UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2023
Commission File Number 001-40889
 
TRICON RESIDENTIAL INC.
(Exact name of Registrant as specified in its charter)
 
N/A
(Translation of Registrant’s name)
7 St. Thomas Street, Suite 801
Toronto, Ontario, Canada M5S 2B7
(416) 925-7228
(Address and telephone number of registrant’s principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F   ☐             Form 40-F  ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐
INCORPORATION BY REFERENCE
Exhibits 99.1 and 99.2 of this Form 6-K are incorporated by reference as additional exhibits to the registrant’s Registration Statement on Form F-10 (File No. 333-260043).
 
DOCUMENTS INCLUDED AS PART OF THIS REPORT


 




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   Tricon Residential Inc.
Date: November 7, 2023   By: /s/ David Veneziano
    Name: David Veneziano
    Title: EVP, Chief Legal Officer and Corporate Secretary





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CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
Unaudited (in thousands of U.S. dollars)
NotesSeptember 30, 2023December 31, 2022
Assets
Non-current assets
Rental properties4$12,122,107 $11,445,659 
Equity-accounted investments in multi-family rental properties521,078 20,769 
Equity-accounted investments in Canadian residential developments6118,327 106,538 
Canadian development properties7159,902 136,413 
Investments in U.S. residential developments8154,814 138,369 
Restricted cash142,673 117,300 
Goodwill29,726 29,726 
Deferred income tax assets1080,017 75,062 
Intangible assets5,630 7,093 
Other assets108,350 96,852 
Derivative financial instruments164,897 10,358 
Total non-current assets12,947,521 12,184,139 
Current assets
Cash172,787 204,303 
Amounts receivable38,671 24,984 
Prepaid expenses and deposits23,348 37,520 
Total current assets234,806 266,807 
Total assets$13,182,327 $12,450,946 
Liabilities
Non-current liabilities
Long-term debt14$5,062,495 $4,971,049 
Due to Affiliate15260,977 256,824 
Derivative financial instruments1632,097 51,158 
Deferred income tax liabilities10622,104 591,713 
Limited partners' interests in single-family rental business2,275,349 1,696,872 
Long-term incentive plan2125,795 25,244 
Performance fees liability2240,343 39,893 
Other liabilities33,471 30,035 
Total non-current liabilities8,352,631 7,662,788 
Current liabilities
Amounts payable and accrued liabilities205,359 138,273 
Resident security deposits83,874 79,864 
Dividends payable1815,834 15,861 
Current portion of long-term debt14624,962 757,135 
Total current liabilities930,029 991,133 
Total liabilities9,282,660 8,653,921 
Equity
Share capital192,121,953 2,124,618 
Contributed surplus25,682 21,354 
Cumulative translation adjustment6,684 6,209 
Retained earnings1,741,413 1,638,068 
Total shareholders' equity3,895,732 3,790,249 
Non-controlling interest3,935 6,776 
Total equity3,899,667 3,797,025 
Total liabilities and equity$13,182,327 $12,450,946 
                            

The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Approved by the Board of Directors
David Berman                    Michael Knowlton
Page 2 of 42


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited (in thousands of U.S. dollars, except per share amounts which are in U.S. dollars, unless otherwise indicated)
For the three months ended
For the nine months ended
NotesSeptember 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Revenue from single-family rental properties11$202,571 $170,769 $588,537 $464,692 
Direct operating expenses (67,298)(54,464)(194,407)(150,718)
Net operating income from single-family rental properties135,273 116,305 394,130 313,974 
Revenue from strategic capital services12$8,960 $112,470 $34,831 $145,268 
Income from equity-accounted investments in multi-family rental properties5179 169 529 499 
Income from equity-accounted investments in Canadian residential developments62,442 3,621 2,734 3,508 
Other income13730 5,448 322 8,869 
Income from investments in U.S. residential developments810,492 5,680 23,847 12,987 
Compensation expense21(20,960)(25,859)(63,182)(76,848)
Performance fees expense22(163)(4,375)(700)(32,056)
General and administration expense(22,174)(14,048)(59,625)(40,828)
Gain (loss) on debt modification and extinguishment
    14
1,326 (6,816)1,326 (6,816)
Transaction costs(5,176)(3,658)(13,173)(11,359)
Interest expense17(80,475)(60,094)(236,221)(142,812)
Fair value gain on rental properties473,261 107,166 208,907 802,573 
Fair value loss on Canadian development properties7— (1,314)— (440)
Realized and unrealized gain on derivative financial instruments(1)
1630,456 31,866 20,777 158,991 
Amortization and depreciation expense
   
(4,522)(3,853)(13,067)(10,844)
Realized and unrealized foreign exchange (loss) gain
(62)623 69 662 
Net change in fair value of limited partners’ interests in single-family rental business(38,819)(42,318)(118,543)(246,553)
(53,465)(7,762)(246,000)419,533 
Income before income taxes from continuing operations$90,768 $221,013 $182,961 $878,775 
Income tax recovery (expense) - current10163 29,860 (1,737)28,294 
Income tax expense - deferred10(9,806)(72,087)(23,930)(183,578)
Net income from continuing operations$81,125 $178,786 $157,294 $723,491 
Income before income taxes from discontinued operations
   3, 5
— 2,277 — 37,889 
Income tax expense - current
3
— (45,094)— (45,094)
Income tax expense - deferred
3
— 40,482 — 40,482 
Net income from discontinued operations— (2,335)— 33,277 
Net income$81,125 $176,451 $157,294 $756,768 
Attributable to:
Shareholders of Tricon80,156 175,591 152,450 753,773 
Non-controlling interest969 860 4,844 2,995 
Net income$81,125 $176,451 $157,294 $756,768 
Other comprehensive income
Items that will be reclassified subsequently to net income
Cumulative translation reserve(5,161)(15,812)475 (19,714)
Comprehensive income for the period$75,964 $160,639 $157,769 $737,054 
Attributable to:
Shareholders of Tricon74,995 159,779 152,925 734,059 
Non-controlling interest969 860 4,844 2,995 
Comprehensive income for the period$75,964 $160,639 $157,769 $737,054 
Basic earnings per share attributable to shareholders of Tricon
Page 3 of 42


Continuing operations20$0.29 0.65 $0.56 2.63 
Discontinued operations20— (0.01)— 0.12 
Basic earnings per share attributable to shareholders of Tricon$0.29 $0.64 $0.56 $2.75 
Diluted earnings per share attributable to shareholders of Tricon
Continuing operations20$0.18 0.49 $0.48 1.87 
Discontinued operations20— (0.01)— 0.11 
Diluted earnings per share attributable to shareholders of Tricon$0.18 $0.48 $0.48 $1.98 
Weighted average shares outstanding - basic20273,810,276 274,710,065 273,738,512 274,474,675 
Weighted average shares outstanding - diluted20310,497,125 311,910,445 310,341,448 312,023,897 
(1) The Company reclassified realized gains on interest rate caps for the three and nine months period ended from Other income to Realized and unrealized gains on derivative financial instruments.
The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Page 4 of 42


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited (in thousands of U.S. dollars)
Notes Share capital Contributed surplus Cumulative translation adjustment Retained earnings Total shareholders' equity Non - controlling interest Total
Balance at January 1, 2023$2,124,618 $21,354 $6,209 $1,638,068 $3,790,249 $6,776 $3,797,025 
Net income— — — 152,450 152,450 4,844 157,294 
Cumulative translation reserve— — 475 — 475 — 475 
Distributions to
non-controlling interest		— — — — — (7,685)(7,685)
Dividends/Dividend
reinvestment plan
18, 19
3,315 — — (47,468)(44,153)— (44,153)
Repurchase of common shares
19
(7,112)— — (1,637)(8,749)— (8,749)
Stock-based compensation
19, 21
1,241 5,786 — — 7,027 — 7,027 
Shares reserved for
restricted share awards		19(109)— — — (109)— (109)
Tax adjustment for equity issuance costs10— (1,458)— — (1,458)— (1,458)
Balance at September 30, 2023$2,121,953 $25,682 $6,684 $1,741,413 $3,895,732 $3,935 $3,899,667 
Balance at January 1, 2022$2,114,783 $22,790 $22,842 $893,379 $3,053,794 $7,275 $3,061,069 
Net income— — — 753,773 753,773 2,995 756,768 
Cumulative translation reserve— — (19,714)— (19,714)— (19,714)
Distributions to
non-controlling interest		— — — — — (5,040)(5,040)
Dividends/Dividend
reinvestment plan
18, 19
3,523 — — (47,618)(44,095)— (44,095)
Stock-based compensation
19, 21
739 2,866 — — 3,605 — 3,605 
Preferred units exchanged
15, 19
8,015 — — — 8,015 — 8,015 
Shares reserved for
restricted share awards		(102)— — — (102)— (102)
Tax adjustment for equity issuance costs— (1,457)— — (1,457)— (1,457)
Balance at September 30, 2022$2,126,958 $24,199 $3,128 $1,599,534 $3,753,819 $5,230 $3,759,049 
The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Page 5 of 42


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (in thousands of U.S. dollars)
For the three months ended
For the nine months ended
NotesSeptember 30, 2023September 30, 2022September 30, 2023September 30, 2022
CASH PROVIDED BY (USED IN)
Operating activities
Net income$81,125 $176,451 $157,294 $756,768 
Net (income) loss from discontinued operations
3
— 2,335 — (33,277)
Adjustments for non-cash items26(52,130)(10,569)(63,810)(463,820)
Cash paid for AIP, LTIP and performance fees, net of equity contribution
21, 22
(697)(1,043)(8,349)(14,142)
Advances made to investments
6, 8
(6,357)(4,975)(16,067)(19,144)
Distributions received from investments(2)
5, 6, 8
5,541 6,002 14,797 42,397 
Addition of interest rate caps derivative(1)
16(528)— (5,502)— 
Changes in non-cash working capital items2653,194 (62,505)71,581 (24,155)
Net cash provided by operating activities from continuing operations80,148 105,696 149,944 244,627 
Net cash provided by operating activities from discontinued operations(2)
— 1,420 — 3,499 
Net cash provided by operating activities$80,148 $107,116 $149,944 $248,126 
Investing activities
Acquisition of rental properties4(118,395)(646,896)(482,047)(2,109,793)
Capital additions to rental properties4(50,599)(100,608)(140,661)(258,387)
Disposition of rental properties453,483 14,124 155,167 45,179 
Disposition of Bryson MPC Holdings LLC— 11,041 — 11,041 
Additions to fixed assets and other non-current assets(9,961)(7,476)(36,373)(26,787)
Net cash used in investing activities from continuing operations(125,472)(729,815)(503,914)(2,338,747)
Net cash used in investing activities$(125,472)$(729,815)$(503,914)$(2,338,747)
Financing activities
Lease payments
   
(1,553)(676)(4,265)(1,935)
Repurchase of common shares19— — (8,749)— 
Proceeds from corporate borrowing128,000 97,000 304,000 294,000 
Repayments of corporate borrowing(136,098)(45,134)(154,294)(113,334)
Proceeds from rental and development properties borrowing637,177 1,205,868 1,227,049 3,142,803 
Repayments of rental and development properties borrowing(767,827)(708,384)(1,423,988)(1,600,020)
Dividends paid18(14,681)(14,905)(44,180)(44,038)
Change in restricted cash18,812 (35,710)(25,373)(70,728)
Contributions from limited partners241,846 128,365 494,996 489,388 
Distributions to limited partners(6,119)(6,810)(35,062)(35,118)
Distributions to non-controlling interests(1,747)(1,198)(7,685)(5,040)
Net cash provided by financing activities from continuing operations97,810 618,416 322,449 2,055,978 
Net cash provided by financing activities$97,810 $618,416 $322,449 $2,055,978 
Effect of foreign exchange rate difference on cash(86)(261)5 (332)
Change in cash during the period52,400 (4,544)(31,516)(34,975)
Cash - beginning of period120,387 146,463 204,303 176,894 
Cash - end of period$172,787 $141,919 $172,787 $141,919 
Supplementary information
Cash paid on
Income taxes$1,108 $— $13,563 $872 
Interest$73,246 $51,689 $216,541 $122,113 
(1) The addition of interest rate caps for the three and nine month period was reclassified from financing activities to operating activities.
(2) Certain comparative figures in the cash flows have been restated to present discontinued operations separately from continuing operations.
Page 6 of 42



The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Page 7 of 42



1.    NATURE OF BUSINESS

Tricon Residential Inc. (“Tricon” or the “Company”) is an owner and operator of a growing portfolio of approximately 38,000 single-family rental homes located primarily in the U.S. Sun Belt and multi-family apartments in Canada. The Company also invests in adjacent residential businesses which include residential development assets in the United States and Canada. Through its fully integrated operating platform, the Company earns rental income and ancillary revenue from single-family rental properties, income from its investments in multi-family rental properties and residential developments, as well as fees from managing strategic capital associated with its businesses.

Tricon was incorporated on June 16, 1997 under the Business Corporations Act (Ontario) and its head office is located at 7 St. Thomas Street, Suite 801, Toronto, Ontario, M5S 2B7. The Company is domiciled in Canada. Tricon became a public company in Canada on May 20, 2010 and completed an initial public offering of its common shares in the U.S. on October 12, 2021. The Company’s common shares are traded under the symbol TCN on both the New York Stock Exchange and the Toronto Stock Exchange.

These condensed interim consolidated financial statements were approved for issue on November 7, 2023 by the Board of Directors of Tricon.

2.    BASIS OF PRESENTATION

The following is a summary of the significant accounting policies applied in the preparation of these condensed interim consolidated financial statements.

Basis of preparation and measurement

Preparation of consolidated financial statements

The condensed interim consolidated financial statements are prepared on a going-concern basis and have been presented in U.S. dollars, which is also the Company’s functional currency. All financial information is presented in thousands of U.S. dollars except where otherwise indicated.

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), including International Accounting Standard 34, Interim Financial Reporting ("IAS 34"), on a basis consistent with the accounting policies disclosed in the Company's annual financial statements. They should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2022.

The accounting impact of the Company's businesses and their presentation in the Company's consolidated financial statements are summarized in the table below.
Page 8 of 42

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






ACCOUNTINGPRESENTATION
Business segmentAccounting assessmentAccounting methodologyPresentation in Balance SheetPresentation in Statement of Income Presentation of Non-controlling interest
Single-Family Rental
Tricon wholly-ownedControlled subsidiaryConsolidationRental propertiesRevenue from single-family rental propertiesN/A
SFR JV-1Controlled subsidiaryConsolidationLimited partners' interests
(Component of liabilities)
SFR JV-HDControlled subsidiaryConsolidation
SFR JV-2Controlled subsidiaryConsolidation
Multi-Family Rental
U.S. multi-family(1)
Divested in October 2022Equity methodDivested in October 2022Income from discontinued operations from January 1, 2022 to June 30, 2022N/A
Canadian multi-family:
592 Sherbourne
(The Selby)		Investments in associateEquity methodEquity-accounted investments in multi-family rental propertiesIncome from equity-accounted investments in multi-family rental propertiesN/A
Canadian residential developments
The Shops of
Summerhill		Controlled subsidiaryConsolidationCanadian development properties
Other incomeN/A
The James (Scrivener Square)N/A
57 Spadina
(The Taylor)(2)
Investments in associateEquity methodEquity-accounted investments in Canadian residential developmentsIncome from equity-accounted investments in Canadian residential developmentsN/A
WDL - Block 8 (Maple House)Joint ventureEquity methodN/A
WDL - Block 20 (Oak House)Joint ventureEquity methodN/A
WDL - Blocks 3/4/7 (Cherry House)Joint ventureEquity methodN/A
WDL - Block 10 (Birch House)Joint ventureEquity methodN/A
6-8 Gloucester (The Ivy)Joint ventureEquity methodN/A
Queen & Ontario (ROQ City)Joint ventureEquity methodN/A
Symington (The Spoke)Joint ventureEquity methodN/A
KT Housing Now(3)
Joint ventureEquity methodN/A
U.S. residential developments
THPAS Holdings JV-1 LLCInvestments in associatesEquity methodInvestments in U.S. residential developmentsIncome from investments in U.S. residential developmentsN/A
THPAS Development JV-2 LLCInvestments in associatesEquity methodN/A
For-sale housingInvestments in associatesEquity methodN/A
Strategic Capital(4)
Private funds GP entitiesControlled subsidiaryConsolidationConsolidatedRevenue from strategic capital servicesN/A
Johnson development managementControlled subsidiaryConsolidationConsolidatedComponent of equity
(1) On October 18, 2022, the Company completed the sale of its remaining 20% equity interest in the U.S. multi-family rental portfolio (Note 3).
(2) As at September 30, 2023, 57 Spadina LP (The Taylor) achieved stabilization. In the fourth quarter of 2023, being the first full quarter after stabilization, it will be reclassified from the Canadian residential developments segment to the multi-family rental segment.
(3) On June 23, 2023, the Company entered into a new joint venture investment, KT Housing Now Six Points LP, with its partner, Kilmer Group (Note 6).
(4) Strategic Capital was previously reported as Private Funds and Advisory.


Page 9 of 42

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






Accounting standards and interpretations adopted

Effective January 1, 2023, the Company has adopted amendments to IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors to improve accounting policy disclosures and to help users of the financial statements distinguish between changes in accounting estimates and changes in accounting policies. The Company also adopted amendments to IAS 12, Income Taxes ("IAS 12"), which requires companies to recognize deferred tax on transactions, such as leases and decommissioning obligations, that on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The adoption of these standards did not have a significant impact on the Company's consolidated financial statements.

Accounting standards and interpretations issued but not yet adopted

In January 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements ("IAS 1"), to provide a more general approach to the classification of liabilities based on the contractual arrangements in place at the reporting date. In November 2022, the IASB further amended IAS 1 to clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability as current or non-current. This amendment is effective for annual reporting periods beginning on or after January 1, 2024.

In August 2023, the IASB amended IAS 21, The Effects of Changes in Foreign Exchange Rates ("IAS 21") to help entities assess the exchangeability between two currencies, determine the spot rate when exchangeability is lacking and require additional disclosure when a currency is not exchangeable. The amendments are effective for annual reporting periods beginning on or after January 1, 2025.

There are no other relevant standards, interpretations or amendments to existing standards that are not yet effective that are expected to have a material impact on the consolidated financial statements of the Company.

3.    DISCONTINUED OPERATIONS

On October 18, 2022, the Company sold its remaining 20% equity interest in its U.S. multi-family rental portfolio (held through Tricon US Multi-Family REIT LLC), for total proceeds of $219,354, which resulted in a loss on sale of $856, net of transaction costs.

(in thousands of U.S. dollars)December 31, 2022
Total consideration$219,354 
Net asset value on disposition(213,493)
Transaction cost(6,717)
Loss on sale(856)

The Company presented prior-period income from equity-accounted investments in U.S. multi-family rental properties as discontinued operations, separate from the Company's continuing operations. The profit or loss of the discontinued operations was as follows:
Page 10 of 42

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)20222022
Revenue $34,173 $99,365 
Expenses(22,787)(65,928)
Fair value gain on U.S. multi-family rental properties — 156,009 
Net and other comprehensive income $11,386 $189,446 
Tricon's share of net income at 20%
$2,277 $37,889 
Income tax expense - current(45,094)(45,094)
Income tax expense - deferred40,482 40,482 
Net income from discontinued operations$(2,335)$33,277 

4.    RENTAL PROPERTIES

Management is responsible for fair value measurements included in the financial statements, including Level 3 measurements. The valuation processes and results are reviewed and approved by the Valuation Committee once every quarter, in line with the Company’s quarterly reporting dates. The Valuation Committee consists of individuals who are knowledgeable and have experience in the fair value techniques for the real estate properties held by the Company. The Valuation Committee decides on the appropriate valuation methodologies for new real estate properties and contemplates changes in the valuation methodology for existing real estate holdings. Additionally, the Valuation Committee analyzes the movements in each property’s (or group of properties') value, which involves assessing the validity of the inputs applied in the valuation.

The following table presents the changes in the rental property balances for the nine months ended September 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance
$11,445,659 $7,978,396 
Acquisitions(1)
482,047 2,362,185 
Capital expenditures
140,661 326,460 
Fair value adjustments(2)
208,907 858,987 
Dispositions
(155,167)(80,369)
Balance, end of period$12,122,107 $11,445,659 
(1) The total purchase price includes $1,994 (2022 - $3,021) of capitalized transaction costs in relation to the acquisitions.
(2) Fair value adjustments include realized fair value gains of $40,441 for the nine months ended September 30, 2023 and realized fair value gains of $12,997 for the year ended December 31, 2022 on the single-family rental properties.

The Company used the following techniques to determine the fair value measurements included in the condensed interim consolidated financial statements categorized under Level 3.

Single-family rental homes

Valuation methodology

The fair value of single-family rental homes is typically determined based on comparable sales primarily by using adjusted Home Price Index (“HPI”) and periodically Broker Price Opinions (“BPOs”), as applicable. In addition, homes that were purchased in the last three to six months (or homes purchased in the year that are not yet stabilized) from the reporting date are recorded at their purchase price plus the cost of capital expenditures.

BPOs are quoted by qualified brokers who hold active real estate licenses and have market experience in the locations and segments of the properties being valued. The brokers value each property based on recent comparable sales and active comparable listings in the area, assuming the properties were all renovated to an
Page 11 of 42

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






average standard in their respective areas. The Company typically obtains a BPO when a home is first included in a securitization or other long-term financing vehicle.

Adjusted HPI is used to update the value, on a quarterly basis, of single-family rental homes that were most recently valued using a BPO for purposes of use in a long-term financing, and if no BPO has been obtained, adjusted HPI is used for homes acquired more than six months prior to such quarter. The HPI is calculated based on a repeat-sales model using large real estate information databases compiled from public records. The HPI was calculated as at August 31, 2023 for rental homes acquired prior to July 1, 2023 and has been adjusted based on management's judgment informed by recent transactions and other relevant factors. The quarterly HPI change is then applied to the previously recorded fair value of the rental homes. The data used to determine the fair value of the Company’s single-family rental homes is specific to the zip code in which the property is located.

Adjusted HPI growth during the quarter was 1.1%, net of capital expenditures (2022 - 1.5%). There were 2,415 homes valued using the BPO method during the quarter (2022 - 1,682 homes). The combination of the HPI and BPO methodologies resulted in a fair value gain of $73,261 for the three months ended September 30, 2023 (2022 - $107,166).

Adjusted HPI growth for the nine months ended September 30, 2023 was 2.5%, net of capital expenditures, compared to 11.6% in the prior period. There were 3,818 homes valued using the BPO method during the period (2022 - 4,166 homes), and the combined methodologies of HPI and BPO resulted in a fair value gain of $208,907 for the nine months ended September 30, 2023 (2022 - $802,573).

Sensitivity

The adjusted HPI change during the quarter was 1.1% (2022 - 1.5%). If the change in the adjusted HPI increased or decreased by 1.0%, the impact on the single-family rental property balance at September 30, 2023 would be $95,879 and ($95,879), respectively (2022 - $83,694 and ($83,694)).

5.    EQUITY-ACCOUNTED INVESTMENTS IN MULTI-FAMILY RENTAL PROPERTIES

Following the Company's divestiture of its interest in the U.S. multi-family rental portfolio in October 2022, the Company's equity-accounted investments in multi-family rental properties consist of an investment in associate ("592 Sherbourne LP", operating as "The Selby"), a 500-unit class A multi-family rental property in Toronto, over which the Company has significant influence.

The following table presents the change in the balance of equity-accounted investments in multi-family rental properties for the nine months ended September 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance$20,769 $199,285 
Distributions(257)(3,824)
Income from equity-accounted investments in multi-family rental properties(1)
529 40,144 
Disposition of equity-accounted investment in U.S. multi-family rental properties (Note 3)
— (213,493)
Translation adjustment(2)
37 (1,343)
Balance, end of period$21,078 $20,769 
(1) Of the $40,144 income from equity-accounted investments earned during 2022, $38,594 was attributable to U.S. multi-family rental properties and reclassified to income from discontinued operations (Note 3).
(2) For the nine months ended September 30, 2023, the USD/CAD exchange rate moved from 1.3544 as at December 31, 2022 to 1.3520 as at September 30, 2023, resulting in a favorable foreign currency translation adjustment of $37. In the prior year, the USD/CAD exchange rate moved from 1.2678 as at December 31, 2021 to 1.3544 as at December 31, 2022, resulting in an unfavorable foreign currency translation adjustment of $1,343.

6.    EQUITY-ACCOUNTED INVESTMENTS IN CANADIAN RESIDENTIAL DEVELOPMENTS

The Company has entered into certain arrangements in the form of jointly controlled entities and investments in associates for various Canadian multi-family rental developments. Joint ventures represent development properties
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






held in partnership with third parties where decisions relating to the relevant activities of the joint venture require the unanimous consent of the partners. These arrangements are accounted for under the equity method.

