Investing in. Communities. E a r n i n g s P r e s e n t a t i o n Q

Transcription

1 Investing in Communities E a r n i n g s P r e s e n t a t i o n Q

2 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 30, 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 30, 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 and on SEDAR at 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 forwardlooking 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 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. 2

3 Tricon Capital Group TSX: TCN $4.7 Billion (C$5.8 billion) Total Assets Under Management 1988 Founded 2010 Listed (TSX) Principal investor and asset manager focused on the North American residential real estate industry Toronto Headquarters Share Price (November 8, 2017) San Francisco All figures in U.S. dollars unless otherwise indicated Regional Offices C$10.81 Quarterly Dividend (Annualized yield %) C$0.065 (2.4%) Basic Shares Outstanding Market Capitalization Enterprise Value Cross Creek Ranch HOUSTON, TX Orange County Houston Million C$1.5 Billion C$1.9 Billion 3 3 Foreign exchange rate as at September 30, 2017 C$1.25: U.S.$1.00.

4 Financial Review Wissam Francis Chief Financial Officer

5 (in millions) AUM Growth 1 $4,700 $109 million increase in Assets Under Management $87 $2 $31 ($19) $4,665 $4,600 $4,556 $8 TAH FV Gains + Capex $3,304 $4,500 Sept 30, 2016 $4,400 June 30, 2017 THP increases TAH TLC TLR THP reductions Sept 30, (1) Assets under management include principal investments and third-party investments.

6 Statement of Comprehensive Income For the three months ended September 30 (in millions of U.S. dollars, except per share amounts) Y/Y % Private Funds & Advisory Revenue $6.0 $7.0 Investment Income THP Includes $12.3M transaction Investment Income TAH 1 costs related to Investment Income TLC 1 Securitization Investment Income TLR Total Revenue and Investment Income $71.7 $ % Compensation Expense Net Change in Fair Value of Derivative Unrealized Foreign Exchange Gain Fair value gain due to quarterly valuation of convertible debenture conversion feature as TCN s share price declined (9.4) 13.5 (2.1) (6.8) Interest Expense (6.7) (3.0) Tax Expense (6.5) (4.5) Other Expenses 2 (3.0) (3.1) Total Expenses ($14.2) ($12.3) 16% Net (Loss) Income $57.5 $ % Basic Earnings per Share $0.43 $ % Diluted Earnings per Share $0.29 $ % 6 (1) Investment income represents NOI and FV gains, less interest expense and direct overhead costs for each vertical. (2) Other Expenses include G&A, transaction costs and amortization expense.

7 Bridge to Adjusted Income Metrics Please refer to Section 6: Non-IFRS Measures in our MD&A for a detailed reconciliation of non-ifrs metrics. For the three months ended September 30 (in millions of U.S. dollars, except per share amounts) YoY % Net Income $57.5 $ % Transaction Costs Net Change in Fair Value of Derivative (13.5) (4.2) Unrealized Foreign Exchange Loss 2.1 (0.9) Non-Cash Items 1 (2.4) (0.2) Adjusted Net Income $56.9 $ % Adjusted Basic Earnings per Share $0.42 $ % Adjusted Diluted Earnings per Share $0.37 $ % 7 (1) Non-cash items include NCI expense, control premium adjustment, LTIP accrual, amortization, foreign exchange gains at investment level and tax effect of adjustments.

8 Adjusted Income Metrics Please refer to Section 6: Non-IFRS Measures in our MD&A for a detailed reconciliation of non-ifrs metrics. For the three months ended September 30 (in millions of U.S. dollars, except per share amounts) YoY % THP Adjusted EBITDA $4.6 $6.2 TAH Adjusted EBITDA TLC Adjusted EBITDA TLR Adjusted EBITDA Contractual Fees + GP Distributions Performance Fees Adjusted non-controlling interest EBITDA (0.5) (0.6) Adjusted EBITDA Before Corporate Overhead $106.4 $ % Adjusted Compensation Expense (9.3) (6.6) G&A Expense (1.3) (1.6) Adjusted EBITDA $95.8 $ % Adjusted Interest Expense (27.3) (8.4) Other Expenses 1 (0.8) (1.2) Adjusted Tax Expense (10.7) (3.5) Adjusted Net Income $56.9 $ % 8 (1) Other expenses include stock option expense and amortization expense.

