Investing in Communities - · PDF fileEnterprise Value C$2.0 Billion ... INCLUDING SILVER BAY...
Transcript of Investing in Communities - · PDF fileEnterprise Value C$2.0 Billion ... INCLUDING SILVER BAY...
Investing in Communities I n v e s t o r P r e s e n t a t i o n | J a n u a r y 2 0 1 8
General You are advised to read this disclaimer carefully before reading, accessing or making any other use of the information included herewith. These materials are not an offer or the solicitation of an offer to purchase any securities or make any investment. This presentation includes information about Tricon Capital Group Inc. and its subsidiaries and investees (together, the “Company”) as of September 30th , 2017, unless otherwise stated. These materials should also be reviewed in conjunction with the Company’s Financial Statements and Management Discussion and Analysis for the periods ending September 30th , 2017. All dollar amounts are expressed in U.S. Dollars unless otherwise stated.
The Company measures the success of its business in part by employing several key performance indicators that are not recognized under IFRS. These indicators should not be considered an alternative to IFRS financial measures, such as net income. As non-IFRS financial measures do not have standardized definitions prescribed by IFRS, they are less likely to be comparable with other issuers or peer companies. A description of the non-IFRS measures used by the Company in measuring its performance is included in its Management Discussion and Analysis available on the Company’s website at www.triconcapital.com and on SEDAR at www.sedar.com.
This presentation may contain information and statistics regarding the markets in which the Company and its investees operate. Some of this information has been obtained from market research, publicly available information and industry publications. This information has been obtained from sources believed to be reliable, but the accuracy or completeness of such information has not been independently verified by the Company and cannot be guaranteed.
Forward-Looking Statements This presentation may contain forward-looking statements and information relating to expected future events and the Company’s financial and operating results and projections, including statements regarding the Company’s growth and investment opportunities and the performance goals and expectations of its investees, including, in particular, targeted returns, that involve risks and uncertainties. Such forward-looking information is typically indicated by the use of words such as “will”, “may”, “expects” or “intends”. The forward-looking statements and information contained in this presentation include statements regarding expected or targeted investment returns and performance including project timing and cash flow; the ability of the Company to generate fee income from investments and the quantum of these fees; the ability to attract third-party investment; the timing and availability of new investment opportunities, future net income from investments; expectations for the overall growth in the business; the availability and quantum of debt reduction opportunities and the Company’s ability to avail itself of them; the timing and opportunity to divest of assets and investments and the impact of such divestiture on Company debt; and the intention to refinance TAH debt. These statements are based on management’s current expectations, intentions and assumptions which management believes to be reasonable having regard to its understanding of prevailing market conditions and the current terms on which investment opportunities may be available.
Projected returns and performance fees are based in part on projected cash flows for incomplete projects. Numerous factors, many of which are not in the Company’s control, and including known and unknown risks, general and local market conditions and general economic conditions (such as prevailing interest rates and rates of inflation) may cause actual investment performance and fee income to differ from current projections. Accordingly, although we believe that our 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. If known or unknown risks materialize, 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, as available on SEDAR at www.sedar.com. 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.
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Data presented as at September 30th, 2017, except where otherwise noted. 3
All figures in U.S. dollars unless otherwise indicated
Total Assets Under Management $4.7 Billion (C$5.8 billion)
Founded 1988
Listed (TSX) 2010
Headquarters Toronto
Regional Offices
San Francisco
Share Price (December 29, 2017) C$11.55
Quarterly Dividend (Annualized yield %) C$0.065 (2.3%)
Basic Shares Outstanding 134 Million
Market Capitalization C$1.6 Billion
Enterprise Value C$2.0 Billion
Tricon Capital Group
TSX: TCN
Principal investor and asset manager focused on the North American residential real estate industry
Orange County Houston
Vistancia West Phoenix, AZ
Multi-Family Rental
SH
AR
E P
RIC
E
$5
$10
$15
4
Investments with a Residential Focus Founded in 1988, Tricon has evolved into a diversified housing platform spanning a range of demographics, lifestyles, affordability and ownership/ rentership options.
