not forget about our adjacent businesses, which account for about 6% of our balance sheet, but represent a meaningful source of upside and potential cash flow to supercharge. Our sfer growth. These include our.
Our Canadian multifamily built or core business, a 20% interest in our high quality multifamily portfolio located in the Sunbelt and legacy for sale housing assets. These businesses are all benefiting from a robust housing market and we believe they could ultimately be worth two times, our IRS carry value and represent $1 1 billion of value for our shareholders.
Should we monetize these assets over time, we would use the proceeds to pay down debt or grow our asset for our portfolio and in the process simplify our business that concludes our prepared remarks, I would like to express our gratitude to our employees, our many long standing shareholders private investors and capital market partners for their ongoing support throughout our journey. We believe we are in a.
Golden decade for housing and for <unk> in particular, and as we look ahead to the future. We plan to use has tremendous opportunity to create significant value for our investors make our business a platform to do good elevate the lives of our employees and residents and inspire the broader industry to do the same I will now pass the call back to <unk> to take questions with Sam Cabinet.
I will also be joined by John <unk>, and Andrew Joyner to answer questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster.
And we will take our first question from Chen Denis Boucher with Goldman Sachs. Your line is open.
Hi, Good morning, everyone. Good morning, Jamie.
Thank you for taking my question and congratulations on a strong.
Strong finish to the year. So thank you for that level of home price appreciation you, obviously talked about your own acquisition price was up 7% sequentially.
And keeping your Florida admixtures are sort of staying within the middle market in a certain box size in mind.
Finding it harder to acquire homes in <unk>.
What's been the cap rate that you acquired homes in fourth quarter due to change much.
From <unk>, if you could perhaps give us some context around that.
Sure.
Well I would say there has been a very slight degradation cap rates, let's say over over a year and the way I would describe that to you as if you assume home price appreciation of 20% and rent growth, let's say a 10% your cap rate will come down by about 20 basis points. So for example, we've seen acquisitions, let's say in Atlanta.
Where in the past, maybe a year or two ago, we would have acquired those homes at a five 5% cap rate, maybe today requiring them at a five 3% cap rate, but even having said that we have no shortage of opportunity. We've had no issue hitting in fact, we had a better quarter than we expected we had no issue hitting getting to 2000 homes and what's normally a weaker.
Third quarter weaker period, because obviously less people are listing their homes after Thanksgiving or Christmas and we continue to hit the cap rates that are outlined in our in our JV underwriting so.
So we from that cargo. So so so and just to spell that out for you to cap rates in JV to nominal cap rates are between five and five 5% homebuilder direct JV or closer to 5% the economic cap rates for both joint ventures are actually very similar in the high 4% range high four person.
Range. So we've continued to hit high 4%.
Since launching <unk> in homebuilder direct now for several quarters, and we don't expect that to change going forward. If anything there may be now a slight pickup in rent vis vis home prices.
We look forward to 2002, and maybe into 'twenty, three and if that happens, we don't actually see higher cap rates.
Okay.
Great color. Thank you for that and just switching gears to your BSA segment, a little bit so performance fee was almost 4 million in the quarter.
The slides for sale housing what are there any other drivers and then how should we think about that going forward and then as an extension what drove higher development fee and how should we think about that in 2020.
Yeah. So performance fees are obviously episodic they will ebb and flow from period to period. All the performance fees in Q4 came from our legacy for sale housing funds, including Cross Creek Ranch.
Getting to the award towards the end of its life and so you should continue to expect the performance fees in the in the next couple of years are largely going to come from our for sale housing funds right and where I would guide you. I mean this is just a guide but based on what we've shown in our MD&A. We are looking at about 5 million in performance fees This year and next year.
<unk>, Okay in $25 million 22, and $5 23, we might be able to do better than that but that's where we're kind of loosely guided.
Your next question was sort of changing what was your next question development fee.
Development fees, yes, so development fees on Johnson.
I think partly explain the beat and were probably $2 $5 million higher than they normally are.
And so I would not use Q4 development fees as a run rate.
Probably $2 5 million higher than where they typically are Johnson had an outstanding year of its too bad Larry Johnson didn't get to see it but the best quarter on record and large sales I mean this business. As you know is booming loss sales are incredibly robust, particularly in Texas and lot sales are largely our pricing was up about 20% year over year.
<unk>, so that that all of those things together I think explain why fees were so much higher than the previous year over year comparison, but we would not expect that going forward. Although we haven't seen any real change in conditions that continue to be very very strong.
Very helpful. Thank you and congrats once again.
Thank you.
Your next question comes from Nick Joseph with Citigroup. Your line is open.
Thank you.
Thinking about pushing renewals in 2022, obviously, you've self governed.
