Tricon Residential Inc.

Wojtek Nowak - Investor Relations Wissam Francis - Chief Financial Officer Gary Berman - President and Chief Executive Officer

Geoff Kwan - RBC Mark Rothschild - Canaccord Stephen MacLeod - BMO Jimmy Shan - GMP Dean Wilkinson - CIBC

Thank you, Virgil. Good morning, everyone.

And thank you for joining us to discuss Tricon's results for the three and nine months ended September 30, 2016, which were shared in the news release we distributed yesterday. I would like to remind you that our remarks and answers to your questions may contain forward-looking statements and information.

This information is subject to risks and uncertainties that may cause actual events or results to differ materially. For more information please refer to our most recent management's discussion and analysis and annual information form, which are available on SEDAR.

Our remarks also include references to non-GAAP financial measures which are explained and reconciled in our MD&A. I would also like to remind everyone that all figures are being quoted in U.S.

dollars unless otherwise stated. Please note that this call is available by webcast at triconcapital.com and a replay will be accessible until November 17, 2016.

Lastly please note that during this call, we will be referring to a supplementary conference call presentation which we have posted on our Web site. If you haven't accessed it already it will be useful tool to help you follow along during the call.

You can find the presentation in the Investor Information section of triconcapital.com under the News Releases tab. With that, I will turn the call over to Wissam Francis, CFO of Tricon Capital Group.

Thank you, Wojtek, and good morning everyone. Before we discuss our third quarter results, I'd like to take a minute to talk about our commitment to simplifying our financial reporting.

We sometimes hear from the investment community that our company is complex. However, our research has shown that this perception does not apply to our business.

The investment community generally understands what we do and how we make money rather this seems complexity pertains to our financial reporting and understanding how the operating results of our various protocols tight to our income statement and balance sheet. With that in mind, we set out to revamp our MD&A and are pleased to unveil the new format this quarter.

Let me highlight a few key changes, we've made as shown on Slide 5 of the conference call presentation. First, we simplified the overall presentation of the results and gave greater prominence to IFRS measures.

Second, we now provide a clear linkage between operating performance on investment verticals and our IFRS balance sheet and income statement metrics. Third, we minimized the number of adjusting items between our IFRS financials and our adjusted measures such as adjusted EBITDA and adjusted income.

The new items we now adjust for our transaction costs non-recurring items or non-cash items such as changes in the fair value of derivatives and foreign exchange gains or losses. Fourth, we provided additional metrics in the Q3 MD&A that we have never disclosed before such as funds from operation and core funds from operation, but the relay verticals Tricon American Homes and Tricon Lifestyle Communities.

We also added disclosure around the projected cash flows and performance fees to provide more clarity and transparency in our reporting. And lastly, we added more visual way finding techniques in the MD&A to clearly show how numbers are derived, but these numbers changed from period to period and how each investment vertical connects the whole picture.

We hope this new MD&A format will provide simple and transparent reporting to our investors and help service value over time and we welcome any feedback from analysts and the investment community on our new document. Now let's discuss the quarter and moving on to Slide 6.

We had a very strong quarter driven by growth in AUM. Our assets under management increased year-over-year by 23% to $3.1 billion, $4.1 billion in Canadian dollars.

During the third quarter, Tricon Housing Partners and Homebuilding investment vertical added $100 million of AUM largely driven from our investment in Trinity Falls in existing master plan community acquired into July. In Tricon American Homes, our single-family rental platform AUM increased by $38 million including $22 million of fair value gains driven by strong home price appreciation in the markets that we operate.

The balance is mainly comprised of off-site renovation CapEx on homes acquired in Q2. During the quarter we slowdown the acquisition pace of new homes to prepare for the buyout of the minority interest in the business.

In Tricon Lifestyle Communities, our manufactured housing, land lease business, assets under management increased by $11 million mainly as a result of acquisition of [Bright Haven] [ph] PLC's 11th age-restricted community in Arizona. And Tricon Luxury Residences are Class A multifamily rental development vertical all five existing projects continue to advance on schedule with no material change to AUM.

The overall growth in AUM was partially offset by $19 million of distributions from maturing investments and the related reduction of invested capital in Tricon Housing Partners specifically in THP-2 Canada. As you can see on Slide 7, we continue to charge ahead with our growth plans adding $429 million of AUM since the start of the year by deploying $182 million of equity capital across our verticals into a multitude of new investments that are expected to drive earnings over time.

Moving to Slide 8 where we outlined the various components of our IFRS income statement. Fee revenue from private funds and advisory business decreased by 9% from $7.6 million to $7 million year-over-year.

The fee revenue consists of first contractual fees and private investment vehicles such as TCG and Johnson, second general partner distributions and third performance fees. The main point of the variance here was Johnson which declined by $1.5 million from a very strong Q3 in the prior year.

