Tricon Residential Inc.

Wojtek Nowak - Director of Corporate Finance and Investor Relations Wissam Francis - Chief Financial Officer Gary Berman - President and Chief Executive Officer Jonathan Ellenzweig - Managing Director Kevin Baldridge - President Tricon American Homes

Dean Wilkinson - CIBC World Markets Jonathan Kelcher - TD Securities Steven MacLeod - BMO Capital Markets Mark Rothschild - Canaccord Himanshu Gupta - GMP Securities

Thank you, Steve. Good morning everyone and thank you for joining us to discuss Tricon's results for the three and 12-months ended December 31, 2017, 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 you 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 there following the call. Lastly, please note that during this call, we will be referring to a supplementary conference call presentation posted on our website.

If you haven't already accessed it, it will be a useful tool to help you follow along during the call. You can find the presentation in the Investor Information section of triconcapital.com, under Events & Presentations.

With that, I will turn the call over to Wissam Francis, CFO of Tricon Capital Group.

Thank you, Wojtek, and good morning everyone. Our prepared remarks this morning will include highlights of our quarterly results and a discussion of our various investment verticals.

Starting on Side 5 of our presentation. Tricon continues to deliver strong growth in 2017, with assets under management increasing by 55% year-over-year to $4.6 billion.

The biggest driver of this growth was the acquisition of Silver Bay in Q2, which added $1.4 billion to our Tricon American Homes AUM. During the fourth quarter however, AUM remained fairly stable.

On Slide 6, you can see that on an IFRS basis, we reported diluted earnings per share of $0.19 for the fourth quarter, up 171%, compared to $0.07 in the same quarter last year. The biggest driver was Tricon American Homes investment income of $45.7 million, which benefited from the Silver Bay acquisition, and strong fair value gains in the portfolio.

This increase was partially offset by $18.7 million of transaction costs related to debt refinancing activities at TAH and a $13.4 million loss relating to the change in the fair value of the derivative embedded in our convertible debenture, as our share price strengthened during the quarter. To provide a more normalized view of our performance, we present the bridge to adjusted income metrics on Slide 7, which removes transaction costs and changes in the fair value of derivatives, as well as other nonrecurring and noncash items.

On an adjusted basis, we reported diluted earnings per share of $0.39, representing 144% increase, compared to $0.16 reported in the prior year. Diving deeper into these metrics on Slide 8, you can see that our adjusted EBITDA more than tripled year-over-year to $97 million, representing our strongest quarter since our IPO in 2010.

The main driver was Tricon American Homes' adjusted EBITDA of $83.5 million, which includes two main components. The first was net operating income of $34.7 million, which increased by 118% year-over-year, as a result of more than doubling our portfolio size along with strong rent growth in the portfolio.

TAH reported a record NOI margin of 64.4% for the quarter and 62.3% for the year, excluding the impacts of hurricanes. The second component with our fair value gain of $51.3 million for the quarter, driven by new BPOs completed for 2017-2 securitization transaction, as well as home price depreciation of 1.4% this quarter or 5.6% annualized using the home price index methodology.

Approximately 60% of the fair value gain came from BPOs completed this quarter and most of the Silver Bay homes have now gone through their initial BPO valuations. In our other business verticals, Tricon Lifestyle Rentals saw positive growth year-over related to solid fair value gains as a result of increased land values and development milestones achieved throughout the year.

This was offset by a lower adjusted EBITDA from Tricon Housing Partners as certain active-adult projects underperformed our expectations, and investment balances declined as a result of ongoing cash distributions from legacy investments. Gary will elaborate further on this in the call.

Moving down the income statement, compensation expense was lower this quarter. We typically accrue annual incentive plan expense based on 15% of EBITDA for bonus purposes.

However, the actual amounts paid are based on corporate, departmental and individual performance. On a full-year basis, AIP worked out to be 9% of EBITDA for bonus purposes resulting in a true-up in the fourth quarter.

Lastly, interest expense increased this year mainly as a result of the incremental debt and convertible debentures used to finance the acquisition of Silver Bay, and our income tax expense was also higher as a result of higher pre-tax earnings. The overall result was a 216% increase in adjusted net income this quarter to $59.5 million, compared to $18.8 million in the prior year.