And continue to do so, but just given the higher inflationary environment, where kudos move too.
I think we move them up to where we want them to be Nick <unk> seen a move from Q4 to Q1.
As we talked about in January so they are right now in the 6% range. They.
They might move a touch higher but.
I think we will probably be about 6% for the year. So again that would be kind of in the upper end of where we've been guiding.
Our formal guidance, but I think we can assume roughly 6% maybe a touch higher.
In 2022, and we get there by really trying to look at Where's wage growth, we're broadly seeing wage growth of 4% to 8%.
And so we think 6% is fair again. This is part of our ESG program to self govern to make sure that our rents are typically below market to keep our residents in our homes as long as possible and we think we're striking a balance at 6%.
Thanks, and then.
I think on slide 17 can you talk about the adjacent residential businesses are there any plans to monetize any of them in 2022.
While the legacy for sale housing business, just obviously gradually monetize over time, so that we will see some more monetization this year and obviously over the next several years that business naturally liquidates as we sell lots of our homes.
Canadian build to core multifamily no.
We're not looking at any monetization until that portfolio has stabilized and delivered so.
It's going to take roughly a few years, but we are having conversations we are starting to explore with our institutional partners in the U S multifamily portfolio to discuss a recap. So we are exploring that I can't really tell you anything more than that.
If something were to happen it's possible that it could be a later half 'twenty two event, but again, we're only exploring it.
And more to recap any more likely or an outright sale of the remaining JV interest.
Can't really say at this point, but I think.
I would probably I'd, probably lean more towards a recap.
Thanks.
Your next question comes from Rich Hill with Morgan Stanley . Your line is open.
Hey, good morning, guys I wanted to maybe follow up on that question.
On pushing renewals.
If I'm thinking about your business right.
Very low turnover, which is a great thing, but how long do you think it's going to take you to capture that healthy loss to lease in your portfolio is it really like a four to five year period of time to capture it given.
Youre not pushing renewals new leases are high but your turnover is low.
Yeah rich that's the way, we're thinking about it I mean, the turnover I mean, we never thought we'd ever see turnover below 25%, let alone 16%, where it's been in December and January did push up a little bit higher in February to about 18% and as we talked about we're guiding to about 20%. So if you assume 20% for <unk>.
Two then we think it's going to take the better part of four or five years to capture that loss of ways and I think the last of which again I think we're being somewhat conservative there at 15% to 20%, it's probably at the upper end of that range, if not higher okay.
Okay got it guys and the reason I was focused on that is if I'm looking at your 2024, <unk> share target, which I appreciate and thank you for that.
As a pretty healthy 20% growth off of our published 23 E. <unk> estimates so I guess, what I'm getting at here is there a scenario where you have really really strong <unk> growth for much longer than maybe the market is anticipating because you do have all of this embedded growth. So yeah, it's not it's not.
Greg you can capture all of it in 'twenty two but does it is there a scenario where growth is sustained and very strong firm 345 years.
Absolutely and the thing I would tell you is there's a lot of focus obviously on the same home on the same home guidance, but the thing you have to remember is that our same home portfolio is only about 60% of our total portfolio right and that may compare to our peers, who are let's say, 85% or 90% So what's really drive.
The growth is what's really driving the growth in <unk> per share is the acquisition volume right, Thats, where youre really going to see a decrease in total NOI. So again, I mean regarding the 7% to 9% NOI growth up to 8% the midpoint, but if you saw in Q4, our actual total proportionate NOI was up 18% right. So.
That's really the number I think to focus on and I think because of the growth and the acquisitions, which.
Again, 8000, this year and maybe over time that that.
It grows from there youre going to see some pretty significant growth in <unk> per share overall, plus significant growth in the fees and the private funds and advisory business that accompanies that growth and acquisitions.
Got it that's helpful. Gary and just one more question. If I may you have a differentiated product type compared to your peers.
In terms of what type of consumer that you target there's been a lot of dialogue about lower income consumers struggling a little bit here because of inflationary pressures, but I also note your rent to disposable income is very low.
So can you maybe just walk us through how you balanced pushing rents with rent and disposable income I know I'm asking a complicated question ultimately asking how affordable homes I think there are affordable, but has that has that changed with inflationary pressures.
Well I'll start and maybe Kevin you're welcome to kind of chime in but no I mean, we haven't really seen a big change in the underwriting I mean, if you look at the rent to income right now it's about 20% to 23%. So we think theres significant cushion or margin there.
And so we feel we're in a really good place with the underwriting.
Our residents on the whole are on a good place.
And so we're not we're not worried about that at all I mean, our bad debt is a little bit elevated.
I think Kevin can talk talk to this but thats largely because I think we've taken a very empathetic approach to dealing with our residents during the pandemic.