This was offset by growth in TCG development fees related to TLR Canada projects, performance fees related to THP and a relatively stable asset management fees from private investment vehicles. At Tricon Housing Partners investment income increased by 19% this quarter to $6.1 million versus $5.1 million last year.

This was driven by new investments in Trinity Falls existing master plan in Dallas as well as the THP U.S. SP1 separate account.

And partly offset by lower income from THP-1 U.S. This fund is in harvest mode until ongoing distributions result in a lower investment balance and therefore lower investment income.

At Tricon American Homes investment income was $20.7 million compared $10.7 million compared to $5.0 million in Q3 last year an increase of 37%. TAH investment income is comprised of net operating income and fair value adjustments plus interest in overhead expense.

TAH recorded a 29% increase in net operating income mainly as a result of an increase in the number of properties owned as well as the higher share value gain driven by strong home price appreciation. The positive results were offset by higher overhead in interest expense incurred from operating a large portfolio.

At Tricon Lifestyle Communities investment income was $1.5 million compared to 0.1 million from Q3 2015. As the portfolio grew from two parts to 11 parts and TLC continued to enhance this operation.

And at Tricon Luxury resident's investment income $0.6 million was a result of fair value gains recognized in TLR U.S. projects as development milestones were achieved.

In terms of corporate operating expenses compensation expense was $6.8 million in Q3. An increase of $1.8 million from last year mainly as a result of higher output accrual related to higher projected performance fees.

The compensation expense also increased as a result of expanding our team and supporting our future growth. Other expenses included a significant positive impact reporting in 2015 from changes in the fair value of the derivative embedded in our convertible debentures which is driven by movements in our share price as well as foreign exchange gains due to their depreciation of the Canadian Dollar.

Such items tend to be volatile quarter-over-quarter and in our opinion do not reflect the underlying performance of the company. For this reason on Slide 9, we present the adjusted metrics that we typically discussed in this call.

These metrics are explained in section 6 of our new MD&A and exclude the impact of transaction cost non-recurring and non-cash items to present a normalized picture of Tricon financials performance. Overall, adjusted net income was $21 million for the quarter as compared to $12 million for the same period in the 2015.

Adjusted basic earnings per share were $0.19 in the third quarter at 58% increase from the $0.12 recorded in the prior year's period. Adjusted diluted earnings per share were $0.17, a 70% increase from the $0.10 recorded in the prior year's period.

The increase was driven by higher investment income from all verticals offset to some extent by the higher interest and tax expense and a higher number of common shares. Adjusted EBITDA in the quarter was $34.1 million, an increase of $8.9 million or 35% for the same period of 2015.

This was driven by the continued growth in our various verticals which continued to contribute higher investment income. As you can see on Slide 10, our continued focus on growth in AUM is driving our growth in our adjusted EPS and our adjusted EBITDA.

As part of revamped MD&A, we also introduced new disclosure to help you assess our performance. For THP as shown on slide 11, we are presenting several new metrics.

First, outstanding invested capital, so you can see how this compares to fair value on our balance sheet. Second, projected distributions net of advancement to Tricon, which does it clearly how each how much net income, how much net cash flow we expected from our THP investments on a go forward basis relative to the outstanding invested capital.

And third, investment income expense on an annualized basis as an invested capital, this metric was $8.4 million in Q3 and we generally expected to be in the range of 9% to 11% on a full-year basis. With Q4 typically being stronger than other quarters, as a result of the timing of annual appraisals.

For our REIT-like verticals, TAH and TLC, we introduced FFO and core FFO, a new performance metric to make the presentation more comparable to our peers as shown on Slide 12. FFO represents investment income excluding the impact of fair value adjustments on other non-cash items while core FFO, presents FFO as a normalized figure adjusting for transaction cost and non-recurring items and is a metric commonly used by our peers.

You can see here that our TAH vertical core FFO was a $5.4 million this quarter 43% higher than last year. On a year-to-date basis core FFO was $17.4 million reflecting a 53% increase year-over-year.

Over time, we introduced additional metrics for TAH such as same home results which should make this performance even more transparent and comparable to other single-family rental REITs. On that note, we have been working with our peer group and the National Rental Home Counsel to develop and refine the definition of these metrics so that key performance indicators are reported consistently across companies.

Lastly on Slide 13, we will provide a summary of our liquidity position. We have access to credit facility of $235 million to deploying to growth initiatives within our various verticals.

As of September 30, 2016 approximately $160 million was drawn on the facility. Another significant social liquidity for us is our 68.4% interest in THP-1 U.S.

As we have stated in the past, we continue to expect $200 million of cash to Tricon from this fund between now and 2018. The next major project to track is Rockwell, a condominium development project located in the Pacific Heights neighborhood of San Francisco.

