Tricon Residential Inc.

Thank you, Suzanne. Good morning, everyone, and thank you for joining us to discuss Tricon's results for the three months and year-ended ended December 31, 2019, which were shared in the news release 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 Discussion and Analysis and Annual Information Form, which are available on SEDAR and on our company website. 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 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, EVP and CFO of Tricon Capital Group.

Thank you, Wojtek and good morning everyone. Q4 2019 was a strong quarter for Tricon, with many accomplishments achieved both financial and operational.

Let's begin with business highlights on Slide 2. In our single-family rental business, we maintained a very active pace of acquisitions, adding 1,162 homes during the quarter under the TAH joint venture partnership, including a portfolio 708 homes in Nashville.

The TAH joint venture is now more than half deployed and based on the current acquisition pace, we expect it to be fully invested by mid-2021. The larger portfolio coupled with strong rent increases and operational efficiencies resulting in total NOI growth of 28% and FFO growth of 57% year-over-year.

On a similar note, NOI for the same home portfolio grew by 6.5% year-over-year, mainly as a result of ongoing rent growth and margin improvements. In our multi-family rental business, the U.S.

portfolio delivered 5% same property NOI growth, driven by continued improvements in occupancy. We also completed the disposition of our last non-core U.S.

development asset with the sale of the Maxwell in December. In total, sale of the four non-core developments; two in our balance sheet and two in our funds generated 14% IRR over a five-year investment period.

We thought we did well on these investments given the pressure of rising construction costs and our role as limited partner. Meanwhile, in the Canadian multi-family portfolio, we achieved 86% lease up at The Selby.

And we have now fully internalized property management in Canada. In our Private Funds and Advisory business, assets under management increased by 41% while fee revenue increased by 13% year-over-year.

And lastly, our legacy for-sale housing business continues to be a significant source of cash flow distributing $24 million to Tricon in the quarter and $52 million for the full year. We generated additional cash subsequent to year-end as we syndicated 50% of our direct investment in Trinity Falls for the ASRS joint venture.

Our financial performance this quarter is highlighted by strong FFO growth, as you can see on Slide 3. Tricon generated total FFO of $34 million in Q4, and 35% increase year-over-year.

The drivers of FFO included: first, higher single-family rental Core FFO of $23 million compared to $17 million last year, as the portfolio grew in size and delivered higher NOI margin. This was partly offset by higher interest expense on a larger outstanding debt balance to finance our growth.

Second, incremental contribution of $7 million of Core FFO from the U.S. multi-family rental portfolio, which was acquired in June 2019.

Third, lower investment income from residential developments of $10 million this quarter compared to $13 million last year, as a result of the lower contribution from Canadian multi-family developments in the current period. And finally, higher contractual fees of $10 million compared to $9 million in the prior year, mainly from higher performance fees earned this quarter as well as strong development fees from Johnson.

Overall, our FFO per share this quarter was $0.16, which translates to $0.21 in Canadian currency. The strong growth in total FFO was offset by an increase in shares outstanding as a result of the U.S.

Multi-Family Portfolio acquisition, resulting in the same FFO per share compared to last year. On Slide 4, you see that on a full year basis, our FFO per share increased by 35% year-over-year to $0.42, exceeding our target range of $0.37 to $0.40.

This outperformance was driven by higher than expected contributions from single-family rental and higher than expected cash distributions from residential development, which also led to a stronger than expected performance fees. Moving on to Slide 5, we summarize the reported IFRS and non-IFRS results.

You can see that Tricon generated IFRS diluted earnings per share of $0.22 this quarter compared to $0.23 last year. We also reported adjusted earnings per share of $0.23 for the quarter and $0.30 for the prior year.

The main differences between the IFRS and adjusted figures relate to the transaction costs and non-recurring items, derivative of the valuation changes and unrealized foreign exchange fluctuations. Digging deeper into the year-over-year variance, our adjusted EBITDA increased by 20% year-over-year to $96 million compared to $80 million last year.

In addition to the drivers already discussed in Slide 3, you will note that there is a significant variance in adjusted compensation and G&A expense. If you look at the table on the right, you can see this variance was largely attributed to AIP.

In 2018 we over accrued the AIP expense during the first three quarters and booked a true-up adjustment in Q4 whereas in 2019, we accrued the expense more evenly throughout the year. I would also point out that adjusted EBITDA catches fair value gains in our single-family rental portfolio.

Without this item our adjusted EBITDA would have increased by 30% year-over-year. Bridging from adjusted EBITDA to adjusted earnings, we had an increase in interest expense mainly from adding the U.S.

multi-family rental portfolio and higher tax expense versus last year where we benefited from tax recoveries. The net result was stable adjusted net income and a decrease in adjusted EPS when you factor in higher share count year-over-year.

Moving on to Slide 6, as the result of us transitioning from an investment entity to an owner and manager of residential real estate properties, we have determined that track on the longer meets all the criterias to apply investment entity accounting. As such and effective January 1, 2020 we will consolidate our control subsidiaries and apply relevant for IFRS standards to the individual assets, liabilities, equity, revenue and expense accounts.