So, but we're not ceiling for the most part we're not really seeing any pressure. Our average household income is about 85000.
<unk>.
We are in the sweet spot ratio really deal with this kind of middle market resident.
David It's definitely have the ability.
To afford our product and over time, if they're earning more income to pay higher higher rent. So we're not really seeing any real pressure if Kevin you want to add any more color on the bad debt.
Yes on the bad debt.
We have as.
As Gary was saying, we've taken various president friendly approach and we've even after the moratoriums had expired we offered rent forgiveness programs ramp.
Our relocation programs for a cohort of people and really trying to keep people in their homes and we found that some people were unresponsive and so we're going to be taking a more conventional approach to collections coming forward and so we will see bad debt going down and Thats really one of the reasons why it's higher in California.
Especially California is very resident trembley, we still can't charge late fees here in California.
If we want to file any kind of notices it takes a lot longer so we're going to be working through that in the coming quarters, and I think we're going to see bad debt come down but.
As far as underwriting we sell.
We turn down maybe 49% to 50% of applicants that apply with us. So we are scrutinizing. The people that are coming in we've seen the FICO scores stay even.
The rent to income stay even so we feel very good about their resident profile that we have and we think we'll get back down to the same kind of bad debt levels pre COVID-19 in the next three quarters.
Great. Thanks, Thanks, Karen Kevin that's really helpful.
Yes rich.
Your next question comes from Mario <unk> with Scotiabank. Your line is open.
Hey, good morning.
Mmm.
Yes.
Our guidance for the first time and here we are talking about 2024.
On that front.
Can you talk about like the 17% CAGR for per share were 14 through 24 garden is pretty strong.
Can you talk about whether that's kind of a split.
Between 'twenty three 'twenty four or.
<unk> per share growth to accelerate upon.
Enrollment completion for example in Canada.
It's lower in 2022, because we have the overhang of the U S. IPO and then we assume relatively consistent <unk> per share growth in 'twenty three 'twenty four so the growth to get to that kind of 17 or 15% to 17% CAGR is a little bit more back ended between 'twenty three.
24, but it is consistent between those two years.
Got it Okay, and then what type of same store NOI growth are you looking at in 'twenty three 'twenty four that underpinned.
Okay.
Yes.
Again, I mean, we're not providing any formal guidance here Mario so I just want to preface that but I think.
In our internal model to get to those numbers were actually assuming.
Lower same same home NOI growth, probably in that kind of 6%, maybe five 5% to 6% range, which is what it's been over the longer term for us in our business. So.
Assuming 10% as we did in Q4, 7% to 9% formal guidance for this year.
Only.
To get to that level of growth, we only need seem home.
NOI growth, probably a 5% to 6%.
Thanks.
And then as you mentioned acquisitions are a big driver of the growth 50 to 60 clinical portfolio property.
What kind of acquisition spread do you think you can continue to achieve given where rates have come up here a little bit of coverage will come down a little bit. So when you look over the next two years.
The reasonable acquisition cap rates.
Okay.
We think it's going to be well I mean, I think the acquisitions as we talked about before we think there is an evergreen opportunity. So the biggest challenge for US. This is not the market. It's actually operations at staffing up in order to manage those acquisitions. So we're very confident that we're going to hit the 8000 acquisitions. This year at the cap rates I was talking about.
Which are kind of low to mid fives on an economic basis high fours very high fours.
We think we can hold that all the way through.
To the extent that.
Higher mortgage rates ultimately impact of for sale housing market. It is possible that cap rates might move up a little bit.
But we're not assuming that we're assuming that they continue to be where they are and.
By 8000 homes this year.
Maybe maybe 10000 homes or eight to 10000 homes in the next couple of years to get to the 50000.
Okay.
Okay.
Okay and then.
In terms of 2022.
Floating rate debt.
On a proportionate basis of about 25% of total debt.
Primarily on the credit facilities.
Internally, how many rate hikes are you guys projecting in 'twenty, two and kind of where do you see.
Floating rate debt exposure going over the course of 'twenty two.
Scenarios with Sam So I'll tell you a couple of things we are actively in the market too.
Pseudo securitization deal as we speak that will actually take out some of that floating rate debt, though youre talking about though youre seeing in there.
Most of our floating rate debt that you have is in the warehouse facility or subscription facilities and we're going to take that out this year, we're expecting to close that in <unk>.
First or second week of April .
The rates that we're seeing on that specific deal is around let's say 353, 6% for that perspective. The last securitization deal that we did was to five 7% and the one before that was a one nine floor. So we've obviously seen a jump in rates.
Having said that we've always said, we're going to maintain we're really focused on overall leverage targets of eight to nine times EBITDA.
As well as making sure that we focus on fixing for a longer term of course as long as we can so we.