The following table presents the change in the balance of equity-accounted investments in Canadian residential developments for the nine months ended September 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance$106,538 $98,675 
Advances(1)
9,301 13,360 
Distributions(2)
(372)(10,212)
Income from equity-accounted investments in Canadian residential developments2,734 11,198 
Translation adjustment(3)
126 (6,483)
Balance, end of period$118,327 $106,538 
(1) Advances to equity-accounted investments in Canadian residential developments for the nine months ended September 30, 2023 include advances for The Ivy, Oak House (Block 20), Cherry House (Blocks 3/4/7), ROQ City (Queen & Ontario), The Spoke (Symington) and KT Housing Now.
(2) Distributions from equity-accounted investments in Canadian residential developments for the year ended December 31, 2022 represent sales proceeds from the Company's divestiture of two-thirds of its original 30% equity ownership in ROQ City (Queen & Ontario) to its institutional partner.
(3) For the nine months ended September 30, 2023, the USD/CAD exchange rate moved from 1.3544 as at December 31, 2022 to 1.3520 as at September 30, 2023, resulting in a favorable foreign currency translation adjustment of $126. In the prior year, the USD/CAD exchange rate moved from 1.2678 as at December 31, 2021 to 1.3544 as at December 31, 2022, resulting in an unfavorable foreign currency translation adjustment of $6,483.

7.     CANADIAN DEVELOPMENT PROPERTIES

The Company's Canadian development properties include one development project (The James) and an adjacent commercial property (The Shops of Summerhill) in Toronto. The following table presents the changes in the Canadian development properties balance for the nine months ended September 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance$136,413 $133,250 
Development expenditures23,365 12,686 
Fair value adjustments— (440)
Translation adjustment(1)
124 (9,083)
Balance, end of period$159,902 $136,413 
(1) For the nine months ended September 30, 2023, the USD/CAD exchange rate moved from 1.3544 as at December 31, 2022 to 1.3520 as at September 30, 2023, resulting in a favorable foreign currency translation adjustment of $124. In the prior year, the USD/CAD exchange rate moved from 1.2678 as at December 31, 2021 to 1.3544 as at December 31, 2022, resulting in an unfavorable foreign currency translation adjustment of $9,083.

The Company earned $354 and $1,077 of commercial rental income from The Shops of Summerhill for the three and nine months ended September 30, 2023, respectively (2022 - $388 and $1,056), which is classified as other income (Note 13).

8.    INVESTMENTS IN U.S. RESIDENTIAL DEVELOPMENTS

The Company makes investments in U.S. residential developments via equity investments and loan advances. Advances made to investments are added to the carrying value when paid; distributions from investments are deducted from the carrying value when received.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The following table presents the changes in the investments in U.S. residential developments for the nine months ended September 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance$138,369 $143,153 
Advances(1)
6,766 15,655 
Distributions(14,168)(37,336)
Income from investments in U.S. residential developments(2)
23,847 16,897 
Balance, end of period
$154,814 $138,369 
(1) Advances to U.S. residential developments for the year ended December 31, 2022 include $2,760 in non-cash contributions related to the syndication of the Company's investment in Bryson MPC Holdings LLC to THPAS Development JV-2 LLC.
(2) There were no realized gains or losses included in the income from investments in U.S. residential developments for the nine months ended September 30, 2023 (2022 - nil).

Valuation methodology

The investments are measured at fair value (excluding THPAS Development JV-2 LLC) as determined by the Company’s proportionate share of the fair value of each Investment Vehicle’s net assets at each measurement date. The fair value of each Investment Vehicle’s net assets is determined by the waterfall distribution calculations specified in the relevant governing agreements. The inputs into the waterfall distribution calculations include the fair values of the land development and homebuilding projects and working capital held by the Investment Vehicles. The fair values of the land development and homebuilding projects are based on appraisals prepared by external third-party valuators or on internal valuations using comparable methodologies and assumptions. THPAS Development JV-2 LLC is measured at cost under the equity method and not recorded at fair value as the entity itself is not considered to be an investment entity.

The residential real estate development business involves significant risks that could adversely affect the fair value of Tricon's investments in for-sale housing, especially in times of economic uncertainty. Quantitative information about fair value measurements of the investments uses the following significant unobservable inputs (Level 3):
September 30, 2023December 31, 2022
Valuation technique(s)Significant unobservable inputRange
of inputs		Weighted average of inputsRange
of inputs		Weighted average of inputsOther inputs and key information
Net asset value, determined using discounted cash flow

Waterfall distribution model
a) Discount rate (1)
b) Future cash flow
c) Appraised value
8.0% - 20.0%
17.8%
8.0% - 20.0%
17.7%Entitlement risk, sales risk and construction risk are taken into account in determining the discount rate.

Price per acre of land, timing of project funding requirements and distributions.

Estimated probability of default.
Less than 1 - 9 years
6.9 years
1 - 10 years
7.2 years
(1) Generally, an increase in future cash flow will result in an increase in the fair value of fund equity investments. An increase in the discount rate will result in a decrease in the fair value of fund equity investments. The same percentage change in the discount rate will result in a greater change in fair value than the same absolute percentage change in future cash flow.

Sensitivity

For those investments valued using discounted cash flows, an increase of 2.5% in the discount rate results in a decrease in fair value of $9,263 and a decrease of 2.5% in the discount rate results in an increase in fair value of $10,921 (December 31, 2022 - ($9,445) and $10,629, respectively).

9.     FAIR VALUE ESTIMATION

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these condensed interim consolidated financial statements is determined on this basis, unless otherwise noted.

Inputs to fair value measurement techniques are disaggregated into three hierarchical levels, which are based on the degree to which inputs to fair value measurement techniques are observable by market participants:

•Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2 - Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset’s or liability’s anticipated life.

•Level 3 - Inputs are unobservable and reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs in determining the estimate.

Fair value measurements are adopted by the Company to calculate the carrying amounts of various assets and liabilities.

Acquisition costs, other than those related to financial instruments classified as FVTPL which are expensed as incurred, are capitalized to the carrying amount of the instrument and amortized using the effective interest method.

The following table provides information about assets and liabilities measured at fair value on the balance sheet and categorized by level according to the significance of the inputs used in making the measurements:
September 30, 2023December 31, 2022
(in thousands of U.S. dollars)Level 1Level 2Level 3Level 1Level 2Level 3
Assets
Rental properties (Note 4)
$— $— $12,122,107 $— $— $11,445,659 
Canadian development properties (Note 7)
— — 159,902 — — 136,413 
Investments in U.S. residential developments (Note 8) (1)
— — 145,373 — — 130,270 
Derivative financial instruments (Note 16)
— 4,897 — — 10,358 — 
$— $4,897 $12,427,382 $— $10,358 $11,712,342 
Liabilities
Derivative financial instruments (Note 16)
$— $32,097 $— $— $51,158 $— 
Limited partners' interests in single-family rental business
— — 2,275,349 — — 1,696,872 
$— $32,097 $2,275,349 $— $51,158 $1,696,872 
(1) Excludes the Company's interest in THPAS Development JV-2 LLC, which is measured at cost under the equity method (Note 8).

There have been no transfers between levels for the nine months ended September 30, 2023.

Cash, restricted cash, amounts receivable, amounts payable and accrued liabilities, lease liabilities (included in other liabilities), resident security deposits and dividends payable are measured at amortized cost, which approximates fair value because they are short-term in nature.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






10.    INCOME TAXES

For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)202320222023
2022
Income tax recovery (expense) - current$163 $29,860 $(1,737)$28,294 
Income tax expense - deferred(9,806)(72,087)(23,930)(183,578)
Income tax expense from continuing operations$(9,643)$(42,227)$(25,667)$(155,284)
Income tax expense from discontinued operations - current— (45,094)$— $(45,094)
Income tax recovery from discontinued operations - deferred— 40,482 — 40,482 
Income tax expense from discontinued operations$— $(4,612)$— $(4,612)


The expected realization of deferred income tax assets and deferred income tax liabilities is as follows:
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Deferred income tax assets
Deferred income tax assets to be recovered after more than 12 months$80,017 $75,062 
Deferred income tax assets to be recovered within 12 months— — 
Total deferred income tax assets$80,017 $75,062 
Deferred income tax liabilities
Deferred income tax liabilities reversing after more than 12 months$622,104 $591,713 
Deferred income tax liabilities reversing within 12 months— — 
Total deferred income tax liabilities$622,104 $591,713 
Net deferred income tax liabilities$542,087 $516,651 

The movement of the deferred income tax accounts was as follows:
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Change in net deferred income tax liabilities
Net deferred income tax liabilities, beginning of period$516,651 $364,744 
Charge to the statement of comprehensive income23,930 148,697 
Charge to equity1,458 1,945 
Other48 1,265 
Net deferred income tax liabilities, end of period$542,087 $516,651 
The tax effects of the significant components of temporary differences giving rise to the Company’s deferred income tax assets and liabilities were as follows:
(in thousands of U.S. dollars)Investments Long-term incentive plan accrualPerformance fees liability Issuance
costs		 Net operating losses Other Total
Deferred income tax assets
At December 31, 2022$— $8,009 $9,091 $8,723 $43,926 $5,313 $75,062 
Addition / (Reversal)— (73)111 (2,361)7,835 (557)4,955 
At September 30, 2023$— $7,936 $9,202 $6,362 $51,761 $4,756 $80,017 

(in thousands of U.S. dollars)
InvestmentsRental propertiesDeferred placement fees Other Total
Deferred income tax liabilities
At December 31, 2022$1,505 $589,720 $488 $— $591,713 
(Reversal) / Addition(121)30,127 385 — 30,391 
At September 30, 2023$1,384 $619,847 $873 $— $622,104 

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The Company believes it will have sufficient future income to realize the deferred income tax assets.

11.     REVENUE FROM SINGLE-FAMILY RENTAL PROPERTIES

The components of the Company's revenue from single-family rental properties are as follows:
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Base rent$167,926 $140,549 $488,448 $382,008 
Other revenue(1)
11,865 11,264 33,753 30,114 
Non-lease component22,780 18,956 66,336 52,570 
Total revenue from single-family rental properties$202,571 $170,769 $588,537 $464,692 
(1) Other revenue includes revenue earned on ancillary services and amenities as well as lease administrative fees.

12.    REVENUE FROM STRATEGIC CAPITAL SERVICES

The components of the Company’s revenue from strategic capital services (previously reported as revenue from private funds and advisory services) are described in the table below. Intercompany revenues and expenses between the Company and its subsidiaries, such as property management fees, are eliminated upon consolidation. Under certain arrangements, asset-based fees that are earned from third-party investors in Tricon's subsidiary entities are billed directly to those investors and are therefore not recognized in the accounts of the applicable subsidiary. These amounts are included in the asset management fees revenue recognized in the statements of comprehensive income.
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Asset management fees
$2,884 $3,252 $8,428 $9,454 
Performance fees
426 101,242 4,134 110,329 
Development fees
5,082 5,055 21,072 17,073 
Property management fees
568 2,921 1,197 8,412 
Total revenue from strategic capital services
$8,960 $112,470 $34,831 $145,268 

13.    OTHER INCOME

Other income is comprised of the following:

For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
The Shops of Summerhill commercial rental$354 $388 $1,077 $1,056 
Insurance recoveries244 — 244 — 
Interest income2,105 — 3,654 — 
Net operating loss from non-core homes(1,973)— (4,653)— 
Gain on sale - Bryson MPC Holdings LLC
— 5,060 — 5,060 
Income from Bryson - pre-sale— — — 2,753 
Total other income$730 $5,448 $322 $8,869 

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






14.    DEBT

The following table presents a summary of the Company's outstanding debt as at September 30, 2023:
September 30, 2023
(in thousands of U.S. dollars)Maturity datesCoupon/stated interest ratesInterest rate floorInterest rate cap
Effective interest
rates(1)
Extension options(2)
Total facilityOutstanding balance
Term Loan (3), (4)
April 2024SOFR+2.30%0.50% SOFR5.09% SOFR7.04 %6 months$302,065$302,065 
Securitization debt 2017-2(3)
January 2024
            3.68%
N/A
N/A
3.68 %N/A322,268322,268 
Warehouse credit facility 2022 (5)
January 2024
SOFR+1.95%
0.15% SOFR3.25% SOFR5.20 %One year100,00076,690 
Securitization debt 2018-1(3)
May 2025
3.96%
N/AN/A3.96 %N/A289,185289,185 
Securitization debt 2020-2(3)
November 2027
1.94%
N/AN/A1.94 %N/A409,636409,636 
Single-family rental wholly-owned properties borrowings1,423,1541,399,844 
SFR JV-1 securitization debt 2019-1(3)
March 2026
3.12%
N/AN/A3.12 %N/A331,431331,431 
SFR JV-1 securitization debt 2020-1(3)
July 2026
2.43%
N/AN/A2.43 %N/A552,441552,441 
SFR JV-1 securitization debt 2021-1(3)
July 2026
2.57%
N/AN/A2.57 %N/A682,956682,956 
Single-family rental JV-1 properties borrowings1,566,8281,566,828 
SFR JV-2 warehouse credit facility(12)
July 2024SOFR+1.99%0.10% SOFRN/A6.98 %One year134,456134,456 
SFR JV-2 term loan(3)
October 2025
SOFR+2.10%
0.50% SOFR
4.55% SOFR
6.65 %Two one years500,000390,208 
SFR JV-2 securitization debt 2022-1(3)
April 2027
4.32%
N/AN/A4.32 %N/A530,387530,387 
SFR JV-2 securitization debt 2022-2(3)
July 2028
5.47%
N/AN/A5.47 %N/A347,459347,459 
SFR JV-2 securitization debt 2023-1(3), (10)
July 2028
5.27%
N/AN/A5.86 %N/A416,430416,430 
SFR JV-2 delayed draw term loan(3)
September 20285.39 %N/AN/A5.39 %N/A194,480194,480 
Single-family rental JV-2 properties borrowings2,123,2122,013,420 
SFR JV-HD warehouse credit facility(6)
May 2024SOFR+2.00%0.15% SOFR2.85% SOFR4.85 %One year350,000262,816 
JV-HD term loan A(3),(7)
March 2028
5.96%
N/AN/A5.96 %N/A150,000150,000 
JV-HD term loan B(3),(7)
March 2028
5.96%
N/AN/A5.96 %N/A150,000150,000 
Single-family rental JV-HD properties borrowings650,000562,816 
Single-family rental properties borrowings
4.34 %5,763,1945,542,908 
The Shops of Summerhill mortgage
October 2025
5.58%
N/AN/A5.58 %N/A15,92615,926 
Construction facility(8), (13)
June 2026
Prime+1.25%
N/AN/A8.23 %One year170,11825,488 
Canadian development properties borrowings
7.21 %186,04441,414 
Corporate office mortgages
November 2024
4.25%
N/AN/A4.30 %N/A12,44812,448 
Corporate credit facility(9), (11)
June 2025
SOFR+3.07%
N/AN/A8.42 %N/A500,000150,000 
Corporate borrowings
8.10 %512,448162,448 
$5,746,770 
Transaction costs (net of amortization)
(47,375)
Debt discount (net of amortization)
(11,938)
Total debt
4.47 %$6,461,686$5,687,457 
Current portion of long-term debt(2)
$624,962 
Long-term debt
$5,062,495 
Fixed-rate debt - principal value
3.83 %$4,405,047 
Floating-rate debt - principal value
6.56 %$1,341,723 
(1) The effective interest rate is determined using the ending consolidated debt balances as at September 30, 2023 and the average of the applicable reference rates for the nine months ended September 30, 2023. The effective interest rate using the average debt balances and the average of the applicable reference rates for the nine months ended September 30, 2023 is 4.51%.
(2) The Company has the ability to extend the maturity of the loans where an extension option exists and intends to exercise such options wherever available. The current portion of long-term debt reflects the balance after the Company's extension options have been exercised.
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(3) The term loan and securitization debt are secured, directly and indirectly, by approximately 30,200 single-family rental homes.
(4) On July 27, 2023, the Company amended the loan agreement to extend the maturity of the term loan by six months to April 2024 (with the option to extend for another six months to October 2024) and increased the commitment value by $100,000 with an interest rate cap of 4.25% SOFR. The coupon rate remains unchanged. The amendment resulted in the extinguishment of the original liability and the recognition of a gain on debt extinguishment of $1,326 in the consolidated statements of comprehensive income. A new liability was recognized, reflecting the amended terms. The weighted average interest rate cap on this facility is 5.09% of SOFR, based on $202,065 at 5.50% of SOFR and $100,000 at 4.25% of SOFR
(5) On September 22, 2023, the Company amended the loan agreement in respect of the Warehouse credit facility 2022 to increase the commitment value by $50,000 to $100,000. The coupon rate also changed from SOFR+1.85% to SOFR+1.95%.
(6) On May 11, 2023, SFR JV-HD amended its warehouse facility agreement to decrease the commitment value by $140,000 to $350,000 and increase the interest rate cap to 2.85% of SOFR. The maturity date and the extension option remained unchanged.
(7) On March 10, 2023, SFR JV-HD entered into two new term loan facilities, each with a total commitment of $150,000, a term to maturity of five years and a fixed interest rate of 5.96%. These facilities are secured by pools of 707 and 696 single-family rental properties. The loan proceeds were primarily used to pay down existing short-term SFR JV-HD debt and to fund the acquisition of rental homes.
(8) The construction facility is secured by the land under development at The James (Scrivener Square).
(9) The Company has provided a general security agreement creating a first priority security interest on the assets of the Company, excluding, among other things, single-family rental homes, multi-family rental properties and interests in for-sale housing. As part of the corporate credit facility, the Company designated $35,000 to issue letters of credit as security against contingent obligations related to its Canadian multi-family developments. As at September 30, 2023, the letters of credit outstanding totaled $5,501 (C$7,438).
(10) On July 11, 2023, SFR JV-2 entered into a new securitized loan facility with a total commitment of $416,430, a term to maturity of five years and a weighted average fixed interest rate of 5.27%. The securitization involved the issuance of five classes of fixed-rate pass-through certificates at a discount of $12,160 to the stated face value, resulting in an effective interest rate of 5.86%. This facility is secured by a pool of 2,115 single-family rental properties. The loan proceeds were primarily used to pay down the existing short-term SFR JV-2 variable-rate debt.
(11) On September 15, 2023, the margin on the corporate facility was reduced by 3 basis points from 3.10% to 3.07%.
(12) On August 1, 2023, the interest rate cap on this facility expired and was not renewed.
(13) The extension option on this facility is subject to the lender's discretion.


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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







The Company was in compliance with the covenants and other undertakings outlined in all loan agreements.

The scheduled principal repayments and debt maturities are as follows, reflecting the maturity dates after all extensions have been exercised:
(in thousands of U.S. dollars)Single-family rental borrowingsCanadian development properties borrowingsCorporate borrowingsTotal
2023$— $56 $98 $154 
2024624,333 228 12,350 636,911 
2025763,147 15,642 150,000 928,789 
20261,957,036 25,488 — 1,982,524 
2027940,023 — — 940,023 
2028 and thereafter1,258,369 — — 1,258,369 
5,542,908 41,414 162,448 5,746,770 
Transaction costs (net of amortization)(47,375)
Debt discount (net of amortization)(11,938)
Total debt$5,687,457 

Fair value of debt

The table below presents the fair value and the carrying value (net of unamortized deferred financing fees and debt discount) of the fixed-rate loans as at September 30, 2023.
September 30, 2023
(in thousands of U.S. dollars)Fair valueCarrying value
Securitization debt 2017-2$320,469 $322,186 
Securitization debt 2018-1281,725 288,953 
Securitization debt 2020-2357,096 405,031 
SFR JV-1 securitization debt 2019-1312,893 328,319 
SFR JV-1 securitization debt 2020-1506,580 547,584 
SFR JV-1 securitization debt 2021-1613,377 676,629 
SFR JV-2 securitization debt 2022-1496,358 524,241 
SFR JV-2 securitization debt 2022-2335,694 342,530 
SFR JV-2 securitization debt 2023-1402,150 397,540 
SFR JV-2 delayed draw term loan182,811 193,190 
JV-HD term loan A148,892 148,892 
JV-HD term loan B148,891 148,891 
The Shops of Summerhill mortgage15,416 15,857 
Corporate office mortgages12,007 12,448 
Total$4,134,359 $4,352,291 

The carrying value of variable term loans approximates their fair value, since their variable interest terms are indicative of prevailing market prices.

15.    DUE TO AFFILIATE

Structured entity – Tricon PIPE LLC (the “Affiliate”)

Tricon PIPE LLC (the “Affiliate” or “LLC”) was incorporated on August 7, 2020 for the purpose of raising third-party capital through the issuance of preferred units for an aggregate amount of $300,000. The Company has a 100% voting interest in this Affiliate; however, the Company does not consolidate this structured entity.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






During the year ended December 31, 2022, 4,675 preferred units were exchanged for 554,832 common shares of the Company at $8.50 per share. The exchange reduced the Affiliate's preferred unit liability and the Company's associated promissory note owed to the Affiliate by $4,675. As at September 30, 2023, the Affiliate has a preferred unit liability of $295,325 (December 31, 2022 - $295,325) and a promissory note receivable from Tricon of $295,325 (December 31, 2022 - $295,325).

During the nine months ended September 30, 2023, the Affiliate earned interest income of $12,736 (2022 - $12,777) from the Company and recognized dividends declared of $12,736 (2022 - $12,777).

The Company’s obligation with respect to its involvement with the structured entity is equal to the cash flows under the promissory note payable. The Company has not recognized any income or losses in connection with its interest in this unconsolidated structured entity in the nine months ended September 30, 2023 (2022 - nil).

Promissory note – between Tricon entities

The promissory note payable to Tricon PIPE LLC (“Promissory Note” or “Due to Affiliate”) recognized on the condensed interim consolidated balance sheets was calculated as follows:

(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Principal amount outstanding$295,325 $295,325 
Less: Discount and transaction costs (net of amortization)(34,348)(38,501)
Due to Affiliate$260,977 $256,824 

The fair value of the Promissory Note was $228,536 as of September 30, 2023 (December 31, 2022 - $225,314). The difference between the amortized cost and the implied fair value is a result of the difference between the effective interest rate and the market interest rate for debt with similar terms.

16.    DERIVATIVE FINANCIAL INSTRUMENTS

The Promissory Note contains a mandatory prepayment option that is intermingled with other options in connection with the preferred units issued by Tricon PIPE LLC (including exchange and redemption rights), as exercising the mandatory prepayment option effectively terminates the other options. Although the exchange and redemption rights exist at the Affiliate level, the Affiliate is unable to issue the common shares of the Company upon exercise of one or all of the rights by either party. As a result, such options, in essence, were deemed to be written by the Company and are treated as a single combined financial derivative instrument for valuation purposes in accordance with IFRS 9, Financial Instruments: Recognition and Measurement. The option pricing model for the derivative uses market-based inputs, including the spot price of the underlying equity, implied volatility of the equity and USD/CAD foreign exchange rates, risk-free rates from the U.S. dollar swap curves and dividend yields related to the underlying equity. The valuation of the derivative assumes a 9.75-year expected life of the investment horizon of the unitholders.

Quantitative information about fair value measurements (Level 2) using significant observable inputs other than quoted prices included in Level 1 is as follows:

Due to AffiliateSeptember 30, 2023December 31, 2022
Risk-free rate (1)
5.28 %4.46 %
Implied volatility (2)
32.03 %36.53 %
Dividend yield (3)
3.14 %3.01 %
(1) Risk-free rates were from the U.S. dollar swap curves matching the expected maturity of the Due to Affiliate.
(2) Implied volatility was computed from the trading volatility of the Company's stock over a comparable term to maturity and the volatility of USD/CAD exchange rates.
(3) Dividend yields were from the forecast dividend yields matching the expected maturity of the Due to Affiliate.

The Company also has other types of derivative financial instruments that consist of interest rate caps on the Company’s floating-rate debt and are classified and measured at FVTPL. Interest rate caps are valued using model
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






calibration. Inputs to the valuation model are determined from observable market data wherever possible, including market volatility and interest rates.

The values attributed to the derivative financial instruments are shown below:
Conversion/redemption optionsExchange/prepayment options
Interest rate caps(1)
Total
(in thousands of U.S. dollars)
For the nine months ended September 30, 2023
Derivative financial (liabilities) assets, beginning of period$— $(51,158)$10,358 $(40,800)
Addition of interest rate caps— — 5,502 5,502 
Fair value gain (loss)— 19,061 (10,963)8,098 
Derivative financial instruments - end of period
$— $(32,097)$4,897 $(27,200)
For the year ended December 31, 2022
Derivative financial (liabilities) assets, beginning of year$— $(230,305)$363 $(229,942)
Derivative financial instruments exchanged into common shares of the Company— 3,299 — 3,299 
Addition of interest rate caps— — 1,034 1,034 
Fair value gain— 175,848 8,961 184,809 
Derivative financial instruments - end of year
$— $(51,158)$10,358 $(40,800)
(1) During the three and nine months ended September 30, 2023, the Company received proceeds of $5,898 and $12,679, respectively, related to in-the-money interest rate caps. These proceeds were recognized as realized gain on derivative financial instruments in the consolidated statements of comprehensive income.