Construction of the West Tower is now completed and closing began in Q3 with meaningful cash distribution expected in late 2016 and early 2017. Finally, Tricon American Homes has access to 400 million warehouse credit facilities.

Subsequent to the quarter, TAH completed its second synchronization transaction and received gross proceeds of approximately $363 million. The bulk of this was applied to TAHs existing warehouse facility reducing the outstanding balance of approximately $59 million given TAH ample room to continue growing its single-family rental portfolio.

Another $60 million was repatriated as equity to Tricon and applied against our corporate credit facility. At this time, I will turn the call over to Gary who will provide additional insight into our various business verticals.

Thank you, Wissam. Let's begin with Tricon Housing Partners on Slide 15.

During the quarter, THP completed a $74 million investment in Trinity Falls fully entitled 1,700 acre master plan community in Metropolitan Dallas increasing THPs AUM to $1.5 billion. Similar THPs prior investments in Viridian and Cross Creek Ranch Trinity Falls is an established cash showing master plan, which has already sold 700 residential lots to homebuilders in the past two years and the business plan is to continue the current pace of development to deliver another 3,200 lots of homebuilders over the next 10 years.

Trinity Falls is our fifth investment and partnership with the Johnson company's who will act as a developer of the project. The current time we plan to retain Trinity Falls in our balance sheet given the anticipated run-off any investment balance of our legacy funds and our desire to keep a relative balance between our TAH and THP principal investments.

However, if the right opportunity comes up, we may change that decision and ultimately syndicate it. Point of emphasis related to Trinity Falls and other existing investments in THP is a focus we have on providing affordably priced product to cater to an important, but currently underserved segment of the housing market the first-time homebuyer.

For Trinity Falls specifically 82% of home sales in 2016 have occurred between $250,000 and $400,000 with an average year-to-date home sales price of $365,000. These affordably priced community should benefit from the so-called Millennials whose oldest members are reaching the age of 37 as they start to form families of their own and move out of denser urban locations to areas with strong schools and family oriented communities.

As you can see on Slide 16, first-time homebuyers represent 34% of all buyers in the U.S. today and this proportion has increased quietly yet conservatively over a three-year period.

Another aspect of THP that we remain excited about is a meaningful cash generation projected for this vertical. We plan to redeploy the principal portion of these proceeds into future land homebuilding opportunities to maintain the THP investment balance and to allocate the profits into our REIT-like verticals where we continue to build the base of consistent and stable cash flow.

We usually focus our conversation on THP-1 U.S. where we expect $200 million of cash flow to Tricon through 2018, but we wanted to draw your attention for other investments in THP, which are going to be major cash contributors as shown on Slide 17.

For example, Trinity Falls is projected to generate net cash flow to Tricon of over $177 million over the next 10 years on our $74 million initial investment. In total, we expect THP investment to generate $580 million to Tricon over the next 10 to 8 years with the profile of cash flow skewed towards the near-term.

And I should add this is before we take into account any management fees and performance fees we might earn. You can see why we called THP the rocket fuel that propels us as we expect this vertical to provide much of the internal cash flow to drive our growth going forward.

Turning to Tricon American Homes on Slide 18, we paused acquisition this quarter allocate capital towards the buyer of minority interest in the TAH business. This process is also allowed us to hone in on operations and further stabilize the portfolio.

On Slide 19, you can already see improvement of portfolio occupancy as TAH slowed its acquisitions with occupancy moving from 98.9% in Q2 to 91.7% in Q3. As we speak, the occupancy has already improved to 94% and we are targeting 95% by year-end.

Turnover at TAH has been stable around 30% for the past four quarters proving at the consistency and predictability of our business model TAH was quite able to grow rents by 5.1% in Q3 including 4.4% of renewals and 6.3 on new move ins. These metrics underscore the high-level demand for our rental product allowing us to increase rents while maintaining an occupancy bias.

To give you a sense of how incredible the demand is, we received roughly 1000 calls to-date to rent our homes, while we only have 200 to 300 homes available at any given time. Our year-to-date operating margin of 60% remain consistent with the full-year of 2015 and is inline with management's full year expectations given the current geographic mix of the portfolio.

For the quarter itself operating margin improved to 59% compared to 56% in Q3 of 2015. It still represents a seasonal low, its repair and maintenance expenses tend to rise in the hot summer months to the HAVC repairs.

The earnings operating results we have had a very exciting couple of formats at TAH. To being with TAH close to second securitization was able to repatriate roughly $60 million of equity back to Tricon by borrowing against the incremental value arising from the meangingful home price appreciation in its portfolio.

We are able to secure financing at a very attractive blended rate of 3.59%, which is basically the same as the floating rate on the existing warehouse facility, but at a fixed rate lock-in for five years. Secondly, plus we alluded last quarter, TAH has recently completed the buyout of over 90% of the minority interest held by Legacy Operating partners in the business, giving it full control over its business and it's destiny.

