Investor Presentation January 2020 - Tricon Capital
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investor Presentation January 2020
Disclaimer
General
You are advised to read this disclaimer carefully before reading, accessing or making any IFRS financial measures do not have standardized definitions prescribed by IFRS, they
other use of the information included herewith. These materials are not an offer or the are less likely to be comparable with other issuers or peer companies. A description of the
solicitation of an offer to purchase any securities or make any investment. This non-IFRS measures used by the Company in measuring its performance is included in its
presentation includes information about Tricon Capital Group Inc. and its subsidiaries and Management Discussion and Analysis available on the Company’s website at
investees (together, the “Company”) as of September 30, 2019, unless otherwise stated. www.triconcapital.com and on SEDAR at www.sedar.com.
These materials should be reviewed in conjunction with the Company’s Financial
Statements and Management Discussion and Analysis for the periods ending September This presentation may contain information and statistics regarding the markets in which
30, 2019 and are subject to the detailed information and disclaimers contained therein. All the Company and its investees operate. Some of this information has been obtained from
dollar amounts are expressed in U.S. Dollars unless otherwise stated. market research, publicly available information and industry publications. This information
has been obtained from sources believed to be reliable, but the accuracy or completeness
The Company measures the success of its business in part by employing several key of such information has not been independently verified by the Company and cannot be
performance indicators that are not recognized under IFRS. These indicators should not guaranteed. Disclosure of past performance is not indicative of future results.
be considered an alternative to IFRS financial measures, such as net income. As non-
Forward-Looking Statements
This presentation may contain forward-looking statements and information relating to These statements are based on management’s current expectations, intentions and
expected future events and the Company’s financial and operating results and projections, assumptions which management believes to be reasonable having regard to its
including statements regarding the Company’s growth and investment opportunities and understanding of prevailing market conditions and the current terms on which investment
the performance goals and expectations of its investees, including, in particular, targeted opportunities may be available.
returns and growth projections, that involve risks and uncertainties. Such forward-looking
information is typically indicated by the use of words such as “will”, “may”, “expects” or Projected returns and performance fees are based in part on projected cash flows for
“intends”. The forward-looking statements and information contained in this presentation incomplete projects. Numerous factors, many of which are not in the Company’s control,
include statements regarding the Company’s strategic priorities; expected or targeted and including known and unknown risks, general and local market conditions and general
investment returns and performance including project timing and cash flow; the ability of economic conditions (such as prevailing interest rates and rates of inflation) may cause
the Company to generate fee income from investments and the quantum of these fees; actual investment performance and fee income to differ from current projections.
the ability to attract third-party investment; the timing and availability of new investment Accordingly, although we believe that our anticipated future results, performance or
opportunities and pace of TAH home acquisitions; the proposed acquisition of Block 10; achievements expressed or implied by the forward-looking statements and information are
future net income from investments; the funding of financing at The Selby; FFO growth based upon reasonable assumptions and expectations, the reader should not place undue
and the potential drivers of that growth; expectations for the growth in the business; the reliance on forward-looking statements and information. If known or unknown risks
availability and quantum of debt reduction opportunities and the Company’s ability to avail materialize, or if any of the assumptions underlying the forward-looking statements prove
itself of them; and improvements to the Company’s financial reporting. In regards to the incorrect, actual results may differ materially from management expectations as projected
targets presented on pages 18-21, 2019 Targets assume that future performance will be in such forward-looking statements. Examples of such risks are described in the
materially consistent with performance for the first half of 2019, though there can be no Company’s continuous disclosure materials from time-to-time, as available on SEDAR at
assurance this will be the case. 2022 Targets are based on the assumed impact of the www.sedar.com. The Company disclaims any intention or obligation to update or revise
growth drivers listed and the assumption that other drivers of FFO performance will not any forward-looking statements, whether as a result of new information, future events or
deteriorate over the relevant period. There can be no assurance that these growth otherwise, unless required by applicable law.
objectives will be realized or that actual performance will align with the Company’s targets.
1
Tricon is a residential real estate company primarily TSX: TCN
focused on rental housing in North America, with
$7.9 billion (C$10.5 billion) of assets under management
Single-Family Rental Multi-Family Rental For-sale Housing
Atlanta, GA
The James, Toronto, ON Viridian, Arlington, TX
The Reserve at Alafaya,
Charlotte, NC The Selby, Toronto, ON Orlando, FL Cross Creek Ranch Houston, TX
The above photos may not be representative of all Tricon investment properties.
