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TORONTO, Feb. 27, 2019 /CNW/ - Tricon Capital Group
Inc. (TSX: TCN) ("Tricon" or the "Company"), an investment manager
focused on the residential real estate industry, announced today
its consolidated financial results for the year ended December 31, 2018. All of the financial
information is in U.S. dollars unless otherwise indicated.
Key operational and financial highlights for 2018 include:
- Net income increased by 212% year-over-year to $216.4 million, and basic and diluted earnings
per share increased by 191% and 137%, respectively, to $1.57 and $1.28;
- Assets under management ("AUM") increased by 23% year-over-year
to $5.7 billion (C$7.8 billion), driven by 39% growth in
third-party managed assets;
- In Q2 2018, the Company entered into a $2 billion joint venture with two leading
institutional investors to assemble a portfolio of 10,000-12,000
single-family rental homes which will be acquired and managed by
Tricon American Homes ("TAH");
- TAH's NOI increased by 32% year-over-year to $151.2 million and Core FFO increased by 51%
year-over-year to $54.0 million; the
results were driven by strong operating performance including 96.2%
stabilized occupancy, 6.4% blended rent growth and 62.7% NOI
margin;
- TAH achieved 7.0% same home NOI growth in 2018, 6.0% same home
blended rent growth, and an increase of 140 bps in its same home
NOI margin to 61.2%;
- Tricon Lifestyle Rentals ("TLR") recognized fair value gains of
$20.4 million, driven primarily by
development progress at The Selby and both TLR U.S. projects, which
are now in the lease-up stage;
- Tricon realized gross proceeds of $172.5
million (net proceeds of $85.2
million) from the sale of Tricon Lifestyle Communities'
("TLC") portfolio, generating a 25% IRR and 1.7x ROI to Tricon;
- Private Funds and Advisory revenue increased by 19%
year-over-year to $30.3 million,
reflecting the growth in third-party capital as well as additional
development fees earned from new TLR Canada projects; and
- Adjusted EBITDA increased by 35% to $364.0 million; and Adjusted basic and diluted
earnings per share increased by 36% and 32% year-over-year,
respectively, to $1.64 and
$1.45.
"Tricon achieved record results in 2018, underscoring a year of
significant growth, operational success and a renewed focus on
raising third-party capital," said Gary
Berman, Tricon's President and CEO. "The formation of a
$2 billion single-family rental joint
venture with two leading institutional investors was a significant
milestone for Tricon, enabling us to scale faster, generate
additional fee income and broaden our appeal among large private
investors. In what we call Tricon 3.0, we intend to optimize
our balance sheet by accelerating the use of third-party capital in
all of our housing verticals, thereby driving return on equity.
Operationally, our largest business vertical, TAH, led the way
with strong metrics including same home NOI growth of 7.0%, total
portfolio turnover of 26.8% and blended rent growth of 6.4% in
2018. Our multi-family vertical, TLR, added 1,700 units to its
development pipeline in Toronto,
advanced existing projects on time and on budget, and quickly
positioned itself as a leader in the burgeoning Class A
multi-family development sector in Canada. These efforts, along with the
successful disposition of our manufactured housing investment, have
added to our track record of growing book value per share by 23%
per annum since entering the single-family rental sector in
2012. We believe that our investment and operational
performance will ultimately be rewarded by the public markets and
that the gap between our strong fundamentals and stock price will
narrow."
Financial Highlights
For the periods
ended December 31
|
Three
months
|
|
Twelve
months
|
(in thousands of U.S.