We paid a total price of $65.7 million which included 3 components. One, the minority interest in the fair value of the homes; two, the embedded performance fees to the minority interest partners which are already being accrued on TAHs balance sheet every quarter; and three, the minority interest share of TAHs operating company, which was determined based on the foregone asset management fees that would have been paid to the operating partners of the remaining life of the partnership agreements.

We believe the cost of this transaction is very reasonable when compared to other internalizations and we expect the transaction to be immediately accretive to Tricon's earnings. If you look to Slide 20, you can see that the minority interest had negative impact of $10.6 million on TAHs investment income over the past nine months, a significant expense that will no longer be incurred.

To put this in this perspective, if you annualize the foregone investment income and multiple by the 92% portion we just acquired and then divide by the acquisition price, you will arrive with nearly 20% return on investment, which we need to be very attractive return. From a capital allocation perspective instead of buying new homes in Q3 and Q4.

We are simply buying stake in our own-homes, which we know well, or renovated to our standard and are cash flowing. In the short-term by focusing our capital on the buyout and not acquiring new vacant homes, we are able to stabilize our business and focus solely on operations.

We are also ultimately going to eliminate 13 different operating entities, which will greatly simplify the reporting structure and administration of the business. Looking ahead one of the most impactful initiatives TAH is undergoing is the internalization of repairs and maintenance.

While TAH currently administers repairs and maintenance function in-house, it relies on outside contractors such as electricians and plumbers to actually complete the service calls. TAH has been running a pilot project in Atlanta for several months, now and expect to roll its own service crews to nearly all of its market by mid-2017 with the goal performing 60% to 70% of RMN in-house by year-end 2017.

Based on initial pilot test results, we expect TAH to capture meaningful cost savings, while at the same time improving resident relations and customer service by sending our own trained employees into our residence homes as supposed to the third party vendors. Turning our attention to Tricon Lifestyle Communities on Slide 21, in Q3 TLC acquired its 11 parking Mesa, Arizona for approximately $9 million.

The new park called Bright Haven is an age-restricted community of 177 pads including primarily manufactured home residence along a set of small seasonal residence base. Bright Haven as an occupancy of 86.4% at the end of Q3 and implemented an initial rent increase of 4% during the quarter.

As you can see Slide 22, with this acquisition, TLCs portfolio occupancy increased to 72.5% compared to 69.8% in the June quarter. If we remove the seasonal component, TLCs long-term occupancy also improved to 70% compared to 67.7% in Q2.

Operating margin in Q3 was 56% compared to 57% in Q2, with both quarters reflecting seasonal weakness in occupancy during the summer months. Operating margin is also lower than our long-term targets as a result of adding nine parks in the past three quarters which have yet to be enhanced positioned.

In Q3 TLC began the capital improvement process of these parks with similar scope of work as Longhaven and Skyhaven. The improvements were expected to be complete in early 2017 and to lead to an improved occupancy and margin over time.

In terms of the acquisition pipeline, we continue to evaluate large and small acquisitions as we seek to build TLC towards a skilled portfolio that can ultimately attract the interest of third party investors. We have one meaningful acquisition that is expected to close by year-end, which would expand TLCs presence from Arizona into California.

An important factor working in our favor in building out this portfolio is the support of lending environment from manufactured housing communities. Lenders in the sector such as Freddie Mac and Fannie Mae, which are mandated to finance affordable housing, are often long-term fixed-rate loans are based on near historically low treasury yields.

These loans typically include and amortization holiday with interest-only payments in the first few years. As of Q3 our energy loans had a blended average fixed-rate interest rate of 4.3% and a 63% loan-to-cost ratio.

Current pricing on similar loans is approximately 25 to 50 basis points lower in the 3.5% to 4% range, which compares very favorably to our average acquisition cap rate of 6.1% in the TLC portfolio. Our fourth quarter on Page 23, Tricon Luxury Residences continue to advance on the two U.S.

and three Canadian projects under development. The two U.S.

projects are both tracking the budget and advancing on schedule. You can see on Slide 24 pictures of the McKenzie currently under construction with concrete now moving above great.

In Canada TLRs three projects in Toronto also tracking as expected. As you can see from the photos of the Selby construction has surpassed with performance now completed up to the third floor.

The project continues to progress well with the construction schedule and budget as per our original underwriting and approximately 70% of the hard cost not secured. ] The second project 57 Spadina remains in the design stage with the recent submission for site plan approval, construction is scheduled to commence in January 2018.

And Scrivener Square the most recent acquisition remains in the initial planning stage. We are currently collaborating with local community members and stakeholders to define a project and we'll be holding an international design competition for the proposed development we're hoping to reveal the preliminary design next year.

We remain very encouraged by TLRs existing presence in Dallas and Toronto. Both cities are seeing tremendous population growth, job creation and strong rental growth as you can see on Slide 25.