INITIAL PUBLIC OFFERING
2010
12% annualized total return since IPO in 2010
24% annualized total return since entering SFR in 2012
Outperformed TSX Index, Real Estate sub-index and Financials sub-index total return since 2010
Single-Family Rental
2012
Manufactured Housing Communities Land Lease
2014
Land Development and Homebuilding / Master Planned Communities 1988
2015
TRICON AUM U.S. vs CANADA
A Vast Residential Market Opportunity
Source: U.S. Census, StatsCan & National Association of Realtors, John Burns Real Estate Consulting 5
Housing is a major component of the economy, representing 3-4% of GDP and ~20% of personal spending in the U.S.
133M residential units
in the U.S.
13M residential units
in Canada
16M single-family
rentals in the U.S.
1.2M annual housing
starts in the U.S.
Canada 9%
U.S. 91%
BC AB
ON
CA NV
AZ
TX
IN
FL
GA SC NC
THP
TAH
TLR
TLC
Millennials represent the largest demographic cohort in the U.S. today and are expected to be a key driver of near-term household formation.
The Great Millennial Demographic Shift
Source: John Burns Real Estate Consulting and Goldman Sachs; annual pace of household formation is as of Q3/17. 6
Key U.S. Demographic Cohorts
In millions
Gen X 61M
Millennials (1980-2000)
92M Baby Boomers
80M
Women’s median age at first marriage
Catalyst to Household Formation
Women’s median age at first child birth
Women’s median age at first child birth +5 years (start of full-time school)
26.5 YRS
27.4 YRS
31.5 YRS
52M MILLENNIALS TO GO
57M MILLENNIALS TO GO
75M MILLENNIALS TO GO
440,000 Owners Annual Pace of U.S. Household Formation: 750,000 Renters
PRINCIPAL VS. 3RD PARTY AUM
26% 3RD PARTY
74% PRINCIPAL
Tricon currently manages $4.7 billion of AUM, including $1.2 billion on behalf of third-party investors and $3.4 billion of principal investments and co-investments funded with our own balance sheet1. Tricon invests across four complimentary housing verticals with a geographic focus on the U.S. sunbelt.
AUM at a Glance
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$4.7B AUM
MANUFACTURED HOUSING
7% MULTI-FAMILY RENTAL
60% SINGLE-FAMILY RENTAL
LAND & HOMEBUILDING / MASTER PLANNED COMMUNITIES
30%
3%
1. Any differences due to rounding
$4.76 $5.23
$6.09 $6.47 $6.75
C$5.06
C$6.07
C$8.43 C$8.69
C$8.42
Solid Financial Performance
Past performance is not necessarily indicative of future performance. There can be no assurance that historical rates of growth will continue. 8
$1.8
$2.2
$2.7
$3.0
$4.7
AUM
30% CAGR
$66
$98
$109 $115
$173
Adjusted EBITDA
20% CAGR
Book Value per Share
$ Billions
15% CAGR In C$ dollars Principal
Third-Party To 2016
$ Millions
Q3 2017 HIGHLIGHTS THP generated investment income of $4.7 million this quarter. The year-to-date investment income translates to a 9.3% annualized net return on invested capital, which is in line with our expectation of 9-11% for the full year.
TAH reported a 158% year-over-year increase in NOI following the full quarter inclusion of the Silver Bay acquisition, and strong operational performance including portfolio occupancy of 96.1%, rent growth of 4.6% and NOI margin of 59.9% (61.6% ex hurricane impact)
TAH also reported year-over-year same-home NOI growth of 12% driven by revenue growth of 11%, an occupancy increase of 230 bps blended rent growth of 4.6%, and NOI margin of 58.6%.
TLC achieved a 49% increase in NOI and a 72% increase in Core FFO year-over-year.