In order to transition to consolidate accounting, we will need to review our fair values for the entire portfolio and our investment in the accounting we fair value our investments, based on the intention of a limited holding period annex and a defined exit strategy. On the consolidated accounting, however, the assumption is, we will hold these assets indefinitely as or an operator.

This transition may result in fair value changes to certain assets of the overall we don't expect significant impact on our financial statements in terms of revaluations. The transition to consolidated accounting is applied on a prospective basis, which means that 2019 comparative results in the financial statements are precluded from being restated.

We will however be providing comparative disclosure in our MD&A, when we report our Q1 2020 results in May. Coupled with consolidating accounting and transitioning Tricon to be a rental housing company, going forward, we'll be focused on IFRS results in FFO metrics only and therefore, we will no longer be disclosing adjusted figures.

With that, I'll now turn the call over to Gary to discuss the highlights of our business verticals and our priorities going forward.

Thank you, Wissam. Let's turn to Slide 7, and before we get to the operating highlights I just want to talk again about our transformation to a rental housing company, which is essentially complete now with the adoption of consolidated accounting as of January 1.

And as many of you would recall in 2010, when we went public, we essentially were an asset manager focused on for-sale housing, we managed no rental property. Fast forward 9 or 10 years, you can see we now have 32,000 units nearly 32,000 units that own and manage.

And if you look at our development as a percentage of our IFRS balance sheet, you can see that's also been significantly de-emphasized. Going back to 2013, 52% of our balance sheet was invested in development assets.

Today that is 18%, and as we move to consolidated accounting, that will drop to 5% and trend lower. I will remind you though that these developments are high quality and cash flowing, as Wissam just said, we generated over $50 million of cash flow in 2019 and we expect to generate even more cash flow from our development assets in 2020.

Tricon is a growth company. Asked to our executives at our Investor Day to think about where we would be in 10 years?

How many units would we own and manage? And each executive used different assumptions that got to about 100,000 units plus in 10 years.

And so, we're going to continue to move towards that longer term goal. This slide also talks about our evolution as an innovator and in many cases our first mover advantages.

We entered in single-family rental. We were one of the first to enter single-family rental in 2012.

We were one of the first to raise significant amounts of institutional capital to invest in single-family rental organically and now in build-to-rent communities and we're the first to put single-family rental in multi-family rental together in a significant way. And we believe this is going to generate operational efficiency synergies and allow us to raise more and more third-party capital.

Let's move on to Slide 8 and now talk about operational highlights beginning with our single-family rental consolidated portfolio. This continues to be a story of strong organic growth and operating performance.

We increased our managed home count by about 3,600 homes over the year, including 1,162 homes net of dispositions in Q1 and acquired a large portfolio in Nashville, 708 homes from Invitation Homes. This is a high-quality portfolio that allows us to gain scale in a high growing market in Nashville and it would stabilize at about 96%.

So, that's one of the reasons that our occupancy edged out year-over-year about 140 basis points to 93.8% at the close of 2019. Rent growth has moderated, but still continues to be very strong at 5.1%.

The higher - larger lease portfolio up 23% year-over-year, strong rent growth and relatively stable occupancy has led our overall revenues in the portfolio to grow almost 27%. Expenses are up again on the larger lease portfolio, but not as much as we continue to contain expenses in overhead and that resulted in our NOI margin increasing 50 basis points from 64.5% to 65% for the quarter.

As we work our way down to FFO, a couple things to point out. Overhead is growing, it's up 14% year-over-year, but obviously not as much as the overall portfolio.

If you look at overhead for the full year, it's roughly $20 million and it's stable with what it was in 2018, and this goes to show how we continue to get economies of scale in this business and that we're really geared up to be much, much larger. Non-recurring items really refers to one-time items transaction cost as a result of refinancing, our warehouse credit facility in Q4; and the new Morgan Stanley term loans.

And now if - and now to get to our proportional share of FFO, we deduct the non-controlling interest. Remember, at this time last year, our single-family rental joint venture only had 2,000 homes in it.

Today, we're at 5,600 homes. So, we're generating more and more income and cash flow and that needs to get deducted as limited partner interest to arrive at our core FFO of $23 million, and up 42% year-over-year.

Let's move on to Slide 9 and talk about our same store portfolio in single-family rental, which provides a more pure comparison year-over-year. We continue to have an occupancy buys particularly in the slower leasing months in Q4, and that occupancy is up normally 30 basis points year-over-year.

Rent growth strong, this is a industry leading metric of 5.3%. It has moderated 110 basis points year-over-year.

The main reason for this is our decision to self-govern on renewals. Our renewals for the last few quarters have been 4.7% or 4.8% compared to 5.6% in Q4 2018.

So, that's the main reason for the lower rent. Obviously sequentially this is a seasonal business and Q4 is a slower quarter.

And so, the new rent growth has obviously dropped from where it was in Q2 and Q3, and that's what we would have expected. Overall, if we move down to revenues, rental revenues up 5%, again a higher rent and stable occupancy.

Ancillary fee income is up 18% year-over-year, and now represents about 4% of rental revenue. We're doing a better job collecting on administration fees, PET fees, enforcing renter's insurance.