In Dallas, average rents increased by 6% since last year while Toronto has seen a whopping 10% increase this bodes well for underwriting which typically factors in the 2% to 3% rent growth. Looking ahead to growth as mentioned last quarter, we remain on the sidelines with respect to additional U.S.

investments given tighter lending conditions for multifamily development and the construction cost continue to escalate making targeted returns more difficult to achieve. While we remain happy with the U.S.

projects we have in place the focus on new investments will remain in Canada where we expect to add another two projects next year. TLR is a relatively new vertical for us, but we wanted to give everyone appreciation for its potential financial impact to Tricon on Slide 26.

In section 4.4 of our new MD&A and on this slide, we present the total projected cost of TLRs buildings upon completion as being $391 million. This excludes Scrivener Square with the development plans have yet to commence.

We generally underwrite these projects to a development yield of about 6% on average was slightly lower yields in Canada and higher yields in the U.S. which translates into approximately $10 million of potential NOI to TLR upon lease given its current ownership stake in the projects.

As a result, the project should meaningfully enhance try comes proportion of recurring revenues. In addition, we see the potential for significant valuation markup on TLRs investment.

Today's market cap rates are generally 150 basis points lower than underwritten average yield of 5.8% which implies a market-based cap rate of 4.2%. If you apply that 4.3% cap rate, the expected NOI of these properties, you arrive at a potential gain of $133 million of which 45% in TLRs ownership portion.

In dollar terms, the gain equates to about $60 million which is basically a double on the projected equity investment of $68 million in these projects. Moving onto our private funds and advisory business, I'd first like to touch upon the Johnson business from Slide 28.

In Q3, lot sales for homebuilders decreased by 18% year-over-year mainly as a result of the successful launch of the Harvest Green master plan in the prior year period. Note, that launch events in new communities are new faces in existing communities will often make quarter-to-quarter comparisons difficult, which is why we tend to focus more on the annual trends.

In addition, lot sales can very widely from actual home sales since builders often take down large sections of loss upfront as such we generally look to home sales to monitor trends since these are generally less volatile and tend to be a good predictor of future lost sales activity. In this regard homes sold within Johnson communities this quarter were up 15% year-over-year which is indicative of ongoing community count growth and the consistent demand for new homes in Johnson communities.

On that note our most recent data from the Cross Creek Ranch master plan shows a 22% increase in year-to-date home sales versus last year which is a phenomenal result in the context of the softer housing market in Houston. I'd also like to take this opportunity to highlight the strength of the Johnson business model for Tricon.

Johnson currently operates 15 active master plan communities including four of the top 30 master plan communities in the United States. With Trinity Falls and Viridian poise to be additional contenders in the top 50 next year, of the 15 communities only four our principal co-investment to Tricon through the THP business and the remainder of finance by other investors.

As an owner in Johnson, Tricon benefits from the receipt of contractual fees on all lots of land sold across the Johnson portfolio regardless of whether we have an ownership interest in underlying real estate. These fees are generally in the range of 3% to 5% of lot revenues.

This lot allows us to leverage the Johnson brand with other property owners and investors to grow revenue and earnings for Tricon without the need to always invest significant amounts of her own capital into new communities. Another aspect of the private funds and advisory business I'd like to highlight is performance fees.

During the third quarter, we earned performance fees from Five St. Tricon Joseph, a Toronto condominium development within THP-2 Canada that is nearing completion.

The process is expected to achieve an annualized IRR 50% and is a good example of THPs ability to execute on projects with attractive returns to both Tricon and its third-party investors. As we look ahead, we expect to performance to become a meaningful contributor to revenues over the coming years.

Rather than having to guess the quantum of performance fees Tricon tends to make from its third-party investments, we decided to disclose the figures as part of our revised MD&A as presented in Slide 29. In total based on Q3 return estimates, we expect to recognize about $116 million a performance fees over the next eight years to 10 years making his visa potentially meaningful contributor to our earnings over time.

In conclusion Q3 was marked by strong AUM growth as well as investment income growth across all our verticals which translated into very healthy Earnings per Share this quarter. We remain enthusiastic about the growth prospects for diversified housing platform and are encouraged by the robust trends we continue to see in the U.S.

housing market which is still in the expansionary phase. I also want to thank Wissam and his team for all the hard-working revamping our MD&A we hope the investment community investors are new format and finds our disclosures helpful and servicing the value we see measures.

With that I will pass the call back to the operator to take questions and we'll be joined by other members of our senior management team including Jonathan Ellenzweig, Craig Mode, Adrian Rocca and Kevin Baldridge.

Hi, good morning. Just had a question.

We've obviously have the U.S. election that happened earlier in the week and then also we had in Canada some of the changes.

Announced by the Department of Finance, just wanted to get your take on what that means for your various business verticals.

