/NOT FOR DISTRIBUTION TO
Key Q3 2020 highlights:
- Net income increased by 74% to
$58.1 million , and diluted earnings per share increased by 53% to$0.23 year-over-year;
- Core FFO per share increased by 38% to
$0.11 (C$0.15 ) year-over-year driven by a larger single-family rental portfolio and improved operating metrics, as well as reduced corporate overhead and interest costs.
- Same home Net Operating Income ("NOI") for the single-family rental business increased by 6.3% year-over-year as a result of strong revenue growth and controlled expenses. Same home occupancy was a record 97.5%, an increase of 160 basis points year-over-year, and blended rent growth was 5.2% (comprised of new lease rent growth of 12.6% and renewal rent growth of 2.4%).
- Tricon issued exchangeable preferred units of a subsidiary to a syndicate of investors led by
Blackstone Real Estate Income Trust for aggregate subscription proceeds of$300 million . The net proceeds from this transaction were used to repay a substantial amount of Tricon's corporate credit facility, resulting in an improved net debt to assets ratio of 56.9% as atSeptember 30, 2020 (and compared to 61.3% in the preceding quarter).
- As of the end of October, Tricon collected 99% of rents billed in Q3 across its single-family rental business and 98% of rents billed in its
U.S. multi-family rental business. Less than 1% of residents requested deferral plans in the month of October, and approximately 3% of single-family residents and 1% ofU.S. multi-family residents are currently on deferral plans.
"The COVID-19 pandemic has unleashed powerful de-urbanization trends across
"Notwithstanding the strength of our single-family rental business, our
"Lastly, we took advantage of our strong overall operating fundamentals to improve our balance sheet and liquidity profile, positioning ourselves for growth in 2021. During the quarter, we closed a
Financial Highlights
For the periods ended | Three months | Nine months | |||||||||||
(in thousands of | 2020 | 2019 | 2020 | 2019 | |||||||||
Financial highlights on a | |||||||||||||
Net income, including: | $ | 58,099 | $ | 33,405 | $ | 34,935 | $ | 66,778 | |||||
Fair value gain on rental properties | 60,378 | 24,897 | 91,319 | 84,523 | |||||||||
Income (loss) from investments | 4,457 | 1,109 | (71,967) | 6,682 | |||||||||
Basic earnings per share | 0.30 | 0.17 | 0.17 | 0.40 | |||||||||
Diluted earnings per share | 0.23 | 0.15 | 0.13 | 0.38 | |||||||||
Dividends per share | $ | 0.07 | $ | 0.07 | $ | 0.21 | $ | 0.21 | |||||
Weighted average shares outstanding - basic | 194,205,434 | 195,182,431 | 194,442,337 | 165,111,005 | |||||||||
Weighted average shares outstanding - diluted | 222,822,876 | 213,371,947 | 199,340,243 | 183,413,037 | |||||||||
Non-IFRS(1) measures on a proportionate basis | |||||||||||||
Core funds from operations ("Core FFO") | $ | 24,772 | $ | 17,255 | $ | 74,773 | $ | 33,263 | |||||
Adjusted funds from operations ("AFFO") | 16,868 | 9,395 | 54,343 | 12,465 | |||||||||
Core FFO per share(2) | 0.11 | 0.08 | 0.35 | 0.18 | |||||||||
Core FFO per share (CAD)(2),(3) | 0.15 | 0.11 | 0.47 | 0.24 | |||||||||
AFFO per share(2) | 0.08 | 0.04 | 0.25 | 0.07 | |||||||||
AFFO per share (CAD)(2),(3) | 0.11 | 0.05 | 0.34 | 0.09 |
(1) Non-IFRS measures are presented to illustrate a normalized picture of the Company's performance. |
(2) Core FFO per share and AFFO per share are calculated using the total number of weighted average potential dilutive shares outstanding, including the assumed conversion of convertible debentures and exchange of preferred units issued by |
The comparative figures in the table above and throughout this news release have been recast to conform with the Company's current reporting framework under consolidation, adopted effective
Net income for the third quarter of 2020 was
- Revenue from rental properties of
$121.1 million compared to$105.7 million in the third quarter of 2019, reflecting significant growth of the single-family rental business along with improvements in average monthly rent and occupancy.