For the nine months ended September 30, 2023, there was a fair value gain on the Due to Affiliate of $19,061 (2022 - fair value gain of $151,970). The fair value gain on the derivatives was primarily driven by a decrease in Tricon's share price, on a USD-converted basis, which served to decrease the probability of exchange of the preferred units of Tricon PIPE LLC into Tricon common shares.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







17.    INTEREST EXPENSE

Interest expense is comprised of the following:
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Term loan
$4,819 $1,913 $9,836 $4,916 
Securitization debt 2017-2
3,069 3,266 9,372 9,856 
Warehouse credit facility 2022
287 52 392 160 
Securitization debt 2018-1
2,941 3,054 8,935 9,223 
Securitization debt 2020-2
2,044 2,110 6,202 6,381 
SFR JV-1 securitization debt 2019-1
2,603 2,609 7,816 7,831 
SFR JV-1 securitization debt 2020-1
3,383 3,385 10,151 10,155 
SFR JV-1 securitization debt 2021-1
4,415 4,416 13,245 13,244 
SFR JV-2 subscription facility(2)
828 4,674 11,985 9,805 
SFR JV-2 warehouse credit facility
4,588 6,606 22,045 13,873 
SFR JV-2 term loan
7,484 — 21,531 — 
SFR JV-2 securitization debt 2022-1
5,752 5,753 17,257 11,116 
SFR JV-2 securitization debt 2022-2
4,777 4,510 14,332 4,510 
SFR JV-2 securitization debt 2023-1
4,888 — 4,888 — 
SFR JV-2 delayed draw term loan2,721 457 8,214 457 
SFR JV-HD subscription facility(1)
(35)1,443 2,299 2,827 
SFR JV-HD warehouse credit facility
4,934 3,624 17,480 6,052 
JV-HD term loan A
2,521 — 5,146 — 
JV-HD term loan B
2,521 — 5,146 — 
Single-family rental interest expense
64,540 47,872 196,272 110,406 
The Shops of Summerhill mortgage
224 121 664 339 
Canadian development properties interest expense(3)
224 121 664 339 
Corporate office mortgages
120 115 356 339 
Corporate credit facility
4,991 2,683 8,350 5,248 
Corporate interest expense
5,111 2,798 8,706 5,587 
Amortization of financing costs
4,244 3,567 12,636 9,316 
Amortization of debt discounts
1,824 1,198 4,330 3,530 
Interest on Due to Affiliate
4,245 4,245 12,736 12,777 
Interest on lease obligation
287 293 877 857 
Total interest expense
80,475 $60,094 236,221 $142,812 
(1) This facility was fully repaid during the nine months ended September 30, 2023.
(2) This facility was fully repaid during the three months ended September 30, 2023.
(3) Canadian development properties capitalized $501 and $894 of interest for the three and nine months ended September 30, 2023, respectively (2022 - $1 and $412).

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






18.    DIVIDENDS
(in thousands of U.S. dollars, except per share amounts)
Date of declarationRecord datePayment dateCommon shares issuedDividend amount
per share		Total dividend amountDividend reinvestment
plan ("DRIP")
February 28, 2023March 31, 2023April 17, 2023272,598,588 $0.058 $15,811 $1,131 
May 9, 2023June 30, 2023July 17, 2023272,803,985 0.058 15,823 1,142 
August 8, 2023September 30, 2023October 16, 2023272,993,974 0.058 15,834 1,125 
$47,468 $3,398 
March 1, 2022March 31, 2022April 18, 2022273,584,673 $0.058 $15,868 $984 
May 10, 2022June 30, 2022July 15, 2022273,653,385 0.058 15,872 967 
August 9, 2022September 30, 2022October 17, 2022273,760,820 0.058 15,878 472 
November 8, 2022December 31, 2022January 15, 2023273,464,780 0.058 15,861 1,042 
$63,479 $3,465 

The Company has a Dividend Reinvestment Plan (“DRIP”) under which eligible shareholders may elect to have their cash dividends automatically reinvested into additional common shares. These additional shares are issued from treasury (or purchased in the open market) at a discount, in the case of treasury issuances, of up to 5% of the Average Market Price, as defined under the DRIP, of the common shares as of the dividend payment date. If common shares are purchased in the open market, they are priced at the average weighted cost to the Company of the shares purchased.

Brokerage, commissions and service fees are not charged to shareholders for purchases or withdrawals of the Company’s shares under the DRIP, and all DRIP administrative costs are assumed by the Company.

For the nine months ended September 30, 2023, 395,852 common shares were issued under the DRIP (2022 - 264,744) for a total amount of $3,315 (2022 - 3,523).

19.    SHARE CAPITAL

The Company is authorized to issue an unlimited number of common shares. The common shares of the Company do not have par value.

As of September 30, 2023, there were 272,993,974 common shares issued by the Company (December 31, 2022 - 273,464,780), of which 272,356,982 were outstanding (December 31, 2022 - 272,840,692) and 636,992 were reserved to settle restricted share awards in accordance with the Company's Restricted Share Plan (December 31, 2022 - 624,088) (Note 21).
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






September 30, 2023December 31, 2022
(in thousands of U.S. dollars)Number of shares issued (repurchased)Share capitalNumber of shares issued (repurchased)Share capital
Beginning balance272,840,692 $2,124,618 272,176,046 $2,114,783 
Normal course issuer bid (NCIB)(1)
(1,048,680)(7,112)(677,666)(4,580)
Shares issued under DRIP (2)
395,852 3,315 323,048 3,995 
Stock-based compensation exercised (3)
182,022 1,241 491,341 2,655 
Preferred units exchanged (Note 15)
— — 554,832 8,015 
Shares repurchased and reserved for restricted share awards (4)
(12,904)(109)(26,909)(250)
Ending balance272,356,982 $2,121,953 272,840,692 $2,124,618 
(1) On October 13, 2022, the Company announced that the Toronto Stock Exchange ("TSX") had approved its notice of intention to make a normal course issuer bid ("NCIB") to repurchase up to 2,500,000 of its common shares trading on the TSX, the New York Stock Exchange ("NYSE") and/or alternative Canadian trading systems during the twelve-month period ending on October 17, 2023. During the nine months ended September 30, 2023, the Company repurchased 525,267 of its common shares on the TSX and 523,413 shares on the NYSE under the NCIB for $8,749, which reduced share capital and retained earnings by $7,112 and $1,637, respectively. Common shares that were purchased under the NCIB were cancelled by the Company.
(2) In the first nine months of 2023, 395,852 common shares were issued under the DRIP at an average price of $8.37 per share.
(3) In the first nine months of 2023, 182,022 common shares were issued upon the exercise of 124,592 vested deferred share units ("DSUs").
(4) In the first nine months of 2023, 12,904 common shares were reserved at $8.45 per share in accordance with the DRIP with respect to restricted share awards granted in prior years.

20.    EARNINGS PER SHARE

Basic

Basic earnings per share is calculated by dividing net income attributable to shareholders of Tricon by the sum of the weighted average number of shares outstanding and vested deferred share units during the period.
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)For the three months ended September 30For the nine months ended September 30
2023202220232022
Net income from continuing operations$81,125 178,786 $157,294 $723,491 
Non-controlling interest969 860 4,844 2,995 
Net income attributable to shareholders of Tricon from continuing operations80,156 177,926 152,450 720,496 
Net income attributable to shareholders of Tricon from discontinued operations— (2,335)— 33,277 
Net income attributable to shareholders of Tricon$80,156 $175,591 $152,450 $753,773 
Weighted average number of common shares outstanding272,328,214 273,140,194 272,256,450 272,904,804 
Adjustments for vested units1,482,062 1,569,871 1,482,062 1,569,871 
Weighted average number of common shares outstanding for basic earnings per share273,810,276 274,710,065 273,738,512 274,474,675 
Basic earnings per share
Continuing operations$0.29 $0.65 $0.56 $2.63 
Discontinued operations— (0.01)— 0.12 
Basic earnings per share$0.29 $0.64 $0.56 $2.75 

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutive shares. The Company has four categories of potentially dilutive shares: stock options (Note 21), restricted shares (Note 19), deferred share units (Note 21) and the preferred units issued by the Affiliate that are exchangeable into the common shares of the Company (Note 15). For the stock options, the number of dilutive shares is based on the number of shares that could have been acquired at fair value with the assumed proceeds, if any, from their exercise (determined using the average market price of the Company’s shares
Page 25 of 42

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






for the period then ended). For restricted shares and deferred share units, the number of dilutive shares is equal to the total number of unvested restricted shares and deferred share units. For the exchangeable preferred units, the number of dilutive shares is based on the number of common shares into which the elected amount would then be exchangeable. The number of shares calculated as described above is comparable to the number of shares that would have been issued assuming the vesting of the stock compensation arrangement and the exchange of preferred units.

Stock options, restricted shares and deferred share units

For the three months ended September 30, 2023, the Company’s stock compensation plans resulted in 1,942,731 dilutive share units (2022 - 2,456,262), given that it would be advantageous to the holders to exercise their associated rights to acquire common shares, as the exercise prices of these potential shares are below the Company's average market share price for the period. Restricted shares and deferred share units are always considered dilutive, as there is no price to the holder associated with receiving or exercising their entitlement, respectively.

For the nine months ended September 30, 2023, the Company’s stock compensation plans resulted in 1,858,818 dilutive share units (2022 - 2,694,298), given that it would be advantageous to the holders to exercise their associated rights to acquire common shares, as the exercise prices of these potential shares are below the Company's average market share price for the period.

Preferred units issued by the Affiliate

For the three and nine months ended September 30, 2023, the impact of exchangeable preferred units of Tricon PIPE LLC (Note 15) was dilutive, as the associated interest expense, net of tax, and the fair value gain on derivative financial instruments would result in decreased earnings per share upon the exchange of the underlying preferred units. Therefore, in computing the diluted weighted average common shares outstanding and the associated earnings per share amounts for the three and nine months ended September 30, 2023, the impact of the preferred units was included (2022 - included).

(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)For the three months ended September 30For the nine months ended September 30
2023202220232022
Net income attributable to shareholders of Tricon from continuing operations$80,156 $177,926 $152,450 $720,496 
Adjustment for preferred units interest expense - net of tax4,718 4,607 14,069 13,775 
Fair value gain on exchange and prepayment options of preferred units(28,043)(28,446)(19,061)(151,970)
Adjusted net income attributable to shareholders of Tricon from continuing operations56,831 154,087 147,458 582,301 
Net income attributable to shareholders of Tricon from discontinued operations— (2,335)— 33,277 
Adjusted net income attributable to shareholders of Tricon$56,831 $151,752 $147,458 $615,578 
Weighted average number of common shares outstanding273,810,276 274,710,065 273,738,512 274,474,675 
Adjustments for stock compensation1,942,731 2,456,262 1,858,818 2,694,298 
Adjustments for preferred units34,744,118 34,744,118 34,744,118 34,854,924 
Weighted average number of common shares outstanding for diluted earnings per share310,497,125 311,910,445 310,341,448 312,023,897 
Diluted earnings per share
Continuing operations$0.18 $0.49 $0.48 $1.87 
Discontinued operations— (0.01)— 0.11 
Diluted earnings per share
$0.18 $0.48 $0.48 $1.98 

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







21.    COMPENSATION EXPENSE

Compensation expense is comprised of the following:
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Salaries and benefits$13,661 $13,065 $42,148 $40,934 
Annual incentive plan ("AIP")4,778 7,015 18,411 21,847 
Long-term incentive plan ("LTIP")2,521 5,779 2,623 14,067 
Total compensation expense$20,960 $25,859 $63,182 $76,848 

The changes to the balances of the various cash-based and equity-based arrangements during the period are detailed in the sections below.

Annual incentive plan
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Cash-based$2,263 $4,955 $8,429 $16,317 
Equity-based2,515 2,060 9,982 5,530 
Total AIP expense$4,778 $7,015 $18,411 $21,847 


Cash-based AIP expense

For the nine months ended September 30, 2023, the Company recognized $8,429 in cash-based AIP expense (2022 - $16,317), of which $8,294 relates to current-year entitlements, and the remainder relates to prior-year adjustments that were paid during 2023.

The following table summarizes the movement in the AIP liability:
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Balance, beginning of period$3,697 $73 
AIP expense8,429 20,307 
Payments(1,984)(16,186)
Translation adjustment(60)(497)
Balance, end of period$10,082 $3,697 

Equity-based AIP expense

For the nine months ended September 30, 2023, the Company recognized $9,982 in equity-based AIP expense (2022 - $5,530), of which $3,889 (2022 - $2,801) relates to current-year entitlements and $6,093 (2022 - $2,729) relates to the amortization of PSUs, DSUs, stock options and restricted shares granted in prior years, along with the revaluation of PSUs at each reporting date, as the total liability amount is dependent on the Company's share price.

Of the total current-year entitlements, $1,363 is cash-settled AIP expense related to the PSUs and $2,526 is equity-settled AIP expense related to DSUs, stock options and restricted shares. Of the amortization expenses related to grants in prior years, an expense of $2,274 was recognized for the PSUs and a total expense of $3,819 was recognized in relation to DSUs, stock options and restricted shares.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The following table summarizes the movement in the PSU liability:
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Balance, beginning of period$6,630 $12,064 
PSU expense3,637 1,889 
Payments(4,010)(7,061)
Translation adjustment(37)(262)
Balance, end of period$6,220 $6,630 

Long-term incentive plan
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Cash-based$2,521 $5,664 $2,623 $13,588 
Equity-based— 115 — 479 
Total LTIP expense$2,521 $5,779 $2,623 $14,067 

Cash-based LTIP expense

For the nine months ended September 30, 2023, the Company increased its accrual related to cash-component LTIP by $2,623 (2022 - increase of $13,588) as a result of an increase in expected future performance fees from Investment Vehicles that will be paid to management when cash is received from each investment over time.

The following table summarizes the movement in the LTIP liability:
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Balance, beginning of period$25,244 $21,431 
LTIP expense2,623 16,635 
Payments(2,094)(11,685)
Translation adjustment22 (1,137)
Balance, end of period$25,795 $25,244 

Equity-based LTIP expense

For the nine months ended September 30, 2023, the Company recorded no equity-based LTIP expense (2022 - $479) related to DSUs granted in prior years. LTIP expense related to income from THP1 US (a U.S. residential development investment) was paid in DSUs vesting in equal tranches over a three- to five-year period commencing on the anniversary date of each grant in past years. The LTIP was amended in 2022 to provide that this expense would be settled in cash only going forward.

Stock option plan

For the nine months ended September 30, 2023, the Company recorded a stock option expense under the AIP of $2,932 (2022 - $146).

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The following tables summarize the movement in the stock option plan during the nine months ended September 30, 2023 and the year ended December 31, 2022.
TSXNYSE
For the nine months ended September 30, 2023
Number of optionsWeighted average exercise price (CAD)Number of optionsWeighted average exercise price (USD)
Opening balance - outstanding3,443,770 $10.61 395,953 $8.54 
Granted112,000 11.27 — — 
Exercised(225,000)8.85 — — 
Cancelled(95,000)10.81 — — 
Ending balance - outstanding3,235,770 $10.75 395,953 $8.54 
TSXNYSE
For the year ended December 31, 2022
Number of optionsWeighted average exercise price (CAD)Number of optionsWeighted average exercise price (USD)
Opening balance - outstanding1,985,563 $10.45 31,764 $14.67 
Granted1,466,541 10.81 364,189 8.00 
Exercised(8,334)9.81 — — 
Ending balance - outstanding3,443,770 $10.61 395,953 $8.54 

The following table presents the inputs used to value the stock options granted in 2023:
For the nine months ended September 30, 2023
TSX
Risk-free interest rate (%)3.53 
Expected option life (years)5.18 
Expected volatility (%)28.13 

The following table summarizes the stock options outstanding as at September 30, 2023:
September 30, 2023
Grant dateExpiration dateOptions outstandingOptions exercisableExercise price of outstanding options (CAD)Exercise price of outstanding options (USD)
November 14, 2016November 14, 2023325,000 325,000 $8.85 $— 
December 15, 2017December 15, 2024800,000 800,000 11.35 — 
December 17, 2018December 17, 2025401,959 401,959 9.81 — 
December 15, 2020December 15, 2027199,380 132,919 11.50 — 
December 15, 2021December 15, 202825,890 8,630 18.85 — 
December 15, 2021December 15, 202831,764 10,588 — 14.67 
December 15, 2022December 15, 20291,371,541 — 10.81 — 
December 15, 2022December 15, 2029364,189 — — 8.00 
March 6, 2023March 6, 2030112,000 — 11.27 — 
Total3,631,723 1,679,096 $10.75 $8.54 

AIP liability is recorded within amounts payable and accrued liabilities, and the equity component is included in the contributed surplus. The breakdown is presented below.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Amounts payable and accrued liabilities(1)
$16,302 $10,327 
Equity - contributed surplus21,809 15,784 
Total AIP$38,111 $26,111 
(1) This balance includes outstanding PSU liability of $6,220 (2022 - $6,630) and cash-based AIP liability of $10,082 (2022 - $3,697).
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







LTIP liability and equity components are presented on the balance sheet as follows:
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
LTIP - liability$25,795 $25,244 
Equity - contributed surplus5,185 5,685 
Total LTIP$30,980 $30,929 

22.    PERFORMANCE FEES LIABILITY

The actual amounts of performance fee revenue to be received and paid will depend on the cash realizations of Investment Vehicles and the performance of underlying investments. Recognizing such fee revenue is only permitted when the receipt is highly probable such that a significant amount of the cumulative fee revenue will not reverse. Any corresponding payable to participating unitholders, however, must be recognized by the Company as an expense and a liability in the period in which the change in underlying investment valuation occurs, although the change in the liability is unrealized and is a non-cash expense.

The following table summarizes the movement in performance fees liability for the nine months ended September 30, 2023 and the year ended December 31, 2022:

(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Balance, beginning of period$39,893 $48,358 
Contributions from equity holders10 971 
Performance fees expense
700 35,854 
Payments(271)(44,867)
Translation adjustment11 (423)
Balance, end of period$40,343 $39,893 

For the nine months ended September 30, 2023, the Company recorded $63,882 (2022 - $108,904) in connection with employment-related costs, including compensation expense (Note 21) and performance fees expense.

23.    SEGMENTED INFORMATION

Inter-segment revenues adjustments

Inter-segment revenues are determined under terms that approximate market value. For the nine months ended September 30, 2023, the adjustment to external revenues when determining segmented revenues consists of property management revenues earned from consolidated entities totaling $70,865 (2022 - $79,443), development revenues earned from consolidated entities totaling $1,087 (2022 - $1,141) and asset management revenues earned from consolidated entities totaling $6,589 (2022 - $7,543), which were eliminated on consolidation to arrive at the Company’s consolidated revenues in accordance with IFRS.

Page 30 of 42

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(in thousands of U.S. dollars)
For the three months ended September 30, 2023
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1),(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$202,571 $— $— $— $202,571 
Direct operating expenses (67,298)— — — (67,298)
Net operating income from single-family rental properties135,273 — — — 135,273 
Revenue from strategic capital services— — 8,960 — 8,960 
Income from equity-accounted investments in multi-family rental properties— 179 — — 179 
Income from equity-accounted investments in Canadian residential developments— 2,442 — — 2,442 
Other income244 354 — 132 730 
Income from investments in U.S. residential developments— 10,492 — — 10,492 
Compensation expense— — — (20,960)(20,960)
Performance fees expense— — — (163)(163)
General and administration expense— — — (22,174)(22,174)
Gain on debt modification and extinguishment— — — 1,326 1,326 
Transaction costs— — — (5,176)(5,176)
Interest expense— — — (80,475)(80,475)
Fair value gain on rental properties— — — 73,261 73,261 
Fair value gain on Canadian development properties— — — — — 
Realized and unrealized gain on derivative financial instruments— — — 30,456 30,456 
Amortization and depreciation expense— — — (4,522)(4,522)
Realized and unrealized foreign exchange loss— — — (62)(62)
Net change in fair value of limited partners’ interests in single-family rental business— — — (38,819)(38,819)
Income tax expense— — — (9,643)(9,643)
Segment net income (loss)$135,517 $13,467 $8,960 $(76,819)$81,125 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(in thousands of U.S. dollars)
For the nine months ended September 30, 2023
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1)(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$588,537 $— $— $— $588,537 
Direct operating expenses (194,407)— — — (194,407)
Net operating income from single-family rental properties394,130 — — — 394,130 
Revenue from strategic capital services— — 34,831 — 34,831 
Income from equity-accounted investments in multi-family rental properties— 529 — — 529 
Income from equity-accounted investments in Canadian residential developments— 2,734 — — 2,734 
Other income (expense)244 1,077 — (999)322 
Income from investments in U.S. residential developments— 23,847 — — 23,847 
Compensation expense— — — (63,182)(63,182)
Performance fees expense— — — (700)(700)
General and administration expense— — — (59,625)(59,625)
Gain on debt modification and extinguishment— — — 1,326 1,326 
Transaction costs— — — (13,173)(13,173)
Interest expense— — — (236,221)(236,221)
Fair value gain on rental properties— — — 208,907 208,907 
Realized and unrealized gain on derivative financial instruments— — — 20,777 20,777 
Amortization and depreciation expense— — — (13,067)(13,067)
Realized and unrealized foreign exchange gain— — — 69 69 
Net change in fair value of limited partners’ interests in single-family rental business— — — (118,543)(118,543)
Income tax expense— — — (25,667)(25,667)
Segment net income (loss)$394,374 $28,187 $34,831 $(300,098)$157,294 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.


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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(in thousands of U.S. dollars)
For the three months ended September 30, 2022
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1)(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$170,769 $— $— $— $170,769 
Direct operating expenses(54,464)— — — (54,464)
Net operating income from single-family rental properties116,305 — — — 116,305 
Revenue from private funds and advisory services— — 112,470 — 112,470 
Income from equity-accounted investments in multi-family rental properties— 169 — — 169 
Income from equity-accounted investments in Canadian residential developments— 3,621 — — 3,621 
Other income— 388 — 5,060 5,448 
Income from investments in U.S. residential developments— 5,680 — — 5,680 
Compensation expense— — — (25,859)(25,859)
Performance fees expense— — — (4,375)(4,375)
General and administration expense— — — (14,048)(14,048)
Loss on debt modification and extinguishment— — — (6,816)(6,816)
Transaction costs— — — (3,658)(3,658)
Interest expense— — — (60,094)(60,094)
Fair value gain on rental properties— — — 107,166 107,166 
Fair value loss on Canadian development properties— — — (1,314)(1,314)
Realized and unrealized gain on derivative financial instruments— — — 31,866 31,866 
Amortization and depreciation expense— — — (3,853)(3,853)
Realized and unrealized foreign exchange gain— — — 623 623 
Net change in fair value of limited partners’ interests in single-family rental business— — — (42,318)(42,318)
Income tax expense— — — (42,227)(42,227)
Segment net income (loss) from continuing operations$116,305 $9,858 $112,470 $(59,847)$178,786 
Segment net loss from discontinued operations— (2,335)— — (2,335)
Segment net income$116,305 $7,523 $112,470 $(59,847)$176,451 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.


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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(in thousands of U.S. dollars)
For the nine months ended September 30, 2022
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1)(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$464,692 $— $— $— $464,692 
Direct operating expenses(150,718)— — — (150,718)
Net operating income from single-family rental properties313,974 — — — 313,974 
Revenue from private funds and advisory services— — 145,268 — 145,268 
Income from equity-accounted investments in multi-family rental properties— 499 — — 499 
Income from equity-accounted investments in Canadian residential developments— 3,508 — — 3,508 
Other income— 1,056 — 7,813 8,869 
Income from investments in U.S. residential developments— 12,987 — — 12,987 
Compensation expense— — — (76,848)(76,848)
Performance fees expense— — — (32,056)(32,056)
General and administration expense— — — (40,828)(40,828)
Loss on debt modification and extinguishment— — — (6,816)(6,816)
Transaction costs— — — (11,359)(11,359)
Interest expense— — — (142,812)(142,812)
Fair value gain on rental properties— — — 802,573 802,573 
Fair value loss on Canadian development properties— — — (440)(440)
Realized and unrealized gain on derivative financial instruments— — — 158,991 158,991 
Amortization and depreciation expense— — — (10,844)(10,844)
Realized and unrealized foreign exchange gain— — — 662 662 
Net change in fair value of limited partners’ interests in single-family rental business— — — (246,553)(246,553)
Income tax expense— — — (155,284)(155,284)
Segment net income from continuing operations$313,974 $18,050 $145,268 $246,199 $723,491 
Segment net income from discontinued operations— 33,277 — — 33,277 
Segment net income$313,974 $51,327 $145,268 $246,199 $756,768 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.


24.    RELATED PARTY TRANSACTIONS AND BALANCES

Related parties include subsidiaries, associates, joint ventures, structured entities, key management personnel, the Board of Directors (“Directors”), immediate family members of key management personnel and Directors, and entities which are directly or indirectly controlled by, jointly controlled by or significantly influenced by key management personnel, Directors or their close family members.