We expect to have some impact, but that's already been factored in our 2022 <unk> targets.
Okay. My last question, Gary you mentioned, some equity requirement for our JV too.
Dollar range for the year.
What are can you just remind us of what your total export goods or equity requirements. Upon co investments in all of your focuses for 'twenty, two including any incremental equity required to complete developments in Canada, which I think is critical.
Okay.
Yes, so and with Sam feel free to chime in yeah. So for based on the 8000 homes. We discussed it at 340000, a door, we're looking about $300 million.
Now some of that could be funded by sub lines. So that I would say, it's kind of a maximum number. So it's about $300 million, we think we need about another $50 million for the other adjacent businesses, including Canadian multifamily development. So that leaves us about 350 million gross.
Sure.
Generating <unk>, roughly $150 million less $75 million of dividends. So if you kind of net off.
<unk> after dividends it leaves us requiring about $275 million of capital for the year.
<unk>.
And obviously that can that can easily be funded through our liquidity like our liquidity right now is more than double that so we're in a very obviously very comfortable position to fund that growth.
As I was saying in an earlier comment to the extent that we have some monetization from our adjacent businesses that could also be used to fund the growth.
We feel we're in a really good place and certainly don't need to tap the market today.
And on that.
The business in the U S on the multifamily side consideration of a sale or a recap of our.
The structural agreement.
Agreements in place with.
Sure.
The investment Department.
In terms of purchase price.
Operator.
Our market.
No I mean listen we need we need their buying to be able to do anything right. We've we've entered into a long term partnership with them so related to entertain any change of structure, including a recap we do need the volume. So we are exploring that with them.
And if that if that makes sense and thats something we could pursue I will say that the <unk>.
Portfolio is appreciated Lee appreciate it massively since we bought it in syndicated it.
So we do have I think a lot of goodwill with our investors and I think they would be more likely than not to work with us or accommodate us on some sort of recap, but it would be based on.
On market and there is no specific parameters I would say on the contract or limited partnership agreement that would prevent us apart from their permission.
Okay. Okay.
Great. Thank you.
Your next question comes from Brad Heffern with RBC capital markets. Your line is open.
Hey, good morning, everyone. Thanks for taking my questions.
On expense growth I was curious.
Guidance for 'twenty, two came in a little bit higher than your peers, but you said in the prepared comments that you are assuming property tax increases in the high single digits, which I think is higher than what others have assumed.
How much visibility do you have into that and ultimately do you think that the expense guidance is potentially conservative.
Yes, I think there I think all of our guidance or maybe an element of conservatism right. I mean this is the first time, we put guidance out you can never be too sure certainly in the new world that we're in with the economic uncertainty so.
We like to under promise and over deliver I would just say, that's just kind of a general raw broad, but the insight. We have really comes from our property tax consultant, who has guided us to high high single digits and and the reason for that is obviously, we've seen 20% plus home price appreciation in our portfolio you can't second blow I mean at some point you have to pay.
Some of that back in higher property taxes, I think the other big thing that has to get taken into account is the market mix right Theres, a big geographic difference in certain cases between us and our peers and.
And if you look at US 65% of our homes are in markets that do not have statutory caps and that might compare to <unk>.
Imitation.
At 35% right. So it's a big difference right, whether you have homes in California, Florida, Arizona, Nevada.
Invitations got a much bigger concentration in those markets and therefore should probably see lower property taxes, that's really the difference but.
As I said I think there is some conservatism in there.
Hope it DNA will know later in the year, obviously once we start seeing the assessments hopefully we can do a little bit better and it doesn't factor in any.
Any appeal.
Of those assessments and so if we're if we're able to successfully appeal them, we'll do a little better there as well.
Hey, Gary if I, if I could add just quickly as we do I mean, we're actively managing that we appeal roughly 5000 homes a year.
So we're working with our with our consultants to do that and then we.
We have a 50% 60% success rate. So it's something that we're actively working on.
Yes.
Okay got it thanks for that.
And then you obviously saw the invitation investment in pathway homes I'm curious if you have any interest in pursuing a similar rent to own strategy at some point it seems like it might correspond well with your resident friendly ethos.
No we don't I mean, we're <unk>.
Very focused on a model, which is we buy homes and we want to hold them.
This is this is a very this is a business that is extremely intensive.
Scattered site property management, it's difficult to run.
And at the end of the day, we want to hold as many properties as we can so.
We don't have any plans to pursue that particular business model, but we think we can accomplish it and really help our residents in different ways and that's really the point in Tri Con vantage. The biggest thing that we do is just governing on on renewals right and that really gives a resident stability that allows them to plan for the future.
It's probably the most important thing we're doing in our ESG program.