- Direct operating expenses of
$43.3 million compared to$38.8 million in the third quarter of 2019, resulting from the aforementioned growth in the single-family rental portfolio.
- Fair value gain on rental properties of
$60.4 million compared to$24.9 million in the third quarter of 2019, driven by higher home price appreciation on the single-family rental portfolio.
Core funds from operations ("Core FFO") for the third quarter of 2020 was
Adjusted funds from operations ("AFFO") for the third quarter of 2020 was
Operating Highlights
Single-family rental operating metrics in the table below and throughout this news release reflect Tricon's proportionate share of the managed portfolio and exclude limited partners' interests in the SFR JV-1 portfolio.
For the periods ended | Three months | Nine months | |||||||||||
(in thousands of | 2020 | 2019 | 2020 | 2019 | |||||||||
SINGLE-FAMILY RENTAL | |||||||||||||
Net operating income (NOI) | $ | 50,192 | $ | 44,126 | $ | 147,052 | $ | 128,372 | |||||
Same home net operating income | 66.2 | % | 65.3 | % | 66.0 | % | 65.5 | % | |||||
Same home net operating income | 6.3 | % | N/A | 5.7 | % | N/A | |||||||
Bad debt as a percentage of revenue(1) | 1.1 | % | 0.8 | % | 1.2 | % | 0.8 | % | |||||
Same home occupancy | 97.5 | % | 95.9 | % | |||||||||
Same home annualized turnover | 26.1 | % | 30.8 | % | |||||||||
Same home average quarterly rent growth | 5.2 | % | 6.2 | % | |||||||||
Net operating income (NOI) | $ | 15,114 | $ | 17,165 | $ | 47,305 | $ | 50,206 | |||||
Net operating income (NOI) margin | 55.2 | % | 59.6 | % | 56.6 | % | 58.9 | % | |||||
Bad debt as a percentage of revenue(1) | 2.5 | % | 0.9 | % | 2.0 | % | 0.9 | % | |||||
Occupancy | 92.8 | % | 95.2 | % | |||||||||
Annualized turnover | 61.8 | % | 52.9 | % | |||||||||
Average quarterly rent growth - blended | (2.0) | % | 2.1 | % |
(1) Bad debt is expressed as a percentage of gross revenue. Tricon reserves 100% of residents' accounts receivable balances that are aged greater than 30 days as bad debt. |
(2) The financial information presented in the table includes prior-year results for comparability although Tricon's |
(3) The total property results equate to same property results for the |
Single-family rental NOI was
Single-family rental same home NOI growth was 6.3% in Q3. Same home revenues increased by 4.7%, driven by higher occupancy and average monthly rent, partially offset by an increase in bad debt expense in anticipation of a higher amount of uncollectible rents as a result of the COVID-19 pandemic. Same home operating expenses increased by 1.8%, driven primarily by higher property taxes as a result of higher assessed property values and applicable tax rates.
Change in Net Assets
As at
Investment Activity
After a temporary pause in the first half of the year owing to the COVID-19 pandemic, Tricon re-started its acquisition program and purchased 388 single-family rental homes during the quarter, bringing its total managed portfolio to 21,981 homes. The Company expects to resume its pre-COVID-19 acquisition pace in Q4.
Across Tricon's Canadian multi-family developments, construction continues at The Taylor, West
Tricon recognized a significant write-down of its investments in connection with its for-sale housing business in the first quarter of this year under the context of a precipitous drop in sales in late March and uncertainty over the timing of future cash flows. Since then, sales in most projects have recovered to pre-COVID-19 levels as strong de-urbanization trends and historically-low mortgage rates have encouraged home-buying in the
Balance Sheet and Liquidity
Through a special-purpose subsidiary, Tricon completed the issuance of
As at
Tricon's liquidity consists of a
During the quarter, the Company extended several short-term debt securities, including the $111 million credit facility on the
On
On
Post Q3 Operational Update
In light of the ongoing COVID-19 pandemic, the Company provided a more current update on its rental operations.