dollars,
except per share amounts)
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Investment income -
Tricon American Homes
|
$
|
38,159
|
$
|
45,709
|
|
$
|
218,932
|
$
|
113,067
|
Investment income -
Tricon Lifestyle Rentals
|
10,653
|
5,950
|
|
15,406
|
12,391
|
Investment income -
Tricon Housing Partners
|
1,943
|
1,236
|
|
11,449
|
18,209
|
Investment income
from discontinued operations and
gain from disposal of investments held for sale - Tricon Lifestyle
Communities
|
—
|
1,187
|
|
21,170
|
7,381
|
Private Funds and
Advisory revenue
|
9,565
|
7,331
|
|
30,347
|
25,399
|
|
|
|
|
|
|
Net income
|
43,297
|
25,724
|
|
216,355
|
69,348
|
|
|
|
|
|
|
Basic earnings per
share
|
0.30
|
0.19
|
|
1.57
|
0.54
|
Diluted earnings per
share
|
0.23
|
0.19
|
|
1.28
|
0.54
|
|
|
|
|
|
|
Dividends per
share
|
C$
|
0.07
|
C$
|
0.065
|
|
C$
|
0.28
|
C$
|
0.26
|
|
|
|
|
|
|
Non-IFRS
measures
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
79,671
|
$
|
96,956
|
|
$
|
363,996
|
$
|
269,709
|
Adjusted net
income
|
46,116
|
59,486
|
|
224,675
|
153,626
|
Adjusted basic
earnings per share
|
0.32
|
0.44
|
|
1.64
|
1.21
|
Adjusted diluted
earnings per share
|
0.30
|
0.39
|
|
1.45
|
1.10
|
Assets under
management (AUM)
|
|
|
|
$
|
5,703,910
|
$
|
4,622,309
|
Net income for the fourth quarter of 2018 was
$43.3 million compared to
$25.7 million in Q4 2017. Net income
per basic and diluted share was $0.30
and $0.23, respectively, compared to
$0.19 and $0.19 in Q4 2017. Net income for the quarter
included:
- Investment income of $38.2
million from TAH compared to $45.7
million in Q4 2017, reflecting lower fair value gains as
determined by the combination of the BPO and HPI methodologies, net
of capital expenditures;
- Investment income of $10.7
million from TLR compared to $6.0
million in Q4 2017, driven by higher fair value gains as The
Selby neared substantial completion and The Taylor (formerly 57
Spadina) achieved development milestones;
- Private Funds and Advisory revenue of $9.6 million earned from all three of Tricon's
investment verticals, including management fees of $1.0 million from TAH JV-1 which was established
on June 27, 2018; and
- A fair value gain on embedded derivatives of $8.6 million related to the Company's outstanding
convertible debentures compared to a $13.4
million loss recognized in Q4 2017.
Net income for the year ended December
31, 2018 was $216.4
million compared to $69.3
million for the year ended December
31, 2017. This equated to net income of $1.57 and $1.28 per
basic and diluted share, respectively, compared to $0.54 and $0.54 for
the year ended December 31, 2017. Net
income for the year included:
- Investment income of $218.9
million from TAH compared to $113.1
million in the prior year, which is a result of strong
operating results, a full-year inclusion of homes acquired with
Silver Bay Realty Trust Corp. ("Silver Bay") in May 2017, and higher fair value gains of
$180.5 million compared to
$144.0 million in 2017 reflecting
home price appreciation on a larger portfolio;
- A fair value gain on embedded derivatives of $27.7 million related to the convertible
debentures compared to a $23.3
million loss recognized in 2017; and
- Interest expense of $31.7 million
compared to $23.7 million in 2017
resulting primarily from a higher outstanding credit facility
balance as well as a higher weighted average interest rate
throughout the year.
Adjusted net income for the fourth quarter of 2018 was
$46.1 million compared to
$59.5 million in Q4 2017. Adjusted
basic and diluted earnings per share were $0.32 and $0.30,
respectively, compared to $0.44 and
$0.39 in Q4 2017. The decrease in
Adjusted net income on an absolute and per-share basis is primarily
attributable to lower fair value gains at TAH in Q4 2018 compared
to the same period in 2017.
Adjusted net income for the year ended December 31, 2018 was $224.7 million compared to $153.6 million in
2017. Adjusted basic and diluted earnings per share were
$1.64 and $1.45, respectively, compared to $1.21 and $1.10 in
2017. The increase in Adjusted net income on an absolute and
per-share basis was attributable to strong fair value gains and
operational results at TAH and the gain on the disposition of TLC,
partly offset by higher interest expense.