2
Our mission is to provide quality housing for families TSX: TCN
across North America and to generate strong risk-adjusted
returns for our public and private investors
1988 Founded 19,962 Single-Family
Rental (“SFR”)
C$2.0B Market
Capitalization
Homes
Dividend Yield
2010 Listed (TSX) 7,289 Stabilized
Multi-Family 2.6% (C$0.07/Quarter)
Rental Apartments
1
Multi-Family
31 Years of Investing
In Communities ~3,600 Rental Apartments 19% Annualized Growth
In Book Value Per
Under Development Share Since Entering
SFR In 2012
All data presented as at November 30th , 2019, All figures in U.S. dollars unless otherwise indicated.
1. Annualized growth in book value per share is calculated based on CAD book value since Tricon entered the Single Family Rental sector in Q1 2012.
3
Our Strategic Vision
Tricon generates predictable cash flow from rental assets and enhances its investment returns with
contractual fees earned from managing third-party capital
Rental Income Contractual Fees
Earned from Managing
Third-party AUM across
Single-Family Rental Multi-Family Rental
all Business Verticals
Centralized Management Office Diverse Fee Streams
Call Centre Human Resources Asset Management Fees
Resident Underwriting Accounting Development Fees
Technology and Innovation Finance Property Management Fees
Procurement Legal Performance Fees
4
Our Portfolio Composition
Tricon currently manages $7.9 billion of AUM, including $5.6 billion of principal investments
and $2.3 billion on behalf of third-party investors
$7.9B AUM
30% Third-Party 70% Principal
Canada $0.7B $3.6B
8% Portfolio of 19,962 rental homes
Single-
Family generating ~$85M of Core FFO
Rental
Joint venture with two leading
Recurring cash flow
U.S. institutional investors to acquire
90% ~10,000 homes Increase
U.S.
92% Balance
Sheet
Geography Exposure
$0.4B $1.6B
Multi- Portfolio of 7,289 apartment units in
For-Sale Family the Sun Belt generating ~$28M of
Housing Rental Core FFO + ~3,600 development
20%
units in Toronto
Single- Third-party managed assets generating
Multi-
Family
Family ~$33M of annualized fee revenue and
Rental
Rental
55%
25% $1.2B projected to generate ~$88M of
For-sale performance fees over 8 to 10 years1
cash flow
Episodic
Housing Reduce
Land and homebuilding development
Business Verticals assets projected to generate ~$600M Balance
$0.4B Sheet
of cash to Tricon over 8−10 years
Exposure
1. Annualized fees based on Q3 2019 performance. Performance fees are based on current project plans. Realized fees may vary.
5
The Case for Investing in Rental Housing
The U.S. is facing a shortage of new affordable housing as many developers struggle to deliver entry level
homes; we see a compelling case for investing in existing housing stock and providing affordable rental
product with exceptional customer service
U.S. Residential Permits and Building Intensity
2,500 8
Building Intensity 7
2,000 is below prior
Recession
Housing Permits (Thousands)
recession levels 6
Building Intensity
5
1,500
4
1,000
3
2
500
1
– –
1980 1990 2000 2010 2020-P
Multi-Family Permits Single-Family Permits
39-Year Average Total Residential Permits Building Intensity (Annualized Housing Starts Per 1,000 Persons)
Source: John Burns Real Estate Consulting
6
Millennials Driving Housing Demand
Housing demand is being driven by Millennials forming new households with a higher
propensity to rent than their Boomer parents
Millennials are a larger
103M Millennials cohort entering prime
years of household 72M Baby Boomers
formation, with a higher
46% Homeownership propensity to rent 77% Homeownership
Rate Rate
(~ 10% lower today than in
1982 for 35-39 year olds)
5.5
5.0
4.5
4.0
U.S. Population (Millions)
3.5
3.0
2.5
2.0
1.5
1.0
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75
Age (Years)
Source: John Burns Real Estate Consulting
7
The U.S. Sun Belt - A Vast Residential Market Opportunity