But to the extent and we also have a program if we ever do sell homes and we do sell roughly 100 homes a year, we do give a first opportunity to our residents and we will be unveiling a down payment assistance program.
Hopefully in the second half of the year. So you should see information that coming it's coming soon.
Which will help longer tenured and residents if they do choose to buy a home will help them. There so we'd probably prefer to do it that way.
Do you want to buy a home we can prepare them for that through financial literacy training credit building downpayment assistance, but we probably prefer to go and buy another home rather than cannibalize, our own portfolio and celeron homes on us.
Got it thank you.
Yes.
Your next question comes from Jade Rahmani with <unk> W. Your line is open.
Thank you very much.
You talked about providing downpayment assistance and tenant friendly approach I was wondering if you might take it a step further considering the companys expertise in capital markets and securitization and perhaps created a vehicle to provide mortgage finance to any.
Customers that might be interested in purchasing homes is that an interesting concept or is there not enough of an installed base that might access such a product.
I think it's an interesting idea and look we're always we're always welcome we always welcome great ideas, we're all about continuous improvement in learning, but I don't think.
I don't think Theres, a big enough opportunity to make that work for us.
Again, I'm not going to reveal too much about the program yet.
What I will tell you is on the modeling that we did we felt we could help $5 to 700 families over about three years.
So if you kind of think about that it's not a huge opportunity in terms of mortgage financing.
You probably can make our business work with that type of volume. So I think you'd have to be you would have to be much bigger and again, we only want to provide a down payment assistance to long tenured residents right. They have to be in good standing eyesore for antibody.
Happy to be with us for a certain period of time and will unveil more of those details later.
Thank you very much.
The supply chain environment.
And with the aggressive acquisition targets hitting those growth that's clearly an important part of the story.
We're seeing homebuilders push out deliveries significantly we're seeing cycle times extend.
Probably 25% so can you talk to what.
The supply chain.
Are you seeing and how it's impacting the business.
Is it impact time to renovate homes, and therefore time to lease is it causing any curtailment in the build to rent delivery strategy.
So Kevin why don't you talk about the general impact on our business and then maybe I'll.
Ill discuss built to rent.
Okay sure thing so yes, we did experience some some pressures early on when it first started and we quickly really went to an expanded our vendor base and our supplier base. We also started ordering materials a lot sooner and we began bulk ordering on kind of a heavily used materials like Pete.
Alliances.
And we're actually right now taking a step further we're working with some of our partners to warehouse inventory. So that we can bulk bulk buy and habit and warehouses, where that are run by our partner. So we're not having to rent space, we're not having to add more people, it's something that we're working with our partners and in terms of.
Slide <unk>.
All of our carpet vinyl flooring smart home controllers and those are all in full supply, where we continue to feel a little bit of pressure as I can our GE appliances.
That continues to be a challenge, but we've found ultimate alternate supply sources. We're working we've got a really good relationship with home depot and Lowe's that we're able to go to get those appliances. So we've really kind of extended the web if you will and have been able to really keep that under control.
We could take a step further we did field pressure supply pressure.
On pricing and but because of these national relationships that we have we've been able to keep the cost increases.
<unk>, 6% on rentals, and churns and 6% to 8% on repairs and maintenance.
Where they could have been retail pricing on like flooring and HVAC have gone up like 25%. So we've been able to mitigate most of those cost increases.
And I think also we've been able to lower incur.
The increased pressure from lower turnover rates our work orders in house are now up to 70%.
We've centralized our scoping and renovation.
Scoping for rentals in R&M and we're also starting to buy slightly newer homes, which we think is going to lower our costs and maintenance going forward.
Yeah. So just I would just add to that I think on build to rent I mean, yes. There is no question. The homebuilding industry is being dramatically affected by supply chain issues, among our building cycle times.
We saw increases in cost of about 20% last year, we've heard from some of our bigger private builder partners that they saw cost increases of up to 6% to 7% a month in January and February in that.
Those inflation levels I would say are scary.
We'll put will ultimately put downward pressure on development yields. So that's something we need to watch very closely.
At this point in time, and we are really happy with our build to rent portfolio. The development yields are in that kind of five to five 5% range on an on trended basis. So we think we're getting paid for the risk, but if we continue to see this type of inflation on costs and direct costs.
I don't think rents will be able to catch up and so we will see some degradation in yields and so thats something we have to watch.
We believe a lot in the build to rent program, we want to be part of the solution, we want to be able to add.
More housing to the market, but we won't do it at any cost right. So if the yields get too thin.
We might need to take a pause, but we'll see how that plays out later in the year.
And what are you seeing on the policy and regulatory side are you detecting crusher building from a rent regulation that standpoint, and taking some of these actions that payment assistance et cetera.
Proactively what are you seeing there.