To wrap-up our financial overview, I’d like to discuss our leverage on liquidity position starting with our refinancing initiatives at Tricon American Homes on Slide 9. Given that a large part of Silver Bay transaction was funded with short-term floating rate warehouse facility, our priority was to put in place a series of debt instruments that extended the term structure.

Reduced TAH has caused a debt over the long-term, introduced new sources of financing, and diversified across fixed and floating rate instruments. Following the Silver Bay acquisition, TAH successfully completed two-securitization transaction and the first of its kind loan in the SFR industry.

With these financings in place, TAH extended its weighted average maturity from 2.5 years to 4.2 years and increased the percentage of fixed rate debt to 63% of the total with a near-term goal of approximately 80% fixed rate debt once the remaining Silver Bay debt is refinanced. Also following the disposition of non-core homes in the fourth quarter TAH reduces loan to value ratio to 65.8% of 4.1% decrease since Q2 2107.

And lastly, TAH’s cost of debt has been reduced by about 60 basis points since the acquisition to a blended rate of approximately 3.73%. Turning over to Slide 10, from an overall corporate perspective, our liquidity position remains flexible with 203 million available under our revolving credit facility at the end of Q4.

In terms of cash flow visibility, at the time of the Silver Bay acquisition, we outlined four key sources of near-term cash flows intended to further reduce our debt levels. The first initiative was completed last quarter with a disposition of noncore homes at TAH generating 153 million of gross proceeds used to repay TAH short-term debt.

The second and third initiatives are the planned dispositions of TLC this year and TLR U.S. in 2019, both of which remain on track.

Lastly, projected near-term cash distributions from THP included approximately $120 million from THP-1 U.S. over the next two years, also remains as scheduled.

As such, we expect to have significant flexibility to invest in attractive growth opportunities while reducing overall debt levels. Lastly, in terms of our overall capital allocation, in Q4 we reactivated our normal course issuer a bit and have since bought back approximately 1% of our stock.

We believe that the market price of our shares may not always reflect their true underlying value, and when you when you see the shares trading at a meaningful discount to our internal value we will take the opportunity to allocate some capital to buying back our stock. We also announced an 8% increase in our dividend from $0.065 per year - per quarter to $0.07 per quarter.

Given our strong visibility into cash flows and the increasing proposition of recurring cash flow within our company. With that, I will now turn the call over to Gary to provide additional insight into the performance of our business verticals.

Thank you, Wissam. 2017 was a pivotal year for Tricon as we set out to simplify our business model, make our earnings more predictable and build scale on our core investment verticals.

A major catalyst in this regard was the $1.4 billion acquisition of Silver Bay Realty Trust, and so let me provide an update on the progress we have made integrating the portfolio on Slide 12. First, we said we were going to increased Silver Bay’s NOI margin by 200 basis points to bringing in-line with TAH’s margin.

Recall that for the full year of 2016 Silver Bay's NOI margin was approximately 58% and TAH’s margin was 60%. We’ve meaningfully surpassed our goal and brought the consolidated portfolio NOI margin of 64.4% for the quarter and 62.3% for the full-year, excluding the impact of hurricane related expenses.

Second, we plan on reducing combined G&A expense by 10 million by eliminating Silver Bay’s public company costs and other duplicate corporate expenses. These G&A synergies are on pace to be realized by mid-2018 as transitional consulting arrangements roll-off.

Our third goal was to prune noncore assets that did not fit our middle market strategy or geographic footprint and in October TAH disposed a 1,500 non-core homes well ahead of schedule and in-line with our book value. Lastly, we set up to implement a more efficient capital structure TAH through a series of refinancing transactions, which is substantially completed as Wissam discussed earlier.

At this point, we can safely say that the acquisition and integration of Silver Bay has been a resounding success and the combined platform solidifies our position as one of the leaders in the burgeoning single-family rental industry, while making our cash flows more predictable. On that note, let's zoom in on the fourth quarter performance at Tricon American Homes on Slide 13.