Single-family rental
In the single-family rental business, same home occupancy for October remained stable at 97.2%. As of
July | August | September | October(1) | |||||
Same home | ||||||||
Average rent growth - renewal | 2.0 | % | 2.5 | % | 2.8 | % | 3.0 | % |
Average rent growth - new move-in | 14.3 | % | 11.5 | % | 11.8 | % | 11.5 | % |
Average rent growth - blended | 5.5 | % | 5.0 | % | 5.2 | % | 5.5 | % |
Occupancy | 97.4 | % | 97.6 | % | 97.4 | % | 97.2 | % |
Total portfolio | ||||||||
Percentage of billings collected as of | 99 | % | 99 | % | 98 | % | 96 | % |
Billings collected as a percentage of historical average | 100 | % | 99 | % | 99 | % | 97 | % |
(1) October results are preliminary since the Company continues to collect October rents. Accordingly, the number is subject to upwards adjustments. |
(2) As of |
In the
Same property | July | August | September | October(1) | ||||
Average rent growth - renewal | 1.1 | % | 1.1 | % | 1.3 | % | 2.2 | % |
Average rent growth - new move-in | (4.7) | % | (5.0) | % | (3.8) | % | (4.9) | % |
Average rent growth - blended | (1.8) | % | (2.5) | % | (1.6) | % | (1.3) | % |
Occupancy | 92.5 | % | 92.9 | % | 93.0 | % | 93.3 | % |
Percentage of billings collected as of | 98 | % | 98 | % | 97 | % | 95 | % |
Billings collected as a percentage of historical average | 98 | % | 98 | % | 97 | % | 97 | % |
(1) October results are preliminary since the Company continues to collect October rents. Accordingly, the number is subject to upwards adjustments. |
(2) As of |
Quarterly Dividend
The Company announced a dividend of
Tricon's dividends are designated as eligible dividends for Canadian tax purposes in accordance with subsection 89(14) of the Income Tax Act (
Conference Call and Webcast
Management will host a conference call at
This press release should be read in conjunction with the Company's Financial Statements and Management's Discussion and Analysis (the "MD&A") for the three and nine months ended
About
Founded in 1988, Tricon is a rental housing company focused on serving the middle-market demographic. Tricon owns and operates approximately 30,000 single-family rental homes and multi-family rental units in 21 markets across
This news release may contain forward-looking statements pertaining to expected future events (including expected future acquisitions of single-family rental homes and the ongoing impact of the current COVID-19 pandemic), financial and operating results, and projections of the Company. Such forward-looking information and statements involve risks and uncertainties and are based on management's current expectations, intentions and assumptions in light of its understanding of relevant current market conditions, its business plans, and its prospects. If unknown risks arise, or if any of the assumptions underlying the forward-looking statements prove incorrect, actual results may differ materially from management expectations as projected in such forward-looking statements. Examples of such risks are described in the Company's continuous disclosure materials from time to time, available on SEDAR at www.sedar.com. Accordingly, although the Company believes that its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
The Company has included herein certain supplemental measures of key performance, including, but not limited to, net operating income ("NOI"), funds from operations ("FFO"), core funds from operations ("Core FFO"), adjusted funds from operations ("AFFO"), Core FFO per share, and AFFO per share, as well as certain key indicators of its operating performance. The Company utilizes these measures in managing its business, including performance measurement and capital allocation, and believes that providing these performance measures on a supplemental basis is helpful to investors in assessing the overall performance of the Company's business. However, these measures are not recognized under IFRS. Because non-IFRS measures do not have standardized meanings prescribed by IFRS, Tricon's use of these measures may not be comparable to similar measures reported by other issuers and they should not be construed as alternatives to net income (loss) or cash flow from the Company's activities, determined in accordance with IFRS, in measuring the Company's performance. The definition, calculation and reconciliation of the non-IFRS measures used herein are provided in Sections 4 and 5 of the Company's MD&A for the three and nine months ended
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