Well I mean, we're not subject to any inquiries. So we haven't seen anything directly we're obviously aware of whats kind of more broadly happening in the industry.
And we're also sensitive the fact that there is a lot of negative press on the industry and so we want to hopefully with our peers start to change the narrative.
I want to talk about all the positive things. This industry is doing for residents right. It's not only about homeownership. It's also about providing more opportunities for people for different reasons that need to rent homes and to talk about the product that we provide for residents and then also I think to try to help our residents write this should not be about extracting value should be about creating value for residents.
So these are the type of programs, we're rolling out.
We're incredibly excited about strike on vantage.
<unk>.
And we hope that these initiatives help inspire the broader industry to do the same.
Thank you very much thanks.
Thanks Chip.
Your next question comes from Tal Woolley with National Bank Financial your line is open.
Hi, good morning, everybody.
No.
Thank you for providing the 2024 sort of bridge. There I was just wondering what sort of targets for capital raising from third parties are you looking at to drive that growth.
John do you want do you want to talk about yes sure Kyle So if you look.
Last year, obviously 2021 was a record year for Tri Con for third party capital raising across all of our businesses, but in particular SSR.
Think about JV to which we raised.
We raised $5 billion of capital over $5 billion of equity of over $5 billion of total capital, which gives us firepower for 15000 60000 homes. So clearly that doesn't get us quite to the 50000, so there could be or does to the edge. So there could be another vehicle in.
The cards between now and the end of 2024, obviously thinking about <unk> guidance on where home prices, maybe and I'll call it $340000 to $350000 of home all in costs.
You could see us raising bigger successor vehicle, perhaps both in terms of equity.
Total capital, but we're not providing specific guidance at this time I would say, though we continue to get significant inbound demand from both our existing investor as well as new investors for single family rental private investment vehicles. So if we were in the market today, there would be no shortage of capital available to help us meet our growth guidelines.
And the only thing I would add to that is on our build to rent.
Graham <unk>, one that is now substantially committed.
So we are working on a successor vehicle.
So thats something that could happen that we could announce in the second half of the year to continue our build to rent initiative.
Okay.
My next question was just around the Toronto apartment platform.
You sold your interest in seven Labatt I'm just wondering if you can give a what prompted the sale there and then I'm. Just also wondering too when you look at.
Some of your longer dated projects like cleaning, Ontario block 28, West Don lands.
How are you feeling about budgets pro forma returns on some of those later projects.
Yes, so on the Labatt project, we just had a difference of opinion.
With our partner on the business plan.
We want to go rental wherever we can this is a kind of long term hold strategy for us to develop more market rate and in some cases affordable housing to Toronto and our partner was more interested in doing condo.
And so that was really the issue. It is often more profitable in the short term to do a condo, but we are taking a longer.
A longer term approach and wherever we can trying to do rental so I think thats what happens on <unk> on <unk>, we still did very well.
Yes.
On the exit so we're happy with where that ended up and got some money back.
On the other projects I think what's really important as we try to enter into opportunities that are basically shovel ready, which means we can lock in costs as soon as possible.
And so we've seen a little bit of creep I mean, theres significant hard cost inflation in the market and we've seen a little bit of creep in our business plans and certainly a little bit.
In the case of the Taylor for example, we're probably three months behind on delivering that building, but on the whole we've been able to hold the costs again, because we've largely been able to lock them in right away.
And so thats been a real advantage and then the other thing I would say is on the rent side I mean, it's been tough in Toronto as you know towels, probably along with San Francisco has probably been the worst major performing market coming out of the pandemic, but now I would say rents are probably back to pre pandemic levels and so if we're able to lock.
Our cost, which we generally have been able to do and now rents are back to pre pandemic, we're essentially back to our on trended development yield underwriting and so now it's just a question of how much do rents rise from here and where will the trended yields ended up and I've got to believe that with the massive immigration targets of $1 billion to over three years.
<unk>, where are people going to laugh I expect we're going to see significant rent growth in in Toronto over the next few years and so I think this business is going to do remarkably well even on the Taylor.
We're going to be delivering by mid year, we expect trended development yields probably be in the high 5% range just to give you a little bit of insight market is probably trading at three five or below.
So it's going to be another I think very profitable investment for us.
Okay. That's helpful. Thanks very much thank.
Thank you.
And your next question comes from Dean Wilkinson with CIBC. Your line is open.
Thanks, Good morning, everybody.
Hi, Dave.
It's probably a question for with Ham, who always raises the bar.
When you look at the active growth vehicles, I think you disclosed there's about $155 million of unfunded equity. So I just wanted to circle back against the.
<unk> hundred 70, fives that Gary was talking about and then just how you're looking at funding that.
From the credit facility, what kind of home price appreciation would you need in order for that drawdown to be leverage neutral.
