Tricon Residential Inc. Common Shares

Good morning. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to the Tricon residential second quarter 2023 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, simply press star one again. I'd now like to hand the conference over to your speaker today, Wojciech Nowak, Managing Director of Capital Markets. Thank you. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us to discuss Tricon's second quarter results for the three and six months ended June 30th, 2023, which were shared in the news release distributed yesterday. I would 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, as well as a supplementary package on our website. Our remarks also include references to non-GAAP 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 slide presentation that you can follow along by joining our webcast or you can access directly to our website. You can find both the webcast registration and the presentation in the investor section of TriconResidential.com. under news and events. With that, I will turn the call over to Gary Berman, President and CEO of Tricom.

Thank you, Wojtek, our very own Top Gun, and good morning, everyone. During the second quarter, we continued to benefit from exceptional demand for our homes and solid operating performance, which in turn led to strong financial results for our company. These results would not be possible without the efforts of our dedicated employees. I want to thank all of you for your commitment to excellence, integrity, and teamwork in serving our residents and communities. Let's turn to slide two so I can share with you our key takeaways for today's call. First, we delivered another great quarter of operational performance with same-home NOI growth of 6.3%, NOI margin of 68.3%, occupancy of 97.5%, turnover of 19.2%, and consistently strong blended rent growth of 7.4%. Second, we remain focused on process improvement and cost containment and successfully reduced our cost to maintain by 5% year-over-year. Third, we continue to grow responsibly, achieving our target of acquiring 805 homes during the quarter at a high 5% to 6% cap rate. We also successfully closed the securitization transaction July at a weighted average yield of 5.86%. This represents a relatively attractive cost of financing that is in line with our acquisition cap rates for SFR homes in the current market environment. The transaction also helps to reduce our floating rate exposure and term out our debt maturity profile. Looking ahead to the second half of the year, we plan to slow acquisitions to about 400 homes per quarter in order to complete the investment programs for our active joint ventures with lower overall leverage while selectively buying homes at higher cap rates. We've also tightened our full year guidance for core FFO per share to 55 to 58 cents, and same home NOI growth to 6 to 7%. And finally, when debt financing conditions do improve, we are well positioned to grow faster with about 60 million of annualized AFFO less dividends, 462 million of liquidity, and most importantly, strong interest from private, institutional, and capital to invest in SFR. Turning to slide three. Let's step back for a minute to put our SFR business in perspective. Demand for housing is outstripping supply, and with skyrocketing 30-year mortgage rates, the case for rental has never been more compelling. In fact, owning a single-family starter home today costs $1,000 more per month than renting the same home, making renting with Tricon an affordable and attractive option for many American families. We serve the need for rental housing by acquiring single-family homes, renovating them to a high standard, and providing a hassle-free lifestyle for our residents. Our acquisition program, in essence, responds to the demand we see every day for accessible housing alternatives. So let's now turn to slide four to talk about the acquisition opportunity. Within our target market, prices of homes that meet our buy box have declined by roughly 4% year over year, while rents have increased by about 1%. Taken together, the combination of moderated home prices and slightly higher rents has led to an expansive tap rate by about 25 basis points compared to last year. At the same time, MLS listing volume in our markets has declined by about 30% compared to last year, given homeowners' reluctance to sell and forego their attractively priced in-place mortgages. As a result, the buying opportunity is smaller than it was a year ago, but it's improving seasonally as we get into the summer months. Listing volumes have increased by over 90% from December lows, which provides us with ample opportunity to achieve our acquisition targets. With that being said, we intend to slow our pace of acquisitions in the back half of the year to approximately 400 homes per quarter as shown on slide five. We've made the decision with our joint venture partners to complete the investment programs of JV2 and HomeBuilder Direct with overall loan to value targets of 55 to 60% rather than 60 to 65% previously. This means we will buy fewer homes but still invest the same amount of equity. By slowing the pace of acquisitions, we can be even more selective in pursuing high cap rates without sacrificing our home quality or location. We've seen that the securitization market is much more receptive to debt instruments that feature lower LCVs, which should translate to lower financing rates and better execution, as demonstrated by our latest securitization transaction. Interestingly, With this shift towards the lower leverage model in our JVs, we're seeing a convergence between private and public markets' appetite for leverage, which makes our strategic capital model all the more compelling for public shareholders. Lastly, on slide six, I'd like to share with you an update on our Canadian multifamily built-to-core portfolio that continues to evolve and see new milestones. Our latest project at Taylor was recently awarded Development of the Year in recognition of its resort quality amenities. exceptional living spaces, and sustainability leadership, among other features. The building is three months ahead of its original leasing schedule, achieving 89% lease-up by the end of June, with average monthly rents of $4.63 Canadian per square foot. The Selby, our fully stabilized building, is also performing very well, with blended rent growth of 7% this quarter and occupancy of 97.8%. I'm also delighted to announce that our latest project, which will access Toronto's much needed housing supply, both market rate and affordable apartments. The City of Toronto selected Cricon and our partner Kilmore Group to develop and operate a 725 unit purpose-built rental apartment community in Toronto's Etobicoke City Centre neighbourhood, which will include 30% affordable units. Cricon now has nine projects totaling 5,000 plus units in pre-construction or active construction. As this portfolio stabilizes over the next few years, we estimate it will have a gross asset value close to $3.2 billion Canadian, creating a lot of strategic optionality for Tricon. Moreover, the book value of our stake in this portfolio is expected to double from $0.94 to $1.90 per share upon stabilization over the next three or so years, creating meaningful value for our shareholders. With that, I'll now turn it over to our CFO with Sam Francis to discuss our financial results.