Investment income - Tricon American Homes
Investment income from TAH was $38.2
million for the quarter compared to $45.7 million in Q4 2017 as a result of (i) fair
value gains of $24.8 million for the
quarter compared to $51.3 million in
the same period in the prior year, from the combination of BPO and
HPI valuation methodologies, and (ii) NOI of $41.4 million compared to $34.7 million in Q4 2017 driven by high rent
growth and expense containment achieved across the portfolio.
For the full year of 2018, investment income from TAH was
$218.9 million compared to
$113.1 million in 2017 as a result of
(i) additional home price appreciation and NOI contribution from
Silver Bay homes for the full year
as opposed to eight months in the prior year, (ii) strong rent
growth and expense containment achieved across the portfolio, and
(iii) a decrease in transaction costs and non-recurring items as
2017 included Silver Bay
acquisition costs.
The NOI margin for the total portfolio in the quarter was 64.5%
compared to 63.0% in Q4 2017 as a result of strong average blended
rent growth of 6.4% (7.9% on new leases and 5.6% on renewals),
partly offset by higher property tax expense. On a same home basis,
Q4 2018 NOI increased by 8.6% year-over-year and the NOI margin
increased to 62.6% from 61.1% in Q4 2017 for similar reasons. Core
FFO was $17.0 million in Q4 2018
compared to $12.8 million in Q4 2017.
This favourable variance was attributable to higher rental revenue
from more leased properties and the high rent growth discussed
above, partially offset by an increase in corporate overhead
associated with staffing increases to accommodate the growth plan
for TAH JV-1.
The TAH operating metrics discussed above (including NOI and
Core FFO) reflect the performance of the entire portfolio under
management, including the TAH JV-1 portfolio, which is managed by a
TAH subsidiary.
Investment income - Tricon Lifestyle Rentals
Investment income from TLR was $10.7
million for the quarter compared to $6.0 million in Q4 2017, driven primarily by fair
value gains of $12.1 million as The
Selby neared substantial completion and The Taylor achieved
development milestones. The fair value gains were offset by
$1.0 million of interest expense and
$0.6 million of operating losses as
certain projects in the lease-up phase ceased to meet the criteria
for capitalizing interest and other costs as development costs.
For the full year, investment income from TLR was $15.4 million compared to $12.4 million in 2017, driven primarily by fair
value gains of $20.4 million earned
across various projects and an income tax recovery of $2.7 million. These were offset by an
unfavourable foreign currency adjustment of $3.7 million, income attributable to
non-controlling interest of $1.8
million along with operating losses and other costs totaling
$2.2 million.
Subsequent to year-end, TLR Canada announced its participation
in a partnership with TAS Design Build and an institutional
investor to develop and manage 7 Labatt, a mixed-use project in
downtown Toronto.
Investment income - Tricon Housing Partners
Investment income from THP was $1.9
million for the quarter compared to $1.2 million in Q4 2017. Investment income was
comprised of $5.3 million from
separate accounts, predominantly as a result of continued strong
performance from Cross Creek Ranch and Viridian, as well as
$3.6 million of investment income
from Trinity Falls. These gains were
partially offset by fair value losses at THP1 US, THP2 US and
side-cars as a result of increased competition in the active-adult
market, lower demand for premium-priced product and delayed project
timelines and sales.
For the full year of 2018, investment income was $11.4 million compared to $18.2 million in 2017. Investment income for the
full year was predominantly driven by the same factors listed
above.
Private Funds and Advisory
Revenue from Private Funds and Advisory (including contractual
fees, general partner distributions and performance fees) for the
quarter was $9.6 million compared to
$7.3 million in Q4 2017. Revenue
included fees of $7.0 million from
THP, $1.5 million of revenue from TLR
and $1.0 million of management fees
earned from TAH JV-1. Revenue from THP of $7.0 million included $1.5
million in performance fees earned mainly from the Mahogany
master-planned community ("MPC") development in Calgary, Alberta.
For the full year of 2018, revenue from Private Funds and
Advisory was $30.3 million compared
to $25.4 million in 2017. This was
comprised of $24.5 million from THP,
$3.8 million from TLR and
$2.1 million from the TAH JV-1. Of
note, nearly 40% of the revenue from THP was generated through
development fees at Johnson. Johnson is credited with being the
only developer in the U.S. to have six MPCs ranked in the top 50 in
2018 with record third-party home sales in the year.