TAH achieved very strong operational results this quarter with core FFO of 12.8 million, increasing by 161% from the prior year. Underpinning this figure was TAH’s net operating income of $35.5 million, excluding the impact of hurricanes, which increased by 123% year-over-year and was largely driven by revenue growth of 106%, primarily as a result of the Silver Bay acquisition.

TAH’s NOI margin was a record 64.4% for the quarter, excluding the impact of hurricanes. Although the Q4 margin tends to outperform the balance of the year as a result of seasonal factors, rent growth and cost containment also factored into this metric.

Specifically, TAH continued to see very strong rent growth of 4.4% on a blended basis comprised of 5% growth on new move-ins, and 4% growth in renewables. On the cost side, in the fourth quarter, R&M internal expenses as a percentage of revenue decreased by 193 basis points year-over-year aided by TAH’s internalization of R&M, which is now in place across all markets, as well as our effort to more tightly manage the scope of repairs when turning a home.

This was achievable, while maintaining a resident turnover of 27.6% or 29.6% for the full-year, which remains an industry-leading metrics. As we noted in the past, Q4 is typically a strong quarter for NOI margin as a result of low turnover during the holidays, and lower seasonal repair and maintenance expense, in particular conditioning repairs.

In addition, we typically conduct year-end accounting [indiscernible] for items such as property taxes, which were accrued throughout the year based on estimated payments and adjusted when bills were received and actual payments were made. With that in mind, we prefer to look at NOI margin on a full-year basis and for 2017 TAH achieved a margin of 62.3%, excluding the impact of hurricanes, a full 270 basis points ahead of last year.

Turning to Slide 14, we showed TAH's same home portfolio metrics, which capture the results for rental homes that have been stabilized for at least 90 days before the start of the prior year. Given the quarterly variations I just mentioned, let’s focus on the full-year same home metrics, which are more representative of the overall trends in the portfolio.

For 2017, same home revenues increased by 7.2%, and expenses grew by 2.2% contributing the same home NOI growth of 10.6%. The increase in operating expenses was largely a result of higher property taxes as property values continue to rise in the Sun Belt markets.

The roughly 8% increase in property taxes results set by reduction in R&M internal expenses, as well as property insurance expenses. These factors contributed to a same home NOI margin of 61.7% for the year, 180 basis point increase from the prior year, and comfortably ahead of our expectation of 60%.

Looking ahead, we remain very excited about the prospects for single-family rental as an asset class and TAH as a leader in the middle market space. Let me share with you some of the initiatives we are focusing on in 2018 to grow TAH and further enhance our returns.

First, TAH has now resumed its acquisition program with the goal of acquiring 400 to 500 homes per quarter. Turning to Slide 15, TAH will focus on 10 growth markets where homes can be acquired in attractive blended cap rates of approximately 6%, and where we see opportunities to drive operating efficiencies through increased scale.

You can see some examples of recently acquired homes on the slide. Second, TAH is piloting build-to-rent as another potential avenue for growth.

If you could flip to Slides of 16, you can see some of the benefits of becoming apparent as we explore this avenue. From an operating perspective, build-to-rent allows us to install a whole suite of standardized TAH finishes from the outset.

Reduce repair and maintenance cost in the initial years and make these terms easier to maintain. Over time, we also expect the customized homes to eliminate floor plan inefficiency and improve accessibility for repair and maintenance technicians.

On the surface, these homes may be more expensive than what we can currently buy through the MLS in a similar location, but we expect that the rent would be commensurately higher year and as we flush out the economics we are penciling to long-term returns to become very close to what we achieved from organic acquisitions, with more certainty around operating costs. Today, we piloted this concept of buying a small portion of a new subdivision, but we are also evaluating the opportunity to acquire full communities of purpose-built single-family rental homes in our target markets, an experiment that it is still in its infancy, but if proven out could represent a large opportunity within this dynamic asset class.

To be clear, we are piloting build-to-rent on a very small scale at this point and want to ensure that this concept works in reality before we launch a more comprehensive program. Finally, we are very excited about the numerous technology initiatives being rolled out at TAH as shown in Slide 17.