We talked about in our Investor Day how this area will continue to grow as percentage of revenues as we offer more services to our residents, including rolling out smart home technology. As we move down to expenses, our property taxes continue to be the one key item that is negating our margin expansion.

And these were up 6.7% year-over-year. This is slightly lower than where we guided at 7% to 8%; that still continues to be a headwind.

Repairs and maintenance, the story continues to be one of internalization, and the gains we get from doing more R&M ourselves. Our turnover was also lower year-over-year at 25.7%.

In fact for the entire portfolio, our turnover was 25.7% for the year, which is a record low for us and points really to our middle market investment strategy, our ability to screen residents better and really a strong focus on customer service. Other expenses were up 8% year-over-year, some of this relates to higher .

We've also reclassified the renter's insurance. We used to show this as a net number, now we showed it as a gross number in both revenues and expenses and that explains some of the increase, the 8% year-over-year.

Overall revenues are up on the same store portfolio, 5.3%; operating expenses up 3%; for same-home NOI growth of 6.5%, that's an industry leading metric up to $39 million for the quarter; and our margin has expanded 75 basis points from 64.7% to 65.5%. This is a record for us in the fourth quarter.

Let's move on to Slide 10 and talk about our U.S. multi-family rental operations.

Since taking over the portfolio from Starlight in June, our focus again continues to be on occupancy growth, that's up 160 basis points year-over-year. It is down slightly sequentially, obviously again, this is a seasonal business and the winter months are a little slower, but overall occupancy up 160 basis points and our longer term goal is to get occupancy up to 95%.

We are able to do this with strong renewal rent growth of 4.6% that we sacrificed on new moving move-in rent in order to drive the occupancy in Q4; overall revenues up 2%. This is also a story of cost containment.

Our property operating costs are down year-over-year; this speaks to Starlight's efforts to renegotiate service contracts in Q2, Valley, trash, cable and that's why our operating costs have come in lower year-over-year. On property taxes, we had some onetime settlements on prior assessments, which led to lower property taxes.

Property taxes in general are increasing, but the one-time settlements allowed us to record lower taxes year-over-year and reduce our operating expenses year-over-year by 1%. That translated to NOI growth on the portfolio of 5%, if you strip out the one-time property tax settlements, it's closer to 4% and our margin increased up from 57.8% to 59%.

Again, very strong performance for the quarter. Let's move on to Slide 11 and talk about our Canadian multi-family development portfolio.

We have 3,600 units in the portfolio today under various stages of lease up or development. This is an incredibly high-quality portfolio.

All the properties are located in downtown Toronto, are transit-oriented or walkable either in midtown or the downtown core in a market with virtually no vacancy; about 1% vacancy and that recorded about 5% rent growth in 2019. I'm starting with The Selby, at the end of the year, we were at 86% lease-up.

Today, we're above 90%, in-place rents of $3.80. This property recorded the fastest lease-up for the year according to Urbanation and also earned a number of accolades, including the Rental Development of the Year by the FRPO.

So, that's something we're really proud of is our first rental property in Toronto. In terms of projects that are under construction, The Taylor, King and Spadina is now above grade.

The Ivy, that's the Gloucester project that's been renamed, Yonge and Gloucester, we are doing site preparation and demolition. The first phase of the West Don Lands, which we call Block 8 is roughly 800 units, that's also - we've also commenced underground construction there as well.

If we move down the page to our last two projects, the Labatt project Corktown is going to be a mix tender building a half condo units, half rental. We intend to launch the condo sale in September and start construction at relatively the same time.

And The James in Scrivener Square in the Rosedale/Summerhill has received its LPAT approval and our plan right now is to commence the demolition of that - of the existing project there in May and get going on construction. So, if you take it in totality, as we look towards the end of this year, we will have five projects and 2,000 units under construction.

Let's move on to Slide 12. When we look at the cost of that construction on completion, I mean you can see that that's roughly $1.5 billion.

I'll just remind everybody that all the figures in this presentation are in U.S. dollars given our functional currency is U.S.D.

So the cost of this portfolio in U.S. dollars is $1.5 billion.

We're about 23% complete to-date and the cost to complete is $1.1 billion or 77% to go. The cost to-date are essentially equity.

The equities in the ground and we'll use construction financing to complete the portfolio. On completion, we expect that to generate a conservative amount of NOI of about $81 million and again, when I say conservative, we're assuming a 5.25% development yield to calculate that, 65% leverage and 3.5% interest rate, that compares to The Selby's, an example.

Selby has a 6% development yield and we locked in 10-year financing at 2.4%. So we think those numbers are relatively conservative, but even at $81 million and our 30% share at $24 million, you can see how much value creation that potentially can create for our shareholders.

Our IFRS now of this business is $0.50. If we're able to receive - achieve a 3.5% to 4% valuation on completion, that translates into NAV growth of 3 to 4 times over three years.

So this is a relatively small part of our business, but you can see it can generate significant upside and NAV accretion for us going forward. Let's move to Slide 13 and talk about our private funds and advisory business.

We talked about in Q2 that our goal was to raise $1.5 billion of incremental third-party equity with the announcement of the ACER'S joint venture we got about 30% of the way there and that largely explains the increase year-over-year from $1.7 billion, up 40% to $2.4 billion of third-party capital. In terms of contractual fees, those were up 13% year-over-year.

