Mr. Gary Berman reports

TRICON REPORTS Q3 2023 RESULTS AS STRONG PROPERTY FUNDAMENTALS CONTINUE

Tricon Residential Inc. has released its consolidated financial results for the three and nine months ended Sept. 30, 2023.

All financial information is presented in United States dollars unless otherwise indicated.

The company's operational and financial highlights of the quarter include:

• Net income from continuing operations decreased by $97.7-million year over year from the $178.8-million earned in Q3 2022 (which included $99.9-million of performance fees earned from the sale of Tricon's remaining 20-per-cent equity interest in the United States multifamily rental portfolio) to $81.1-million in the current period. Correspondingly, basic earnings per share from continuing operations decreased to 29 cents compared with 65 cents per share in Q3 2022; and diluted earnings per share from continuing operations decreased to 18 cents compared with 49 cents per share in Q3 2022.
• Core funds from operations (core FFO) was $42.7-million and core FFO per share was 14 cents in Q3 2023, a decrease of 7.9 per cent and 6.7 per cent year over year, respectively. Net operating income (NOI) growth of 8.6 per cent was offset by higher borrowing costs, the loss of core FFO from the U.S. multifamily rental portfolio sold in Q4 2022 and lower performance fees.
• Same home NOI growth for the single-family rental portfolio in Q3 2023 was 6.0 per cent year over year and same home NOI margin was 68.5 per cent. Same home operating metrics remained consistently strong, including occupancy of 97.4 per cent, annualized turnover of 18.8 per cent and blended rent growth of 6.8 per cent (comprising new lease rent growth of 6.9 per cent and renewal rent growth of 6.7 per cent).
• In response to strong resident demand for rental homes across its Sun Belt markets, the company acquired 410 homes during the quarter at an average price of $310,000 per home (including upfront renovations) for a total acquisition cost of $127-million, of which Tricon's proportionate share was $102-million.
• Positive rent trends continued into the fourth quarter, with same home rent growth of 6.8 per cent in October, 2023, including 6.6-per-cent growth on new leases and 6.8-per-cent growth on renewals, while same home occupancy was 97.1 per cent and same home turnover was at 19.4 per cent.
• Tricon has continued to make progress in its Global Real Estate Sustainability Benchmark (GRESB) ratings, marking a 7-per-cent increase compared with 2022 and a 29-per-cent improvement from its inaugural submission in 2021. The ratings improvement underscores Tricon's commitment to sustainable business practices, environmental stewardship, and focus on resident and employee well-being.

"The operating fundamentals of our single-family rental business remain consistently strong with near-full occupancy, low turnover and healthy same home NOI growth of 6.0 per cent delivered in the third quarter. Our U.S. residential development business and our newly launched Canadian multifamily properties are also performing well above our expectations. Underpinning these results is a persistent shortage of housing supply across North America, and a commitment by Tricon to be part of the housing solution," said Gary Berman, president and chief executive officer of Tricon. "That being said, responding to the strong demand for rental housing and growing our portfolio is challenging in the current capital markets environment. As interest rates have continued to press higher in recent weeks, we have reduced our acquisition pace further, buying 410 homes in Q3 and lowering our target to roughly 250 homes in Q4. These acquisitions are largely being funded by our capital recycling program where we replace older, non-core homes with newer vintage properties. Notwithstanding slower external growth, we are pleased to report that we have substantially completed the investment programs for SFR JV-2 and SFR JV-HD and are gearing up to launch SFR JV-3. We remain encouraged by the performance of our existing portfolio and our cost containment efforts which should enable us to finish the year largely in line with our prior expectations for core FFO per share."

Financial highlights

Core FFO for the third quarter of 2023 was $42.7-million, a decrease of $3.7-million or 8 per cent compared with $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. multifamily rental portfolio, and lower acquisition fees associated with acquiring fewer SFR homes. 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 Sept. 30, 2023, core FFO decreased by $13.5-million or 10 per cent to $126.9-million compared with $140.4-million in the prior period, for the reasons noted herein, along with lower performance fees.

AFFO for the three and nine months ended Sept. 30,, 2023 was $34.1-million and $101.0-million, respectively, a decrease of $1.0-million (3 per cent) and $8.6-million (8 per cent) from the same periods in the prior year. This change in AFFO was driven by the decrease in core FFO discussed herein, 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. multifamily rental portfolio following its sale.

Single-family rental operating highlights

The measures presented in the attached table and throughout this press release are 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, unless otherwise stated. A list of these measures, 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 of Tricon's MD&A (management's discussion and analysis).

Single-family rental NOI was $77.4-million for the third quarter of 2023, an increase of $6.1-million or 8.6 per cent compared with the same period in 2022. The growth in NOI was primarily attributable to a $10.7-million or 10.7-per-cent increase in rental revenues as a result of a 5.9-per-cent increase in the average monthly rent ($1,815 in Q3 2023 compared with $1,714 in Q3 2022) and 2.2-per-cent portfolio growth (Tricon's proportionate share of rental homes was 21,840 in Q3 2023 compared with 21,372 in Q3 2022), and a 0.5-per-cent increase in occupancy (94.5 per cent in Q3 2023 compared with 94.0 per cent in Q3 2022). This favourable growth in rental revenue was partially offset by a $4.9-million or 14.4-per-cent increase in direct operating expenses reflecting incremental costs associated with a larger portfolio of homes, higher property taxes from increased assessed property values, elevated property management costs reflecting a tighter labour market, increased homeowners' association (HOA) dues, and higher other direct costs associated with smart-home technology and higher utility rates.