Yes . Sure Jeff.

Well, I think the first thing I would say is that I mean from what we can discern from his policies, it certainly his economic policy he seems to be intent on lowering taxes and adding fiscal stimulus through infrastructure spending and he does have obviously -- as Republican support in the Congress. So we'll see whether or how much he actually is able to enact in terms of those ideas.

But, if he is able to do that, I would say that those are inflationary policies. Our land and housing business is set up to benefit from inflation.

A lot of our investors or pension funds will invest in our land business because they believe land is in inflation is a hedge against inflation and obviously inflation will lead to higher home prices which is obviously great for a single-family rental business, obviously through our HPA were able to borrow against that value and repeat the capital back to the business and continue to grow and so those are good things that may happen. We obviously although we have a Canadian taker we are we're essentially an American company and we are and American taxpayer so if there are lower corporate tax rates, that is a boon for try con definitely for Atlanta homebuilding business, which has a less efficient tax structure and obviously, I think is a benefit from the entire U.S.

economy. So I think may be North of the border here and I'm taking more of a contrarian view, but those economic policies as long as they don't lead to hyperinflation would be a positive thing, I think for Tricon's Land and Homebuilding business.

In Canada, the change in the mortgage finance world, I think largely makes affordability and even bigger problem. They're trying to slowdown home prices, but I actually think it's going to lead to less affordability because in return I think the banks and lenders are going to have to raise rates and so that's a real problem that we've identified and that's why in Canada our focus is on multi family rental because we've seen this in the U.S.

when there's an affordability crisis people certainly young people are going to have to rent for longer. And so we think were uniquely positioned with our multifamily brand here try con luxury residence to take advantage of that and we've already seen as I've said some very impressive rent gains in Toronto which is indicative of the affordability problem.

Okay. Thanks.

And the other question I had was on -- you've been growing your business quite significantly over the past few years and you've added headcount as a result. I just wanted to get a sense from your in terms of when you kind of take a look at your organization right now kind of where you see it, are there other -- are there other areas that you need to kind of fill some gaps in and also from a G&A perspective for stuff like systems or other stuff or are there other things that you need to have or do you have that scalability that you need to take yourself to the next couple of years?

Yes. So, I think we always try to plan ahead Geoff and we don't want to find ourselves in a reactive situation where things look through the cracks.

We're always planning to trying to staff up ahead of future growth and we've been doing that all along. I would say we're pretty good in terms of I think our headcount certainly the corporate level.

I think where we do need to add is potentially with the private funds person. We do want to increase our ability to raise third-party capital especially as our verticals become stable our income producing verticals and so I think ultimately having a private funds percent and obviously we have seen companies like Brookfield or Blackstone ultimately build that the department I think that something we can benefit from -- we might need to ultimately hire Chief Marketing Officer as we've obviously vertically integrated in many of our verticals are now more consumer facing.

So I think those are opportunities we've identified but apart from that I mean were in very good shape. At the TAH level, for example, we now have roughly 250 employees so we've done a lot of hiring there and were well positioned to continue to grow and we have made heavy investments in technology.

We've lamented [indiscernible] at TAH and where investing in our technology, unwarned vesting in our technology here Tricon as well.

Okay. Great.

Thank you very much.

Thanks and good morning guys.

Hey Mark.

Maybe on [indiscernible] buying up the partners, clearly it looks like proper and good investments for Tricon. Can you just give a little more color on that, what motivated the clearly looks like a profitable and good investment for Tricon, maybe just give little more color on what motivated the front-runners in what mechanisms you are able to use to encourage or push them towards selling to how that process works.

Yes. Well, just to remind you, when we gone into the business we entered a partnership agreements with those operators and they have a term of five years of they were essentially going to mature early next year so we were going to have to deal with it sooner than later.

The other thing I would say is our partners have substantial amounts of their own capital invested in this business and so they were obviously looking to redeploy that capital and welcomed the liquidity event. The other thing is I think they recognize and we can connect to fully recognize, how difficult it was to administer a business with literally 13 different operating entities.

Needed harder range financing to securitization and so we all knew that it would be inevitable that it made sense for us to take out the operating partners, Tricon are control external; our own destiny.

Okay. Great.

That make sense in with the new securitization how much capacity do you have to grow this business now without requiring maybe additional from other parts of Tricon external equity?

Well, I mean if you look at the equity, I mean obviously there's a lot of different ways to look at this but I look at the equity that we repatriated and now look at the new capacity the additional capacity in our warehouse line, I think if you run through the month depending on what you assume for the average home price, call it 100 call it $130,000-$150,000, basically allows us another full year of growth. And our current, our 2017 business plan assumes that we will buy 400 -- 400 homes per quarter, so again that gives us a lot of runway as we continue to add.

And which you feel comfortable levering up to that extent?