The big story here is Johnson, a much higher Johnson development fees and higher performance fees. Johnson had a record year in 2019 in terms of home sales.

Our lot sales for the quarter were up 75% year-over-year. This is partly explained by weather delays in Q4 of 2018, which led to back-ended lot closings in 2019, but it also points to the much stronger housing market with dramatically lower mortgage rates.

Home buying - new home buying is being very strong, and that spurred obviously the builders that need to replenish their existing inventory. I would also add that home sales in Q4 - home sales in Johnson's 19 active communities were up 20% year-over-year, and we've seen that trend continue into Q1 with home sales also up another 20%.

So this business right now is looking very strong. As we look at the components of contractual fees, for-sale housing is down, and this is to be expected as we continue to distribute cash and many of these investment vehicles are harvest mode, the investment balance is declining and that obviously translates into lower contractual fees.

But for those vehicles that are in the money, we're seeing higher performance fees, and our performance fees for the quarter were $2.6 million and about $7.5 million for the year. So that translate - those were the main reasons, higher Johnson fees and performance fees that likely to be on our contractual fees.

Let's move on to Slide 14, and really talking about our key five priorities, which we introduced in Q2 2019. Our first priority is to continue Tricon's transformation into a rental housing company, providing our shareholders with stable predictable income.

To measure our performance, we adopted FFO per share as a key metric and set a target of a 10% compounded annual growth rate through 2022. We tend to achieve this by simply completing what we've started, fully investing our single-family rental joint venture, building out our Canadian multi-family projects, growing single-family NOI by 4% to 5% and multi-family NOI by 3% per annum through 2022.

Our second priority is to raise third-party capital in all our business verticals. We see raising third-party capital as a pathway to enhance scale, improve our operational efficiency and drive a return on equity.

Our third priority is to continue growing our book value per share by reinvesting the majority of free cash flows into accretive growth opportunities in rental housing. Our fourth priority is to reduce leverage.

Our goal is to pursue look-through leverage that's net debt-to-assets of 50% to 55% over the next three years, excluding the convertible debentures. And finally, we want to improve and simplify our financial reporting to make our performance comparable to other real estate companies.

We believe the move to consolidated accounting will be a big step towards this goal. We will also be revamping our MD&A in Q1 to include more disclosure around such items as CapEx, cash flow segment and reporting and overhead allocation.

Okay. Let's move over to Slide 15 and go through our performance dashboard, let's see how we're doing.

So starting with FFO per share as Wissam mentioned, we're up 35% year-over-year very strong growth admittedly though off of a low base. Our prior year target out to 2022 was $0.50 to $0.55 given that we beat our 2019 guidance by $0.02.

We've also revised our 2022 target up $0.02 to $0.52 to $0.57 and if you take the top end of the guidance, that represents more than 10% annual compounded growth to 2022. Third-party AUM, no tangible progress here in the quarter, but we are working on two major fund raisers in multi-family, one at further our Canadian build-to-core strategy and also the syndication of our U.S.

multi-family business and we're hoping for closings of those major vehicles in Q3. Our book value per share has grown by 18% per annum since entering single-family rental in 2012.

This is something that we're going to continue to track. As a reminder our book value per share does not take into account our private funds in business or any embedded growth in our underlying investments.

In terms of leverage, we've stated that about 60% to 61% look-through leverage, but the major catalyst here is going to be the syndication of our U.S. multi-family portfolio that will help us get closer to 50% to 55%.

So that is tied to the third-party AUM. So we're still working on that.

And again subsequent to quarter-end, we were able to syndicate a 50% interest in Trinity Falls and that capital is being used to repay debt. And finally in terms of improving reporting, we checked the box in Q3 when we formally adopted FFO per share.

We launched our ESG plan. This year we've checked that box and we will be checking the financial disclosure practices and simplification next quarter when we formally adopt consolidated accounting and we update our MD&A and in many cases adopt U.S.

dollar reporting. I'd like to close our Q4 earnings presentation with a summary of our key priorities unveiled in our ESG roadmap on page 16.

Although we've only recently formalized our ESG framework, ESG has always guided our investment in asset management practices over the past 31 years. When we developed this framework last year, it wasn't just a simple checking the boxes exercise.

We spent several months thinking through what really matters to us and our stakeholders and we summarized our findings to five key priorities that we will focus on in the next three years. Our first priority is our people, at Tricon we believe that our people are most important asset.

We make it our top priority to foster our culture of diversity, inclusiveness and service so that our team in turn can enrich lives of residents and stakeholders. Our second priority is our residents.

We believe a person's home is where they experienced the most important life events. In all our rental offerings, we focus on quality housing and excellent customer service to enrich our residents' lives and the communities they live in.

Our third priority is our innovation. We view ourselves as tech enabled rental housing company, managing a disparate portfolio of single-family rental homes could only be possible with the use of technology and now we intend to apply the innovations from this business to multi-family rental and harness our culture of innovation to improve the resident experience and operations.

Our fourth priority is our impact. We view it as our mission to consume fewer resources and reduce our carbon footprint.