Okay.
Good morning, I was actually waiting for you haven't seen the Nols so.
Talk about our commitment first Gary you talked about $300 million in so far and probably another 50 from adjacent businesses Thats really for 2022 .
Talking about his MD&A and financials I really is looking at unfunded commitment over a period of time, so its youre looking at stretching that out.
Looking at the end of the day, even if I look on a three year basis as opposed to a one year basis, we're still going to need about $500 million total equity for us so far.
$800 million this year, a couple hundred million dollars next year simply because of financing and making sure our leverage stays between eight to nine times.
And.
And you'd also assumed that youre growing <unk>, So Gary mentioned <unk> 150.
Dividends, Yes, 75, and then you're also going to be buying more homes throughout the year. So if you model it out and I can help you with the modeling if you need.
We could probably get a lot of the caution so.
Our total equity requirement might be as high as maybe $400 million and we have as I mentioned earlier $677 million available cash so actually fine for the next couple of years now having said all of that we are opportunistic and if we think the stock prices, where it is and we want to issue equity for an opportunistic way, we will but we are really.
Managing the growth and leverage the exact same time, we want to maintain a leverage of eight to nine times.
Okay. Good point.
You don't need a 20% increase again in HPA.
In order to keep your deal there is no no no we don't and.
Again like the home price appreciation is is really in many ways is kind of an IRS concept in terms of kind of working at our NAV, but from an acquisition perspective, it's really about the interplay between home prices or home price appreciation and rent growth, but how does how does that move over time and what we do.
Dean is that they're maybe not in a year and a period, but over time over a couple of years. Several years. There is an extremely high correlation between home price appreciation and rent growth.
So as a result, we think the cap rates will stay fairly constant.
Looking forward over the next few years.
So look we can't predict home price appreciation I would tell you.
Got to stabilize at some point, it's still running hot into into January and February , but we got to believe that with mortgage rates up now at 4%.
Significant inflation and delivering new homes on a call on the homebuilding cost side it.
At some point the market is going to the price depreciation is going to slow.
So that would be that would be our prediction over time that youre not going to have 20% home price appreciation forever that is not sustainable.
And it will slow down probably in the back half of this year and into 'twenty, three but that that that won't and in some ways that might help us because there'll be an opportunity for rents to catch up.
Right, but I guess, we've had kind of been having this conversation where a couple of years at some point is going to slow.
For the year.
Just going into scale.
Do you have the internal infrastructure now in place to go from 30000 to 50000.
That ramp up quickly or would you need to do some sort of larger expansion in order to kind of get to you.
Ultimate goal.
We scaled up as being a big.
I mean, if you look at this the company has grown dramatically over the last year or two and also in head count.
In order to prepare for that growth.
We're going we're incurring right now so.
We are at a point right now where we could easily accommodate at least 2000 homes a quarter right. So we're ready there right. We did 2000 homes and in Q3 and Q4 regarding the <unk> hundred 2000 homes in Q1, we've got the team in place to accommodate that if we were to go faster than that and let's see.
I wanted to go to 3000 homes.
Obviously out the increase the hiring of gap.
Because.
Sure.
Yeah.
Attack for example, can only do three or four homes a day right. So if you add 5000 or 10000 homes you do need to add you do need to add more bodies over time. So the operations in place right now to handle the acquisitions, but I would say that over time, we do to increase the hiring in order to handle the higher volume.
And.
And so what I would I would guide to.
Is.
We're probably going to increase our head count head count by about 25%. This year right again in order to accommodate the 8000 homes.
And Thats why.
We are guiding I think in our formal comments too if you look at the overhead and the <unk> schedule.
We are guiding to about $30 million a quarter.
Throughout this year, which is a big jump from Q3, but that isn't that is to accommodate the higher head count for this growth.
Got it okay. That's it from me thanks, guys, Quebec.
Thanks, Steve.
Okay.
Your next question comes from Jonathan <unk> with TD Securities. Your line is open.
Thanks, Good morning, just on the.
If I look at your Q4 acquisitions the average rents for those houses were were about 2000.
Has there been any change in your target tenant profile.
Not really.
I mean, the rents youre seeing first of all remember we've got significant loss to lease in our portfolio right.
We've been talking about that being 15% to 20%, but that's probably conservative. So that's why when you when you see our in place rents compared to the new acquisitions, you see that big difference that is the loss that is the loss to lease.
The other factor is that in our new acquisition program under JV too and homebuilder direct where we are buying homes and price share markets that have higher rates right. So if we're buying homes in Austin or Las Vegas or Phoenix.
Sure.
Those markets do have higher home prices and commensurate with that higher rates. So that thats typically that's typically what you are saying.
Okay, So where those marks would also have higher median family income.