9 Balance Sheet Update Marlow SAN FRANCISCO, CA Sources of Liquidity Corporate Revolver (in millions of U.S. dollars) Q3 / 2017 Revolving Facility $365.0 Less: Amount Drawn Amount Available $ Tricon American Homes Disposition of non-core homes Tricon Housing Partners Strong net cash flow profile Tricon Lifestyle Communities Divestiture of 14 park portfolio Tricon Luxury Residences U.S. Divestiture of U.S. multi-family assets Completed ahead of schedule $400M - $500M Projected Near Term Cash Flow 1 9 (1) Includes sale of TAH non-core homes completed in October.

10 Recent Refinancing Initiatives at TAH TAH Debt Maturity Profile As of Q2 / 17 Objectives: SBY Acquisition Facility L bps Warehouse Credit Facility L bps Securitization L bps Securitization 3.59% fixed Securitization 3.50% fixed Term Loan L bps Reduce cost of capital over long term $1,198 $1,975M Debt Outstanding Extend term structure Diversify across fixed & floating instruments Diversify sources of financing Current $74 $340 $363 May 2019 Oct 2019 May 2020 Nov 2021 Aug 2022 Oct 2022 Maturity $1,874M Debt Outstanding $370 $330 $- $363 $463 $348 May 2019 Oct 2019 May 2020 Nov 2021 Aug 2022 Oct 2022 Target for refinancing by mid 2018 Maturity 10

11 Operating Review Gary Berman President and Chief Executive Officer

12 THP Update Viridian DALLAS-FORT WORTH, TX THP Investment Income For the three months ended September 30 (in millions of U.S. dollars) Y/Y % THP1 US $1.4 $2.9 (52%) THP2 US (57%) THP3 Canada Trinity Falls % Separate accounts Side-cars Total $4.7 $6.1 (23%) Harvesting funds and lower investment balance Positive revaluations of 2 projects in prior year New investment in 2016 Cross Creek Ranch HOUSTON, TX Investment Income YTD 2017 (A) $17.0 Outstanding Invested Capital at September 30, 2017 (B) $242.8 as a % of invested capital (annualized) (A / B) 9.3% 12

13 THP - Confronting a Supply / Demand Imbalance Demand Supply Labor Shortage Regulatory Costs per Home 80M Baby Boomers 92M Millennials ( ) 46% 63% In 000 s 2016 $33.8 $ % 2011 $22.5 $ M Gen X Share of homebuilders reporting labor shortages During Construction During Development 8 6 Building Intensity (annualized housing starts per 000 persons) Median New Home Price $300K 4 $200K 2 $100K 0 $0K 9/1/1987 9/1/1992 9/1/1997 9/1/2002 9/1/2007 9/1/2012 9/1/ Source: US Census, MacroTrends, Bank of America Merrill Lynch and John Burns Real Estate Consulting.

14 TAH Portfolio Operating Metrics For the three months ended September 30 (in millions of U.S. dollars) Y/Y% Total Homes 16,594 8,006 Occupancy % 91.7% Blended Rental Growth 4.6% 5.1% Annualized Turnover % 30.1% Total Revenue $59.8 $ % Total Operating Expenses ($24.0) ($9.8) 146% Net Operating Income $35.9 $ % Net Operating Income (excl. impact of hurricanes) $36.9 $ % NOI Margin (excl. impact of hurricanes) 61.6% 58.7% Interest Expense (20.8) (5.1) Overhead Expenses (5.7) (4.5) Other Expenses Number of Total Homes Owned Silver Bay 16,660 16,594 8,006 7,765 7,821 Charlotte, NC 15,071 Core FFO 2 $10.1 $5.4 87% Q Q Q Q Q Post Sale 14 (1) Occupancy and Annualized Turnover are based on rental homes, which excludes homes held for sale. (2) Core FFO excludes the impact of hurricanes.

15 Same Home Operating Metrics 1 For the three months ended September 30 (in millions of U.S. dollars) Rental Homes 4,424 4,424 Occupancy 97.2% 94.9% Blended Rental Growth 4.6% 5.4% Annualized Turnover 29.2% 34.1% 2017 % of revenue 2016 % of revenue Y/Y% Total Revenue $16.8 $ % Repair, Maintenance & Turnover (2.3) 13.7% (2.1) 13.8% Property Taxes (2.4) 14.1% (2.0) 13.3% Property Management Fees (1.2) 7.1% (1.1) 7.2% Other Expenses (1.1) 6.5% (1.2) 7.6% Total Operating Expenses ($7.0) ($6.3) 9.8% Net Operating Income $9.9 $ % NOI Margin 58.6% 58.1% 15 (1) All same-home metrics exclude the impact of hurricanes. Houston, TX