We're dedicated to building developments to lead standards and protecting wildlife and biodiversity by creating parks, green spaces and natural ecosystems where appropriate. And our last priority is our governance.

At Tricon we believe in conducting ourselves with integrity, trust and transparency in everything we do. We're also committed to fostering culture inclusion and diversity within our board, management team and employees.

We believe this ESG roadmap will guide us in achieving measurable results over the next three years and will provide a framework for robust data collection reporting on Tricon's ongoing progress and performance. The full roadmap is available on our website and on SEDAR and I would encourage you to read it.

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

First question just on the single-family rental, you guys had a big portfolio acquisition in Nashville in Q4. Do you expect that to impact the pace of acquisitions at least at the beginning part of 2020?

On a little bit. I mean we've guided that we're - and we've been very specific about this.

On average, we're trying to buy 800 homes per quarter. This is what we've agreed to with our joint venture partners.

That will ebb and flow a little bit based on the seasonality and opportunities, and obviously this opportunity with Invitation Homes came up in Q4, which exceeded our target, will essentially just rebalance this year. So, it is probably going to mean that our acquisition pace will be below 800 in Q1, and then we'll probably go back to 800 in Q2.

Okay. Are there any portfolios you're looking at now?

We're always looking at small portfolios. Nothing - there's no major portfolios that are being marketed right now, but we're always looking at our smaller portfolios could be 50 or a couple of hundred homes.

But we don't depend on it. The whole acquisition program is really built around organic acquisitions, onesie-twosies through the MLS and through iBuyers.

And so, if any portfolios come out, we really view it is gravy.

And then just secondly looking at FFO going forward, the TLR Canada, it's - some pretty good fair value gains in there that you guys count in the FFO. What's a good run rate or best way to model that going forward into 2020?

So, in terms of FFO from developments, there's probably different ways to think about it. If you wanted to look at it for example as a return on average invested capital, the way I think about it is it could be 5% let's say on the for-sale housing piece and maybe 10% on the Canadian multi-family development piece.

If you work through that math, you'll probably get to a run rate. That's very similar to 2019 Jon.

So I think that numbers, maybe just shy of $20 million for the full year, but that that's probably where we would guide you.

I just wanted to follow-up quickly on the portfolio sort of acquisition pace for the SFR business. Are you still seeing very strong demand or opportunities on the MLS side of things, like just thinking about how things will evolve over the next couple of years?

Do you think you'll eventually have to - have more of a reliance on portfolio acquisition, would you think about growing that business?

No. I mean if anything, in a sense we're capital constrained by the joint venture and the guidelines of that joint venture, which has been very prescriptive.

If we could deploy more capital, if we could expand or buy box, we absolutely could buy more homes on the MLS and through iBuyers. So this is very much being governed by ourselves and we really view it as a long, long term opportunity.

And if you think about it this way, roughly 5.5 million to 6 million homes are being traded on the secondary market through the MLS every year in the U.S. and 40% let say of those are in the Sun Belt.

We're only trying to get 3,000 right now 3,200. With more capital, over time, we could easily expand or buy box and go to 5,000, but for today, we're focusing on 800 and then down the road, when we think about creating a new joint venture, we'll determine whether it makes sense to grow faster.

And then just coming back to the FFO outlook, any change - I assume the answer is no, but any change to the FFO outlook on the multi-family side in the U.S., TLR U.S.?

No, I mean, our long-term - the long-term goals that we're setting over three years, the parameters to achieve that growth, a 10% per annum growth haven't changed. I mean, we upped our target, our guidance essentially because the 2019 numbers moved up and we've used that as the base to move forward.

But otherwise, the underlying growth assumptions are the same. We continue to believe that over time, our single-family rental will generate 4% to 5% same-store growth and our multi-family - you asked about the multi-family, that we - over time, we think it will be about 3%.

There will be some pressure I think in the short-term as I talked about in my prepared remarks, regarding property taxes and insurance. But over a longer period of time, we feel good about 3% growth for multi-family.

And then maybe just finally, you syndicated, I guess, 50% of Trinity Falls, how do you expect those syndications to roll out over the future?

What we're - we've been pretty clear that we want to de-emphasize our exposure to for-sale housing on the balance sheet, and we're going to continue to do that. So, we feel great about syndicating a 50% interest in Trinity Falls.

We're now looking - we have another master planned community on our balance sheet called Bryson. We're now talking to the joint venture about that opportunity as well.

I'm so hopeful - we're hopeful that we can syndicate that. And then we've got some other larger assets, which were also really - we're looking to expedite those business plans as well instead of letting them kind of build out in the normal course of operations, we're evaluating some cases whether we just sell those portfolios or investments.

So you should expect this to continue to look for asset sales to reduce our exposure to for-sale housing and to generate cash for deleveraging.

As we think about the internalization of the Canadian property management and U.S. asset management, could you give us a couple of examples on things that you plan to do differently or perhaps alternatively maybe some opportunities for potential revenue growth or expense savings?

I'm going to turn that over to Jon and then perhaps Kevin. But Jon maybe you can start with that.

Yes, sure, and Matt, we appreciate the question. And really as Gary talked about, as we transition it to a rental housing company one of the core competencies that we've built over time, especially in our Orange County operating hub is Proptech, right, in some of the ways we've been able to leverage technology in our single-family rental business.