Yes. I mean were comfortable -- were comfortable in the TAH vertical going to 70%.

Our acquisition facility allows us to borrow 70% in cost. And then, obviously through securitization we can board roughly 77% of value, so home prices move up that's how we are able to repatriate equity.

But you have to remember that we take a holistic view of leverage and THP were essentially using virtually no leverage. So we're really looking to blend and make sure we don't get over escapes.

Okay. And then, just lastly your portfolio obviously Texas is doing quite well as far as Dallas goes and even some of your projects there and Houston have been well even with some of the staffing that's been in that market.

Are there new markets in the U.S. that you're more focused on or are you going to continue to focus on growing in Texas?

Well, mean if you look at different businesses really THP and TAH were in 14 different markets. And so I don't really think we need to expand into new markets.

I mean we could for example in single-family rental of ultimately go into a place like Orlando I mean there's other markets we cannot on the margin. But in general we've already identified I think the markets that have the best fundamentals, the best population growth and job growth and obviously we want to maintain our good diversity.

Even though Texas in Dallas is red-hot, and even though Houston is performing better than I think anyone would of thought, we certainly believe in diversification. We don't want to put too much concentration to anyone market.

Great. Thank you very much.

Thanks Mark.

Hey good morning.

Good morning.

Just a quick question on the value gains were there any particular markets that contributed more than others?

Not really. I mean I would say -- I would say it was pretty even across the board.

You know obviously there's a couple there might be 1% or 2% different from market to market but on the whole we're seeing very good home price appreciation across the board.

Okay. Great.

Thanks.

Thank you good morning.

Hi, Steve.

Just on the TAH business, I just to clarify what is your current minority interest position or what sort of was the proportion of minority interest is outstanding today? Are you fully like set now?

No, no. So when we talked about the buyout at $65.7 million that's from 92%.

So we still have a little bit of work to do. We've got two more partners and we're not making any promises that we're hoping to get them wrapped up by the end of the year as well.

So then that's 92% of the minority interest position that just bought?

Right. Correct.

Okay. And then, we obviously saw the benefit of sort of the slower home buying activity in the quarter.

You talk about whether or not that accelerated post-quarter and then how many homes you expect to purchase in Q4. Is it back to 400 or does it sort of trickle into Q1 2017.

No. Again from a capital allocation perspective we decided that rather than buying new homes in Q3 and Q4 Steve, that we would allocate the capital [indiscernible] minority interest.

You should not expect any new acquisitions in Q4. And as I said, if you look at our employees occupancy today, it's already grown to 94%.

Okay. That's great.

And then in terms of the TLC business you mentioned that you had is sort of an acquisition in the pipeline that would expand your business into California can you talk a little bit about if there are any major differences between the California market where you are currently in Arizona?

What I will tell you is that, we are going to be buying I think a higher quality portfolio. I think what we own in Phoenix is really kind of 3.5 to 5 star parts and you've seen we've wanted to add value to that part so we could add value in rent.

The portfolio that were looking at in California is -- has is more stabilized it has higher occupancy and I would characterize it more as for star parts. And obviously, we view this as very positive because we've been looking to diversify and I think this really has a lot of value to the overall portfolio.

So I can't really tell you a lot more than that but that's where were at.

Sure. Okay.

That's great. And then just one last one.

In terms of the cash flow that you expect to receive in from THP-1 U.S. is that $100 million -- $200 million you expect, is that all principle that you would expect to deploy or is only a certain portion of that the people that you would deploy?

We are going to redeploy all of it. It's just a question of how we do that right and do we take that $200 million and allocated back into land and homebuilding?

Or do we allocated towards the more REIT like or income producing verticals. So that is kind of a work in progress but I think as we said in our prepared remarks we do want to allocate a good amount of that to the REIT like businesses so we can continue to grow and generate more stable cash flow.

Okay. That's great.

Thank you.

Thanks. Gary, you mentioned internalizing significant part of your R&M crew.

How do you think that translates into margin improvement or is that just more of a customer service impact? Maybe you could share what your experience was with respect to the pilot project that you did.

No. I think there will be an economic benefit Jimmy although it's too early to see what that is but I can tell you from our pilot project in Atlanta we thought that we were able to save 20% of our R&M budget.

So right now R&M is roughly 12% of revenues and if you're able to save 20% of that you're going to add roughly 2% to margin. So there's a real opportunity to grow the margin there over time.

This is a nickel and dime's business of that very meaningful cash flow. Obviously from a customer service perspective, you know one of the issues we've had apart from not being more difficult to control your cost is that third parties go into our homes there given a prescribed list of what they can do.

And a residence say, well, now that you're here maybe can help me fix the screen door for example and the third-party vendor would say sorry we can't do that. So that's not that's not great customer service and we can do it ourselves.

We can fix all the issues for a resident in their home and we don't need to come back. So I think it's our game changer for us.