So that's the way to think about it.
They typically would right because.
Across the board, we are underwriting rent to income and that kind of 20% to 23% range and so thats really consistent across our markets it might be a little bit different in California, where it is much more expensive, but typically that's pretty steady across the markets.
Okay, and then just on the maintenance Capex.
Jump on an annualized basis pretty good in Q4 was there anything onetime in there or.
What do you think what's a good run rate for that going forward.
Yeah, Kevin do you want to start with that and maybe I'll continue.
Yes.
Capex one of the things that happened in Q4, as we took a proactive step.
On replacing a bunch of HVAC units that were aging out we thought it'd be better to do it on our own time versus some of these units breaking in the middle of summer in Phoenix, right, where it costs more so we replaced 60 units for the same home portfolio in Q4, as I turn $65000 so that that affected.
At about $100 a unit for the quarter.
And then on top of that we did see about a 38% increase in the number of homes, requiring some form of Capex and a lot of that is due to still coming out we're comparing against a period, where we were still slower due to the pandemic and so now we're back to full tilt and.
So the numbers of that.
The number of work orders happening, whether it's R&M or Capex has increased so that was the bigger driver and then there was there was a 7% to 8% inflation factor that went into that.
And so those were really the biggest drivers.
And then I would just add to that John I would say that as we look ahead to 2022 with the new same home portfolio, which will be re composed it will include.
Holmes from JV, one which are newer homes.
And so as a result of that we do expect that the cost to maintain on the same home portfolio will come down.
Over the course of 'twenty, two because of the introduction of newer homes and.
And that's the hope and probably say, we're probably being a high two thousands rather than the low three thousands.
Oncology, but obviously between R&M and yeah, that's R&M and recurring capex cost to maintain.
Okay. Thanks, I'll turn it back.
Thank you.
Your next question comes from Chris Coca Cola loaded with Canaccord. Your line is open.
Thanks, Good morning, everyone.
Just a quick question here on the fair value of your <unk> portfolio equates to a value of about 274000 per home I'm. Just wondering if you think that's fairly reflective of current home prices or that might be a little bit conservative.
Yes, sure, Chris and great to speak with yes, I would say we think it's more on the conservative side again, a couple of things as Gary and with Sam talked about earlier, you know you saw a meaningful ramp up in home price appreciation over the course of 2021 that we've seen continue in many markets in 2022, and our valuation models lag.
Little bit because of the nature of <unk>, which are backward looking at it and a transaction. So you see that as well and then secondarily, we are using a home by home our HPA PPO methodology. You can also look at the fair market value on a cap rate basis, which we don't do for.
For <unk> purposes, but given where you are seeing single family rental portfolios trading on that would support a higher higher for market value as well. So I think our preference is to be on the conservative side for that metric.
Just to give you more context on that Chris the implied cap rate right now in the portfolio is about four 7%.
Right. So so.
We would see thats actually very conservative compared to where we've seen private market portfolios trade.
In many cases in the low threes.
Never mind in the fours, but in the low threes and the reason for that is that when people are looking at portfolios there tends to be a significant amount of loss to lease.
So they are factoring that in and value in the portfolio and so at.
At $4 seven Thats extremely conservative, especially factoring in the loss to lease, which as we said as minimum 15% to 20%.
So theres, a pretty big Delta there between what we're seeing in the private markets and the public markets.
Okay, great much appreciate it thanks.
Thank you.
And your next question comes from Mario <unk> with Scotiabank. Your line is open.
Sorry, guys just one more quick one for me coming back to the Canadian multi row development can you just remind us of what the.
The cumulative fair value gain you've taken on that portfolio.
You have to remember that.
Maybe I can get back to you I don't have the number off top of my head, but we haven't we haven't taken that many gains most of the gains have been as the property goes through development. We think we keep it at book costs, which is what we've done in and is the property mature.
So 75% Mark we got external appraisals done.
<unk>, we've done an appraisal this year so some of the gains there, but the cumulative gains since the beginning I don't have we did $20 million. This year, yes, we're talking $20 million in the year. So.
Yes.
Mario I'll, let Sam get back even im going to guess, it's around $40 million $40 million to $50 million I don't think I don't I don't think its a huge number.
Alright, and Sam was only 5% of our construction completion.
Lisa.
Yes, we usually do in our construction completion with switching methodology from cost plus to fully externally appraised on a completion less customers.
Okay. Okay.
And there are no further questions at this time I'll turn the call back over to Gary Berman, President and CEO of Tracon residential for closing remark.
Thank you Abby I would like to thank all of you on this call for your participation. We look forward to speaking with you again in may to discuss our Q1 results.
And ladies and gentlemen. This concludes today's conference call. We thank you for your participation.
Participation and you may now disconnect.
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