The U.S. Sun Belt is home to about 40% of all U.S. households, and is expected to see
60% of the growth in U.S. households over the next decade
Projected population
growth in the next 10 years EDMONTON
CALGARY
10%− VANCOUVER
10% to 20%
TORONTO
20%+
Tricon Investments
RENO INDIANAPOLIS
RENO
Tricon American Homes NORTHERN CALIFORNIA DENVER
DENVER
LAS VEGAS
Single-Family Rental LAS
SOUTHERN VEGAS
CALIFORNIA RALEIGH
NASHVILLE
CHARLOTTE
SOUTHERN CALIFORNIA NASHVILLE
Tricon Lifestyle Rentals DALLAS-FORT WORTH COLUMBIA
ATLANTA
ATLANTA
Multi-Family Rental PHOENIX
PHOENIX DALLAS-FORT
AUSTIN WORTH
Tricon Housing Partners SAN ANTONIO
AUSTIN
JACKSONVILLE
HOUSTON
ORLANDO
For-Sale Housing SAN ANTONIO
HOUSTON TAMPA
SOUTHEAST FLORIDA
Source: John Burns Real Estate Consulting
8
Focus on the Middle Market
Tricon’s rental businesses are focused on the middle market, an addressable market of over
11 million households that possess strong long-term rentership fundamentals
7M RENTERS
37M $1,800+ Monthly Rent
HOUSEHOLDS • Temporary renters
>$100K • Higher turnover
• Higher ownership rate
$100K
Rent % of Household Income HOUSEHOLD INCOME
11.4M RENTERS
34M $1,000 − $1,800 Monthly Rent
HOUSEHOLDS • Long-term residents
30% HUD1
threshold
$60K − $100K • Lower turnover
Income cushion • Stable cash flow
~20%
avg. rent to income of ~$7,000 per
across the TAH & year
TLR US rental portfolio
$60K
25.8M RENTERS
53M < $1,000 Monthly Rent
HOUSEHOLDS • Higher eviction ratesOur People
A dynamic, high-performing team of industry leaders and housing experts leading a team
of ~700 dedicated employees
Toronto / San Francisco
26
Investment Team &
Tricon Development Group
Gary Berman Wissam Francis David Berman Geoff Matus Jonathan Ellenzweig Andy Carmody
57
Finance, Accounting,
President & CEO EVP & Chief Financial Officer Executive Chairman
& Co-Founder
Co-Founder Senior Managing Director Managing Director
Tax and Legal Team
Houston
107 Andrew Joyner Kevin Baldrige Andrew Gray Larry Johnson David Veneziano Wojtek Nowak
Johnson Development Corp. Managing Director President, President, President, EVP & General Counsel Managing Director,
Tricon American Homes Tricon Development Group The Johnson Companies LP Capital Markets
Orange County /
Local Field Offices
505
Tricon American Homes Evelyne Dubé Douglas Quesnel Sandra Pereira David Mark Gina McMullan Geoffrey Gakundi
Managing Director, Chief Accounting Officer SVP, Head of Tax Services Managing Director, Finance Vice President, Controller,
Private Funds Corporate Accounting Private Funds
10Tricon American Homes
An owner and operator of single-family rental homes focused on the U.S. Sun Belt
$3.6B $0.7B 19,962 $1,403 6.1% 10.0%
Principal Investments Third-Party AUM Total Homes Avg. Monthly Rent Blended Rent Growth Same Home NOI Growth
Our
20,000th
Home
Atlanta, GA Houston, TX Charlotte, NC
Jacksonville, FL Columbia, SC Atlanta, GA
Jacksonville, FL
Note: Homes depicted may not represent all homes in the portfolio.
11Strong Performance Metrics at TAH
TAH’s service-oriented and technology-enabled platform continues to drive strong operating results
Total Portfolio
Blended Rental Growth Annualized Turnover Number of Homes, NOI Margin and NOI1
$60.0M
16,766 17,442 18,131 19,080 19,962
9.5% on new leases
4.7% on renewals 29.2% 64.5% 64.7% 65.1% 64.7%
27.7% 28.0% 60.9%
23.6% $49.7M
6.7% 6.4% 20.8% $47.1M
6.2% 6.1%
5.7% $45.0M
$43.7M
$41.4M
$37.2M
$30.0M
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
Same Home Portfolio
Same Home NOI Growth1 Same Home NOI Margin Components % of
(in millions of U.S. dollars) Q3 2019 Revenue
11.6% Revenue $59.5
9.3% 10.0%
Repair, Maintenance & Turnover 4.7 8.0%
8.6%
8.0%
Property Taxes 9.2 15.5%
Property Management Fees 4.2 7.1%
Other Expenses 2.5 4.2%
Total Operating Expenses 20.6 34.8%
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Net Operating Income $38.8 65.2%