In the normal course of operations, the Company executes transactions on market terms with related parties that have been measured at the exchange value and are recognized in the consolidated financial statements, including, but not limited to: asset management fees, performance fees and incentive distributions; loans, interest and non-interest bearing deposits; purchase and sale agreements; capital commitments to Investment Vehicles; and development of residential real estate assets. In connection with the Investment Vehicles, the Company has unfunded capital commitments of $261,533 as at September 30, 2023. Transactions and balances between consolidated entities are fully eliminated upon consolidation. Transactions and balances with unconsolidated structured entities are disclosed in Note 15.
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







Transactions with related parties

The following table lists the related party balances included within the condensed interim consolidated financial statements.
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Revenue from strategic capital services$8,960 $112,470 $34,831 $145,268 
Income from equity-accounted investments in multi-family rental properties179 169 529 499 
Income from equity-accounted investments in Canadian residential developments2,442 3,621 2,734 3,508 
Income from investments in U.S. residential developments10,492 5,680 23,847 12,987 
Performance fees expense(163)(4,375)(700)(32,056)
Gain on sale of Bryson MPC Holdings LLC— 5,060 — 5,060 
Net income recognized from related parties$21,910 $122,625 $61,241 $135,266 

Balances arising from transactions with related parties

The items set out below are included on various line items in the Company’s condensed interim consolidated financial statements.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Receivables from related parties included in amounts receivable
Contractual fees and other receivables from investments managed$30,010 $14,976 
Employee relocation housing loan(1)
1,479 1,477 
Annual incentive plan(2)
38,111 26,111 
Long-term incentive plan(2)
30,980 30,929 
Performance fees liability(2)
40,343 39,893 
Dividends payable501 497 
Other payables to related parties included in amounts payable and accrued liabilities86 166 
(1) The employee relocation housing loan is non-interest bearing for a term of ten years, maturing in 2028.
(2) Balances from compensation arrangements are due to employees of the Company.

The receivables are unsecured and non-interest bearing. There are no provisions recorded against receivables from related parties at September 30, 2023 (December 31, 2022 - nil).

25.    FINANCIAL RISK MANAGEMENT

The Company is experiencing the effect of rising interest rates and inflation, which touches all aspects of its business, including its ability to negotiate contract terms and make investment and financing decisions. The Company is exposed to the following risks as a result of holding financial instruments, as well as real estate assets that are measured at fair value: market risk (i.e., interest rate risk, foreign currency risk and other price risk that may impact the fair value of financial instruments, as well as rental properties and development properties), credit risk and liquidity risk. The following is a description of these risks and how they are managed.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes the risk of changes in interest rates, foreign currency rates and changes in market prices due to other factors, such as changes in equity prices or credit spreads. The Company manages market risk from foreign currency assets and liabilities and the impact of changes in currency exchange
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






rates and interest rates by funding assets with financial liabilities in the same currency and with similar interest rate characteristics, and by holding financial contracts such as interest rate derivatives to minimize residual exposures.

The sensitivities to market risks included below are based on a change in one factor while holding all other factors constant. In practice, this is unlikely to occur, and changes in some of the factors may be correlated - for example, changes in interest rates and changes in foreign currency rates.

Financial instruments held by the Company that are subject to market risk include other financial assets, borrowings and derivative instruments such as interest rate cap contracts.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The observable impacts on the fair values and future cash flows of financial instruments that can be directly attributable to interest rate risk include changes in the net income from financial instruments whose cash flows are determined with reference to floating interest rates and changes in the value of financial instruments whose cash flows are fixed in nature.

The Company’s assets largely consist of long-term interest-sensitive physical real estate assets. Accordingly, the Company’s financial liabilities consist of long-term fixed-rate debt and floating-rate debt. These financial liabilities are recorded at their amortized cost. The Company also holds interest rate caps to limit its exposure to increases in interest rates on floating-rate debt and sometimes holds interest rate contracts to lock in fixed rates on anticipated future debt issuances and as an economic hedge against the changes in the value of long-term interest-sensitive physical real estate assets that have not been otherwise matched with fixed-rate debt. During the nine months ended September 30, 2023, the Company recognized a realized gain of $12,679 related to interest rate caps that were in-the-money. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. To limit its exposure to interest rate risk, the Company has a mixed portfolio of fixed-rate and variable-rate debt, with $4,405,047 (77%) in fixed-rate debt and $1,341,723 (23%) in variable-rate debt as at September 30, 2023. If interest rates had been 1% higher or lower, with all other variables held constant, interest expense would have increased (decreased) by:
For the nine months ended September 3020232022
(in thousands of U.S. dollars)
1% increase
1% decrease
1% increase
1% decrease
Interest expense$1,708 $(10,664)12,168 (11,657)

Foreign currency risk

Changes in foreign currency rates will impact the carrying value of financial instruments denominated in currencies other than the U.S. dollar, which is the functional and presentation currency of the Company. The Company has exposure to monetary and non-monetary foreign currency risk due to the effects of changes in foreign exchange rates related to consolidated Canadian subsidiaries, equity-accounted investments, and cash and debt in Canadian dollars held at the corporate level. The Company manages foreign currency risk by raising equity in Canadian dollars and by matching its principal cash outflows to the currency in which the principal cash inflows are denominated.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The impact of a 1% increase or decrease in the Canadian dollar exchange rate would result in the following impacts to assets and liabilities:
For the nine months ended September 3020232022
(in thousands of U.S. dollars)
1% increase
1% decrease
1% increase
1% decrease
Assets
Equity-accounted investments in multi-family rental properties$211 $(211)$197 $(197)
Equity-accounted investments in Canadian residential developments1,184 (1,184)960 (960)
Canadian development properties1,600 (1,600)1,310 (1,310)
Investments in U.S. residential developments2 (2)1 (1)
$2,997 $(2,997)$2,468 $(2,468)
Liabilities
Debt539 (539)239 (239)
$539 $(539)$239 $(239)
Foreign exchange volatility is already embedded in the fair value of derivative financial instruments (Note 16), and therefore is excluded from the sensitivity calculations above.

Other price risk

Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as commodity prices and credit spreads. The Company does not hold any financial instruments that are exposed to equity price risk, including equity securities and equity derivatives.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause financial loss for the other party by failing to discharge an obligation.

The Company's exposure to credit risk arises from cash, restricted cash, loans and receivables which are due primarily from associates. Cash and restricted cash are placed only with approved counterparties. For banks and financial institutions, only independently rated parties that meet the minimum credit rating of AA or equivalent are accepted. Through the equity portion of its investments, the Company is also indirectly exposed to credit risk arising from loans advanced by investees to individual real estate development projects. As at September 30, 2023, the Company held cash and restricted cash with regulated financial institutions that met minimum credit rating requirements. As at September 30, 2023, the Company's maximum exposure to receivables due from its associates amounts to $31,489 (December 31, 2022 - $16,453).

Credit risk arises from the possibility that residents may experience financial difficulty and be unable to fulfill their lease commitments. A provision for bad debt (or expected credit loss) is taken for all anticipated collectability risks. The Company also manages credit risk by performing resident underwriting due diligence during the leasing process. As at September 30, 2023, the Company had rent receivables of $4,876 (December 31, 2022 – $3,581), net of bad debt, which adequately reflects the Company's credit risk.

Liquidity risk

The real estate industry is highly capital intensive. Liquidity risk is the risk that the Company may have difficulty in meeting obligations associated with its financial liabilities as they fall due. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price. The Company's liquidity risk management includes maintaining sufficient cash on hand and the availability of funding through an adequate amount of committed credit facilities, as well as performing periodic cash flow forecasts to ensure the Company has sufficient cash to meet operational and financing costs. The Company's primary source of liquidity consists of cash and other financial assets, net of deposits and other associated liabilities, and undrawn available credit facilities. Cash flow
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






generated from operating the rental property portfolio represents the primary source of liquidity used to service the interest on the property-level debt and fund direct property operating expenses, as well as reinvest in the portfolio through capital expenditures.

The Company is subject to the risks associated with debt financing, including the ability to refinance indebtedness at maturity. The Company believes these risks are mitigated through the use of long-term debt secured by high-quality assets, by maintaining certain debt levels that are set by management, and by staggering maturities over an extended period.

The following tables present the contractual maturities of the Company’s financial liabilities at September 30, 2023 and December 31, 2022, excluding remaining unamortized deferred financing fees and debt discount:
(in thousands of U.S. dollars)
As at September 30, 2023Due on demand and in 2023From 2024
to 2025		From 2026
to 2027		2028 and thereafterTotal
Liabilities
Debt(1)
$154 $1,565,700 $2,922,547 $1,258,369 $5,746,770 
Other liabilities
— 14,410 12,633 18,985 46,028 
Limited partners' interests in single-family rental business
— 900,084 1,099,363 275,902 2,275,349 
Derivative financial instruments
— — — 32,097 32,097 
Due to Affiliate
— — — 295,325 295,325 
Amounts payable and accrued liabilities
205,359 — — — 205,359 
Resident security deposits
83,874 — — — 83,874 
Dividends payable
15,834 — — — 15,834 
Total
$305,221 $2,480,194 $4,034,543 $1,880,678 $8,700,636 
(1) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise the extension options available on all loans.

(in thousands of U.S. dollars)
As at December 31, 2022Due on demand and in 2022From 2023
to 2024		From 2025
to 2026		2027 and thereafterTotal
Liabilities
Debt(1)
$757,135 $1,949,405 $2,529,240 $542,457 $5,778,237 
Other liabilities
— 10,370 8,620 15,534 34,524 
Limited partners' interests in single-family rental business
— — 851,416 845,456 1,696,872 
Derivative financial instruments
— — — 51,158 51,158 
Due to Affiliate
— — — 295,325 295,325 
Amounts payable and accrued liabilities
138,273 — — — 138,273 
Resident security deposits
79,864 — — — 79,864 
Dividends payable
15,861 — — — 15,861 
Total$991,133 $1,959,775 $3,389,276 $1,749,930 $8,090,114 
(1) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise the extension options available on all loans.


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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







The future repayments of principal and interest on financial liabilities are as follows, excluding remaining unamortized deferred financing fees and debt discount:
(in thousands of U.S. dollars)
As at September 30, 2023Due on demand and in 2023From 2024
to 2025		From 2026
to 2027		2028 and thereafterTotal
Principal
Debt(1),(2)
$154 $1,565,700 $2,922,547 $1,258,369 $5,746,770 
Due to Affiliate
— — — 295,325 295,325 
Interest
Debt(1),(3)
67,346 444,582 228,394 37,649 777,971 
Due to Affiliate(4)
4,245 33,962 34,192 120,936 193,335 
Total$71,745 $2,044,244 $3,185,133 $1,712,279 $7,013,401 
(1) Certain mortgages' principal and interest repayments were translated to U.S. dollars at the period-end exchange rate.
(2) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise, where appropriate, the extension options available on all loans.
(3) For floating-rate debt facilities, the future interest payments are calculated using the prevailing floating interest rates at the period-end date.
(4) Reflects the contractual maturity date of September 3, 2032.

The details of the net liabilities are shown below:
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Cash$172,787 $204,303 
Amounts receivable38,671 24,984 
Prepaid expenses and deposits23,348 37,520 
Current assets234,806 266,807 
Amounts payable and accrued liabilities205,359 138,273 
Resident security deposits83,874 79,864 
Dividends payable15,834 15,861 
Current portion of long-term debt624,962 757,135 
Current liabilities930,029 991,133 
Net current liabilities$(695,223)$(724,326)

During the nine months ended September 30, 2023, the change in the Company’s liquidity resulted in a working capital deficit of $695,223 (2022 - deficit of $724,326). The working capital deficit is predominantly driven by debts coming due in 2024. The Company is in the process of exploring refinancing options for the securitization debt 2017-2 of $322,268 and the term loan of $302,065.

As of September 30, 2023, there was $150,000 outstanding under the corporate credit facility (December 31, 2022 - nil) and $350,000 (December 31, 2022 - $500,000) of the corporate credit facility remained available to the Company. During the nine months ended September 30, 2023, the Company received distributions of $14,797 (2022 - $45,896) from its investments.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






26.    SUPPLEMENTARY CASH FLOW DETAILS

The details of the adjustments for non-cash items presented in operating activities of the cash flow statement are shown below:
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Fair value gain on rental properties (Note 4)
$(73,261)$(107,166)$(208,907)$(802,573)
Fair value (gain) loss on Canadian development properties (Note 7)
— 1,314 — 440 
Unrealized gain on derivative financial instruments (Note 16)
(24,558)(31,866)(8,098)(158,991)
Income from investments in U.S. residential developments (Note 8)
(10,492)(5,680)(23,847)(12,987)
Income from equity-accounted investments in multi-family rental properties (Note 5)
(179)(169)(529)(499)
Income from equity-accounted investments in Canadian residential developments (Note 6)
(2,442)(3,621)(2,734)(3,508)
Gain on Bryson MPC Holdings LLC disposition (Note 13)
— (5,060)— (5,060)
(Gain) loss on debt modification and extinguishment (Notes 14, 17)
(1,326)6,816 (1,326)6,816 
Amortization and depreciation expense
4,522 3,853 13,067 10,844 
Deferred income taxes (Note 10)
9,806 72,087 23,930 183,578 
Net change in fair value of limited partners’ interests in single-family rental business
38,819 42,318 118,543 246,553 
Amortization of debt discount and financing costs (Note 17)
6,068 4,765 16,966 12,846 
Interest on lease obligation (Note 17)
287 293 877 857 
Other non-cash interest (Note 17)
— (424)— (424)
Long-term incentive plan (Note 21)
2,521 5,779 2,623 14,067 
Annual incentive plan (Note 21)
4,778 7,015 18,411 21,847 
Performance fees expense (Note 22)
163 4,375 700 32,056 
Non-cash impact related to debt modification
(3,933)— (3,933)— 
Unrealized foreign exchange gain
(2,903)(5,198)(9,553)(9,682)
Adjustments for non-cash items$(52,130)$(10,569)$(63,810)$(463,820)

The following table presents the changes in non-cash working capital items for the periods ended September 30, 2023 and September 30, 2022.
For the three months ended September 30For the nine months ended September 30
(in thousands of U.S. dollars)2023202220232022
Amounts receivable$(13,338)$(100,885)$(13,687)$(98,494)
Prepaid expenses and deposits8,914 8,356 14,172 (4,247)
Resident security deposits5,881 7,029 4,010 15,574 
Amounts payable and accrued liabilities51,737 68,089 67,086 108,106 
Deduct non-cash working capital items from discontinued operations— (45,094)— (45,094)
Changes in non-cash working capital items$53,194 $(62,505)$71,581 $(24,155)


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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and nine months ended September 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






27.    SUBSEQUENT EVENTS

Quarterly dividend

On November 7, 2023, the Board of Directors of the Company declared a dividend of $0.058 per common share in U.S. dollars payable on or after January 15, 2024 to shareholders of record on December 31, 2023.


Page 41 of 42













































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7 St. Thomas Street, Suite 801 Toronto, Ontario M5S 2B7
T 416-925-7228 F 416-925-7964 www.triconresidential.com
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Non-IFRS measures, forward-looking statements and market industry data
1
Introduction
1.1
Business overview
1.2
The Tricon difference
2
Highlights
3
Consolidated financial results
3.1
Review of income statements
3.2
Review of selected balance sheet items
3.3
Subsequent events
4
Operating results of businesses
4.1
Single-Family Rental
4.2
Adjacent residential businesses
4.2.1
Multi-Family Rental
4.2.2
Residential Development
4.3Strategic Capital
5
Liquidity and capital resources
5.1
Financial strategy
5.2
Liquidity
5.3
Capital resources
6
Operational key performance indicators
7
Accounting estimates and policies, controls and procedures, and risk analysis
7.1
Accounting estimates and policies
7.2
Controls and procedures
7.3
Transactions with related parties
7.4
Dividends
7.5
Compensation incentive plans
7.6
Risk definition and management
8
Historical financial information
Appendix A - Reconciliations


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Non-IFRS measures

This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the unaudited condensed interim consolidated financial statements and accompanying notes for the three and nine months ended September 30, 2023 (the "Interim Financial Statements") of Tricon Residential Inc. (“Tricon", "us", "we" or the “Company”), prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“the IASB”) and consistent with the Company's audited annual consolidated financial statements for the year ended December 31, 2022.

The Company has included herein certain non-IFRS financial measures and non-IFRS ratios, including, but not limited to: "proportionate" metrics, net operating income ("NOI"), NOI margin, proportionate same home NOI and NOI margin, funds from operations ("FFO"), core funds from operations ("Core FFO"), adjusted funds from operations ("AFFO"), Core FFO per share, AFFO per share, Core FFO payout ratio, AFFO payout ratio, as well as certain key indicators of the performance of our businesses which are supplementary financial measures. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. We utilize these measures in managing our business, including performance measurement and capital allocation. In addition, certain of these measures are used in measuring compliance with our debt covenants. We believe that providing these performance measures on a supplemental basis is helpful to investors and shareholders in assessing the overall performance of the Company’s business. However, these measures are not recognized under and do not have any standardized meaning prescribed by IFRS as issued by the IASB, and are not necessarily comparable to similar measures presented by other publicly-traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. Because non-IFRS financial measures, non-IFRS ratios and supplementary financial measures do not have standardized meanings prescribed under IFRS, securities regulations require that such measures be clearly defined, identified, and reconciled to their nearest IFRS measure. The definition, calculation and reconciliation of the non-IFRS financial measures and the requisite disclosure for non-IFRS ratios used in this MD&A are provided in Section 4 and Appendix A, and the supplementary financial measures which are key performance indicators presented herein are discussed in detail in Section 6.

The non-IFRS financial measures, non-IFRS ratios and supplementary financial measures presented herein should not be construed as alternatives to net income (loss) or cash flow from the Company’s activities, determined in accordance with IFRS, as indicators of Tricon’s financial performance. Tricon’s method of calculating these measures may differ from other issuers’ methods and, accordingly, these measures may not be comparable to similar measures presented by other publicly-traded entities.

Forward-looking statements

Certain statements in this MD&A are considered “forward-looking information” as defined under applicable securities laws (“forward-looking statements”). This document should be read in conjunction with material contained in the Company’s current Interim Financial Statements along with the Company’s other publicly filed documents. Words such as “may”, “would”, “could”, “will”, “anticipate”, “believe”, “plan”, “expect”, “intend”, “estimate”, “aim”, “endeavor”, “project”, “continue”, "target" and similar expressions identify these forward-looking statements. Statements containing forward-looking information are not historical facts but instead reflect management’s expectations, intentions and beliefs concerning anticipated future events, results, circumstances, economic performance or expectations with respect to Tricon and its investments and are based on information currently available to management and on assumptions that management believes to be reasonable.

This MD&A includes forward-looking statements pertaining to: anticipated operational and financial performance; the Company’s strategic and operating plans and growth prospects; expected demographic and economic trends impacting the Company’s key markets; project plans, costs, timelines and sales/rental expectations; expected performance fees; future cash flows; transaction and development timelines; anticipated demand for residential real estate; the anticipated growth of the Company's rental businesses; the acquisition of build-to-rent projects; the Company’s key priorities over the next three years and the manner in which they might be achieved; expected future acquisitions, acquisition pace, rent growth, operating expenses, occupancy and turnover rates, and capital expenditure programs for single-family rental homes and multi-family rental apartments; rollout of operations programs and resident betterment programs; debt financing and refinancing intentions; continuing increases in
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


interest rates, inflation and economic uncertainty; and the impact and aftermath of the COVID-19 pandemic. The assumptions underlying these forward-looking statements and a list of factors that may cause actual business performance to differ from current projections are discussed in this MD&A and in the Company’s Annual Information Form dated February 28, 2023 (the “AIF”), which is available on SEDAR at www.sedar.com. The continuing impact and aftermath of COVID-19 on the operations, business and financial results of the Company may cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements.

Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by management of the Company as of the date of this MD&A, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company’s estimates, beliefs and assumptions, which may prove to be incorrect, include the various assumptions set forth herein, including, but not limited to, the Company’s future growth potential; results of operations; future prospects and opportunities; demographic and industry trends; no change in legislative or regulatory matters; future levels of indebtedness and prevailing interest rates; the tax laws as currently in effect; the continuing availability of capital and suitable acquisition and investment opportunities; current economic conditions including property value appreciation and overall levels of inflation; and the impact and aftermath of COVID-19.

When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant unknown risks and uncertainties. Forward-looking statements should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements, including, but not limited to, the Company’s ability to execute its growth strategies; the impact of changing conditions in the multi-family housing market; increasing competition in the single-family and multi-family housing market; the effect of fluctuations and cycles in the Canadian and U.S. real estate market; the marketability and value of the Company’s portfolio; the expected future value of the Company's portfolio; changes in the attitudes, financial condition and demand of the Company’s demographic market; rising interest rates and volatility in financial markets; the potential impact of reduced supply of labor and materials on expected costs and timelines; rates of inflation and overall economic uncertainty; developments and changes in applicable laws and regulations; and the impact of COVID-19 on the operations, business and financial results of the Company.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this MD&A. See the AIF and the continuous disclosure documents referenced in Section 7.6 for a more complete list of risks relating to an investment in the Company and an indication of the impact the materialization of such risks could have on the Company, and therefore cause actual results to deviate from the forward-looking statements.

Certain statements included in this MD&A may be considered a “financial outlook” for purposes of applicable securities laws, and as such, the financial outlook may not be appropriate for purposes other than this document. Although the forward-looking statements contained in this MD&A are based upon what management currently believes to be reasonable assumptions (including those noted above), there can be no assurance that actual results, performance or achievements will be consistent with these forward-looking statements. The forward-looking statements contained in this document are expressly qualified in their entirety by this cautionary statement.

When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking statements in this MD&A are made as of the date of this document and the Company does not intend to, or assume any obligation to, update or revise these forward-looking statements or information to reflect new information, events, results or circumstances or otherwise after the date on which such statements are made to reflect the occurrence of unanticipated events, except as required by law, including securities laws.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Market and industry data

This MD&A may include certain market and industry data and forecasts obtained from third-party sources, industry publications and publicly available information as well as industry data prepared by management on the basis of its knowledge of the industry in which the Company operates (including management’s estimates and assumptions relating to the industry based on that knowledge). Management’s knowledge of the North American residential real estate industry has been developed through its experience and participation in the industry. Management believes that its industry data is accurate and that its estimates and assumptions are reasonable, but there can be no assurance as to the accuracy or completeness of this data. Third-party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. Although management believes it to be reliable, the Company has not independently verified any of the data from third-party sources referred to in this MD&A, or analyzed or verified the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying economic assumptions relied upon by such sources.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


1.    Introduction

This Management’s Discussion and Analysis (“MD&A”) is dated as of November 7, 2023, the date it was approved by the Board of Directors of Tricon Residential Inc. (“Tricon", “us", “we” or the “Company”), and reflects all material events up to that date. It should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and related notes for the three and nine months ended September 30, 2023 ("Interim Financial Statements"), which were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), including International Accounting Standard 34, Interim Financial Reporting (“IAS 34”). The accounting policies are consistent with the Company’s audited annual consolidated financial statements for the year ended December 31, 2022, available on the Company's website at www.triconresidential.com, on the Canadian Securities Administrators’ website at www.sedar.com, and as part of the Company's annual report (Form 40-F) filed on the EDGAR section of the U.S. Securities and Exchange Commission’s (“SEC”) website at www.sec.gov. Additional information about the Company, including its Annual Information Form, is available on these websites.

The registered office of the Company is at 7 St. Thomas Street, Suite 801, Toronto, Ontario M5S 2B7. The Company’s common shares are traded under the symbol TCN on both the New York Stock Exchange and the Toronto Stock Exchange.

All dollar amounts in this MD&A are expressed in U.S. dollars unless otherwise indicated.

1.1    Business overview

Tricon Residential Inc. (NYSE: TCN, TSX: TCN) is an owner and operator of a growing portfolio of approximately 38,000 single-family rental homes located primarily in the U.S. Sun Belt and multi-family apartments in Canada. The Company also invests in adjacent residential businesses which include residential development assets in the United States and Canada. Through its fully integrated operating platform, the Company earns rental income and ancillary revenue from single-family rental properties, income from its investments in multi-family rental properties and residential developments, as well as fees from managing strategic capital associated with its businesses. Our commitment to enriching the lives of our employees, residents and local communities underpins Tricon’s culture and business philosophy. We provide high-quality rental housing options for families across the United States and Canada through our technology-enabled operating platform and dedicated on-the-ground operating teams. Our development programs are also delivering thousands of new rental homes and apartments as part of our commitment to help solve the housing supply shortage. At Tricon, we imagine a world where housing unlocks life’s potential.

As at September 30, 2023, about 97% of the Company’s real estate assets are stabilized single-family rental homes and the remaining 3% are investments in adjacent residential businesses.

Please refer to the section entitled “Description of the Business” in the Company’s Annual Information Form dated February 28, 2023 (the “AIF”), which is available on SEDAR at www.sedar.com, for a more fulsome overview of Tricon’s business.