Tricon’s Senior Management Team
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TAH INCLUDING SILVER BAY ACQUISITION 390 Johnson 105
Investment Team & Tricon Development Group 19
Finance, Tax and Accounting Team 44
Orange County / Local Field Offices Houston Toronto / San Francisco
Evelyne Dubé Managing Director,
Private Funds
Kevin Baldrige President TAH
Douglas Quesnel Chief Accounting Officer
Wojtek Nowak Director, Corporate Finance
& Investor Relations
Sandra Pereira Senior Vice President, Head of Tax Services
Andrew Joyner Director
David Mark Director, Finance
Alexandra Blum Chief Marketing Officer
Wissam Francis EVP & Chief Financial Officer
David Berman Executive Chairman
& Co-Founder
Jonathan Ellenzweig
Managing Director
David Veneziano EVP & General Counsel
Geoff Matus Director & Co-Founder
Andy Carmody Managing Director
Gary Berman Director, President & CEO
Enhanced Financial Disclosure SIMPLIFYING OUR STORY:
Tricon has revamped its financial disclosure to provide a simplified and streamlined view of performance for our shareholders
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Objectives Simplify presentation of financial reporting
Clearly link operating and financial metrics
Align performance metrics with industry peers
Minimize adjustments from IFRS accounting
1
2
3
4
Marlow SAN FRANCISCO, CA
Focus on Scale and Leadership SIMPLIFYING OUR STORY:
The acquisition of Silver Bay served as a catalyst for Tricon to simplify its business plan and focus exclusively on housing sectors where it can establish critical scale and obtain a leadership position
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THP
TAH
TLC
TLR
$3.1B AUM
49%
40%
8%
3%
Q3 2016 Tricon plans to exit TLC and TLR US and focus on scale and leadership in THP, TAH and TLR Canada
$4.7B AUM
30% 60%
7%
3%
FOLLOWING SILVER BAY ACQUISITION Q3 2017
THP
TAH
TLC
TLR
Integrated Operating Businesses
Tricon is creating integrated operating businesses within each investment vertical to better control its growth strategy and enhance investment returns for third-party investors and shareholders
SIMPLIFYING OUR STORY:
Viridian DALLAS-FORT WORTH, TX
Cross Creek Ranch HOUSTON, TX
Fully integrated investment and development platform
Acquisition, construction oversight, marketing, builder program management and municipal bond finance
Institutional reporting and asset management capabilities
TAH CHARLOTTE, NC
TAH ATLANTA, GA
Fully internalized operating platform including acquisitions, leasing, customer service/call centre, maintenance, accounting and asset management
The Selby TORONTO, ON
57 Spadina TORONTO, ON
Fully integrated investment, development and asset management platform with expertise in acquisitions, zoning/entitlement, building design and construction
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Developing five luxury rental apartment buildings that will ultimately generate stable rental revenue
Shift Towards Recurring Revenue Focus on investments with recurring and predictable cash flows to drive consistent financial results, reduce risk and simplify valuation
SIMPLIFYING OUR STORY:
Focus on longer-term master planned community investments with stable revenue from recurring lot sales
Recurring rental revenue from 3,065 manufactured housing community rental sites
PRIVATE FUNDS AND ADVISORY (PF&A) Diversified contractual fee stream from third-party asset management and development activities
$202M
Adjusted EBITDA before corporate overhead YTD Q3
2017
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Recurring rental revenue from ~16,594 single-family homes
8%
78%
2% 8%
4%
Land development and homebuilding / master planned communities
Tricon Housing Partners
$1.4B1 Total AUM
$358M Principal Investments
$1.1B Third-Party Assets
Generated
$17M of Investment Income YTD Q3 2017,
within the targeted range of 9-11% of invested capital (annualized)
Distributed
$25M of cash to Tricon YTD Q3 2017
with $513M net distributions projected over 8-10 years
Augmented Tricon’s returns with
$8M of management fees
YTD Q3 2017
Projected to generate
$78M of performance fees
over 8-10 years
THP1 US THP2 US THP1 CA
THP US SP1 THP US SP2
Cross Creek Ranch Grand Central Park Fulshear Farms
Trinity Falls Viridian
THP2 CA THP3 CA
Trilogy at Verde River
Active THP Commingled Funds, Separate Accounts and Principal Investments
Vida SAN FRANCISCO, CA
30% of AUM
1. Any differences due to rounding 14
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Active 3,200 acre master plan (~5,500 potential homes); 2,800 homes sold to date
Located in Katy-South submarket of Houston, Texas with convenient access to major employment nodes
Consistently ranked as one of the best selling master planned communities in the U.S.