And a handful of examples that we'll be able to roll out in multi-family over time is self-showing, so single-family rental we've been very successful with having residents shop the homes and allowed themselves to access those homes after providing us their drivers' license and a credit card. We think there are select opportunities in multi-family to leverage that as well maybe they shop at a leasing center that then can tour themselves through the properties after they provided us some information.

So we're very excited about that opportunity. We've also developed great 360 tour technology.

So someone can you using their smartphone in the comfort of their own home tour one of our homes and we think that can be rolled out across multi-family to enhance the online experience, but also allow us to inventory some of the components of each individual unit in our multi-family portfolio. We've also built a fantastic operating hub, call center, accounting team in Orange County that we think we can leverage across multi-family.

So where calls can come into a centralized state-of-the-art call center, would be handled there versus at the property. Similarly where accounting related can come into our large and very sophisticated accounting team versus being handled locally.

So those are our handful of other ideas. We've also built up a great buying program and procurement department through our single-family rental business that we think can be leveraged across multi-family to make sure that we're really buying all components whether it's appliances, washer, dryers, flooring at best possible price.

So I think a couple of those will hit us on the revenue side or we can drive incremental revenue growth and a couple of those will hit us on the expense savings side. And overall we think there's a number of things.

None of these will be dramatic in and of themselves, but when you add them all together we think there's a number of areas that we're going to be able to make incremental - and drive the incremental NOI and FFO growth.

Appreciate the color.

Jon, the only thing I would add is I operated a large portfolio of apartment communities in my past and when we created the call center, one of the things and benefits we found just to add a little color to it is when we have a call center and all the calls whether they're maintenance calls, vendor calls even leasing calls, as you take those off of the office, it really brings a much calmer pace in the rental community and in the leasing office. So the people that are there can really focus on the customer that's in front of them or the residents when they come in as opposed to trying to negotiate phones that are ringing and somebody in front of them.

And that more relaxed pace really helps in how we correspond with our residents. And so, it makes a pretty big difference, it's hard to explain kind of in the numbers.

And then lastly, what we've already done is we've been working with our asset management group to migrate over to CoreLogic as our resident underwriting platform, which will help us with delinquencies and going forward.

Thank you. I appreciate the color on that.

And maybe just changing gears a tad. In terms of the demographic composition of your tenant base, could you tell us the average age of the tenant in your portfolio, and maybe what impact you think household formation might have over the next two or three years?

Sure. So the average head of household in our single-family rental business is 38 years.

Our multi-family business is younger than that. This is increasingly becoming a millennial demographic, that's - that are our residents.

And so, that's not just going to continue. And so, Matt, can I speak to household formation specifically over the next few years?

We don't have a crystal ball. I mean U.S.

household formation has been growing at 1 million plus per year. It's hard to know how that breaks down between ownership and rentership.

But what we would say is that we're focused on really essential middle market housing, this is affordable housing. And because of a number of factors including the ballooning of student debt, tighter underwriting on the mortgage side compared to pre-financial crisis, there's a lot of people with household formation that are really shutout for different reasons of the new housing or the existing housing market, and need shelter, need a quality place to live.

And so we're uniquely positioned I think to take advantage of that and I think the other thing is, is our focus on the Sun Belt, in particular, we're going to continue to see lots of growth. You can think about it this way, 40% of the U.S.

population lives in the Sun Belt, but they're going to get 60% to 70% of the growth. And, so a lot of that house formation - household information is going to be focused on the Sun Belt because, look, Americans are focused on moving to places with better weather, lower taxes, newer infrastructure where there's more jobs, and we believe although we don't have a crystal ball, we believe that those Sun Belt markets are going to continue to grow faster than the national average and we'll continue to have the wind behind your back.

Appreciate that. And maybe one last question from me.

Maybe you could just outline your top three priorities for 2020?

Yeah. So, the top three very similar to what we talked about on our prepared remarks is the first one is driving FFO per share growth.

We'd like to see that grow by 10% per annum. We've talked about that over three years.

We haven't given any kind of specific or hard guidance for a given year, it might ebb and flow from year to year, but we would like to see 10% growth, let's say, for 2020. Our second key priority would be raising a third-party capital and a significant amount of third-party capital.

We talked about two major fund raisers that are in the works for multi-family again to further our Canadian multi-family build-to-core program, also to syndicate our U.S. multi-family portfolio, we'd love to have these done by Q3.

It takes time. It's not like the public markets, but we'd love to have those closed by Q3 and that really dovetails, I think, to the third priority which is deleveraging.

And if we can raise a significant amount of money in the syndication of our U.S. multi-family portfolio, we can apply those proceeds that can delever and get closer to our longer term target 50% to 55% debt to assets.

So I hope that helps.

Maybe starting off with Gary, your kind of long-term guidance for same home NOI growth within NTH of 4% to 5%. Given your kind of self-regulating on lease renewals and some of the peers are talking about expenses kind of inching up.

How much of that 4% to 5% is predicated on continued margin expansion going forward?

It's really not I mean we're not guiding - we're being careful with this, but we're not guiding the higher margins. We're at 65%.