TAH recently hired its first data scientist and is in the early stages of putting together a revenue management tool that will help optimize rent growth turnover on occupancy. The SFR industry is still in the early stages of implementing revenue management and if we look to the multifamily sectors of point of reference, we should be able to achieve revenue growth that is above the underlying market growth rates.

In addition to revenue management, TAH is piloting smart-home technology encompassing a suite of sensors that can be used to monitor among other things moisture levels and air temperature. These tools will help us spot potential water leaks and air conditioner breakdowns as soon as they occur and fix them before the problems exacerbate.

And lastly, TAHs exploring the use of drones to monitor roof conditions as well as SD imaging as a surveying and marketing tool. In summary, 2018 should be another exciting year for TAH with ample runway for growth, operational improvements, and technological innovation.

Let’s now turn to Tricon Housing Partners or THP our land and homebuilding business on Slide 18. THP generated investment income of 1.2 million this quarter and 18.2 million for the year, which translates to 7.4% annualized net return on invested capital and is below our expectation of 9% to 11% annual return.

As a reminder, our investment income under IFRS accounting is a function of realized cash flows, as well as changes in fair value that are largely driven by discounted cash flow models or annual appraisals, typically refreshed at year-end. In the fourth quarter, investments in three active-adult community developments recorded fair value losses as a result of budget updates, the reflected reductions and delays in future cash flows.

These unfavorable updates are primarily a result of slower absorption, due to increasing competition in the active adult segment. The second factor is labor cost pressures, which we have spoken about in the past.

We continue to work with our development partners to fully reflect these dynamics in our budgets. The large contributing factor was a delay in the opening of the amenity’s and clubhouses within our communities, which typically help to drive sales.

Following the grand opening of amenity centers and clubhouses at Trilogy Lake Norman and Trilogy at Verde River in late 2017 both communities have experienced stronger traffic and sales volume so far in 2018, which increases our confidence in the future performance of these investments. We also took a downward revision on the Arantine Hills budget this quarter as a result of delays in permitting lower lot prices and slower absorption assumptions giving current market trends in the Inland Empire, which has taken long and recovered in the Coastal California markets.

These four projects had a negative impact in Q4 THP investment income as reflected in the [indiscernible] separate accounts and THP2 US investment vehicles. At the other end of the spectrum, our Texas communities are performing very well and are more reflective of strong underlying fundamentals in the broader U.S.

housing market. On Slide 19, you can see third-party home sales as an indicator of consumer demand for Johnson managed communities reflecting a 16% increase for 2017 as a whole towards a Q4 year-over-year increase was 25%, including some catch up activity following the hurricanes.

While this is not necessarily apples-to-apples given the changing mix of communities we see year-over-year sales remaining directionally positive with 2018 getting off to a good start so far. We believe Johnson's results driven by strong local market fundamentals, as well as thoughtful product segmentation and compelling builder programs.

Notwithstanding the poor performance of our active adult communities, we feel good about the housing fundamentals across our target US markets and the overall prospects for THP. This vertical will continue to be a major driver of cash flows for Tricon as it has been in the past.

In 2017 distributed approximately $35 million of cash back to Tricon and we expect approximately $600 million of net distributions from THP over the next 8 years to 10 years. Moving on to Tricon Lifestyle Rentals, our multifamily development and rental vertical and formerly known as Tricon Luxury Residences, but still called TLR.

At TLR, we continue to make progress on the development of three Canadian and two US projects. If you flip to Slide 20, you can see the construction status at the Selby, which is officially topped out with brick and window installations tracking ahead of schedule.

The project is expected to commence leasing in the second half of 2018. The [indiscernible] noticed some strong leasing activity and the average rent is tracking around $3.50 per square foot well above our underwriting assumptions of roughly $2.09 per square foot.

Our second development 57 Spadina design development is substantially completed an on-site demolition commenced last month. Our third development at Scrivener Square remains in the design stage.

As we advance these projects, there is much work being done behind the screens on a consumer facing brands and service offering. To start, we are proud to introduce Tricon House, TLR’s consumer facing brand umbrella for individual projects.

Take the Selby as an example. The renderings on Slide 21 give you a sense of the customer experience.