1.2    The Tricon difference

I. Superior growth profile

Tricon is focused on disciplined, long-term growth of its single-family rental home portfolio and has a sophisticated acquisition platform that is capable of deploying large amounts of capital across multiple acquisition channels and markets simultaneously. Tricon sources acquisition opportunities of existing homes through traditional channels, including Multiple Listing Service (“MLS”), “iBuyer” direct channels, and portfolio acquisitions. These traditional channels will account for the majority of Tricon’s planned acquisitions over the near term and leverage the Company’s acquisition platform which filters and ranks many listings per year while standardizing hundreds of key underwriting parameters, enabling the Company to efficiently convert listings into offers.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


In an undersupplied housing market, Tricon also believes in adding to the supply of rental homes and providing accessible housing solutions through its three newest home growth channels. These include the development of dedicated “build-to-rent” communities and the acquisition of both scattered new homes and completed single-family rental communities directly from homebuilders. In aggregate, our six existing and new home acquisition channels are expected to provide the Company with sufficient volume to meet its acquisition targets.

II. Differentiated strategic partnership model

Through its differentiated strategic partnership model, Tricon has demonstrated its ability to raise and deploy third-party capital to accelerate growth, improve operating efficiency, and take development off balance sheet. The Company has recently partnered with leading global real estate investors to form three complementary single-family rental joint ventures, each with a unique acquisition strategy that provides residents with more housing options at an accessible price point.
mdaactivegrowthvehiclesq22.jpg
(1) As at September 30, 2023, Tricon's unfunded equity commitment to the active growth vehicles was approximately $147 million and it is expected to be funded over the next three years.

III. Technology-enabled operating platform

Tricon has developed a technology-enabled platform that supports its growth, provides its residents an elevated living experience, and optimizes operating efficiencies. The Company's proprietary suite of software applications, referred to as “TriApps”, automates many facets of the single-family rental business. More information is available in the AIF.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


2.    Highlights

The following section presents highlights for the quarter on a consolidated and proportionate basis.

On October 18, 2022, the Company sold its remaining 20% equity interest in its U.S. multi-family rental portfolio, held through Tricon US Multi-Family REIT LLC. In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the Company reclassified the prior-period results and cash flows of Tricon US Multi-Family REIT LLC as discontinued operations separate from the Company's continuing operations.

Core funds from operations ("Core FFO"), Core FFO per share, Adjusted funds from operations ("AFFO"), and AFFO per share are non-IFRS financial measures and non-IFRS ratios as identified in Section 6. The Company uses guidance specified by the National Association of Real Estate Investment Trusts ("NAREIT") to calculate FFO, upon which Core FFO and AFFO are based. The measures are presented on a proportionate basis, reflecting only the portion attributable to Tricon's shareholders based on the Company's ownership percentage of the underlying entities and excludes the percentage associated with non-controlling and limited partners' interests. The Company believes that providing FFO, Core FFO and AFFO on a proportionate basis is helpful to investors in assessing the overall performance of the Company’s business. Note that FFO, Core FFO, Core FFO per share, AFFO and AFFO per share are not meant to be used in measuring the Company's liquidity. See “Non-IFRS measures” on page 1 and Appendix A for a reconciliation to the most directly comparable IFRS measures.
For the periods ended September 30
Three months
Nine months
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars, unless otherwise indicated)2023202220232022
Financial highlights on a consolidated basis
Net income from continuing operations, including:
$81,125 $178,786 $157,294 $723,491 
Fair value gain on rental properties
73,261 107,166 208,907 802,573 
Basic earnings per share attributable to shareholders of Tricon from continuing operations
0.29 0.65 0.56 2.63 
Diluted earnings per share attributable to shareholders of Tricon from continuing operations
0.18 0.49 0.48 1.87 
Net (loss) income from discontinued operations
— (2,335)— 33,277 
Basic earnings (loss) per share attributable to shareholders of Tricon from discontinued operations
— (0.01)— 0.12 
Diluted earnings (loss) per share attributable to shareholders of Tricon from discontinued operations
— (0.01)— 0.11 
Dividends per share
$0.058 $0.058 $0.174 $0.174 
Weighted average shares outstanding - basic
273,810,276 274,710,065 273,738,512 274,474,675 
Weighted average shares outstanding - diluted
310,497,125 311,910,445 310,341,448 312,023,897 
Non-IFRS(1) measures on a proportionate basis
Core funds from operations ("Core FFO")
$42,737 $46,403 $126,946 $140,447 
Adjusted funds from operations ("AFFO")
34,143 35,182 100,951 109,570 
Core FFO per share(2)
0.14 0.15 0.41 0.45 
AFFO per share(2)
0.11 0.11 0.33 0.35 
Select balance sheet items reported on a consolidated basis
September 30, 2023December 31, 2022
Total assets
$13,182,327 $12,450,946 
Total liabilities(3)
9,282,660 8,653,921 
Net assets attributable to shareholders of Tricon
3,895,732 3,790,249 
Rental properties
12,122,107 11,445,659 
Debt
5,687,457 5,728,184 
(1) Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company's performance. Refer to “Non-IFRS measures” on page 1 and Appendix A.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


(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 Tricon PIPE LLC, which were 310,497,125 and 310,341,448 for the three and nine months ended September 30, 2023, respectively, and 311,910,445 and 312,023,897 for the three and nine months ended September 30, 2022, respectively.
(3) Includes limited partners' interests in SFR JV-1, SFR JV-HD and SFR JV-2.

IFRS measures on a consolidated basis

Net income from continuing operations in the third quarter of 2023 was $81.1 million compared to $178.8 million in the third quarter of 2022, and included:

•Fair value gain on rental properties of $73.3 million compared to $107.2 million in the third quarter of 2022, attributable to a moderation in home price appreciation within the single-family rental portfolio. This moderation is attributed to persistently higher mortgage rates and ongoing economic uncertainty which have introduced a level of caution for homebuyers.

•Revenue from single-family rental properties of $202.6 million compared to $170.8 million in the third quarter of 2022, driven primarily by growth of 5.0% in the single-family rental portfolio to 37,024 homes, a 6.1% year-over-year increase in average effective monthly rent (from $1,755 to $1,862) and a 3.6% increase in total portfolio occupancy to 94.5%.

•Direct operating expenses of $67.3 million compared to $54.5 million in the third quarter of 2022, primarily reflecting an expansion in the rental portfolio and higher property tax expenses associated with increasing property value assessments, as well as general cost and labor market inflationary pressures.

•Revenue from strategic capital services (previously reported as Revenue from private funds and advisory services) of $9.0 million compared to $112.5 million in the third quarter of 2022, primarily attributable to $99.9 million of performance fees earned from the sale of Tricon's remaining 20% equity interest in the U.S. multi-family rental portfolio in the third quarter of 2022, along with lower asset management and property management fees following the divestiture of Tricon's interest in the U.S. multi-family rental portfolio.

Net income from continuing operations for the nine months ended September 30, 2023 was $157.3 million compared to $723.5 million for the period ended September 30, 2022, and included:

•Fair value gain on rental properties of $208.9 million compared to $802.6 million in the prior year for the same reasons discussed above.

•Revenue from single-family rental properties of $588.5 million and direct operating expenses of $194.4 million compared to $464.7 million and $150.7 million in the prior year, respectively, which translated to a net operating income ("NOI") increase of $80.2 million, attributable to the continued expansion of the single-family rental portfolio and strong rent growth.

•Revenue from strategic capital services of $34.8 million compared to $145.3 million in the prior year, for the reasons discussed above, partially offset by higher Johnson development fees from large commercial land bulk sales in the first quarter of 2023.

Non-IFRS measures on a proportionate basis

Core FFO for the third quarter of 2023 was $42.7 million, a decrease of $3.7 million or 8% compared to $46.4 million in the third quarter of 2022. The change was driven by higher borrowing costs incurred to support the expansion of the SFR portfolio, a loss of NOI and fee income from the disposition of the U.S. multi-family rental portfolio, lower acquisition fees associated with acquiring fewer SFR homes, and lower performance fees. These items were partially offset by NOI growth in the SFR business and stronger results from U.S. residential developments. During the nine months ended September 30, 2023, Core FFO decreased by $13.5 million or 10% to $126.9 million compared to $140.4 million in the prior period, for the reasons noted above.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


AFFO for the three and nine months ended September 30, 2023 was $34.1 million and $101.0 million, respectively, a decrease of $1.0 million (3%) and $8.6 million (8%) from the same periods in the prior year. This change in AFFO was driven by the decrease in Core FFO discussed above, partially offset by lower recurring capital expenditures as a result of disciplined cost containment and scoping refinement when turning homes, and the absence of recurring capital expenditures from the U.S. multi-family rental portfolio following its sale.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


3.    Consolidated financial results

The following section should be read in conjunction with the Company’s condensed interim financial statements and related notes for the three and nine months ended September 30, 2023.

On October 18, 2022, the Company completed the sale of its remaining 20% equity interest in its U.S. multi-family rental portfolio that was held through Tricon US Multi-Family REIT LLC. Accordingly, the Company reclassified its prior-year results as discontinued operations separate from the Company’s continuing operations in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations ("IFRS 5").


3.1    Review of income statements

Consolidated statements of income
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)20232022Variance20232022Variance
Revenue from single-family rental properties
$202,571 $170,769 $31,802 $588,537 $464,692 $123,845 
Direct operating expenses
(67,298)(54,464)(12,834)(194,407)(150,718)(43,689)
Net operating income from single-family rental properties
135,273 116,305 18,968 394,130 313,974 80,156 
Revenue from strategic capital services
8,960 112,470 (103,510)34,831 145,268 (110,437)
Income from equity-accounted investments in multi-family rental properties(1)
179 169 10 529 499 30 
Income from equity-accounted investments in Canadian residential developments(2)
2,442 3,621 (1,179)2,734 3,508 (774)
Other income(3)
730 5,448 (4,718)322 8,869 (8,547)
Income from investments in U.S. residential developments(4)
10,492 5,680 4,812 23,847 12,987 10,860 
Compensation expense
(20,960)(25,859)4,899 (63,182)(76,848)13,666 
Performance fees expense
(163)(4,375)4,212 (700)(32,056)31,356 
General and administration expense
(22,174)(14,048)(8,126)(59,625)(40,828)(18,797)
Gain (loss) on debt modification and extinguishment
1,326 (6,816)8,142 1,326 (6,816)8,142 
Transaction costs
(5,176)(3,658)(1,518)(13,173)(11,359)(1,814)
Interest expense
(80,475)(60,094)(20,381)(236,221)(142,812)(93,409)
Fair value gain on rental properties
73,261 107,166 (33,905)208,907 802,573 (593,666)
Fair value loss on Canadian development properties— (1,314)1,314 — (440)440 
Realized and unrealized gain on derivative financial instruments
30,456 31,866 (1,410)20,777 158,991 (138,214)
Amortization and depreciation expense
(4,522)(3,853)(669)(13,067)(10,844)(2,223)
Realized and unrealized foreign exchange (loss) gain
(62)623 (685)69 662 (593)
Net change in fair value of limited partners’ interests in single-family rental business
(38,819)(42,318)3,499 (118,543)(246,553)128,010 
(53,465)(7,762)(45,703)(246,000)419,533 (665,533)
Income before income taxes from continuing operations
$90,768 $221,013 $(130,245)$182,961 $878,775 $(695,814)
Income tax expense from continuing operations
(9,643)(42,227)32,584 (25,667)(155,284)129,617 
Net income from continuing operations
$81,125 $178,786 $(97,661)$157,294 $723,491 $(566,197)
Basic earnings per share attributable to shareholders of Tricon from continuing operations
0.29 0.65 (0.36)0.56 2.63 (2.07)
Diluted earnings per share attributable to shareholders of Tricon from continuing operations
0.18 0.49 (0.31)0.48 1.87 (1.39)
Net (loss) income from discontinued operations
— (2,335)2,335 — 33,277 (33,277)
Basic earnings (loss) per share attributable to shareholders of Tricon from discontinued operations
— (0.01)0.01 — 0.12 (0.12)
Diluted earnings (loss) per share attributable to shareholders of Tricon from discontinued operations
— (0.01)0.01 — 0.11 (0.11)
Weighted average shares outstanding - basic273,810,276 274,710,065 (899,789)273,738,512 274,474,675 (736,163)
Weighted average shares outstanding - diluted(5)
310,497,125 311,910,445 (1,413,320)310,341,448 312,023,897 (1,682,449)
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


(1) Includes income from The Selby (Section 4.2.1).
(2) Includes income from The Taylor, Maple House (Block 8), Birch House (Block 10), Cherry House (Blocks 3/4/7), Oak House (Block 20), The Ivy, The Spoke (Symington), ROQ City (Queen & Ontario) and KT Housing Now (Section 4.2.2).
(3) Includes commercial rental income from The Shops of Summerhill (Section 4.2.2) and interest income, partially offset by the inclusion of a net operating loss from non-core single-family rental homes, which were disposed of during the quarter.
(4) Reflects the net change in the fair values of the underlying investments in the build-to-rent and legacy for-sale housing businesses (Section 4.2.2).
(5) For the three and nine months ended September 30, 2023, the exchangeable preferred units of Tricon PIPE LLC were dilutive (2022 - dilutive). Refer to Note 20 to the Consolidated Financial Statements.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Revenue from single-family rental properties

The following table provides further details regarding revenue from single-family rental properties for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Rental revenue(1)
$192,064 $161,518 $30,546 $559,011 $438,123 $120,888 
Other revenue(1)
10,507 9,251 1,256 29,526 26,569 2,957 
Revenue from single-family rental properties
$202,571 $170,769 $31,802 $588,537 $464,692 $123,845 
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.

Revenue from single-family rental properties for the three months ended September 30, 2023 totaled $202.6 million, an increase of $31.8 million or 18.6% compared to $170.8 million for the same period in the prior year. The increase is attributable to:

•Growth of $30.5 million in rental revenue, driven by portfolio expansion of 5.0% (37,024 rental homes compared to 35,262), and a 6.1% year-over-year increase in average effective monthly rent per home ($1,862 compared to $1,755) attributable to the continued strong demand for single-family rental homes. This strong demand also contributed to a 3.6% increase in occupancy (94.5% compared to 90.9%) notwithstanding the acquisition of 410 vacant homes this quarter.

•An increase of $1.3 million in other revenue driven by portfolio expansion, as well as incremental ancillary revenue from the rollout of the Company's smart-home technology initiative (75% of single-family rental homes were smart-home enabled at September 30, 2023 compared to 66% at September 30, 2022), along with higher resident enrollment in the renters insurance program. These items were partially offset by a heightened provision on resident recoveries to reflect actual collections rather than billed amounts (see Section 4.1).

Revenue from single-family rental properties for the nine months ended September 30, 2023 totaled $588.5 million, an increase of $123.8 million or 26.7% compared to the prior year. This favorable variance was primarily driven by growth of the rental portfolio, an improvement in the average monthly rent, as well as higher other revenue for the reasons discussed above.

Direct operating expenses

The following table provides further details regarding direct operating expenses of the single-family rental portfolio for the three and nine months ended September 30, 2023 and 2022.
For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)2023
2022
Variance2023
2022
Variance
Property taxes
$33,181 $25,976 $7,205 $96,413 $71,730 $24,683 
Repairs and maintenance
8,693 7,698 995 23,474 21,653 1,821 
Turnover
3,109 1,920 1,189 8,485 5,948 2,537 
Property management expenses
12,534 10,904 1,630 37,316 29,748 7,568 
Property insurance
2,245 1,951 294 6,690 5,515 1,175 
Marketing and leasing
573 705 (132)1,694 1,906 (212)
Homeowners' association (HOA) costs
3,647 2,581 1,066 10,217 6,484 3,733 
Other direct expense(1)
3,316 2,729 587 10,118 7,734 2,384 
Direct operating expenses
$67,298 $54,464 $12,834 $194,407 $150,718 $43,689 
(1) Other direct expense includes property utilities, landscaping costs on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas and electricity, as well as landscaping costs, are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Direct operating expenses for the three months ended September 30, 2023 were $67.3 million, an increase of $12.8 million or 23.6% compared to the same period in the prior year. The variance is primarily attributable to:

•An increase of $7.2 million in property taxes driven by 5.0% growth in the size of the portfolio, as well as a higher property tax expense per home arising from significant year-over-year assessed home value appreciation and anticipated tax increases in Tricon's markets.

•An increase of $1.2 million in turnover expense primarily attributable to a higher annualized turnover rate (25.1% in the current period compared to 22.5% in the prior period for the total portfolio) on a larger portfolio of homes which led to an increased volume of work orders, partly offset by effective cost control through scope refinement and higher utilization of in-house maintenance personnel on turn projects.

•An increase of $1.6 million in property management expenses as a result of additional operations personnel hired to manage a growing rental portfolio and inflationary pressures reflecting a tighter labor market.

•An increase of $1.1 million in homeowners' association (HOA) costs driven by growth in the size of the portfolio, with more homes being situated in HOAs as well as increases in annual HOA dues. A heightened level of rule enforcement by HOAs became more prevalent as pandemic-era regulations eased, which also increased violation / penalty fees. While the number of violation / penalty fees has stabilized, the impact of heightened rule enforcement is expected to continue in the coming quarters.

•An increase of $0.6 million in other direct expense resulting from the additional costs of supplying access to smart-home technology in more homes and providing renters insurance to more residents (these costs are offset by higher revenue), as well as increased utility costs on vacant homes from higher rates and a growing portfolio.

Direct operating expenses for the nine months ended September 30, 2023 were $194.4 million, an increase of $43.7 million or 29.0% compared to the prior year, primarily for the reasons described above.

Revenue from strategic capital services (previously reported as Revenue from private funds and advisory services)

The following table provides further details regarding revenue from strategic capital services for the three and nine months ended September 30, 2023 and 2022, net of inter-segment revenues eliminated upon consolidation.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Asset management fees
$2,884 $3,252 $(368)$8,428 $9,454 $(1,026)
Performance fees
426 101,242 (100,816)4,134 110,329 (106,195)
Development fees
5,082 5,055 27 21,072 17,073 3,999 
Property management fees
568 2,921 (2,353)1,197 8,412 (7,215)
Revenue from strategic capital services
$8,960 $112,470 $(103,510)$34,831 $145,268 $(110,437)

Revenue from strategic capital services for the three months ended September 30, 2023 totaled $9.0 million, a decrease of $103.5 million from the same period in the prior year, mainly attributable to:

•A decrease of $100.8 million in performance fees earned, including $99.9 million recognized in the comparable period from the sale of the Company's remaining 20% equity interest in its U.S. multi-family rental portfolio completed on October 18, 2022.

•A decrease of $2.4 million in property management fees primarily related to loss of revenue of $2.7 million following the Company's sale of the U.S. multi-family rental portfolio in October 2022, partially offset by an increase in property management fees from the Canadian multi-family rental portfolio as additional properties enter the lease-up phase.

Revenue from strategic capital services for the nine months ended September 30, 2023 totaled $34.8 million, a decrease of $110.4 million from the prior year, largely resulting from the same reasons discussed above, offset by a
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


$4.0 million increase in development fees from Johnson communities primarily driven by incentive fees earned on a large commercial land bulk sale in the first quarter of 2023.

Income from equity-accounted investments in Canadian residential developments

Equity-accounted investments in Canadian residential developments include joint ventures and equity holdings in development projects, namely The Taylor, Maple House (Block 8), Birch House (Block 10), Cherry House (Blocks 3/4/7), Oak House (Block 20), The Ivy, ROQ City (Queen & Ontario), The Spoke (Symington) and KT Housing Now. The James (Scrivener Square) and The Shops of Summerhill are accounted for as Canadian development properties. The income earned from The Shops of Summerhill is presented as other income.

The following table presents the income from equity-accounted investments in Canadian residential developments for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Income from equity-accounted investments in Canadian residential developments
$2,442 $3,621 $(1,179)$2,734 $3,508 $(774)

Income from equity-accounted investments in Canadian residential developments for the three months ended September 30, 2023 was $2.4 million, a decrease of $1.2 million from the same period in the prior year. Income in the current period was driven by a fair value gain recognized at Maple House (Block 8) as a result of achieving key development milestones, partially offset by net operating losses incurred at The Taylor and Maple House (Block 8) as the properties continued to lease up and approach stabilization. In comparison, The Ivy recorded a fair value gain in the comparative period without any offsetting losses from operations.

Income from investments in Canadian residential developments for the nine months ended September 30, 2023 was $2.7 million, which decreased by $0.8 million compared to the prior year, as a result of the net operating losses mentioned above.

Income from investments in U.S. residential developments

The following table presents income from investments in U.S. residential developments for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Income from investments in U.S. residential developments$10,492 $5,680 $4,812 $23,847 $12,987 $10,860 

Income from investments in U.S. residential developments for the three months ended September 30, 2023 was $10.5 million, an increase of $4.8 million from the same period in the prior year. The increase was largely reflective of strong demand for new housing following the economic uncertainty and rising interest rates which temporarily dampened housing demand in the prior year. Further, high mortgage rates have created a "lock in" effect which has reduced the availability of existing homes for sale and increased new home sales as a percentage of total home sales.

Income from investments in U.S. residential developments for the nine months ended September 30, 2023 was $23.8 million, an increase of $10.9 million from the same period in the prior year. This year-over-year increase is attributable to the same reasons mentioned above.

Management continues to monitor the macroeconomic factors that are fundamental to the for-sale housing market, including rising mortgage rates, which could impact consumer demand and pricing, development timelines as well as new for-sale housing supply.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023



Compensation expense

The following table provides further details regarding compensation expense for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Salaries and benefitsA$13,661 $13,065 $596 $42,148 $40,934 $1,214 
Cash-based(1)
2,263 4,955 (2,692)8,429 16,317 (7,888)
Equity-based2,515 2,060 455 9,982 5,530 4,452 
Annual incentive plan ("AIP")B4,778 7,015 (2,237)18,411 21,847 (3,436)
Cash-based2,521 5,664 (3,143)2,623 13,588 (10,965)
Equity-based— 115 (115)— 479 (479)
Long-term incentive plan ("LTIP")C2,521 5,779 (3,258)2,623 14,067 (11,444)
Total compensation expenseA+B+C$20,960 $25,859 $(4,899)$63,182 $76,848 $(13,666)
(1) The cash-based AIP figure for the nine months ended September 30, 2022 includes one-time allocations for special awards.

Compensation expense for the three months ended September 30, 2023 was $21.0 million, a decrease of $4.9 million or 18.9% compared to the same period in the prior year. The variance is attributable to:

•A decrease of $3.3 million in LTIP expense, driven by a nominal increase in unrealized carried interest as a result of lower fair value gains of underlying Investment Vehicles compared to the prior period. In addition, the comparative period also included the accrual of performance fees payable related to the U.S. multi-family rental Investment Vehicle which was sold in October 2022.

•A decrease of $2.2 million in AIP expense, primarily attributable to a $2.7 million reduction in the accrual for 2023. The AIP expense is typically finalized in the fourth quarter of each year.

Compensation expense for the nine months ended September 30, 2023 was $63.2 million, a decrease of $13.7 million or 17.8% compared to the prior year, comprising a decrease of $11.4 million in LTIP expense and a decrease of $3.4 million in AIP expense for the same reasons described above.


Performance fees expense

Performance fees expense reflects amounts that are expected to be paid to key management equity participants who have an equity interest in entities that earn performance fee revenue, whereas LTIP participants do not have said equity interests. In aggregate, cash-based LTIP expense and performance fees expense represent no more than 50% of the performance fees earned from each Investment Vehicle and both are paid to participants if and when the performance fees are in fact realized and paid.

The following table presents performance fees expense for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Performance fees expense$163 $4,375 $(4,212)$700 $32,056 $(31,356)

Performance fees expense for the three months ended September 30, 2023 was $0.2 million, a decrease of $4.2 million compared to the same period of the prior year, driven by a nominal increase in unrealized carried interest as a result of lower fair value gains of underlying Investment Vehicles. In addition, the U.S. multi-family rental
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Investment Vehicle was disposed of in the fourth quarter of 2022 and generated significant performance fees in the prior year period.

Performance fees expense for the nine months ended September 30, 2023 was $0.7 million, a decrease of $31.4 million compared to the prior period, for the same reasons described above.

General and administration expense

The following table presents general and administration expense for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
General and administration expense$22,174 $14,048 $8,126 $59,625$40,828$18,797

General and administration expense for the three months ended September 30, 2023 was $22.2 million, an increase of $8.1 million compared to the same period in the prior year. This increase was primarily attributable to a substantial investment in an enterprise resource planning system implementation. This major technology upgrade aims to enhance operating efficiency and streamline various business processes.

General and administration expense for the nine months ended September 30, 2023 was $59.6 million, an increase of $18.8 million compared to the prior year, driven by the substantial investment in relation to the new enterprise resource planning system as noted above, as well as additional spending on the continued expansion of the Company's technology-enabled operating platform and increased travel expenses.