I mean think about how far we've come. We were at literally 53% three to five years ago with Silver Bay, we were at 57% and now we're up to 65% or 65.5% for the quarter.

We're not guiding beyond that, Mario, because I think that we will see - we will see expenses grow and we can't - again, we don't have a crystal ball, but I will say that one of the reasons our NOI growth, same-store NOI growth has been so strong and it's moderated a little bit is because of the internalization of R&M. And for us that in some cases has going to catch up compared to our larger peers.

And so now that that's largely in place, we're not going to be able to really drive reductions in R&M. That will probably more likely increase with inflation.

I think we'll continue to see incremental process improvements and we'll get the benefit of economies of scale and a better procurement program, but that the market shouldn't expect us to have lower R&M expense going forward, so I think the 4% to 5% is largely predicated on both revenues and expenses growing.

And then you mentioned that your turnover was at an all-time low at just shy of 26%. Is that a floor, is that a structural low for your portfolio or could it go lower?

I'm going to turn that over to Kevin. I'd like to get his views on that.

Yes, I think much like Gary just talked about on margin improvement or expansion, I think that where we are, I could see it staying in the 25%, 26%. We drove a lot of that just by optimizing the quality of our portfolio.

We've integrated CoreLogic. We've got very purposeful about our collections and all of that and how we're working with residents, I think really drove down the retention rates, and we've got good quality people that are staying longer with us where we're buying homes are in places that we have families are getting and integrated in the schools and they're staying longer with us.

So I think that in our culture really peer service and enriching lives that Gary talked about at the beginning, all of that has taken hold and has really brought the improvements that we've seen. Two years ago, I didn't know that we would get to 25.7% or below 26%.

I think this is where I want to be careful. Could we get lower?

Yeah. But I wouldn't message it at this point.

I think we're close to what we're going to bottom out.

Yes. Okay.

And just to build on that Mario, I mean, to get down to 25%, I mean that means that on average our residents are staying in our homes for four years as you know right, in an environment that's not rent control. That's very, very good.

And so I would agree with that. I don't think we're going to see anything below 25%, but you never know.

In terms of the fundraising initiatives for 2020, you mentioned the couple, one in the U.S. and one in Canada.

The expansion in Canada on the build-to-rent, would that bring, kind of is there a plan to bring a third-party capital and to further syndicate your 30% interest in existing projects or is the plan to substantially increase the number of projects do you looking at going forward?

Yes. It's the latter.

It's the latter. In an existing portfolio, we own 30% and we're not looking to syndicate that any further.

If anything we want to give ourselves the opportunity in the future if any of our existing partners whether they're financial strategic we can buy their interest, so we can increase our share in those properties. The real intent - the main intent and bringing in third-party capital into development is because obviously as you know, it's a drag on our balance sheet with no real cash earnings until stabilization or completion.

So we're going to continue to use third-party capital to grow our development business. It just makes a lot of sense.

We can essentially take it off balance sheet. And so this new capital is really just a further - is just to grow the existing portfolio.

In fact we'd love to double the existing portfolio. We're about 3,600 units on this new sleeve of capital could over time do that.

And we'd also probably look to co-invest roughly 30%.

And what would the primary governor be in terms of the planned total amount funds raised, is it kind of the available opportunities, is it the amount of capital that LP investors are looking to put into development in Canada?

Yes. I know, I mean I can't get into the specifics, but the group that we're working with is extremely large.

So it's not the capital. I think the governor will ultimately be the opportunities which as you know in Toronto are tough to come by, you have to be creative.

And also I think within development, you never want to get too far over your skies. You've got to grow at a natural - a speed that makes sense.

And so even if all the opportunities were there like today, we would never want to go too fast. So we've currently been doing two or three projects per year and that feels like a comfortable pace.

And then just on the Starlight portfolio, presumably the partner that you select to syndicate, an interest in is someone that you plan to grow with over time, in terms of future capital deployment or acquisition opportunities, is that kind of 3% same-store number that you're thinking about for the existing Starlight portfolio, kind of a good number to use for assets you plan on acquiring within that JV going forward?

Yes. I think that's fair.

And you're right, I think that and whoever we're going to select to syndicate this portfolio to and we've seen a lot of investor. We've seen some significant enthusiasm for not just, not only the asset class but certainly this specific portfolio; we are taking a longer term view with them.

We're not just looking to syndicate. We're also saying look this is a partnership, how can we grow together in the future and how can we acquire more one-off assets.

So the capital raising exercise here is syndication plus looking for growth capital.

And with the plan kind of Q3 closing your announcement, is that simply the syndication of the Starlight portfolio or do you think you'd be in a position to kind of highlight what that growth capital may look like in terms of magnitude?

Yes, I think we will do both at the same time.

My last question just on the sale of Trinity Falls into the JV from an FFO standpoint and then Gary, you mentioned that we should think about land development in terms of 5% on the invested capital. Would that be similar to any Trinity Falls in terms of what the FFO would be - kind of a loss to FFO on the sale versus kind of the cost of debt that you'd be using the proceeds to pay down kind of FFO neutral?

Yes. That I think - maybe that's a question Mario we take offline, I'd have to kind of work - we'll have to work through that.