1. All NOI metrics exclude impact of hurricanes.
12TAH: Delivering on the Acquisition Plan
TAH is on track to acquire ~3,000 homes this year with buying activity accelerating into the summer months;
TAH’s upfront renovation program is designed to minimize deferred maintenance issues and
provide residents with a consistent high quality product
INDIANAPOLIS
Acquisitions Upfront Renovations
173,721
New Q3 MLS homes Chimney
filtered by Roof
proprietary TriAD platform
Attic
14,168 Gutters
Underwritten homes
Bathrooms
1,850
Offers Plumbing
Windows
Paint
918
Purchased Siding
in Q32
Air Conditioning
Planned acquisition pace of 700−900
homes per quarter with the TAH JV1
Curb
Appeal
Q3 Total
Portfolio Metrics Acquisitions Portfolio
Flooring
Average Sq. Ft. 1,642 1,612 Foundation/
Electrical Heating Water
Appliances
Average Monthly Rent $1,462 $1,403 Insulation Heater
Average Monthly Rent / Sq. Ft. $0.89 $0.87
1. Refer to the general disclaimer on page 1.
2. Includes homes purchased through MLS and other channels.
13Industry Leading Technology Platform
Innovative technology is at the core of TAH operations – from acquisition of homes to leasing
and customer service
Cloud
Cellular Broadband
Computing
Mobility Networking
and Analytics
Proprietary TriAD platform filters over
Home 1 million MLS listing/yr based on 90 point Revenue Balancing rent vs. occupancy and
Acquisitions criteria with ability to issue a purchase Optimization time on market
agreement in under five minutes
Coded lock boxes allow for secure and 3D imaging captures and
Self Home
efficient showings at times that are Documenting
documents key components of
Showings
convenient for the potential resident the home
TriOPS platform enables real-time data
sharing by field staff and head office
Automated lease application, Repair &
Leasing resident underwriting and Maintenance Mobile inventory management for
rental payment options maintenance techs
Roof diagnosis using drones
14Tricon Lifestyle Rentals – Canada
Tricon’s multi-family development and rental business, operated through an in-house investment,
development and asset management platform
$0.2B $0.4B ~3,100 ~500 73%
Principal Investments Third-Party AUM Suites Under development Suites in Lease-up The Selby Lease-up
(112 leases signed during Q3;
$3.75 Average In-Place Rent PSF1)
Cost to date
$338M
$36M
The Selby The Taylor The James Remaining Costs (TCN share
$1,088M 2 = ~30% or ~$11M)
(mostly
funded by
construction
loans)
3
Funding Status Projected Annual FFO
Upon Stabilization
West Don Lands Gloucester 7 Labatt
1. As of September 30th, 2019.
2. Based on current project plans, which are subject to change.
3. Calculated on a total portfolio basis and based on target development yield of 5.25% on cost, with assumed financing of 65% loan-to-cost and interest rate of 3.5%; Tricon’s equity stake in the portfolio is approximately 30%.
There can be no assurance that actual performance will align with these projections.
15Tricon Lifestyle Rentals – U.S.
An owner of multi-family garden-style apartment buildings focused on the U.S. Sun Belt
~$1.3B 23 7,289 966 SF $1,240 $1.28 2012
Market Value1 Properties Total Units Avg. Unit Size Avg. Monthly Rent Avg. Monthly Rent / SF Average Vintage
Falls at Eagle Creek, Houston, TX The Allure, Austin, TX The Reserves at Alafaya, Orlando, FL
The Callie, Dallas, TX Carrick Bend, Denver, CO Altis at Sand Lake, Orlando, FL
Note: Representative images are of select units and may not represent all properties.
1. Market value reflects IFRS fair value of investment properties as at September 30, 2019.
16Tricon Housing Partners
A leading equity investor in For-Sale Housing across North America, with a fully-integrated investment
management and development platform via Johnson Development
$0.4B $1.2B ~$600M 78,900
Principal Investments Third-Party AUM Projected distributions to Planned residential units across 18
Tricon over 8-10 years Johnson communities
Cross Creek Ranch, Houston, TX Viridian, Dallas, TX Rockwell, San Francisco, CA
Massey Tower, Toronto, ON Vida, San Francisco, CA 1101 El Camino, Mountain View, CA
17FFO Growth Drivers
Targeting annual compounded growth of 10% in FFO per Share
Target FFO per Diluted Share1 Selected Growth Drivers 1
1 Single-Family Rental
$8M $108M
$24M
10%+ $76M
Target Compounded
Annual Growth Rate
Q3 2019 FFO Impact of 4.5% Impact of Illustrative FFO
Annualized Same Home NOI Completing Run-Rate in + $0.15
Growth JV-1 Acquisitions 2022 FFO Per Share 3
2 U.S. Multi-Family Rental
$6M $33M
$27M
$0.50 to $0.55
$0.37 to $0.40
(C$0.66 to C$0.72)
(C$0.48 to C$0.52)