The Selby's reimagine rental lifestyle includes a modern main floor Loby meeting space with concierge services, an elegant outdoor swimming pool with a lounge deck on the second floor, a full-service bar and bistro in our beautifully restored historic mansion, and a welcoming games room and a home theatre on the second and third floors, as well as an outdoor kitchen and lounge area with barbecues on the fourth floor. Our mandate is to invest in communities and to build diverse neighborhoods that put people first and faster lifestyle that inspires comfort, connection, and a sense of belonging.

This is the Tricon House Brand promise that we plan to deliver in each of forward TLR projects. Looking forward, our focus remains on building at a leading Class A multifamily portfolio in Canada under the Tricon House Brand.

We’re tracking an active pipeline that includes 3 to 5 large opportunities that will give us a meaningful part to scale. While competition from counter-developers remains intense, we are pursuing sites that are designated specifically for rentals by the municipal and provincial government, as well as sites owned by private investors wishing to partner with experienced developers like Tricon to develop underutilized sites.

Given our in-house expertise in multifamily development, we are very well-positioned to executing our growth plan for TLR and given the strong demand for our core assets by institutional investors, we expect third-party capital to pay a meaningful role in TLRs growth strategy. Lastly, let’s take a look at Tricon Lifestyle Communities, our manufactured housing land lease business, on Slide 22.

We reached total occupancy of 86.5% in 2017 and a record occupancy of approximately 90% in January 2018. We’ve recently launched a sales process for the portfolio with the broker, reaching out to approximately 100 potential buyers.

To date, we’ve received 40 signed confidentiality agreements on our advanced discussions with numerous bidders for participating in our final round process. The level of interest gives us confidence that we can achieve a sales price above our carrying value and also validates our decision to exit the business given a highly competitive environment for assets.

To sum up, 2017 was a transformative year for Tricon as the acquisition and seamless integration of Silver Bay coupled with strong operational execution in support of housing fundamentals propelled the company to record results. I’d like to conclude with Slide 23, which gives you a holistic view of how we think about a diversified housing brand from a risk return perspective, and how we position our business verticals when speaking to third-party investors.

Private funds and advisory has always been a core aspect of our business allowing us to gain scale by leveraging third-party capital and we intend to use this strategy to proactively grow all of our business verticals going forward and to create shareholder value with efficient use of our balance sheet. A diversified platform allows us to offer institutional investors a suite of opportunities ranging from opportunistic to value-add to core plus, which would not have been possible without first proving out these investments using our own balance sheet as we’ve done over the past few years.

And so, as we set our sights in a target of 10 billion of AUM within the next five years, we expect third-party capital to play a meaningful role in getting us there. The strong market fundamentals continue to serve as a backdrop for housing centric investment strategy and we see tremendous opportunity to add scale on all of our core verticals.

With that, I will pass the call back to Steve to take questions, and we'll be joined by other members of the senior management team including Jonathan Ellenzweig, Andy Carmody, Andrew Joyner, and Kevin Baldrige.

Thanks, Steve. Good morning everybody.

Hi Dean.

Hi Dean.

Gary, on the TLR vertical, the gain that came in the quarter, was that largely around a market-to-market adjustment on the underlying land value of the Selby?

Hi Dean, it is Wissam. No, it wasn’t just a Selby it was actually all three properties contributed.

Remember what we do is, we do year end appraisals for active projects. That’s 55 Spadina and The Selby.

57 Spadina and The Selby, for 57 Spadina it increased because of land value, but the Selby increased because of cost to complete. So, meaning, as we get closer to completion you expect the value to go up over time based on actual costs incurred.

So, could we infer from that perhaps then that when you hit substantial completion on that there is actually going to be a larger markup that’s probably coming in that vertical?

Yes, we can.

Would that come on completion or lease up?

It’s two different stages. So, you’ll get a small chunk of it on lease up because as you de-risk the project and you’ll get another piece on completion as you further de-risk the project.

Okay. Makes sense.