I think to be more specific, but we are - I mean in a kind of a go-forward - well, let me put it to you this way. I think in our go-forward plan of growing FFO per share by 10% per annum, we are taking into account two things.

One is the reduction of the for-sale housing business. As we continue just through not ordinary course and also through more accelerated dispositions like Trinity Falls and we're also assuming investment income of roughly 5%.

So I don't know if that answers your question, but we're not getting more - we're not using aggressive numbers there to drive the longer term growth of the overall FFO.

Most of my questions have been answered, just a few modeling ones. Gary, what's your expectation for-sale cash flow in 2020?

I think it will be higher than 2019. How about that?

We generated $52 million in 2019. We have now syndicated 50% interest in Trinity Falls.

That's generated again roughly $50 million of cash right there. So we're definitely going to be ahead of 2019.

I can't give you a specific number, but it's going to be $50 million plus.

And then do you have a sense as to what The Selby rents would be on average on a per suite basis? And maybe what the NOI expectation is for 2020?

$2,800.

Yes. I would say about $2,800 per suite and the expectation for 2020...

Or maybe just the margin there?

Yes, so the - actually the average - look the average rent is about $3.80 and that that is moving $3.80 per foot per suite, that's moving up. That translates to probably about $2,800 per suite.

At the top of my head and we're looking at renewal growth - we're probably looking at renewal growth. There's been very little - very few renewals.

I think there's only been a couple. People love the building .

So we've been able to keep the backdoor of essentially close as we continue to drive the complete the lease up. But I would assume that our renewals would probably be around 3%.

Again, we are not rent controlled under these new buildings. And...

And...

And the margin, we're currently at about 65%, but we're, let's say 90% leased. So I think as we get the full stabilization of around, what 97% to 97.5%, will probably get to a margin about 70%.

Does that help?

And then last question, what percentage of the Starlight portfolio are you hoping to syndicate?

That one is easier. 50%.

50%. Okay.

Okay. Thanks, I'll turn back.

Just to go back to the FFO discussion and the fair value gains from the development projects. You said to expect something around $20 million in gains on an annual basis.

Just to be clear, is that - so when you talk about 10% growth for FFO per share, is that the assumption that you guys use in that growth metric $20 million of fair value gains?

Yes. It is.

And then just relating to that with the potential - with the change in the disclosures going forward and there was commentary around - there could be some movement around those fair value numbers. Is that still a - like are you fairly confident that that's the number to go by post the reporting changes still or could there be some changes to that $20 million?

No. I don't think.

There, we will not see any kind of meaningful changes on the P&L or FFO. So yeah, that changed the consolidated accounting will not impact that, so that remains true whether we're under investment entity or consolidated accounting.

I appreciate the clarification there. And just switching gears to the single family portfolio, and so after the portfolio acquisition in Nashville and the way things have been turning in the existing portfolio, where do you look in terms of geographic exposure.

I mean I know cities like Phoenix, Atlanta have been performing really well. So can we expect to see more deployments in areas you're already located in or would it be potential new areas or kind of where you're seeing the best demographic that play out?

Well, I would say in the short term, let's say you know over the next 6 months to 12 months we're going to continue to largely focus on Texas in the Southeast. That's where, there's great underlying growth economic fundamentals and we're continuing to be able in our JV buy box to buy it high 5%, you know 6% cap rates.

So just I wouldn't just expect this to continue to do that, but I think as we look further ahead, maybe into 2021 particularly as we think about creating a new joint venture or maybe creating various different products or buy boxes, there is going to - there is certainly an opportunity available there to expand into other markets or to grow in other markets where we are initially - where we currently have a presence, like Phoenix or Vegas or even California. Those are markets where there's great buying opportunities today, but the going in yield is lower.

Yet you might get more rent appreciation. So it's a bit of a - it's a slightly different strategy where you might get - it's a trade-off between - in the short-term between the kind of income and growth, but we think that just like a multi-family there's various strategies that the market accepts, we think in single-family rental, there could be there could be multiple strategies related to income growth or build-to-core, build-to-rent.

And so our goal long-term is to expand our buy box to - we potentially have three different product types. And to invest across all our key markets, not just the Southeast and Texas.

And as a reminder right now, we're in 18 different markets including on the West Coast and in the Southwest.

I appreciate the color there. And just one last question from me on the multi-family portfolio, when you talk about the synergy opportunities with the TAH back office and potentially repair and maintenance programs, we have in place is - as I know that the near-term focus is to focus on occupancy, but could we start to see some of those synergies realize kind of towards the end of this year or is that more of a 2021 goal to work towards just where do you think and when do you think we could start to see that?

Yes it's not - look I think that the best opportunity in our U.S. multi-family portfolio is to drive new lease growth.

That's where there's the biggest upside. To really see synergies from an operational perspective, we have to internalize property management and we haven't done that yet.

We've internalized - I want to be clear we've internalized asset management not property management in the in U.S. multi-family.

And in our goal to internalized property management is a longer term goal, it's not something we're going to do in 2020; it's probably more likely 2021. And so therefore to see any kind of operational benefits or synergies, we have to look further ahead to probably 2021.

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

We look forward to speaking to you in May when we discuss our Q1 results.