Q3 2019 FFO Impact of 3.0% Same Illustrative FFO + $0.03
Annualized Property NOI Growth Run-Rate in 2022 FFO Per Share 3
3 Contractual Fees
$42M
$10M
2019 Target 2022 Target
2
$32M
Q3 2019 FFO Impact of Adding $1B of Illustrative FFO + $0.05
Annualized Third-Party AUM Run-Rate in 2022 FFO Per Share 3
1. Refer to the Forward-Looking Statements in Page 1. at 1% Fee
2. Q3 2019 annualized FFO excludes performance fees.
3. FFO per share impact is calculated as the additional FFO divided by 215 million diluted weighted average shares outstanding
18Targeted Asset Mix
Targeting higher contribution from predictable income streams and third-party capital
Current 2022 Target 3 Drivers
FFO Contribution 1 26% 20% • Completing TAH JV – 1
5%
investment program
Single-Family Multi-Family 49% 55%
Rental 2 8%
Rental 2
20%
• Assumed syndication of 50%
Contractual Fees Residential 17% of the U.S. Multi-Family
Developments
Portfolio
• Completion of Canadian Multi-
Family development projects,
19% 10% -15%
Balance Sheet including The Selby, The
Assets Taylor, Gloucester, and WDL-
81%
Block 8/20
Rental 2 Development 85% - 90%
• Reducing THP balance sheet
exposure by half
• Selling remaining TLR U.S.
30%
45% non-core asset (The Maxwell)
AUM
Principal Third-Party 70% 55%
1. Current FFO per vertical (before corporate overhead) is based on Q3 2019 funds from operations as disclosed in Section 6 of the MD&A.
2. Rental portfolio include single-family rental, U.S. multi-family rental and stabilized Canadian multi-family rental portfolios.
3. Refer to the Forward-Looking Statements in Page 1.
19Strategic Priorities1
• Continue to transform Tricon into a residential real estate company primarily focused
Grow FFO per on rental housing, providing stable, predictable income for shareholders
Share • Target 10%+ compounded annual growth rate in FFO per Share
• Raise third-party capital in all business verticals to enhance scale, improve operational
Increase Third-Party efficiency, and drive return on equity with incremental fee income
AUM • Add new third-party equity capital commitments of $1B+ over three years and generate
fee income that largely covers Tricon’s corporate overhead
Grow Book Value • Build shareholder value by deploying the majority of our free cash flow into accretive
per Share growth opportunities focused largely on rental housing
• Minimize corporate-level debt while maintaining prudent and largely non-recourse
leverage at the subsidiary level
Reduce Leverage • Pursue look-through leverage target of 50-55% net debt to assets, largely by
reducing debt using THP cash flows
• Adopt financial disclosure practices that reduce complexity and improve comparability
Improve Reporting of results with real estate peers
1. There can be no assurance that these objectives will be achieved in line with the Company’s current expectations, or at al l.
20Performance Dashboard1
Grow FFO per Share4 Increase Third-Party AUM Grow Book Value per Share
Target 10%+ compounded Target raising $1.0B+ in fee-bearing 19% annualized growth since 2012
annual growth capital over the next 3 years
C$11.04
C$0.66 to C$0.73
($0.50 to $0.55)
67%
~$3.3B +
$2.3B C$3.38
C$0.15
C$0.09 ($0.11)
($0.07)
2012 2013 2014 2015 2016 2017 2018 Q3'19
Q3 2018 Q3 2019 2022 FY Q3 2019 2022
Target Target Book Value per Share does not fully capture the value from:
• Private Funds & Advisory fee stream ($11.3M in Q3/19)
• Embedded growth in underlying investments
Reduce Leverage2 Improve Reporting
Current Corporate Total Current Targeted Look-Through
Leverage Look-Through Leverage3 Leverage of 50-55%
✓
□ Adopt more conventional company-
wide real estate performance metrics,
14% Working towards
39% 45-50% such as FFO per share
the syndication of
wholly-owned THP □ Adopt comprehensive ESG plan
86% 61% 50-55% and TLR U.S.
investments • Review financial disclosure practices
vs. real estate peers
Equity Debt Equity Debt
1. Refer to Page 1.
2. All debt figures are presented net of cash and exclude Tricon’s outstanding 5.75% convertible debentures.
3. Includes Tricon’s share of THP net asset value.
4. USD/CAD exchange rates used are 1.32 at September 30, 2019 and going-forward;1.29 at September 30, 2018.
21Gary Berman Wissam Francis Wojtek Nowak
President and Chief Executive Officer Executive Vice President Managing Director, Capital Markets
and Chief Financial Officer
416.928.4122 416.323.2484 416.925.2409
gberman@triconcapital.com wfrancis@triconcapital.com wnowak@triconcapital.com
www.triconcapital.comYou can also read