And then just turning to the SFR business, the 64% margin obviously very strong, was any of that impact as a result of the assets that you sold sort of the lower rent properties and when you look forward and you sort of roll those out, role technology in, do you think that that’s probably a sustainable and annualized margin or do you think you could maybe even get it better from there?

I think the sale of the non-core assets definitely helped a bit, but it was clearly not the major driving factor of the margin Dean. The other thing I would say is that, 64% is a terrific print that remember this is a seasonal business, and we would really guide you more to look at the full-year where the margin was 62%, not 64%.

So, look we feel great, we don't provide guidance on the margin. We feel great about the business, we feel we can continue to drive revenue growth and we are seeing very strong demand for all of our products.

So, I think we’ve got very good visibility in being able to continue to increase rents and I think we continue to get a little bit better on our cost containment. I mean, remember property taxes have been a major drag.

When those start to come more into line, it will help margin and we continue to get better and better at R&M. So, I think we are optimistic about our ability to drive higher margin in the future, but we're not guiding it specifically.

Okay. Fair enough.

That’s helpful. Last question for me is, Wissam, on the derivative liability loss, the 13.4 million, does that revert, like the mechanics of that would that reverse on sort of a flat stock price or a down stock price or can we think of that basically like the Peterman one, that once that ball is gone it is gone?

Yes, so you can think of it is as, as those stock price increases your derivatives becomes a negative, becomes a loss; and as your stock price decreases your derivative is a positive. It will revert to the mean by at the time of when the convert actually matures.

So, over time it will start converting towards the price down to 0 over the maturity period.

So, we could expect that to ebb and flow kind of, it’s going to be pluses and minuses over the course of [indiscernible].

It is 100% correlated to the change in share price from quarter-to-quarter.

And then there is not any asymmetry that it only goes one way?

I hope so, but no.

Okay. That's it.

Thanks guys, I’ll hand it back.

Thanks Dean.

Thanks, good morning.

Thanks John.

Just going back to the property taxes, 8% is a pretty good jump year-over-year. What sort of -- what are you expecting for 2018 on that front?

Jon, do you want to talk to that?

Sure. So, regarding property taxes, these are really correlated to home price appreciation, though if you thought it’s quarter in this year, we benefited significant from the HPA, but as an offset to that you see a growth in property taxes.

So, I think it is really going to be based on what you assume home price appreciation would be in 2018, and you will see similar property tax growth. I would also note that we have a property tax advisor that we use to monitor and challenge and help forecast property taxes and they have been very successful this year.

So, we are making every effort possible to contain those, but really it is going to be based on the market and where homes and go.

Okay. Now, would that be your biggest noncontrollable cost for the TAH business?

Yes.

Yes, that is right.

Okay. And then just sticking there and looking at the FFO on that, there's been a lot of transaction and nonrecurring costs, I guess almost all related to Silver Bay, the last three quarters.

When do you expect that to really settle down and get a real good run rate there?

I think it’s probably the second half of the year Jon, because remember we have another securitization transaction coming up, which will probably be a Q2 event, and that will be more transaction cost related to that. We will be largely through Silver Bay as we said in the first half of the year.

So, I think run rate, you will start to get a better sense of run rate probably in Q3, Q4.

Okay. And then just lastly on the THP, what's the pipeline there for any new projects?

What are you hoping to do this year?

I mean we’re remaining opportunistic. I think it is a business we would say that there is, if you grow for growth sake, you could really run yourself into a wall, and so we feel no pressure to grow the vertical.

We really only want to take on opportunities that are incredibly compelling. We looked at our couple this last quarter, where we’ve been on, I think what we are compelling master plans, but we lost that on a big process.

So, those again, we remain disciplined in terms of return requirements and we’re looking at a couple of others, but it’s hard to say whether we will hit them or not. We have got about three or four, I would say large MPCs in our pipeline, but it’s just hard to know whether we will be able to acquire them based on the process.

Okay. And 9% to 11% would be fair for this year, back to that?

Yes, we think so. I mean we had a disappointing quarter this year for the active-adult projects on the market-to-market, but we’re off to a very strong start of the year, in fact our sales of those projects are nearly double our budget.

So, we're hopeful that we will get back on track in 2018.

Perfect. Thanks.