Interest expense

The following table provides details regarding interest expense for the three and nine months ended September 30, 2023 and 2022 by borrowing type and nature.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Corporate borrowings$5,111 $2,798 $2,313 $8,706 $5,587 $3,119 
Property-level borrowings64,764 47,993 16,771 196,936 110,745 86,191 
Due to Affiliate4,245 4,245 — 12,736 12,777 (41)
Amortization of deferred financing costs, discounts and lease obligations6,355 5,058 1,297 17,843 13,703 4,140 
Total interest expense$80,475 $60,094 $20,381 $236,221 $142,812 $93,409 
Weighted average interest rate(1)
4.51 %3.20 %1.31 %
(1) The weighted average effective interest rates are calculated based on the average debt balances and the average applicable reference rates for the nine months ended September 30, 2023.

Interest expense was $80.5 million for the three months ended September 30, 2023, an increase of $20.4 million compared to $60.1 million for the same period last year. The variance is primarily attributable to an increase of $16.8 million in interest expense on property-level borrowings. This increase was driven by a 0.78% increase in the weighted average interest rate applicable to the Company’s debt portfolio in the current period compared to the same period in the prior year, resulting from higher benchmark interest rates.

Interest expense was $236.2 million for the nine months ended September 30, 2023, an increase of $93.4 million compared to $142.8 million in the prior period. The variance is primarily attributable to the year-over-year increase in property-level borrowings and increased interest rates, as discussed above.



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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023



Fair value gain on rental properties

The following table presents the fair value gain on rental properties held by the Company for the three and nine months ended September 30, 2023 and 2022.
For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Fair value gain on rental properties
$73,261 $107,166 $(33,905)$208,907 $802,573 $(593,666)

Fair value gain on single-family rental properties was $73.3 million for the three months ended September 30, 2023, compared to $107.2 million for the same period last year. For the nine months ended September 30, 2023, the fair value gain totaled $208.9 million, compared to $802.6 million from the prior year. The fair value of single-family rental homes is determined based on comparable sales, primarily by using the adjusted Home Price Index (“HPI”) methodology and periodically Broker Price Opinions (“BPOs”), where applicable. Refer to Note 4 in the condensed interim consolidated financial statements for further details.

Home values in the U.S. Sun Belt markets have increased over the past several years driven by a number of factors, including strong population and job growth, an acceleration of migration trends driven by the pandemic, historically low mortgage rates during 2020 and 2021, and an overall shortage of new housing supply. However, higher mortgage rates and rising economic uncertainty beginning in the second half of 2022 led to a deceleration in home price growth and in some cases, a decline in certain markets over the course of 2022 and into 2023. While home prices in Tricon's markets have improved throughout the year, mainly as a result of improved consumer confidence and a continued shortage of housing supply, there has been a discernible decrease in home buying activity and the pace of home price appreciation remains well below that in the comparative period. Adjusted HPI growth in the quarter was 1.1%, net of capital expenditures, compared to 1.5% in the same period in the prior year, driving lower fair value gains in the current period. Adjusted HPI growth for the year was 2.5%, net of capital expenditures, compared to 11.6% in the prior year, driving lower fair value gains in the current year.

Realized and unrealized gain on derivative financial instruments

The following table presents the realized and unrealized gain on derivative financial instruments for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Realized and unrealized gain on derivative financial instruments
$30,456 $31,866 $(1,410)$20,777 $158,991 $(138,214)

For the three months ended September 30, 2023, realized and unrealized gain on derivative financial instruments changed by $1.4 million to a gain of $30.5 million compared to a gain of $31.9 million in the same period in the prior year. The gain in the current period reflects (i) a realized gain of $5.9 million from interest rate caps which were in the money in the current period, and (ii) an unrealized gain of $24.6 million due to a decrease in the fair value of exchange and redemption options associated with the preferred units issued by Tricon PIPE LLC liability, in light of a decline in Tricon’s share price.

For the nine months ended September 30, 2023, realized and unrealized gain on derivative financial instruments decreased by $138.2 million to $20.8 million. The gain in the current period was driven by the reasons mentioned above, whereas the gain in the prior year period reflected a much larger unrealized gain associated with the preferred units issued by Tricon PIPE LLC liability, driven by a more pronounced decline in Tricon’s share price.

Net change in fair value of limited partners’ interests in single-family rental business

Limited partner ownership interests in the Company's single-family rental joint ventures, "SFR JV-1", "SFR JV-HD" and "SFR JV-2", are in the form of non-controlling limited partnership interests which are classified as liabilities
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


under the provisions of IFRS. The following table presents the net change in fair value of limited partners' interests in the single-family rental business for the three and nine months ended September 30, 2023 and 2022.
For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Net change in fair value of limited partners’ interests in single-family rental business$(38,819)$(42,318)$3,499 $(118,543)$(246,553)$128,010 

For the three months ended September 30, 2023, the change in fair value of limited partners' interests in the single-family rental business was $38.8 million compared to $42.3 million for the same period in the prior year, representing a decrease of $3.5 million. This decrease primarily reflects a $3.4 million decline in the fair value gain attributed to the limited partners' interests during the period and a $12.9 million increase in interest and other expenses, offset by a $12.8 million increase in NOI.
For the nine months ended September 30, 2023, the change in fair value of limited partners' interests in the single-family rental business was $118.5 million compared to $246.6 million for the same period in the prior year, representing a decrease of $128.0 million. This change in limited partners' interest was attributable to several factors, including a $116.3 million year-over-year decline in fair value gains within SFR JV-1, SFR JV-2 and SFR JV-HD over the same nine-month period (year-to-date HPI growth of 2.5% for 2023 compared to 11.6% for 2022). Additionally, there was a $64.4 million increase in interest and other expenses, partially offset by a $52.7 million increase in NOI.

Income tax expense from continuing operations

The following table provides details regarding income tax expense from continuing operations for the three and nine months ended September 30, 2023 and 2022.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Income tax recovery (expense) - current
$163 $29,860 $(29,697)$(1,737)$28,294 $(30,031)
Income tax expense - deferred(1)
(9,806)(72,087)62,281 (23,930)(183,578)159,648 
Income tax expense from continuing operations
$(9,643)$(42,227)$32,584 $(25,667)$(155,284)$129,617 
(1) Deferred income tax expense for the three and nine months ended September 30, 2022 has been adjusted to conform with the current period presentation as a result of the reclassification of prior-year results of the U.S. multi-family rental investment as discontinued operations separate from the Company's continued operations in accordance with IFRS 5.

For the three months ended September 30, 2023, income tax expense from continuing operations was $9.6 million, compared to $42.2 million of income tax expense in the same period in the prior year. This variance was primarily driven by significantly higher fair value gains recognized on single-family rental properties in the comparative period, which led to a much higher deferred income tax expense. In addition, the Company had a significant tax recovery from the utilization of tax losses carried forward from past years to offset cash taxes triggered by the 2022 divestiture of its remaining 20% interest in the U.S. multi-family rental portfolio, which has led to a decrease in the current income tax recovery.

For the nine months ended September 30, 2023, income tax expense from continuing operations was $25.7 million, a decrease of $129.6 million compared to $155.3 million in the prior year, driven by the decreases in the current tax recovery and deferred tax expense for the reasons noted above.

Page 18 of 51
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


3.2    Review of selected balance sheet items
As at
(in thousands of U.S. dollars)
September 30, 2023December 31, 2022
Assets
Non-current assets
Rental properties$12,122,107 $11,445,659 
Equity-accounted investments in multi-family rental properties21,078 20,769 
Equity-accounted investments in Canadian residential developments118,327 106,538 
Canadian development properties159,902 136,413 
Investments in U.S. residential developments154,814 138,369 
Restricted cash142,673 117,300 
Goodwill29,726 29,726 
Deferred income tax assets80,017 75,062 
Intangible assets5,630 7,093 
Other assets108,350 96,852 
Derivative financial instruments4,897 10,358 
Total non-current assets12,947,521 12,184,139 
Current assets
Cash172,787 204,303 
Amounts receivable38,671 24,984 
Prepaid expenses and deposits23,348 37,520 
Total current assets234,806 266,807 
Total assets$13,182,327 $12,450,946 
Liabilities
Non-current liabilities
Long-term debt$5,062,495 $4,971,049 
Due to Affiliate260,977 256,824 
Derivative financial instruments32,097 51,158 
Deferred income tax liabilities622,104 591,713 
Limited partners' interests in single-family rental business2,275,349 1,696,872 
Long-term incentive plan25,795 25,244 
Performance fees liability40,343 39,893 
Other liabilities33,471 30,035 
Total non-current liabilities8,352,631 7,662,788 
Current liabilities
Amounts payable and accrued liabilities205,359 138,273 
Resident security deposits83,874 79,864 
Dividends payable15,834 15,861 
Current portion of long-term debt624,962 757,135 
Total current liabilities930,029 991,133 
Total liabilities9,282,660 8,653,921 
Equity
Share capital2,121,953 2,124,618 
Contributed surplus25,682 21,354 
Cumulative translation adjustment6,684 6,209 
Retained earnings1,741,413 1,638,068 
Total shareholders' equity3,895,732 3,790,249 
Non-controlling interest3,935 6,776 
Total equity3,899,667 3,797,025 
Total liabilities and equity$13,182,327 $12,450,946 

Page 19 of 51
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Rental properties

The table below presents the changes in the fair value of rental properties by business segment for the nine months ended September 30, 2023 and the year ended December 31, 2022.

(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance
$11,445,659 $7,978,396 
Acquisitions
482,047 2,362,185 
Capital expenditures
140,661 326,460 
Fair value adjustments
208,907 858,987 
Dispositions
(155,167)(80,369)
Balance, end of period
$12,122,107 $11,445,659 

Rental properties increased by $0.7 billion to $12.1 billion as at September 30, 2023, from $11.4 billion as at December 31, 2022. The increase was driven by:

•Acquisition of 1,624 single-family rental homes for $482.0 million, partially offset by the disposition of 533 homes as part of Tricon's normal-course disposition program of non-core homes; these homes had an aggregate carrying value of $155.2 million at the time of disposition.

•Capital expenditures of $140.7 million, of which $86.3 million was attributable to the initial renovation of recently acquired single-family homes, and the remainder to capital improvement activities during turns.

•Fair value gain of $208.9 million on the single-family rental portfolio, driven by strong demand for single-family rental homes, as previously discussed, combined with limited new and resale housing supply in the Company's Sun Belt markets.

Canadian development properties

The table below presents the change in Canadian development properties, which are comprised of The James (Scrivener Square) and The Shops of Summerhill, for the nine months ended September 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance$136,413 $133,250 
Development expenditures23,365 12,686 
Fair value adjustments— (440)
Translation adjustment124 (9,083)
Balance, end of period
$159,902 $136,413 

Canadian development properties increased by $23.5 million to $159.9 million as at September 30, 2023 compared to $136.4 million as at December 31, 2022. The increase was primarily driven by $23.4 million of development expenditures attributable to the ongoing construction of The James.

Investments in U.S. residential developments

The table below presents the change in investments in U.S. residential developments for the nine months ended September 30, 2023 and the year ended December 31, 2022.

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(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance$138,369 $143,153 
Advances
6,766 15,655 
Distributions(14,168)(37,336)
Income from investments in U.S. residential developments
23,847 16,897 
Balance, end of period
$154,814 $138,369 

Investments in U.S. residential developments increased by $16.4 million to $154.8 million as at September 30, 2023 compared to $138.4 million as at December 31, 2022. The increase was attributable to $23.8 million of investment income from legacy for-sale housing investments buoyed by strong housing demand fundamentals. The remaining change was driven by advances of $6.8 million to the Company's build-to-rent Investment Vehicles as communities within these vehicles continue through their early stages of development, partially offset by distributions of $14.2 million from maturing assets within the legacy for-sale housing portfolio.

Equity-accounted investments in Canadian residential developments

The table below presents the change in equity-accounted investments in Canadian residential developments for the nine months ended September 30, 2023 and the year ended December 31, 2022.

(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance$106,538 $98,675 
Advances9,301 13,360 
Distributions(372)(10,212)
Income from equity-accounted investments in Canadian residential developments2,734 11,198 
Translation adjustment126 (6,483)
Balance, end of period
$118,327 $106,538 
Equity-accounted investments in Canadian residential developments increased by $11.8 million to $118.3 million as at September 30, 2023 compared to $106.5 million as at December 31, 2022. The increase was primarily attributable to advances of $9.3 million to fund development activities across the portfolio and $2.7 million of income driven by a fair value gain recognized at Maple House (Block 8) as a result of achieving key development milestones.

Debt

The following table summarizes the consolidated net debt position of the Company.
As at
(in thousands of U.S. dollars)
September 30, 2023December 31, 2022Variance
Single-family rental properties borrowings$5,542,908 $5,744,425 $(201,517)
Canadian development properties borrowings41,414 21,095 20,319 
Corporate borrowings162,448 12,717 149,731 
$5,746,770 $5,778,237 $(31,467)
Transaction costs (net of amortization)(47,375)(49,404)2,029 
Debt discount (net of amortization)(11,938)(649)(11,289)
Total debt per balance sheet(1)
$5,687,457 $5,728,184 $(40,727)
Cash and restricted cash(315,460)(321,603)6,143 
Net debt(2)
$5,371,997 $5,406,581 $(34,584)
(1) Excludes Due to Affiliate.
(2) Non-IFRS measure; see “Non-IFRS measures” on page 1 and Section 6.

Net debt decreased by $34.6 million to $5.4 billion as at September 30, 2023, from $5.4 billion as at December 31, 2022. The variance was primarily attributable to:
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•A decrease of $201.5 million in single-family rental properties borrowings, driven primarily by debt repayments made to achieve lower leverage on certain Investment Vehicles.

•An offsetting increase of $149.7 million in corporate borrowings along with a decrease of $6.1 million in cash and restricted cash, of which approximately $51 million was used for debt repayments as discussed above, $68 million was used to fund acquisitions of single-family rental homes, and $48 million was used for property tax payments during the first nine months of 2023.

•An increase of $20.3 million in Canadian development properties borrowings as construction activities for The James (Scrivener Square) increased during the first nine months of the year.

The weighted average interest rate applicable to debt owed by the Company as at September 30, 2023 was 4.51%. The following table summarizes the debt structure and leverage position as at September 30, 2023:
(in thousands of U.S. dollars)
Debt structureBalance% of total
Weighted average interest rate(1)
Weighted average time to maturity (years)
Fixed$4,405,047 76.7 %3.65 %3.25
Floating 1,341,723 23.3 %6.61 %2.12
Total/Weighted average$5,746,770 100.0 %4.51 %2.99
(1) The weighted average effective interest rates as shown in the table above were based on average debt balances for the period ended September 30, 2023. The weighted average effective interest rates based on consolidated outstanding debt balances as at September 30, 2023 were 3.83% and 6.56% for fixed-rate debt and floating-rate debt, respectively.

During the third quarter, the Company engaged in the following financing activities:

•On July 11, 2023, SFR JV-2 entered into a new securitized loan facility with a total commitment of $416.4 million, a term to maturity of five years and an effective interest rate of 5.86%. This facility is secured by a pool of 2,115 single-family rental properties. The loan proceeds were primarily used to pay down the existing short-term SFR JV-2 variable-rate debt.

•On July 27, 2023, the Company amended its Term Loan to increase the commitment value by $100.0 million with an interest rate cap of 4.25% SOFR. The coupon rate remains unchanged. The Company also extended the maturity of the facility by six months to April 2024 (with the option to extend for another six months to October 2024).

•On September 22, 2023, the Company amended the loan agreement in respect of the Warehouse credit facility 2022 to increase the commitment value by $50.0 million to $100.0 million. The coupon rate also changed from SOFR+1.85% to SOFR+1.95%.

As at September 30, 2023, Tricon's near-term debt maturities included the 2017-2 securitization debt of $322.3 million and the Term Loan of $302.1 million financing a portion of the wholly-owned single-family rental portfolio. The Company has no debt maturing in 2023.

Tricon's debt maturities as at September 30, 2023 are presented below, assuming the exercise of all extension options.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


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* Reflects the maturity dates after all extensions have been exercised.

3.3    Subsequent events

Quarterly dividend

On November 7, 2023, the Board of Directors of the Company declared a dividend of $0.058 per common share in U.S. dollars payable on or after January 15, 2024 to shareholders of record on December 31, 2023.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


4.    Operating results of businesses

Management believes that information concerning the underlying activities within each of the Company’s operating businesses is useful for investors in understanding the Company’s overall performance, and this section presents key operating highlights for the quarter and for the year on a business-by-business basis. Management monitors the underlying activities within those businesses using non-IFRS measures and Key Performance Indicators ("KPIs"). A list of these measures and KPIs, together with a description of the information each measure reflects and the reasons why management believes the measure to be useful or relevant in evaluating the underlying performance of the Company’s businesses, is set out in Section 6. The supplemental measures presented herein are not recognized under IFRS and should not be construed as alternatives to net income determined in accordance with IFRS as indicators of Tricon’s financial performance. Tricon’s method of calculating these measures may differ from other issuers’ methods and, accordingly, these measures may not be comparable to similar measures presented by other publicly-traded entities.

The financial results and performance metrics in Section 4 and where indicated throughout this document reflect Tricon’s proportionate results, unless otherwise stated, as described in Section 6. Refer to “Non-IFRS measures” on page 1 and to Appendix A for IFRS reconciliations of financial information. The number of rental homes, properties or units quoted in Section 4 are presented in aggregate.

4.1    Single-Family Rental

Business update

The Company's single-family rental business continued to benefit from favorable demographic shifts driven by new household formation as well as population, job and wage growth in U.S. Sun Belt markets. Meanwhile, an imbalance continues to persist between the demand for affordable single-family homes, both for homebuyers and renters, and the supply of new construction. This imbalance, coupled with inflationary cost pressures, and higher mortgage rates which have dramatically increased the cost of owning versus the cost of renting, has made homeownership less attainable and increased demand for rental homes. Tricon’s relatively affordable single-family rental homes provide a much-needed alternative for those seeking the benefits of a home without the added cost of ownership.

These dynamics contributed to the Company's continued strong operating performance, including same home occupancy of 97.4%, same home resident turnover of 18.8% and same home blended rent growth of 6.8% during the quarter (comprised of 6.9% growth on new move-ins as well as 6.7% growth on renewals). The demand for Tricon's rental homes (as measured by leads per available home) remains strong; however, the rent growth on new move-ins has normalized towards pre-pandemic levels as a result of resident turnover skewing towards residents with shorter tenure. The Company continues to balance market rent growth appreciation and its embedded portfolio loss-to-lease with its continued efforts to self-govern and moderate rent growth for existing residents as a key component of its Single-Family Resident Bill of Rights and ESG strategy.

Acquisitions and dispositions update

In response to strong demand for rental homes across its Sun Belt markets, the Company acquired 410 homes during the quarter at an average cost of $310,000 per home, including closing costs and up-front renovations, for a total acquisition cost of $127 million (of which Tricon's proportionate share was approximately $102 million). The acquisitions included 299 wholly-owned homes for $90.2 million, largely funded by dispositions as part of Tricon’s capital recycling program, and 111 homes for $36.8 million owned through joint ventures. The average acquisition cost per home of $310,000 decreased by 4.9% sequentially from $326,000 in Q2 2023, and decreased by 11.9% year-over-year from $352,000 in Q3 2022. The decrease reflects Tricon’s disciplined approach to acquisitions, focused on selectively buying homes at a discount to list price to achieve a higher blended cap rate at or above the cost of long-term financing. A moderation in home prices year-over-year also contributed to the lower average acquisition cost.

During the quarter, Tricon disposed of 175 homes (169 wholly-owned homes for $61.3 million and six homes owned through joint ventures for $1.7 million) as part of its normal-course disposition program for non-core homes. The
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


homes were typically sold via the retail home-sale channel, at an average price of $360,000 per home, in line with their IFRS fair value.

Subsequent to quarter-end, the Company completed the investment programs for SFR JV-2 and JV-HD with overall leverage of 58%, below initial expectations of 60-65% in light of the higher interest rate environment. Tricon plans to slow its acquisition pace further in the fourth quarter to acquire approximately 250 homes. The acquisitions will be largely funded by dispositions as part of the Company’s capital recycling program, whereby non-core homes are being replaced with newer vintage homes.
In the first quarter of 2022, Tricon had set forth a target of growing its single-family rental portfolio to 50,000 homes by the end of 2024. However, the substantial increase in interest rates has made the acquisition environment more challenging, and management no longer believes that this target is feasible within the stated time frame. The Company has adopted a more measured approach to portfolio growth in the current economic climate (see "Forward-looking statements" on page 1).

For the nine months ended September 30, 2023, the Company acquired 1,624 homes at an average cost of $320,000 per home, including closing costs and up-front renovations, for a total acquisition cost of $520 million (of which Tricon's proportionate share was approximately $279 million). For the nine months ended September 30, 2023, Tricon disposed of 533 homes at an average price of $339,000 per home.

OPERATING RESULTS – PROPORTIONATE TOTAL PORTFOLIO

For the periods ended September 30
Three monthsNine months
(in U.S. dollars)20232022Variance20232022Variance
Operating metrics(1)
Tricon wholly-owned rental homes14,786 14,894 (108)14,786 14,894 (108)
SFR JV homes 22,238 20,368 1,870 22,238 20,368 1,870 
Rental homes(2)
37,024 35,262 1,762 37,024 35,262 1,762 
Occupancy94.5 %94.0 %0.5 %95.0 %93.9 %1.1 %
Average monthly rent$1,815 $1,714 $101 $1,792 $1,669 $123 
(1) The operating metrics reflect Tricon's proportionate share of the total portfolio, other than the number of rental homes which is presented in aggregate. The occupancy and average monthly rent are KPIs and are defined in Section 6.
(2) Tricon's proportionate share of rental homes for the period ended September 30, 2023 was 21,840 (2022 - 21,372).

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)2023
2022
Variance% Variance2023
2022
Variance% Variance
Rental revenue(1)
$110,389 $99,714 $10,675 10.7 %$324,143 $283,674 $40,469 14.3 %
Other revenue(1)
5,635 5,324 311 5.8 %16,062 15,775 287 1.8 %
Total revenue from rental properties
116,024 105,038 10,986 10.5 %340,205 299,449 40,756 13.6 %
Property taxes
18,897 16,327 2,570 15.7 %55,330 47,016 8,314 17.7 %
Repairs and maintenance
5,550 5,009 541 10.8 %14,602 14,985 (383)(2.6 %)
Turnover
1,466 1,029 437 42.5 %4,008 3,402 606 17.8 %
Property management expenses
7,144 6,680 464 6.9 %20,918 19,052 1,866 9.8 %
Property insurance
1,400 1,326 74 5.6 %4,234 3,905 329 8.4 %
Marketing and leasing
341 333 8 2.4 %929 901 28 3.1 %
Homeowners' association (HOA) costs
1,940 1,444 496 34.3 %5,497 3,879 1,618 41.7 %
Other direct expenses(2)
1,848 1,569 279 17.8 %5,449 4,510 939 20.8 %
Total direct operating expenses
38,586 33,717 4,869 14.4 %110,967 97,650 13,317 13.6 %
Net operating income (NOI)(3)
$77,438 $71,321 $6,117 8.6 %$229,238 $201,799 $27,439 13.6 %
Net operating income (NOI) margin(3)
66.7 %67.9 %67.4 %67.4 %
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.
(2) Other direct expenses include property utilities, landscaping costs on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas, and electricity, as well as landscaping costs, are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.
(3) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

Total portfolio NOI increased by $6.1 million or 8.6% to $77.4 million in the third quarter of 2023 compared to $71.3 million in the third quarter of 2022, as revenue expansion outpaced expense growth.

Rental revenue increased by $10.7 million or 10.7% during the quarter, driven primarily by a 5.9% increase in the average monthly rent ($1,815 in Q3 2023 vs. $1,714 in Q3 2022), a 0.5% increase in occupancy (94.5% in Q3 2023 vs. 94.0% in Q3 2022) and 2.2% portfolio growth (Tricon’s proportionate share of rental homes was 21,840 in Q3 2023 compared to 21,372 in Q3 2022).

Direct operating expenses increased by $4.9 million or 14.4% during the quarter, reflecting incremental costs incurred on a larger portfolio of homes, increased property taxes attributable to higher assessed home values, elevated property management costs reflecting a tighter labor market and increased homeowners' association (HOA) costs reflecting higher dues and heightened enforcement of HOA rules. Other direct expenses also contributed to the variance, reflecting higher costs of providing smart-home technology to residents and increased utility costs driven by higher rates.

OPERATING RESULTS – PROPORTIONATE SAME HOME PORTFOLIO

The same home portfolio includes homes that have been stabilized since September 30, 2021 as per the NAREIT guidelines (see Section 6).