Single-family rental same home NOI growth was 6.0 per cent in the third quarter of 2023, compared with the same period last year. This favourable change was driven by a 6.5-per-cent increase in revenue from rental properties as a result of a 6.0-per-cent higher average monthly rent ($1,758 in Q3 2023 compared with $1,658 in Q3 2022), and an improvement in bad debt (0.9 per cent in Q3 2023 compared with 1.4 per cent in Q3 2022), partially offset by slightly lower occupancy (97.4 per cent in Q3 2023 compared with 97.6 per cent in Q3 2022). Same home operating expense increased by 7.5 per cent, attributable primarily to a 10.5-per-cent increase in property taxes, partially offset by lower turnover expense and proactive cost containment in property management, repair and maintenance expenses.

Single-family rental investment activity

The company expanded its single-family rental portfolio during the quarter by acquiring 410 homes (299 wholly owned homes for $90.2-million and 111 homes owned through joint ventures for $36.8-million), bringing its total managed portfolio to 37,478 homes. The homes were purchased at an average cost per home of $310,000, including upfront renovations, for a total acquisition cost of $127-million, of which Tricon's share was approximately $102-million.

During the quarter, Tricon also disposed of 175 homes for a total of $63.0-million (169 wholly owned homes for $61.3-million and six homes owned through joint ventures for $1.7-million) at an average price of $360,000 per home. Tricon's proportionate share of dispositions was approximately $61.8-million. Tricon expects to continue disposing of non-core homes as a means of recycling capital toward the acquisition of newer homes in its core markets.

Adjacent residential businesses highlights

Quarterly highlights of the company's adjacent residential businesses include:

• In the Canadian multifamily business, The Selby's occupancy remained stable at 98.5 per cent, and annualized turnover improved to 30.4 per cent compared with 39.2 per cent during the same period in the prior year. Blended rent growth was 11.2 per cent during the quarter, driven by healthy new lease and renewal rent growth as the number of leases with pandemic-era rents at the property continue to diminish.
• In Tricon's Canadian residential development portfolio, The Taylor achieved a stabilized physical occupancy of 98.3 per cent as at Sept. 30, 2023, at an average monthly rent of $4.63 (Canadian) per square foot. Maple House at Canary Landing welcomed its first residents to the 770-unit mixed-use rental community during the quarter, with 20 per cent of the building already preleased, driven by strong market unit demand and an oversubscribed affordable housing lottery.
• Tricon's investments in U.S. residential developments generated $5.5 million of distributions to the company in Q3 2023.

Change in net assets

Tricon's net assets were $3.9-billion as at Sept. 30, 2023, an increase of $62-million compared with $3.8-billion as at June 30, 2023. Tricon's book value (net assets) per common share outstanding increased by 1 per cent sequentially or 4 per cent year over year to $14.30 ($19.33 (Canadian)) as at Sept. 30, 2023.

Balance sheet and liquidity

Tricon's liquidity consists of a $500-million corporate credit facility with approximately $350-million of undrawn capacity as at Sept. 30, 2023. The company also had approximately $173-million of unrestricted cash on hand, resulting in total liquidity of $523-million.

As at Sept. 30, 2023, Tricon's pro-rata net debt (excluding exchangeable instruments) was $2.9-billion, reflecting a pro-rata net debt to assets ratio of 36.3 per cent. For the three months ended Sept. 30, 2023, Tricon's pro-rata net debt to adjusted EBITDAre ratio was 8.2 times.

2023 guidance update

The company updated its guidance for the current fiscal year, including reiterating the midpoint of core FFO per share guidance and tightening the range of expected same home metrics. The company also updated its acquisitions guidance to reflect a smaller number of homes to be acquired in 2023 but with a similar equity contribution as previously expected. Subsequent to quarter-end, the company substantially completed the investment programs of SFR JV-2 and SFR JV-HD with lower leverage parameters, and continues to acquire homes at a moderated pace as part of its capital recycling program.

Quarterly dividend

On Nov. 7, 2023, the board of directors of the company declared a dividend of 5.8 cents per common share in U.S. dollars payable on or after Jan. 15, 2024, to shareholders of record on Dec. 31, 2023.

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-per-cent 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 investors section of Tricon's website.

Conference call and webcast

Management will host a conference call at 11 a.m. ET on Wednesday, Nov. 8, 2023, to discuss the company's results. Please call 888-550-5422 or 646-960-0676 (conference ID: 3699415). The conference call will also be accessible via webcast (investors -- news and events). A replay of the call will be available from 2 p.m. ET on Nov. 8, 2023, until midnight ET, on Dec. 8, 2023. To access the replay, call 800-770-2030 or 647-362-9199, followed by conference ID 3699415.

This press release should be read in conjunction with the company's interim financial statements and management's discussion and analysis (the MD&A) for the three and nine months ended Sept. 30, 2023, which are available on Tricon's website and have been filed on SEDAR+ as well as with the SEC (Securities and Exchange Commission) as part of the company's annual report filed on Form 40-F. The financial information therein is presented in U.S. dollars. Shareholders have the ability to receive a hard copy of the complete audited financial statements free of charge upon request.

The company has also made available on its website supplemental information for the three and nine months ended Sept. 30, 2023.

About Tricon Residential Inc.

Tricon Residential is an owner and operator of a growing portfolio of approximately 38,000 single-family rental homes in the U.S. Sun Belt and multifamily apartments in Canada. Its commitment to enriching the lives of its employees, residents and local communities underpins Tricon's culture and business philosophy. The company provides high-quality rental housing options for families across the United States and Canada through its technology-enabled operating platform and dedicated on-the-ground operating teams. The company's development programs are also delivering thousands of new rental homes and apartments as part of its commitment to help solve the housing supply shortage.

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