Stable cash flows projected from recurring lot sales over 8-10 years
Unlevered projected IRR of 18% before fees
Cross Creek Ranch HOUSTON, TX
The MPC Advantage Case Study: Cross Creek Ranch
Attractive risk-adjusted returns Recurring cash flows from ongoing land sales and
municipal bond issuance Suitable size for institutional partners Lot mix adaptable to market conditions Outperformance in down-markets Long duration assets (5-15 years)
Focus on Master Planned Communities (MPCs)
Adding Value Through Johnson
Fully integrated investment and development platform
6 of the top 50 master plans in the U.S. in first half of 2017
15 communities under development (including 4 THP investments)
Source of recurring fee revenue from lot sales across all managed communities
Extensive builder relationships
Innovative community programs and amenities
Johnson communities ranked in the top-50 Master Planned Communities in first half of 2017 1 16
15 Active Communities
TRICON’S PRINCIPAL INVESTMENTS
1. Source: Robert Charles Lesser & Co. Real Estate Advisors
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Tricon American Homes Single-Family Rental
60% of AUM $81M NOI and
$23M Core FFO YTD Q3 20171
16,594 Homes
96.1% Occupancy
$1,256 Average Monthly Rent
61.3% NOI Margin1
$2.8B Total AUM
31.4% Annualized Turnover
HOUSTON, TX
1,582
3,256
5,030
7,193 7,765
16,660 16,594
15,071
2012 2013 2014 2015 2016 Q2 2017 Q3 2017 Current
Number of homes
SBY Acquisition
After disposition
of non-core
homes
1. Excludes impact of hurricanes
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TAH Portfolio Overview TAH MARGIN DRIVERS (as of Q3 2017)
Total Portfolio
Same Home
Portfolio
Total Homes 16,594 4,424
Occupancy 96.1% 97.2%
Annualized Turnover 31.4% 28.6%
Average Monthly Rent $1,256 $1,309
YTD Q3 2017
Revenue 100.0% 100.0%
Repair, Maintenance & Turnover
11.9% 11.8%
Property Taxes 15.2% 13.8%
Property Management Fees 7.0% 7.1%
Other Expenses 5.2% 6.4%
Total Operating Expenses 39.4% 39.1%
NOI Margin 60.6% 60.9%
NOI Margin (ex hurricanes impact) 61.3% 60.9% Year-over-year NOI Growth (ex hurricanes impact)
99.7% 11.6%
COLUMBIA, SC DALLAS, TX ATLANTA, GA
CHARLOTTE
COLUMBIA ATLANTA
SOUTHEAST FLORIDA TAMPA
HOUSTON SAN ANTONIO
DALLAS-FORT WORTH
PHOENIX
SOUTHERN CALIFORNIA
LAS VEGAS
NORTHERN CALIFORNIA
RENO
INDIANAPOLIS
Mature Market
Active Acquisition Market
ORLANDO JACKSONVILLE
SFR is a Rapidly Evolving Asset Class
1. SFR data consists of Invitation Homes (INVH), American Homes 4 Rent (AMH), Colony Starwood Homes (SFR) . Equity Market Cap as of October 31, 2017. 2. SFR sector includes AMH, SFR , INVH and SBY. Multi-Family, Office, Industrial and Retail sector indices per SNL Financial. Information as of October 31, 2017. 3. Commonly known as the RMZ Index. 19
SFR Sector Outperformance2
TECHNOLOGY
Robust IT platforms enable scalable operations and seamless customer interface and support
OPERATIONS
Professionally managed organizations include national call centers, in-house leasing capabilities and comprehensive repair & maintenance programs
FINANCING
Access to capital markets facilitates portfolio growth and attractive debt terms enhance investor returns
U.S. MARKET OPPORTUNITY
126M Households
45M Renters
15.8M SFR Universe
0.2M Institutionally-Owned SFR Homes (~1% of SFR Universe)
SFR Office MSCI U.S.
REIT Index3 Retail Multi- Family Industrial
Q3 2017 14.9% (6.0%) (0.6%) (17.3%) 5.4% 18.3%
One Year 14.2% (0.0%) 1.3% (19.3%) 10.6% 19.8%
Two Years 44.3% (0.2%) 3.8% (21.4%) 6.3% 44.0%
SFR vs Other Housing-Related REITs1
$110
$19 $16 $8
$153
$31
$22
$12
Multi-Family SFR Manufactured Housing
Student Housing
Equity Market CapGross Asset Value
SFR vs Other Housing-Related REITs1
$ Billions
Gross Asset Value
Equity Market Cap
Gross Asset Value
Equity Market Cap
$95k
$50k
$1,000 - $1,600 Monthly Rent
TAH target market Generally longer-term residents Lower turnover and stable cash flow Attractive value proposition drives
enhanced returns
11.4M RENTERS
$1,600+ Monthly Rent
View rentership as temporary, resulting in higher turnover
High ownership rates
7.0M RENTERS
> $95K
37M HOUSEHOLDS
< $50K
53M HOUSEHOLDS
<$1,000 Monthly Rent Higher eviction
rates / turnover Employment
volatility
25.8M RENTERS
Strategic Focus on the Middle Market
The acquisition of Silver Bay enhances TAH’s position as the leading SFR operator focused on the Middle Market, an addressable market of approximately 11 million households that possess strong long-term rentership fundamentals.