And were going to implement it over the course of 2017 or good amount of it.

Okay. All right.

And then just on the new disclosed performance fees, which you have is so what would that cash distribution profile look like. You did that with THP just wondering like you mentioned over 8 to 10 years but is that skewed evenly or?

Not really. I mean it's more back ended Jimmy and we're not -- because this obviously can move quite substantially from quarter-to-quarter depending on how our estimates change, our projects get pushed forward or backward, we haven't wanted to give the distribution profile.

But I would say it is skewed towards the back-end. We should expect to see some nominal performance fees next year in larger amounts in 2018 and 2019 based on what we know today.

Okay. Fair enough.

And lastly, just going back to that THP disclosure on the projected distributions. So how do we think about so you mentioned part of the proceeds from THP-1 U.S.

could go towards other verticals, but is the idea that the goal is to maintain that distribution profile such that cash distribution from shorter-term investment will fund equity commitment on longer-term investment so that business become somewhat of a self funding business that sort of kind of part of the thinking or is it just that near-term cash which is reallocated to somewhere else?

Yes. I would think about it this way.

I mean, if you look at -- the reason we're now showing you -- we're showing you two new things that are going to report and how much capital we currently invested in the business as opposed to just the fair value. And also what we project the future distribution net of advances to be.

So you can essentially look at a multiple between those two numbers and I think we are telling you right now, we expect that number to be about two times, which means we're essentially going to double our capital. So the idea at this point in time, this is just somewhat crude, but we would reinvest the principle back into the business, so we basically maintain those balances and then we take the profits which is -- and put it into the other income producing verticals.

So I'm not sure if that makes sense. But, again, we're trying to double, so the one would go -- 1.0 would go into THP and the other 1.0 would go into the income or REIT like verticals.

Okay got it. Okay.

Thank you.

Okay.

Thanks. Good morning guys.

Hi, Dean.

Gary just on the acquisition of those minority interest, are the fees that you expect to save from that all below the line because I guess the question is does it impact the NOI margin?

No not really.

No.

In fact, it's investment income not so much of the NOI.

Okay. So the operations number is actually G&A not operations of the assets itself?

Yes. I mean I'm not going to say there's no impact on the NOI because obviously the operators are getting their pro-rata share of whatever operating income there is.

But, the vast majority of those savings are really below the line in fact investment income and a lot of it's obviously coming from the HPA or the fair value gain that otherwise we'd be paying them in the performance fees.

Okay. Got it.

One thing to remember is that I just want to explain this. In our limited partnership agreements with them they're acting -- when they were acting as GP, they received performance fees and that could be -- I can't remember the exact number, but it could be 20% or 25% over prep so once you clear that prep, which we have they continue to get 20% or 25% so it's a significant number.

So we're saving that. We're basically stopping that with this.

Great. Right.

Got it. And then just on the Cross Creek and we've talked about this before, the volume that went there is probably surprising to everyone yourselves included.

Obviously, evidence of what Johnson's able to achieve down there, was there a change in pricing or was it just been a continued asset mix towards a more affordable stuff?

No. There hasn't been really -- there hasn't been a change really in price per front foot or lot.

It's more that we've been able to change the mix. And people often criticize Houston and say there's no zoning while actually that's been a huge benefit for us because we essentially are the master planner.

We are the city and we can change the product very quickly and so recognizing last year, two years ago the things are going to get tougher. We shifted our mix to smaller lot products.

So instead of doing 80 foot and 90 foot lots we're doing more 50 foot lots. That brought the lot price down, it's obviously brought the lot home price down and that led to more absorption.

And that's a trend that's continuing?

Yes. It's a trend that's continuing and we've identified it as just a general opportunity across the board because as I said there is lots of so-called millennials that are now at the beginning -- on this trend they're going to become they're going to have to ultimately move out of the cities into more suburban communities as they have families and children.

And the key thing in order to support them is affordability. And so we in the industry really need to provide more affordable product and we can play a major role in that through Johnson by bringing on smaller and more affordable lot product.

And are you finding the same thing adjustments are needed to be made at say Viridian or is that a little bit more balanced in that market?

Viridian -- I mean one of the things we loved about Viridian is really a lot of small lot product they're ready. I mean you've got a lot of town homes.

We got 20, 30 foot lot product. So we're ready there.

The issue for Viridian is, we've had major weather problems at the beginning of last year which has prevented us from putting the lots online. But we're now there and so we should have a very good sales years in 2017.

But, we've been looking for that so when we looked at Viridian and Trinity Falls we're looking for communities that have the ability to sell affordable product.

Perfect. That's it for me.

Thanks guys.

Thank you.

Thank you, Virgil. I would like to thank all of you on this call for your participation.

We look forward to speaking you in March 2017 when we discuss the results for the fourth quarter of 2016.