Quarterly Dividend
The Company announced a dividend of seven
cents per share in Canadian dollars payable on or after
April 15, 2019 to shareholders of
record on March 31, 2019.
Tricon's dividends are designated as eligible dividends for
Canadian tax purposes in accordance with subsection 89(14) of the
Income Tax Act (Canada),
and any applicable corresponding provincial and territorial
legislation. Tricon has a Dividend Reinvestment Plan ("DRIP") which
allows eligible shareholders of the Company to reinvest their cash
dividends in additional common shares of the Company. Common shares
issued pursuant to the DRIP in connection with the announced
dividend will be issued from treasury at a 1% discount from the
market price, as defined in the DRIP. Participation in the DRIP is
optional and shareholders who do not participate in the plan will
continue to receive cash dividends. A complete copy of the DRIP is
available in the Investor Information section of Tricon's website
at www.triconcapital.com.
Conference Call and Webcast
Management will host a conference call at 10 a.m. ET on
Thursday, February 28, 2019 to
discuss the Company's results. Please call 647-427-2311 or
1-866-521-4909 (Conference ID # 7684609). The conference call will
also be accessible via webcast, and a supplementary conference call
presentation will be provided at www.triconcapital.com (Investor
Information - Events). A replay of the conference call will be
available from 1 p.m. ET on February
28, 2019 until midnight ET on
March 7, 2019. To access the replay,
call 1-800-585-8367 or 416-621-4642, followed by passcode
7684609.
The Company's Financial Statements and Management's Discussion
and Analysis for the year ended December 31,
2018 are available on Tricon's website at
www.triconcapital.com and have been filed on SEDAR (www.sedar.com).
The financial information therein is presented in U.S. dollars.
About Tricon Capital Group Inc.
Tricon is an investment manager focused on the residential real
estate industry in North America
with approximately $5.7 billion
(C$7.8 billion) of assets under
management. Tricon invests in a portfolio of single-family rental
homes, purpose-built rental apartments and for-sale housing assets,
and manages third-party capital in connection with its investments.
Since its inception in 1988, Tricon has invested in real estate and
development projects valued at approximately $20 billion. More information about Tricon is
available at www.triconcapital.com.
This news release may contain forward-looking statements
relating to expected future events and financial and operating
results and projections of the Company. Such forward-looking
information and statements involve risks and uncertainties and are
based on management's current expectations, intentions and
assumptions in light of its understanding of relevant current
market conditions, investee business plans, and the Company's
prospects. If unknown risks arise, or if any of the assumptions
underlying the forward-looking statements prove incorrect, actual
results may differ materially from management expectations as
projected in such forward-looking statements. Examples of such
risks are described in the Company's continuous disclosure
materials from time to time, available on SEDAR at www.sedar.com.
Accordingly, although the Company believes that its anticipated
future results, performance or achievements expressed or implied by
the forward-looking statements and information are based upon
reasonable assumptions and expectations, the reader should not
place undue reliance on forward-looking statements and information.
The Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, unless required by
applicable law.
The Company has included herein certain supplemental measures
of key performance, including, but not limited to, adjusted EBITDA,
adjusted net income and adjusted earnings per share ("EPS"), as
well as certain key indicators of the performance of its investees.
The Company utilizes these measures in managing its business,
including performance measurement and capital allocation, and
believes that providing these performance measures on a
supplemental basis is helpful to investors in assessing the overall
performance of the Company's business. However, these measures are
not recognized under IFRS. Because non-IFRS measures do not have
standardized meanings prescribed by IFRS, Tricon's use of these
measures may not be comparable to similar measures reported by
other issuers and they should not be construed as alternatives to
net income (loss) or cash flow from the Company's activities,
determined in accordance with IFRS, in measuring the Company's
performance. The definition, calculation and reconciliation of the
non-IFRS measures used herein are provided in Sections 6 and 7 of
the Company's MD&A for the year ended December 31, 2018, which is available on SEDAR at
www.sedar.com.
SOURCE Tricon Capital Group Inc.