I’ll turn it back.

Thanks Jon.

Thank you. Good morning guys.

We got too many interferences in your line.

I apologize. Is it better?

No. Go ahead and ask a question [indiscernible].

Okay great, thanks. Just looking at the securitizations you have planned for Q2, is it fair to say that the fair value gain would be more modest than what we've seen over the last couple of quarters?

Like is it - did I understand correctly, are all the Silver Bay homes now done?

Yes. I think that is a fair assessment.

I mean we have got a roughly, you know the next securitization would be a roughly 2,500 homes and of those aboard 900 are Silver Bay. We still have about 900 Silver Bay homes to come.

So, we do expect another increase, but it should be more measured than what we have seen in the past.

Okay. Even though we are targeting a securitization transaction, we are also looking at other options around financing as well.

But from a BPO perspective it will be the remaining homes that haven't been financed yet?

Okay, that’s great. And then just on turning to the THP business, did some of those challenges that you highlighted in Q3, did those really deepen in Q4?

I'm just wondering if you can give a bit of color around what some of those headwinds were and whether they have continued into the first quarter of 2018.

Look, I mean I see this about active-adult. It has become a bit of a crowded back, and I think we understood why we need the investments.

We thought demographically it looked very positive for the active-adult sector. We also felt that we focused on the more premium product, with more affluent baby boomers we do all there.

And part of that proved out, if you actually look at the metrics, active-adult has taken a higher percent of the overall new home sales market share, post great recession and pre-great recession. What we didn’t recognize or appreciate is how much competition would ultimately come.

So, essentially everyone had the same idea. And so, we continue to see more and more competition.

And just to use high-level example, when we underwrote these deals we probably thought we might have one or two or three competitors and, in some cases, we have eight. And all of the big public builders have launched into active adult.

And so, in the case, if we thought let’s say we are going to achieve 125 sales of 150 sales they ended up being let’s say closer to a 100 and that just means it takes longer to sell through the project and therefore you have to take the way we report fair value for appraisals, you have to take a write-down. So, it’s very much a time-based metric.

We’ve known Steve obviously for a few quarters that our sales were lower than what our budget was, but because of the valuation process for some of these separate accounts and side-cars they only get done through our year-end appraisal where you can have a big change positive or negative. I think going forward, we like to have appraisals probably a couple of times a here.

So, it’s steady. I mean no one likes surprises.

I mean we could deal with positive surprise, but really no one likes negative surprises, especially us. And so, we're going to try to find a way to kind of steady the valuations for some of those side-cars and separate accounts.

Having said all of that, we’re off to a very strong start to the year. As I said in my last comments, our sales at these three active-adult communities are probably double what our budget has been.

It’s hard to know exactly why that is, first of all, I think the housing market in general has got off to a good start to the year, maybe an optimism around the economy and tax reform. It’s also quite possible that in completing our major amenity centers, which were delayed that’s also and these are state-of-the-art community centers that really started to drive sales and provided the consumer with more visibility and confidence of the project.

So, we’re off to a very good strong start. If this were to continue and by no means this two months make a trend, we could see ourselves writing up these assets in the future.

Okay great. Thank you.

That's very helpful. And then just finally, just turning back to the TAH business, you've had very strong NOI margin performance over the last, well, through 2017 clearly.

Are you comfortable giving sort of an outlook for what your next target might be, or what your next aspirational target might be?

We don't really believe in guidance. I mean we guided the market to 60% on TAH largely because of the Silver Bay acquisition and trying to allow the market to understand the integration and how to model it on our pro forma basis, but apart from that, I mean we prefer not to provide guidance.

I would just say that the fundamentals for the business are excellent. They seem to be continuing.

We achieved 62% for the full-year, excluding the hurricanes and obviously we feel very good about that and if I had a bias, I would say it’s to the upside and rather to the downside of the margin.

Okay, great. Thank you.

Thanks, and good morning. Most of my questions have been answered.

Maybe you could just talk about, I mean you clearly have some plans of being active in growing the SFR business and buying homes and developing, can you talk about the availability of homes to buy and whether it is smaller portfolios, even larger portfolios in the market, how easy is it to find assets that prices and that would be accretive?