Source: U.S. Census Bureau. 20
HOUSEHOLDS BY INCOME BRACKET
$50K–95K
34M HOUSEHOLDS
HO
US
EHO
LD I
NC
OM
E
$370 $330 $- $363 $463
$348
May 2019 Oct 2019 May 2020 Nov 2021 Aug 2022 Oct 2022
Current
Recent Refinancing Initiatives at TAH
Objectives:
• Reduce cost of capital over long term
• Extend term structure
• Diversify across fixed & floating instruments
• Diversify sources of financing
TAH Debt Maturity Profile
$1,198
$74 $340 $363
May 2019 Oct 2019 May 2020 Nov 2021 Aug 2022 Oct 2022
As of Q2 / 17
THP Update
SBY Acquisition
Facility L + 356 bps
Warehouse Credit Facility L + 300 bps
2015-1 Securitization L + 196 bps
Term Loan L + 200 bps
2016-1 Securitization
3.59% fixed
2017-1 Securitization
3.50% fixed
$1,975M Debt
Outstanding
$1,874M Debt
Outstanding
Weighted Average Maturity of 2.6 Years
Weighted Average Maturity of 3.7 Years Target for refinancing
by mid 2018
21 *As at September 30th, 2017 Weighted Average Maturity of 2.3 Years
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Tricon Luxury Residences Multi-family development and rental business
Current TLR Projects
The McKenzie DALLAS, TX
The Maxwell FRISCO, TX
The Selby TORONTO, ON
$330M Total AUM
$159M Principal Investments
$171M Third-Party Assets
Generated $6M of Investment
Income YTD Q3 2017 as project
milestones were met
Augmented Tricon’s returns with $1.8M of asset management and
development fees YTD Q3 2017
Projected to generate $17M of performance fees over 8-10 years 7%
of AUM
Summerhill TORONTO, ON
57 Spadina TORONTO, ON
TLR Brand and Value Proposition: The Selby 502 unit and 50 storey Class A rental building in
Toronto, Canada
Positioned as a premium rental building with amenities and suite finishes similar to new high-end condominiums
Amenities include outdoor pool, terrace, gym and multi-purpose lounge
Proximity to Bloor Street and Sherbourne subway station offers convenient access to employment and retail nodes
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CLASS-A FINISHES AND AMENITIES ACTIVE LIFESTYLE MANAGEMENT
CUSTOMER SERVICE & PROPERTY MANAGEMENT
INTEGRATED RETAIL
The Selby TORONTO, ON
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Tricon Lifestyle Communities Manufactured Housing Land Lease Business
14 Properties (including 13 age-restricted)
1,119
3,065 3,065
2015 2016 Q3 2017
Number of Sites Owned New Acquisitions
Strategy
Complete value-enhancement capex programs Increase occupancy and rent Exit the business in 2018
3,065 Rental Sites
73.4% Long-term Occupancy
$423 Average Monthly Rent
57.4% NOI Margin
$6.0M NOI and
$2.7M Core FFO YTD Q3 2017
$136M Total AUM
3% of AUM
TOTAL AUM $4.7B WWW.TRICONCAPITAL.COM
Core / Income
Value Added / Income + Development Component
Opportunistic / Development
Financial Leverage (Debt/Assets)
Inve
stm
ent S
trat
egy
LAND & HOMEBUILDING / MASTER PLANNED COMMUNITIES
SINGLE-FAMILY RENTAL
MANUFACTURED HOUSING
MULTI-FAMILY RENTAL
Tricon’s Diversified Housing Investment Platform
$2.8B
$0.1B
$0.3B
$1.4B
25
15-20% target
returns
Investor Presentation Page 26
Gary Berman President and Chief Executive Officer
T: 416.928.4122
Wissam Francis EVP and Chief Financial Officer
T: 416.323.2484
Wojtek Nowak Director, Corporate Finance and
Investor Relations
T: 416.925.2409
w w w . t r i c o n c a p i t a l . c o m