16 Sale of Non-Core Homes ATLANTA, GA TAH Portfolio Q3 / 17 Disposition Portfolio $153M Proceeds ~ 6% Implied Cap Rate TAH Portfolio Pro forma Total Homes 16,594 1,523 15,071 Geographic Markets Average Rent $ 1,256 $ 1,075 $ 1,274 Book Value per Home $145,000 ~ $100,000 ~ $150,000 Occupancy 96.1% 91.2% 96.6% 480 homes in non-core markets of Tucson & Columbus 573 homes below $1,000 monthly rent 470 homes in core markets, but geographic outliers 16

17 DALLAS, TX COLUMBIA, SC ATLANTA, GA TAH Portfolio Overview RENO NORTHERN CALIFORNIA Plan to acquire homes per quarter starting in Q Target Criteria: LAS VEGAS SOUTHERN CALIFORNIA PHOENIX DALLAS-FORT WORTH INDIANAPOLIS ATLANTA COLUMBIA CHARLOTTE ~6% cap rate (incl. upfront renovations) $160K average purchase price (incl. upfront renovations) Mature Market SAN ANTONIO Active Acquisition Market HOUSTON ORLANDO TAMPA JACKSONVILLE SOUTHEAST FLORIDA Add to sub-scale markets where possible 17

18 TLC Capital Enhancement Program Community Name Location Complete Capex Status Substantially Complete In Progress Improvements to amenity center and club house at Rosehaven Longhaven Glendale, AZ Skyhaven Apache Junction, AZ Brookhaven Apache Junction, AZ Springhaven Mesa, AZ Sunhaven Apache Junction, AZ Parkhaven Mesa, AZ Rosehaven Apache Junction, AZ Glenhaven Mesa, AZ Newhaven Apache Junction, AZ Sundowner Apache Junction, AZ Brighthaven Mesa, AZ Riverdale Indio, CA Palmdale Indio, CA Springdale San Marcos, CA TLC s typical improvement plan includes upgrades to roads, entrance monumentation, community signage, security gates and perimeter walls. Amenity upgrades include improvements to shuffleboard courts, pools and clubhouses, and in some cases brand new stick-built amenity centers are constructed. 18

19 TLR Construction Progress The Selby, Toronto The McKenzie, Dallas The Maxwell, Frisco 2018 expected construction completion expected construction completion expected construction completion 1 Q3 2017: Formwork on 44 th floor Q3 2017: 90% of trades under contract Q3 2017: 90% of trades under contract 19 (1) Expected completion dates are based on current project plans and may differ based on a number of local market factors.

20 TLR Toronto Market Snapshot Average Rent (PSF) 1 Vacancy Rate 2 +11% $3.44 $ % 0.60% 0.50% $3.10 $3.13 $ % 0.20% Q Q Q Q Q Q Q Q Q Q Spadina TORONTO, ON $3.79 PSF 1 $3.92 PSF $3.51 PSF 1 Summerhill TORONTO, ON The Selby TORONTO, ON $3.69 PSF 1 $3.42 PSF Source: Urbanation (as at Q3 2017). (1) Average condo rent (PSF) in the City of Toronto. (2) Represents vacancy rates for purpose-built rental apartments completed since 2005 in the GTA.

21 Private Funds & Advisory For the three months ended September 30 (in millions of U.S. dollars) Y/Y % For the three months ended September 30 Management / TDG / GP Fees (5%) Johnson Fees (11%) Performance Fees Lot Sales rd Party Home Sales % - 8% Total Revenues $6.0 $7.0 (15%) Land Sales (Acres) Cross Creek Ranch HOUSTON, TX 21

22 Investment Strategy Tricon s Diversified Housing Investment Platform Core / Income SINGLE-FAMILY RENTAL $2.8B Value Added / Income + Development Component 15-20% target returns MANUFACTURED HOUSING $0.1B MULTI-FAMILY RENTAL $0.3B Opportunistic / Development LAND & HOMEBUILDING / MASTER PLANNED COMMUNITIES $1.4B Financial Leverage (Debt/Assets) TOTAL AUM $4.7B 22

23 Gary Berman President and Chief Executive Officer T: E: w w w. t r i c o n c a p i t a l. c o m Wissam Francis Chief Financial Officer T: E: wfrancis@triconcapital.com Wojtek Nowak Director, Corporate Finance and Investor Relations T: E: wnowak@triconcapital.com Investor Presentation Page 23