For the same home portfolio, blended rent growth for the quarter was 6.8% (including 6.9% on new leases and 6.7% on renewals), accompanied by a 0.2% decrease in occupancy to 97.4% from 97.6% recorded in the comparative period. While rent growth has moderated throughout the year, it remains above long-term historical norms and is in line with seasonal trends as management aims to drive occupancy heading into the slower winter leasing period. Management expects the continued supply-demand imbalance, along with embedded portfolio loss-
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FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


to-lease (estimated to be approximately 15% of market rents), to drive healthy rent growth for the next few quarters (see “Forward-looking statements” on page 1). The Company’s continued focus on resident retention has resulted in maintaining relatively low annualized turnover of 18.8% compared to 20.0% in the same period of the prior year. These KPIs are defined in Section 6.
For the periods ended September 30
Three monthsNine months
(in U.S. dollars)20232022Variance20232022Variance
Operating metrics - same home(1)
Tricon wholly-owned rental homes12,541 12,541 — 12,541 12,541 — 
SFR JV homes 8,940 8,940 — 8,940 8,940 — 
Rental homes21,481 21,481 — 21,481 21,481 — 
Occupancy97.4 %97.6 %(0.2 %)97.4 %97.8 %(0.4 %)
Annualized turnover rate18.8 %20.0 %(1.2 %)17.9 %18.4 %(0.5 %)
Average monthly rent$1,758 $1,658 $100 $1,733 $1,638 $95 
Average rent growth - renewal6.7 %6.6 %0.1 %6.6 %6.4 %0.2 %
Average rent growth - new move-in6.9 %15.1 %(8.2 %)8.9 %16.7 %(7.8 %)
Average rent growth - blended6.8 %8.3 %(1.5 %)7.1 %8.4 %(1.3 %)
(1) The operating metrics reflect Tricon's proportionate share of the same home portfolio, other than the total number of homes comprising the same home portfolio which is presented in aggregate.

For the three months ended September 30
(in thousands of U.S. dollars)2023% of revenue2022% of revenueVariance% Variance
Rental revenue(1)
$78,840$73,817$5,023 6.8 %
Other revenue(1)
3,5173,549(32)(0.9 %)
Total revenue from rental properties
$82,357100.0 %$77,366100.0 %$4,991 6.5 %
Property taxes
13,31216.2 %12,04615.6 %1,266 10.5 %
Repairs and maintenance
3,9774.8 %3,8895.0 %88 2.3 %
Turnover
8681.1 %8881.1 %(20)(2.3 %)
Property management expenses
4,3185.2 %4,2365.5 %82 1.9 %
Property insurance
9641.2 %9051.2 %59 6.5 %
Marketing and leasing
1380.2 %1310.2 %7 5.3 %
Homeowners' association (HOA) costs
1,2481.5 %9971.3 %251 25.2 %
Other direct expenses(2)
1,0941.3 %1,0151.3 %79 7.8 %
Total direct operating expenses
25,91924,1071,812 7.5 %
Net operating income (NOI)(3)
$56,438 $53,259$3,179 6.0 %
Net operating income (NOI) margin(3)
68.5 %68.8%
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.
(2) Other direct expenses include property utilities, landscaping costs on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas and electricity, as well as landscaping costs, are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.
(3) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

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FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


For the nine months ended September 30
(in thousands of U.S. dollars)2023% of revenue2022% of revenueVariance% Variance
Rental revenue(1)
$232,229 $217,748 $14,481 6.7 %
Other revenue(1)
9,709 10,570 (861)(8.1 %)
Total revenue from rental properties
$241,938 100.0 %$228,318 100.0 %$13,620 6.0 %
Property taxes
39,116 16.2 %35,521 15.6 %3,595 10.1 %
Repairs and maintenance
10,685 4.4 %11,514 5.0 %(829)(7.2 %)
Turnover
2,541 1.1 %2,946 1.3 %(405)(13.7 %)
Property management expenses
13,080 5.4 %12,744 5.6 %336 2.6 %
Property insurance
2,889 1.2 %2,635 1.2 %254 9.6 %
Marketing and leasing
393 0.2 %340 0.1 %53 15.6 %
Homeowners' association (HOA) costs
3,595 1.5 %2,878 1.3 %717 24.9 %
Other direct expenses(2)
3,317 1.4 %2,981 1.3 %336 11.3 %
Total direct operating expenses
75,616 71,559 4,057 5.7 %
Net operating income (NOI)(3)
$166,322 $156,759 $9,563 6.1 %
Net operating income (NOI) margin(3)
68.7 %68.7 %
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.
(2) Other direct expenses include property utilities, landscaping costs on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas and electricity, as well as landscaping costs, are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.
(3) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

Total revenue for the same home portfolio increased by $5.0 million or 6.5% to $82.4 million in the third quarter of 2023 compared to $77.4 million for the same period in the prior year. This favorable change was primarily attributable to the following:

•Rental revenue – Rental revenue was $78.8 million compared to $73.8 million in the comparative period, representing an increase of 6.8%. This favorable variance was primarily attributable to an increase of 6.0% in the average monthly rent per occupied home ($1,758 in Q3 2023 compared to $1,658 in Q3 2022), and the Company's successful collection efforts, which reduced bad debt expense to 0.9% of revenue compared to 1.4% in the comparative period. This was partially offset by a 0.2% decrease in occupancy from 97.6% to 97.4%.

•Other revenue – Other revenue was $3.5 million compared to $3.5 million in the third quarter of 2022, a modest decrease of 0.9%. Other revenue includes revenue generated from residents' enrollment in the Company's renters insurance program and fees earned from smart-home offerings intended to enhance the resident experience, including keyless access, smart thermostats, and a suite of in-home sensors (approximately 60% of same home properties or 12,807 homes were smart-home enabled in the current quarter compared to 51% or 10,887 homes in the same period in the prior year).

Same home operating expenses increased by $1.8 million or 7.5% to $25.9 million in the third quarter of 2023 from $24.1 million during the same period in 2022. The variance is largely attributable to the following:

•Property taxes – Property taxes were $13.3 million compared to $12.0 million in the comparative period, an increase of 10.5%, reflecting significantly higher year-over-year home value assessments as well as lower property taxes being accrued in the comparative period. The current period's tax accrual was based on 2022 assessments, calibrated for anticipated changes in property assessed values, as well as expected millage rates. Tricon continues to work with a property tax consultant to monitor and appeal tax assessments where appropriate.

•Repairs and maintenance – Repairs and maintenance expense was $4.0 million compared to $3.9 million in the comparative period, an increase of 2.3%. The marginal rise in repairs and maintenance expense was driven by an 8% increase in completed work orders which was partially offset by a decrease in the average
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


cost per work order owing to the Company's continued focus on cost management through refining and managing work scopes.

•Property management expenses – Property management expenses were $4.3 million compared to $4.2 million in the comparative period, an increase of 1.9% which was relatively contained given the tight labor market.

•Homeowners' association ("HOA") costs – Homeowners' association costs were $1.2 million compared to $1.0 million in the comparative period, an increase of 25.2%. The rise in HOA expense was driven by increases in annual HOA dues and a heightened level of rule enforcement by HOAs as pandemic-era regulations eased, which also increased violation / penalty fees. While the number of violation / penalty fees has stabilized, the impact of heightened rule enforcement is expected to continue in the coming quarters.

•Other direct expenses – Other direct expenses were $1.1 million compared to $1.0 million in the comparative period, an increase of 7.8%. This is primarily driven by increased utility costs from higher utility rates and lower average physical occupancy compared to the prior year period. In addition, higher renters insurance enrollments and an increased number of smart home installations caused the other direct expense to go up.

Same home NOI increased by 6.0% to $56.4 million in the third quarter of 2023 compared to $53.3 million in the third quarter of 2022. Same home NOI margin decreased slightly to 68.5% from 68.8% in the same period in the prior year as year-over-year revenue growth was offset by higher expense growth, mainly in property tax, property insurance, other direct expenses, and HOA costs as discussed above.
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4.2    Adjacent residential businesses

4.2.1    Multi-Family Rental

Tricon's multi-family rental business segment includes one Class A high-rise property in downtown Toronto known as The Selby. There are ten other properties in downtown Toronto that are currently under development or lease-up and are discussed in Section 4.2.2.

As at September 30, 2023, The Taylor achieved stabilized physical occupancy of 98.3%. The property will be reclassified from the residential development business segment to the multi-family rental business segment in the fourth quarter of 2023, being the first full quarter of stabilization.

The Selby

Supportive demand fundamentals continued to underpin robust rental market conditions in downtown Toronto in the third quarter of 2023. Occupancy at The Selby remained strong at 98.5%, and annualized turnover improved to 30.4% compared to 39.2% during the same period in the prior year. Blended rent growth was 11.2% in the third quarter, driven by healthy new-lease and renewal rent growth as the number of leases with pandemic-era rents at the property continued to diminish.

The Selby generated net operating income for the quarter of C$0.4 million, an increase of 4.6% compared to the same period in the prior year.

For the periods ended September 30
Three monthsNine months
(in Canadian dollars)20232022Variance20232022Variance
Number of properties1 1 — 1 1 — 
Number of units500 500 — 500 500 — 
Occupancy98.5 %98.6 %(0.1 %)97.9 %98.2 %(0.3 %)
Annualized turnover rate30.4 %39.2 %(8.8 %)28.3 %31.5 %(3.2 %)
Average monthly rent$2,840 $2,604 $236 $2,772 $2,516 $256 
Average rent growth - renewal8.5 %20.3 %(11.8 %)8.1 %17.4 %(9.3 %)
Average rent growth - new move-in18.6 %28.1 %(9.5 %)13.6 %17.6 %(4.0 %)
Average rent growth - blended11.2 %23.0 %(11.8 %)9.7 %17.5 %(7.8 %)

For the three months ended September 30
(in thousands of Canadian dollars, unless otherwise indicated)20232022Variance% Variance
Total revenue from rental properties
$672 $628 $44 7.0 %
Total direct operating expenses
264 238 26 10.9 %
Net operating income (NOI)(1),(2)
$408 $390 $18 4.6 %
Net operating income (NOI) margin(2)
60.7 %62.1 %
Net operating income (NOI)(1),(2)
US$304 US$299 US$5 1.7 %
For the nine months ended September 30
(in thousands of Canadian dollars, unless otherwise indicated)20232022Variance% Variance
Total revenue from rental properties
$1,958 $1,827 $131 7.2 %
Total direct operating expenses
741 687 54 7.9 %
Net operating income (NOI)(1),(2)
$1,217 $1,140 $77 6.8 %
Net operating income (NOI) margin(2)
62.2 %62.4 %
Net operating income (NOI)(1),(2)
US$904 US$889 US$15 1.7 %
(1) All dollar amounts in this table represent Tricon's 15% share of the operating results.
(2) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


4.2.2    Residential Development

Tricon's residential development business segment currently includes (i) new Class A multi-family rental apartments in Canada that are in the development and construction stages and two income-producing properties that are not yet stabilized, (ii) build-to-rent, dedicated single-family rental communities in the United States with the intention to operate as part of the single-family rental portfolio upon stabilization, and (iii) legacy investments in for-sale housing development projects predominantly in the United States.

As at
(in thousands of U.S. dollars)
September 30, 2023December 31, 2022
Canadian residential developments$231,875 $221,250 
U.S. residential developments154,814 138,369 
Net investments in residential developments$386,689 $359,619 
Net investments in residential developments as a % of total real estate assets3 %3 %

Canadian residential developments

The Company is one of the most active rental developers in downtown Toronto with ten projects totaling 5,071 units, comprising of eight projects in pre-construction or under construction and two income-producing properties (The Taylor and Maple House) that were not yet fully stabilized during the third quarter of 2023. The Company's portfolio also includes an existing commercial property, The Shops of Summerhill, adjacent to The James development project.

The Taylor continued to ramp up occupancy in the third quarter, achieving a stabilized physical occupancy of 98.3% as at September 30, 2023. In-place rents at the end of the third quarter were C$4.63 per square foot, reflecting the strength of the property’s location in the heart of Toronto’s fashion and entertainment district, and its design-forward product offering. Subsequent to quarter-end, The Taylor was reclassified from the residential development business segment to Tricon’s multi-family rental business segment in the fourth quarter of 2023.

Maple House at Canary Landing, the first of four phases at Tricon’s Canary Landing development, welcomed its first residents to the 770-unit mixed-use rental community in the third quarter of 2023. Located in Toronto’s Downtown East node adjacent to the Distillery District, a renowned retail, arts, culture and entertainment destination, Maple House is a complete mixed-income community where approximately 30% of the residential units are affordable units set at predetermined rents and dedicated to workforce households. Leasing demand has been robust with 20% of the building already pre-leased, driven by strong market unit demand and an oversubscribed affordable housing lottery.

As at September 30, 2023, the carrying value of Tricon's net assets in its Canadian multi-family development portfolio was $231.9 million. The following table summarizes the net assets by stage of development.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


September 30, 2023December 31, 2022
(in thousands of U.S. dollars)Tricon's share of property value
Tricon's share of debt and lease obligations(1)
Tricon's share of net working capital and other items
Tricon's net assets (2)
Tricon's share of property value
Tricon's share of debt and lease obligations(1)
Tricon's share of net working capital and other items
Tricon's net assets (2)
Projects in pre-construction
$17,751 $(11,775)$318 $6,294 $14,361 $(11,432)$185 $3,114 
Projects under construction(3)
283,306 (109,478)(11,061)162,767 224,807 (63,018)(5,125)156,664 
Project in lease-up(4)
158,026 (113,235)(3,375)41,416 137,323 (91,735)(5,734)39,854 
Stabilized commercial property(5)
35,649 (15,857)1,606 21,398 35,586 (15,972)2,004 21,618 
Total$494,732 $(250,345)$(12,512)$231,875 $412,077 $(182,157)$(8,670)$221,250 
Equity-accounted investments in Canadian residential developments$334,830 $(209,000)$(7,503)$118,327 $275,664 $(161,153)$(7,973)$106,538 
Canadian development properties, net of debt159,902 (41,345)(5,009)113,548 136,413 (21,004)(697)114,712 
Total$494,732 $(250,345)$(12,512)$231,875 $412,077 $(182,157)$(8,670)$221,250 
(1) Tricon's share of debt and lease obligations of $250,345 (December 31, 2022 - $182,157) consists of $215,796 of land and construction loans (net of deferred financing fees) and $34,549 of lease obligations under ground leases (December 31, 2022 - $148,694 and $33,463, respectively).
(2) Represents Tricon's share of development properties and other working capital items, net of debt and lease obligations.
(3) In Q1 2023, the Company started construction on The Spoke (Symington), and is now categorized under Projects under construction. Comparative figures have been reclassified to Projects under construction to conform with current period presentation.
(4) Includes The Taylor and Maple House, which began generating rental income during Q4 2022 and Q3 2023, respectively. As at September 30, 2023, The Taylor achieved stabilization, while Maple House has yet to reach stabilization.
(5) Represents The Shops of Summerhill, an adjacent commercial property to The James development project.

Projected units and timelines are estimated based on current project plans which are subject to change. Refer to page 1, "Forward-looking statements". Although the portfolio experienced pressures on construction timelines and costs associated with the current inflationary environment, the Company leveraged its strong trade relationships to minimize construction delays and reduce the impact of cost increases.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Investments in U.S. residential developments

The Company’s U.S. residential developments include the development of dedicated single-family communities, and legacy investments in for-sale housing, including land development and homebuilding projects.

Tricon develops single-family rental communities through its two joint venture partnerships with the Arizona State Retirement System which have a total equity commitment of $950 million. The total portfolio comprising both joint venture partnerships currently consists of 2,228 build-to-rent units under development across 14 communities in Texas, California and Nevada. These investments in single-family rental communities represent $24.2 million of Tricon’s $154.8 million total U.S. residential development investments at fair value.

The Company’s legacy for-sale housing investments are structured as self-liquidating investments with cash flows generated as land, lots or homes are sold to third-party buyers (typically large homebuilders or commercial developers in the case of land and end consumers for homebuilding). These investments represent $130.6 million of Tricon’s $154.8 million total U.S. residential development investments at fair value.

In aggregate, the Company's U.S. residential development investments represent 1.2% of the Company's total assets and are expected to generate approximately $271.7 million of net cash flow to Tricon, with the majority anticipated over the next five years (see “Non-IFRS measures and forward-looking statements” on page 1).

During the third quarter of 2023, these assets generated $5.5 million of distributions to Tricon, including $0.4 million of performance fees.

(in thousands of U.S. dollars)Advances
to date
Distributions to date(1)
Tricon's fair value of investment
Projected distributions net of advances remaining(2)
Investments in U.S. residential developments
$549,193 $559,233 $154,814 $271,690 
(1) Distributions include repayments of preferred return and capital.
(2) Projected distributions are based on current project plans which are subject to change. Refer to page 1, "Forward-looking statements".

The scheduled time frame for Tricon to receive the projected net distributions remaining, which is based on current project plans and subject to change (refer to page 1, "Forward-looking statements"), is as follows:

(in thousands of U.S. dollars)1 to 2 years3 to 5 yearsMore than 5 yearsTotal
Projected distributions net of advances remaining
$38,731 $169,990 $62,969 $271,690 
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


4.3    Strategic Capital

Through its Strategic Capital business, Tricon earns fees from managing third-party capital co-invested in its real estate assets. Activities of this business include providing asset management, property management and development management services. The Company intends to continue raising and managing third-party capital to generate scale and drive operational synergies, diversify its investor base, capitalize on opportunities that would otherwise be too large for the Company, reduce its balance sheet exposure to development activities, and enhance Tricon’s return on equity by earning asset management and other fees.

Tricon manages third-party capital for 12 of the top 100 largest institutional real estate investors in the world (source: “PERE Global Investor 100” ranking, October 2023) and is currently ranked 40th globally and second in Canada (compared to 53rd globally and second in Canada in 2022) among global real estate investment managers based on the institutional equity raised since 2018 (source: "2023 PERE 100" manager ranking, June 2023).
Performance overview

The following table provides details of revenue from Strategic Capital services for the three and nine months ended September 30, 2023 and 2022, including inter-segment revenues eliminated upon consolidation.

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Asset management fees(1)
$2,884 $3,252 $(368)$8,428 $9,454 $(1,026)
Performance fees(2)
426 101,242 (100,816)4,134 110,329 (106,195)
Development fees(3)
5,082 5,055 27 21,072 17,073 3,999 
Property management fees(4)
568 2,921 (2,353)1,197 8,412 (7,215)
Revenue from strategic capital services
8,960 112,470 (103,510)34,831 145,268 (110,437)
Asset management fees(5)
$2,637 $2,542 95 6,589 7,543 (954)
Property management fees (6)
2,715 5,648 (2,933)10,121 18,320 (8,199)
Fees eliminated upon consolidation5,352 8,190 (2,838)16,710 25,863 (9,153)
Performance fees realized on sale of U.S. multi-family rental portfolio(2)
— (99,865)99,865 — (99,865)99,865 
Total FFO(7) impact from fees
$14,312 $20,795 $(6,483)$51,541 $71,266 $(19,725)
(1) Ranges typically from 0.5-2% of committed or invested capital throughout the lives of the Investment Vehicles under management.
(2) Calculated as approximately 20% (in most cases) of net cash flow after investors’ capital has been returned, together with a pre-tax preferred return on capital of, typically, between 8% and 10%.
(3) Calculated as 2-5% of the sales price of single-family lots, residential land parcels and commercial land within master-planned communities, and 4-5% of overall development costs of Canadian multi-family rental apartments.
(4) Includes 4-7.75% of rental revenue from multi-family rental properties, build-to-rent single-family homes and other ancillary fees.
(5) Asset management fees earned from the limited partners of the single-family rental joint ventures are eliminated upon the consolidation of these Investment Vehicles; however, such fees are accounted for within Tricon's proportionate Core FFO.
(6) Property management fees (including acquisition fees calculated at 1% of pre-renovation costs and leasing fees) earned from the limited partners of the single-family rental joint ventures are eliminated upon the consolidation of these Investment Vehicles. Such fees are accounted for within Tricon's proportionate Core FFO. The details of property management fees are as follows:
For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Leasing fees $2,553 $2,776 $(223)$8,206 $7,826 $380 
Acquisition fees 162 2,872 (2,710)1,915 10,494 (8,579)
Property management fees$2,715 $5,648 $(2,933)$10,121 $18,320 $(8,199)
(7) Non-IFRS measure; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

The following table provides details of the total FFO impact from Strategic Capital services:
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Asset management fees
$5,521 $5,794 $(273)$15,017 $16,997 $(1,980)
Performance fees
426 1,377 (951)4,134 10,464 (6,330)
Development fees
5,082 5,055 27 21,072 17,073 3,999 
Property management fees
3,283 8,569 (5,286)11,318 26,732 (15,414)
Total FFO impact from fees
$14,312 $20,795 $(6,483)$51,541 $71,266 $(19,725)

Asset management fees

Tricon earns asset management fee revenue on $2.6 billion of fee-bearing capital across its business segments. Asset management fee revenues for this quarter were $5.5 million compared to $5.8 million in the third quarter of 2022. The decrease was primarily driven by the sale of the U.S. multi-family rental portfolio which was completed on October 18, 2022. Accordingly, in the third quarter there were no asset management fees from the U.S. multi-family rental portfolio as opposed to $0.5 million in the same period in the prior year.

Performance fees

Performance fee revenues for the third quarter were $0.4 million compared to $1.4 million in the prior year comparative period which included relatively higher performance fees earned from Tricon’s legacy for-sale housing investments. The Company earns performance fees once targeted returns are achieved by Investment Vehicles and records them only to the extent that it is highly probable that a significant amount of the cumulative revenue recognized will not reverse. Consideration for these services is variable as it is dependent upon the occurrence of a future event that includes the repayment of investor capital and a predetermined rate of return.

(in thousands of U.S. dollars)1 to 2 years3 to 5 yearsMore than 5 yearsTotal
Estimated future performance fees (1)
$26,000 $126,000 $36,000 $188,000 
(1) Estimated future performance fees are calculated pursuant to current business plans, which involve estimating future cash flows from operations and eventual sale, less construction and development costs, to determine the quantum and timing of funding requirements and cash distributions for each Investment Vehicle. Such estimated future performance fees are discounted based on expected time horizons and risk (including the risks set out in the AIF and the risk that future performance does not align with assumptions noted under the heading "Forward-looking statements" on page 1), and presented above before the deduction of any amounts paid to employees under the LTIP and performance fee expense to unitholders of the participation arrangements. Forward-looking information; see page 1.

Development fees

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
The Johnson Companies (“Johnson”)$4,077 $3,672 $405 $17,371 $12,929 $4,442 
Tricon Development Group ("TDG")1,005 1,383 (378)3,701 4,144 (443)
Development fees$5,082 $5,055 $27 $21,072 $17,073 $3,999 

Development fee revenue remained flat in the third quarter. An increase in Johnson revenue compared to the same period in the prior year was offset by a decrease in fees from Canadian residential developments, as certain properties have entered their lease-up phase.

Property management fees

The Company earned $3.3 million in property management fees in the quarter through its rental operating platform, representing a $5.3 million decrease from the comparative period. This decrease was driven primarily by a reduction in acquisition fees as a result of fewer acquisitions of SFR homes, as well as lower property management fees following the divestiture of Tricon's interest in the U.S. multi-family rental portfolio which occurred on October 18, 2022.

Corporate overhead efficiency
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023



Fees earned from managing third-party capital allow Tricon to improve operating efficiency and offset corporate overhead expenses. The following table provides details of the Company's net overhead expenses for the three and nine months ended September 30, 2023 and 2022:

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Total FFO impact from fees (excluding performance fees)
$13,886 $19,418 $(5,532)$47,407 $60,802 $(13,395)
Salaries and benefits
(13,661)(13,065)(596)(42,148)(40,934)(1,214)
Cash-based AIP expense(2,263)(4,955)2,692 (8,429)(16,317)7,888 
General and administration expense in Core FFO(1)
(10,817)(11,936)1,119 (37,720)(34,789)(2,931)
Recurring gross overhead expenses
$(26,741)$(29,956)$3,215 $(88,297)$(92,040)$3,743 
Overhead expenses, net
(12,855)(10,538)(2,317)(40,890)(31,238)(9,652)
Total FFO impact from fees (excluding performance fees) as a percentage of recurring gross overhead expenses
52 %65 %(13 %)54 %66 %(12 %)
(1) See Appendix A for reconciliation to general and administration expense per the Company's Interim Financial Statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


5.    Liquidity and capital resources

5.1    Financial strategy

The Company seeks to maintain financial strength and flexibility by lowering its cost of debt and equity capital and minimizing interest rate fluctuations over the long term. Some key elements of Tricon’s financing strategy are:

•Using various forms of debt such as fixed-rate or floating-rate bank financing and unsecured debentures with conversion features, and attempting to stagger the maturity of its obligations. The Company typically purchases interest rate caps to limit its exposure to variable interest rate increases.

•Using convertible or exchangeable securities where the principal can be redeemed by the issuance of common shares at the Company’s option.

•Where appropriate, raising equity through the public or private markets in the U.S. and Canada to finance its growth and strengthen its financial position.

5.2    Liquidity

Tricon generates substantial liquidity through:

•Stable cash flow received from our single-family rental business.

•Cash distributions from operating cash flow generated by our multi-family rental businesses.

•Cash distributions from land, lot and home sales in our legacy for-sale housing business.

•Fee income from our Strategic Capital business.

•Repatriation of capital extracted through refinancings.

•Cash distributions generated from the turnover of assets with shorter investment horizons.

•Syndicating investments to private investors and thereby extracting Tricon's invested capital.

