Tricon Residential Inc. Common Shares

time i would like to welcome everyone to the tricon residential's fourth quarter and full year 2021 analyst conference call all lines have been placed on mute to prevent any background noise after the speaker's 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, Wojtek 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 Tricom's results for the three and 12 months ended December 31st, 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 CDAR-EDGAR and our company website. Our remarks also include references to non-IFRS 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 through our website. You can find both the webcast registration and the presentation in the Investors section of TriconResidential.com under News and Events. With that, I will turn the call over to Gary Berman, President and CEO of Tricon.

Thank you, Wojtek, and good morning, everyone. By all accounts, 2021 was a breakout year for Tricon Residential as we harnessed powerful demand trends to deliver on our business plan and implement bold strategic initiatives. None of this would have been possible without our world-class team and their commitment to excellence, integrity, and teamwork in serving our residents and communities. I cannot be prouder 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 FFO 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 same-home turnover, occupancy rent growth, and NOI margin in our single-family rental or SFR business. Our growth plan was supported by over $2 billion of new third-party equity capital commitments, making 2021 the most prolific year of fundraising in Tricon's history. From there, we completed one of the largest U.S. real estate IPOs in Canadian follow-on offerings in history, raising $570 million in gross proceeds. All this activity culminated in a monster year for our stock, with TCN 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%. And finally, above all else, we did this while staying true to who we are at the core, a people-first company. We prioritized the well-being of our residents by continuing to self-govern on renewal rent increases and by launching Tricon Vantage, a 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 $0.46, up 28% year-over-year. Our core FFO increased by 10%, while core FFO per share was $0.15, or 12% lower than the prior year. A big driver of the variance was our deleveraging process, which resulted in a diluted share count that's 24% higher than last year. Last year's number also benefited from a $7 million tax recovery, and without this item, FFO per share would have been up 7.5%, even with the higher share count. On a full-year basis, our core FFO per share and AFFO 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 2,000 single-family rental homes in what is typically a softer quarter of home sales. Tricon's 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 of 16%, and strong rank growth of 8.8% on a blended basis. We also had stellar results in private funds and advisories, new joint ventures, record Johnson development fees, and performance fees from legacy four-cell housing funds all contributed to significant year-over-year growth in core FFO from fees. And with the benefit of our US IPO, we reduced leverage to 35% net debt to assets and 7.8 times net debt to adjusted EBITDA compared to 43% and 9.8 times in Q3. Moving to slide four. In 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 Tricon. And Canadian multifamily is progressing on its development pipeline, with over 1,000 apartment units on track to be delivered in 2022. Lastly, the CELBI located in downtown Toronto achieved stabilization in Q4 with 98% occupancy rate. We're also pleased to introduce full-year guidance for the first time. Our SFR same-home NOI growth for 2022 is expected to be 7% to 9% compared to 7.2% for 2021 and to be driven by same-home revenue growth of 7% to 9% and same-home expense growth of 6.5% to 8.5%. 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%. In our guidance, we assume relatively elevated bad debt at 1.5% 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 and other expense items as we continue to navigate an inflationary environment. Second, we expect to acquire over 8,000 homes during the year as we remain focused on growth and squarely on track to reach 50,000 homes by 2024. If we assume an average acquisition price of $340,000, slightly above Q4 of $335,000, and 65% financing in our SFR joint venture vehicles, Tricon's equity requirement at a one-third share is approximately $300 million. Finally, we expect core FFO per share to be $0.60 to $0.64, 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 FFO is about 20% to 30%. This is driven by the aforementioned growth in our total SFR portfolio and same-home NOI. Relatively stable fee revenue and overhead costs 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 Tricon 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 is our longstanding practice of self-governing on renewal rent increases, with annual rent increases for existing residents typically set at rates below market. In addition, Tricon Advantage includes educational tools to help residents plan and achieve their financial goals, a credit builder tool that helps residents improve their credit scores. We are pleased to report that over 1,200 residents have enrolled in this program so far. A resident home purchase program that gives qualifying residents the first opportunity to purchase the home they're renting if Tricon and Alexa sell it. A resident emergency assistance fund, which is awarded over $350,000 to over 100 families since inception. And finally, our soon-to-be-launched resident down payment assistance program, which will provide qualifying long-term residents with a portion of their down payment should they remain in good standing and wish to buy a home. Tricon's ESG strategy is heavily focused 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 compassionate approach to serving our residents is not only the right thing to do, but also the primary reason for our high occupancy, 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 from nearly 800 homes in Q1 to over 2,000 homes in the past two quarters, bringing total acquisitions to 6,574 for 2021. At the current pace, we are well positioned to acquire over 8,000 homes in 2022 through our resale and new home channels, including deliveries from our built-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. In Q4, we also acquired resale homes through non-MLS channels such as iBuyers. You'll note that our average acquisition price is trending higher over time. This is a function of significant home price appreciation in all our markets. An expanded buy box under SFRJV2, which includes traditionally pricier 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 home builder, DirectJV. Given market rents have also been increasing, our acquisition cap rates remain healthy and are in line with our GED underwriting. And finally, we're excited about our active bill-to-rent pipeline, which now has expanded to include over 3,000 rental units in 23 new home communities across the U.S. Sun Belt. What we really like about both of our new home channels through HomeBuilder Direct and TPAS JV1 is that they provide our residents with the ability to live in a brand-new home at an accessible price point while giving us a maintenance holiday and lower upfront renovation costs. I would now like to pass the presentation over to Sam to discuss our financial results.