It is easy, is the quick answer. I mean we’re buying 400 to 500 homes per quarter, we are actively buying those today.

We bought 116 Q4 to start getting ready, we're buying a 6% cap rates, we have no issue. I have always said it is not difficult to acquire homes, it is much harder to manage them.

And so, in the volume that we're trying to buy we don't have any issue hitting those targets and even in a relatively tight MOS market, we think we can continue to do that for many quarters to come.

So, and would there be portfolios as well that you're able to buy, like could they be more active here?

Yes, I mean we always look at portfolios, but I will say that our acquisition pipeline really just focuses on once you choose the acquisitions. If we are able to buy portfolios that’s really gravy.

There are situations where sometimes we can buy 10 or 50-unit portfolios, but again the 400 to 500 per quarter metric is based on once you chose these. And so, if we can go faster, we certainly will look at it.

There are other larger portfolios out there. There are many private equity companies.

They are on the 1,000, or 2,000 or 3,000 homes those will ultimately come to the market. And so those opportunities make sense, we will look at them as well.

Okay great. I have another question, you finished of your presentation talking about the goal of getting to 10 billion of AUM with a lot of that bring third-party capital.

You have parts of your business such as the Tricon American Homes, I don't know if you would consider that third-party capital, or you really using your own capital, so, which areas do you see the biggest opportunities to grow dramatically using third-party capital? Is it in THP?

It is all the vertical fit. In order to get the 10 billion of AUM we would have to bring third-party capital into TH or SFR.

And we have been educating the pension plan community on and this asset class for a couple of years. I think it’s starting to become increasingly accepted by institutions, and so we think it’s just a matter of time before ultimately institutions will start to embrace this is an asset-class.

And so, the goal really is, I mean we have been bringing third-party capital into the development verticals, but we'd really like to bring third-party capital to every business we’re-in in order to leverage our own capital and generate higher returns for shareholders.

Great. Thank you, very much.

Good morning, guys. Gary, you mentioned that homebuilding has been off to a good start, how is the single-family rental business doing?

What are your thoughts on the Spring leasing season, any data points on demand in January or February, you can share any data points in terms of call center volumes or any other website enquiries, just to get a sense of the activity in the year so far?

Sure. I’m going to hand that over to Kevin.

Kevin can you take that for Himanshu?

Sure. Yes, we’ve seen renewed activity.

Usually the demand falls off, obviously, in November/December because because of the holidays. So, what happens we see generally in January and February a pent-up demand that comes out, and so we’ve – occupancies remain robust or we look at availability as a sign for future occupancy availabilities and the stabilized portfolio are still in the mid-5s, 5.5, 5.7, which shows our occupancies remain strong growing going into the next couple of months.

And our rent growth continues to be robust. We’re going to, in the first couple of months, and even in January rents continue to meet or exceed what we experienced in the fourth quarter.

And our website, the demand is back up to where it was, late in the third quarter, so we’ve seen the seasonality starting to come around as we have in the prior years.

Sure. Thank you.

And on the single-family rental business, do you track same property NOI growth for the Silver Bay portfolio? I mean is the performance very similar to Tricon 10% year-over-year and has there been any surprises since your acquisition or any areas of opportunity for margin expansion here?

Yes, I mean we don't track it per se, and if we did we probably couldn't tell you what it is, but what I would tell you is that, if you look at the rent growth and remember the rent growth for the quarter was 4.4% blended, 5% on new move-ins, 4% on renewable. The numbers on our TAH legacy portfolio were slightly lower.

So, if we are 4.4 blended maybe we are [indiscernible] for TAH and higher on the Silver Bay portfolio, and so that reflects certainly some loss for release. That is closing a bit, but I mean one of the reasons we have been continue to drive strong rent growth is because of the loss lease on Silver Bay.

And as Kevin alluded to in his last remarks that is continuing.

Sure. Thank you.

I’ll turn it back.

Thanks, Himanshu.

Thank you, Steve. I would like to thank all of you on this call for your participation, and we look forward to speaking with you in May, when we discuss our first quarter results for 2018.