To enable us to react to attractive acquisition or investment opportunities and deal with contingencies when they arise, we typically maintain sufficient liquidity at the corporate level and within our key operating platforms. Our primary sources of liquidity consist of cash and a corporate credit facility.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Contractual obligations

The following table presents the contractual maturities of the Company’s financial liabilities at September 30, 2023, excluding remaining unamortized deferred financing fees and debt discount:

(in thousands of U.S. dollars)
As at September 30, 2023
Due on demand
and within the
year		From 1 to 2
years		From 3 to 4
years		From 5 years
and later		Total
Liabilities
Debt(1)
154 1,565,700 2,922,547 1,258,369 5,746,770 
Other liabilities
— 14,410 12,633 18,985 46,028 
Limited partners' interests in single-family rental business
— 900,084 1,099,363 275,902 2,275,349 
Derivative financial instruments
— — — 32,097 32,097 
Due to Affiliate
— — — 295,325 295,325 
Amounts payable and accrued liabilities
205,359 — — — 205,359 
Resident security deposits
83,874 — — — 83,874 
Dividends payable
15,834 — — — 15,834 
Total
$305,221 $2,480,194 $4,034,543 $1,880,678 $8,700,636 
(1) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise the extension options available on all loans.

Working capital

As at September 30, 2023, Tricon had a net working capital deficit of $695.2 million, reflecting current assets of $234.8 million, offset by current liabilities of $930.0 million. The working capital deficit primarily results from two facilities (a term loan and a securitization) with an aggregate outstanding balance of $624.3 million maturing in the next twelve months. The Company is currently exploring options to refinance both facilities before their maturities in early 2024. The Company has determined that its current financial obligations and working capital deficit are adequately funded from the available borrowing capacity and from operating cash flows.

As of September 30, 2023, there was $150.0 million outstanding under the Company's corporate credit facility with $350.0 million remaining undrawn on that facility.

5.3    Capital resources

Debt structure

Management mitigates interest rate risk by maintaining the majority of its debt at fixed rates. The impact of variable interest rate increases or decreases is discussed in the Company’s financial statements. Management also mitigates its exposure to fixed-rate interest risk by staggering maturities with the objective of achieving even, annual maturities over a ten-year time horizon to reduce Tricon’s exposure to interest rate fluctuations in any one period. The Company’s long-term debt structure is presented in Note 14 of the Company's interim financial statements, which information is incorporated herein by reference, and further summarized in Section 3.2 of this document.

The Company provides financial guarantees for land loans and construction loans in its residential development business.

As at September 30, 2023, the Company was in compliance with all of its financial covenants.







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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Equity issuance and cancellations    

As at September 30, 2023, there were 272,993,974 common shares issued by the Company, of which 272,356,982 were outstanding and 636,992 were reserved to settle restricted share awards in accordance with the Company's Restricted Share Plan. In addition, the Company had 3,631,723 outstanding stock options and 2,372,563 outstanding deferred share units (DSUs).

The Company’s Dividend Reinvestment Plan (“DRIP”) provides eligible holders of common shares with the opportunity to reinvest their cash dividends paid on the Company’s common shares to purchase additional common shares at a price equal to the average market price (as defined in the DRIP) on the applicable dividend payment date, less an applicable discount of up to 5% determined by the Board from time to time.

On October 13, 2022, the Company announced that the TSX had approved its notice of intention to make a normal course issuer bid ("NCIB") to repurchase up to 2,500,000 of its common shares trading on the TSX, the NYSE and/or alternative Canadian trading systems during the twelve-month period ending on October 17, 2023. During the nine months ended September 30, 2023, the Company repurchased 525,267 of its common shares on the TSX and 523,413 shares on the NYSE under the NCIB for $8.7 million, all of which were repurchased in the first quarter. The repurchased common shares were subsequently cancelled.

The following table summarizes the Company's equity capital structure at September 30, 2023 and December 31, 2022:

September 30, 2023December 31, 2022Variance
Common shares outstanding(1)
272,356,982 272,840,692 (483,710)
Restricted common shares636,992 624,088 12,904 
Number of basic common shares issued272,993,974 273,464,780 (470,806)
Outstanding stock options3,631,723 3,839,723 (208,000)
Outstanding deferred share units (DSUs)2,372,563 2,419,824 (47,261)
Common shares underlying exchangeable preferred units34,744,118 34,744,118 — 
(1) Common shares outstanding as at September 30, 2023 includes 395,852 common shares issued under the Dividend Reinvestment Plan ("DRIP") during the year.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023




6.    Operational key performance indicators

The non-IFRS financial measures, non-IFRS ratios and KPI supplementary financial measures discussed throughout this MD&A for each of the Company’s business segments are calculated based on Tricon's proportionate share of each portfolio or business and are defined and discussed below. The presentation on a proportionate basis reflects only the portion attributable to Tricon's shareholders based on the Company's ownership percentage of the underlying entities and excludes the percentage associated with non-controlling and limited partners' interests. The Company believes that providing these measures on a proportionate basis is helpful to investors in assessing the overall performance of the Company’s business. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance; however, they do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly-traded entities. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS. See “Non-IFRS measures” on page 1 and Appendix A.

Single-family and multi-family rental

•Net operating income ("NOI") represents total revenue from rental properties, less direct operating expenses and property management expenses. NOI excludes non-property specific and indirect overhead expenses, interest expense and non-core income or expenses such as gains or losses on the disposition of rental properties. Tricon believes NOI is a helpful metric to evaluate the performance of its rental business and compare it to industry peers.

•Net operating income ("NOI") margin represents net operating income as a percentage of total revenue from rental properties.

•Occupancy rate represents the total number of days that units were occupied during the measurement period, divided by the total number of days that the units were owned during the measurement period (excluding units held for sale). Management believes occupancy is a main driver of rental revenues and that comparing occupancy across different periods is helpful in evaluating changes in rental revenues.

•Annualized turnover rate during the period represents the number of resident move-outs divided by the weighted average number of rental units (excluding units held for sale) in the period, annualized for a twelve-month period. Management believes the annualized turnover rate impacts occupancy and therefore revenue, as well as the cost to maintain the rental portfolios.

•Average monthly rent represents average monthly rental income per unit for occupied units and reflects the impact of rent concessions amortized over the life of the related leases. Tricon believes average monthly rent reflects pricing trends which impact rental revenue over time.

•Average rent growth during the period represents the percentage difference between the monthly rent from an expiring lease and the monthly rent from the next lease and reflects the impact of rent concessions amortized over the life of the related lease. Leases are either renewal leases, where a current resident chooses to stay for a subsequent lease term, or a new lease, where a previous resident moves out and a new resident signs a lease to occupy the same unit. Average rent growth drives average monthly rent and management finds it is useful to evaluate changes in rental revenue across periods.
•“Same home” or “same home portfolio” includes homes that were stabilized 90 days prior to the first day of the prior-year comparative period as per the guidelines of the National Rental Home Council. It excludes homes that have been sold, homes that have been designated for sale and homes taken out of service as a result of a major renovation. This same home portfolio is defined on January 1 of each reporting year. Based on this definition, any home currently included in the same home portfolio will have satisfied the conditions described above prior to September 30, 2021, and those homes have been held in operations throughout the full periods presented in both 2022 and 2023.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023



Strategic Capital (previously reported as private funds and advisory)

•Total fee revenue represents total asset management, property management, development management and performance fees earned, excluding inter-company fees earned.

•Assets Under Management (“AUM”) includes balance sheet capital invested in the Company's principal investments and capital managed on behalf of third-party investors and is a helpful measure in evaluating the Company’s ability to grow and manage strategic capital. AUM is calculated as follows:

ASSETS UNDER MANAGEMENT
Principal Assets Under Management
Single-family rental, multi-family rental and Canadian residential developmentsFair value of rental and development properties plus unfunded commitment
U.S. residential developmentsFair value of invested capital plus unfunded commitment
Third-Party Assets Under Management
Single-family rental, multi-family rental and Canadian residential developments
Fair value of rental and development properties plus unfunded commitment
U.S. residential developments
For-sale housing
Outstanding invested equity and unfunded commitment
Build-to-rentOutstanding invested equity and project-level funded debt plus unfunded commitment

Company operating performance

Funds from operations (“FFO”), core funds from operations (“Core FFO”) and adjusted funds from operations ("AFFO") are metrics that management believes to be helpful in evaluating the Company's operating performance, considering the recent expansion of its residential rental portfolio. These are metrics commonly used by securities analysts, investors and other interested parties in the evaluation of real estate entities, particularly those that own and operate income-producing properties. Management believes that providing these performance measures on a supplemental basis is helpful to investors in assessing the overall performance of the Company’s business.

•FFO represents net income excluding the impact of fair value adjustments and amortization of intangibles arising from business combinations. The Company's definition of FFO reflects all adjustments that are specified by the National Association of Real Estate Investment Trusts ("NAREIT"). In addition to the adjustments prescribed by NAREIT, Tricon excludes any fair value gains that arise as a result of reporting under IFRS, except for fair value gains arising from Tricon's U.S. residential developments business which are intended to act as a proxy for cash generation.

•Core FFO presents FFO as a normalized figure, adjusting for transaction costs, interest on Due to Affiliate, fees eliminated upon consolidation, and non-cash items.

•AFFO represents Core FFO less recurring capital expenditures, which represent ongoing costs associated with maintaining and preserving the quality of a property after it has been renovated.

•Effect of FFO, Core FFO and AFFO from discontinued operations is presented on a combined basis with continued operations.

Tricon’s method of calculating FFO is substantially in accordance with NAREIT’s recommendations, but may differ from other issuers’ methods and, accordingly, may not be comparable to FFO reported by other issuers.

Core FFO and AFFO per share amounts are calculated based on the weighted average common shares outstanding in the period, assuming the conversion of all potentially dilutive shares (including exchangeable preferred units) to show the full dilutive impact to shareholders.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023



Core FFO and AFFO payout ratios are calculated by dividing dividends declared for the period by Core FFO and AFFO, respectively, which are indicative of the Company's ability to fund dividend payments using cash from operations.

Net debt

Net debt represents the Company's total current and long-term debt per its financial statements, less its cash and restricted cash. Management believes it is a helpful liquidity measure to reflect the Company's ability to meet all of its obligations simultaneously if they were due immediately.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


7.    Accounting estimates and policies, controls and procedures, and risk analysis

Refer to the Company’s MD&A for the year ended December 31, 2022, which is available on SEDAR at www.sedar.com and on the Company’s website at www.triconresidential.com, for detailed discussions of accounting estimates and policies, controls and procedures, and risk analysis.

7.1    Accounting estimates and policies

The Company’s accounting policies are described in Notes 2 and 3 to the consolidated financial statements for the year ended December 31, 2022, and any changes thereto are described in Note 2 to the Interim Financial Statements for the three and nine months ended September 30, 2023.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Refer to Note 4 to the consolidated financial statements for the year ended December 31, 2022 for details on critical accounting estimates.

7.2    Controls and procedures

Management, including our President & Chief Executive Officer and Executive Vice-President & Chief Financial Officer, assessed the design and effectiveness of internal control over financial reporting (“ICFR”) and disclosure controls and procedures (“DC&P”) as at September 30, 2023. In making its assessment, management used the Committee of Sponsoring Organizations of the Treadway Commission Framework in Internal Control – Integrated Framework (2013) to evaluate the design and effectiveness of internal control over financial reporting. During the first quarter of 2023, the Company completed the initial phase of its new enterprise resource planning ("ERP") implementation and migrated its general ledger onto the new system. In connection with this implementation, the Company modified the design and documentation of its internal control processes and procedures relating to the new system. Other than these ERP system implementation changes, there have been no other changes in the Company's internal controls over financial reporting that occurred during the nine months ended September 30, 2023. Based on our evaluation within this framework, management has concluded that both ICFR and DC&P were effective as at September 30, 2023.

Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

7.3    Transactions with related parties

Senior management of the Company own units, directly or indirectly, in certain legacy Investment Vehicles, as well as common shares of the Company. Refer to Note 24 in the Company's interim financial statements for further details concerning the Company’s transactions with related parties.

7.4    Dividends

On November 7, 2023, the Board of Directors of the Company declared a dividend of $0.058 per common share in U.S. dollars payable on or after January 15, 2024 to shareholders of record on December 31, 2023.

7.5    Compensation incentive plans

Complete details concerning the Company’s compensation plans are set out in the Company’s most recent Management Information Circular, available on SEDAR at www.sedar.com and on the Company’s website at www.triconresidential.com.

7.6    Risk definition and management

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


There are certain risks inherent in the Company’s activities and those of its investees, which may impact the Company’s financial and operating performance, the value of its investments and the value of its securities. The Company’s Annual Information Form dated February 28, 2023 and its MD&A for the year ended December 31, 2022, which are available on SEDAR at www.sedar.com and on the Company’s website at www.triconresidential.com, contain detailed discussions of these risks.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


8.    Historical financial information

The following tables show selected IFRS measures for the past eight quarters. The comparative period results have been recast in conformity with the current period presentation to show the results from the U.S. multi-family rental subsidiary as discontinued operations separate from the Company's continuing operations.

For the three months ended
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Financial statement results
Net operating income from single-family rental properties from continuing operations$135,273 $132,455 $126,402 $122,522 
Total revenue from continuing operations(1), (2)
211,531 208,207 203,630 195,713 
Net income from continuing operations81,125 46,768 29,401 55,883 
Net income from discontinued operations— — — 1,829 
Net income81,125 46,768 29,401 57,712 
Basic earnings per share from continuing operations0.29 0.17 0.10 0.19 
Basic earnings per share from discontinued operations— — — 0.01 
Basic earnings per share0.29 0.17 0.10 0.20 
Diluted earnings per share from continuing operations0.18 0.16 0.08 0.11 
Diluted earnings per share from discontinued operations— — — 0.01 
Diluted earnings per share0.18 0.16 0.08 0.12 

For the three months ended
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)September 30, 2022June 30, 2022March 31, 2022December 31, 2021
Financial statement results
Net operating income from single-family rental properties from continuing operations$116,305 $104,396 $93,273 $83,355 
Total revenue from continuing operations(1), (2)
283,239 175,522 151,199 142,077 
Net income from continuing operations178,786 405,604 150,124 110,439 
Net (loss) income from discontinued operations(2,335)11,256 13,333 16,538 
Net income176,451 416,860 163,457 126,977 
Basic earnings per share from continuing operations0.65 1.47 0.54 0.41 
Basic (loss) earnings per share from discontinued operations(0.01)0.04 0.05 0.06 
Basic earnings per share0.64 1.51 0.59 0.47 
Diluted earnings per share from continuing operations0.49 0.82 0.54 0.40 
Diluted (loss) earnings per share from discontinued operations(0.01)0.03 0.05 0.06 
Diluted earnings per share0.48 0.85 0.59 0.46 
(1) Total revenue from continuing operations includes revenue from single-family rental properties and revenue from strategic capital services.
(2) The comparative periods prior to March 31, 2022 have been reclassified to conform with the current period presentation. Resident recoveries previously recorded in direct operating expenses have been reclassified to revenue from single-family rental properties with no impact to net operating income.

Over the past two years, the Company’s single-family rental business benefited from a number of trends that have been accelerated by the COVID-19 pandemic, including in-migration and strong population growth in U.S. Sun Belt markets, favorable demographic shifts driving new household formation, as well as a shift towards work-from-home employment with families prioritizing larger living spaces. Meanwhile, the supply of new housing was constrained by ongoing challenges related to securing entitlements for new lots and by a shortage of labor and materials, including pandemic-related supply chain bottlenecks. This imbalance, coupled with inflationary cost pressures and higher mortgage rates, has made home ownership less attainable and increased demand for rental homes.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Notwithstanding the foregoing, beginning in late 2022, Company performance began to be impacted by macro-economic factors such as rising interest rates and general inflation, as well as overall uncertainty in financial markets and moderating rent growth. Some of these factors also led the Company to slow its SFR home acquisition pace, in order to preserve capital for more attractive opportunities in the future, which slowing also had an impact on performance.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


Appendix A - Reconciliations

Management considers NOI, NOI margin, Core FFO, Core FFO per share, AFFO and AFFO per share to be key measures of the Company's operating performance (see Section 6 for definitions and page 1 for discussion of non-IFRS measures).

RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND AFFO

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Net income from continuing operations attributable to Tricon's shareholders
$80,156 $177,926 $(97,770)$152,450 $720,496 $(568,046)
Fair value gain on rental properties
(73,261)(107,166)33,905 (208,907)(802,573)593,666 
Fair value loss on Canadian development properties
— 1,314 (1,314)— 440 (440)
Unrealized gain on derivative financial instruments
(24,558)(31,866)7,308 (8,098)(158,991)150,893 
Limited partners' share of FFO adjustments
25,341 37,621 (12,280)95,955 233,504 (137,549)
FFO attributable to Tricon's shareholders
$7,678 $77,829 $(70,151)$31,400 $(7,124)$38,524 
Core FFO from U.S. and Canadian multi-family rental
198 2,479 (2,281)584 7,305 (6,721)
Income from equity-accounted investments in multi-family rental properties
(179)(169)(10)(529)(499)(30)
Income from equity-accounted investments in Canadian residential developments
(2,442)(3,621)1,179 (2,734)(3,508)774 
Performance fees revenue from the sale of U.S. multi-family rental portfolio
— (99,866)99,866 — (99,866)99,866 
Current income tax adjustment
(1,271)— (1,271)629 — 629 
Deferred income tax expense
9,806 72,087 (62,281)23,930 183,578 (159,648)
Current tax impact on sale of U.S. multi-family rental portfolio (Section 3.1)
— (29,835)29,835 — (29,835)29,835 
Interest on Due to Affiliate
4,245 4,245 — 12,736 12,777 (41)
Amortization of deferred financing costs, discounts and lease obligations
6,355 5,058 1,297 17,843 13,703 4,140 
Equity-based, non-cash and non-recurring compensation(1)
4,802 7,539 (2,737)12,019 46,333 (34,314)
Other adjustments(2)
13,545 10,657 2,888 31,068 17,583 13,485 
Core FFO attributable to Tricon's shareholders
$42,737 $46,403 $(3,666)$126,946 $140,447 $(13,501)
Recurring capital expenditures(3)
(8,594)(11,221)2,627 (25,995)(30,877)4,882 
AFFO attributable to Tricon's shareholders
$34,143 $35,182 $(1,039)$100,951 $109,570 $(8,619)
Core FFO payout ratio(4)
37 %34 %3 %37 %34 %3 %
AFFO payout ratio(4)
46 %45 %1 %47 %43 %4 %
Weighted average shares outstanding - diluted
310,497,125 311,910,445 (1,413,320)310,341,448 312,023,897 (1,682,449)
(1) Includes non-cash performance fees expense. Performance fees expense is accrued based on changes in the unrealized carried interest liability of the underlying Investment Vehicles and hence is added back to Core FFO as a non-cash expense. Performance fees are paid and deducted in arriving at Core FFO only when the associated fee revenue has been realized.
(2) Includes the following adjustments:
        
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Transaction costs
$5,176 $3,658 $1,518 $13,173 $11,359 $1,814 
(Gain) loss on debt modification and extinguishment
(1,326)6,816 (8,142)(1,326)6,816 (8,142)
Amortization and depreciation expense
4,359 3,853 506 12,781 10,844 1,937 
Realized and unrealized foreign exchange loss (gain)
62 (623)685 (69)(662)593 
Lease payments on right-of-use assets
(1,496)(676)(820)(4,208)(1,935)(2,273)
Core FFO adjustments to income from investments in U.S. residential developments
— (34)34 — (484)484 
Non-controlling interest's share of Core FFO adjustments
(149)(196)47 (503)(616)113 
Other Core FFO adjustments
7,340 — 7,340 13,975 — 13,975 
Limited partners' share of Core FFO adjustments
(421)(2,141)1,720 (2,755)(7,739)4,984 
Total other adjustments
$13,545 $10,657 $2,888 $31,068 $17,583 $13,485 
(3) Recurring capital expenditures represent ongoing costs associated with maintaining and preserving the quality of a property after it has been renovated. Capital expenditures related to renovations or value-enhancement are excluded from recurring capital expenditures.
(4) Core FFO and AFFO payout ratios are computed by dividing dividends declared for the period by Core FFO and AFFO, respectively.

RECONCILIATION OF RECURRING SINGLE-FAMILY RENTAL PROPORTIONATE CAPITAL EXPENDITURES
TO CONSOLIDATED PORTFOLIO CAPITAL EXPENDITURES BY PERIOD

(in thousands of U.S. dollars)Q3 2023Q2 2023Q1 2023Q4 2022Q3 2022Q2 2022Q1 2022
Recurring capital expenditures, proportionate total portfolio(A)$8,577$8,275$9,093$8,037$10,750$9,788$8,796
Renovation, value-enhancing and disposition capital expenditures, proportionate total portfolio34,09623,41518,29130,29540,86833,94128,475
Total capital expenditures, proportionate total portfolio$42,673$31,690$27,384$38,332$51,618$43,729$37,271
Limited partners' share of capital expenditures(1)
7,92611,83119,15729,74148,99034,78241,997
Total capital expenditures by period$50,599$43,521$46,541$68,073$100,608$78,511$79,268
(1) Represents the limited partners' interest of the capital expenditures in SFR JV-1, SFR JV-2 and SFR JV-HD.

RECONCILIATION OF SINGLE-FAMILY RENTAL TOTAL PORTFOLIO RECURRING CAPITAL EXPENDITURES TO RECURRING CAPITAL EXPENDITURES IN AFFO

(in thousands of U.S. dollars)Q3 2023Q2 2023Q1 2023Q4 2022Q3 2022Q2 2022Q1 2022
Recurring capital expenditures, single-family rental proportionate total portfolio
(A)$8,577$8,275$9,093$8,037$10,750$9,788$8,796
Recurring capital expenditures from adjacent residential businesses
171815110471491581
Recurring capital expenditures in AFFO
$8,594$8,293$9,108$8,147$11,221$10,279$9,377

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


RECONCILIATION OF QUARTERLY CONSOLIDATED CAPITAL EXPENDITURES TO CONSOLIDATED SINGLE FAMILY RENTAL PROPERTIES

(in thousands of U.S. dollars)September 30, 2023December 31, 2022
Opening balance
$11,445,659 $7,978,396 
Acquisitions
482,047 2,362,185 
Total capital expenditures by period
Q1
46,541 79,268 
Q2
43,521 78,511 
Q3
50,599 100,608 
Q4
— 68,073 
Total capital expenditures
140,661 326,460 
Fair value adjustments
208,907 858,987 
Dispositions
(155,167)(80,369)
Single-family rental properties balance per financial statements, end of period
$12,122,107 $11,445,659 

RECONCILIATION OF SINGLE-FAMILY RENTAL TOTAL AND SAME HOME NOI

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)
2023202220232022
Net operating income (NOI), proportionate same home portfolio
$56,438 $53,259 $166,322 $156,759 
Net operating income (NOI), proportionate non-same home
21,000 18,062 62,916 45,040 
Net operating income (NOI), proportionate total portfolio
77,438 71,321 229,238 201,799 
Limited partners' share of NOI(1)
57,835 44,984 164,892 112,175 
Net operating income from single-family rental properties per financial statements
$135,273 $116,305 $394,130 $313,974 
(1) Represents the limited partners' interest in the NOI from SFR JV-1, SFR JV-2 and SFR JV-HD.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023


RECONCILIATION OF CANADIAN MULTI-FAMILY RENTAL NOI

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)
2023202220232022
Net operating income (NOI), proportionate portfolio
$304 $299 $904 $889 
Other expenses, proportionate portfolio
(125)(130)(375)(390)
Income from equity-accounted investments in Canadian multi-family rental properties per financial statements
$179 $169 $529 $499 

RECONCILIATION OF PROPORTIONATE GENERAL AND ADMINISTRATION EXPENSE IN CORE FFO

For the periods ended September 30
Three monthsNine months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Proportionate general and administration expense in Core FFO
$10,817 $11,936 $(1,119)$37,720 $34,789 $2,931 
Non-recurring general and administration expense7,340 — 7,340 13,975 — 13,975 
Cash lease payments
(1,496)(676)(820)(4,208)(1,935)(2,273)
Proportionate general and administration expense
16,661 11,260 5,401 47,487 32,854 14,633 
Limited partner's share of general and administration expense
5,513 2,788 2,725 12,138 7,974 4,164 
General and administration expense per financial statements
$22,174 $14,048 $8,126 $59,625 $40,828 $18,797 

TOTAL ASSETS UNDER MANAGEMENT
September 30, 2023
December 31, 2022
(in thousands of U.S. dollars)
Balance
% of total AUM
Balance
% of total AUM
Third-party AUM
$8,124,882 50.1 %$8,120,344 50.7 %
Principal AUM
8,078,867 49.9 %7,882,908 49.3 %
Total AUM
$16,203,749 100.0 %$16,003,252 100.0 %
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

















































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7 St. Thomas Street, Suite 801 Toronto, Ontario M5S 2B7
T 416-925-7228 F 416-925-7964 www.triconresidential.com
Page 51 of 51
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