Tricon Reports Robust Q3 2014 Results

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TORONTO, Nov. 11, 2014 /CNW/ - Tricon Capital Group Inc. announced results for the quarter ended September 30, 2014 (Q3 2014) including growth in quarterly Adjusted Base Revenue of 22% year over year ("YOY") to $21.6 million which drove an 11% YOY increase in Adjusted EBITDA to $19.6 million.

David Berman, Chairman and CEO stated "I'm very proud that our team was able to deliver a 49% YOY increase in adjusted EBITDA for the first nine months of this year, reflecting meaningful growth in each of our business lines. This progress is being driven by our success in securing attractive investment opportunities, while quickly assimilating them to deliver bottom line results. We are redeploying our capital and efforts into new transactions which, through early November, has supported 44% YOY growth in both our total and externally managed AUM. As we look ahead to 2015, we are excited about the prospects for our newest US commingled fund, Tricon Housing Partners US III, on which we expect to announce an initial close in the first half next year."

Q3 2014 Financial Highlights (Summarized in Table below):

• Adjusted Base Revenue was $21.6 million, a 22% YOY increase. Realized Investment Income – Single Family Rental more than doubled as the number of homes owned and occupied increased. Contractual Fees rose 31% including fee income earned from the recent investment in Johnson (the development management division of The Johnson Development Corp.). Investment Income - Land and Homebuilding contracted slightly as a result of capital distributions throughout the year, primarily from THP1 US (formerly "Tricon IX").
  
  
• Adjusted EBITDA of $19.6 million rose 11% YOY, augmented by a $5.8 million SFR Fair Value Adjustment which offset higher costs and fees incurred to support new business developments. For the nine months ended September 30, 2014, Adjusted EBITDA increased 49% YOY to $60.5 million total, driven by a 59% increase in Contractual Fees, 196% increase in Investment Income – Single-Family Rental and 117% increase in Investment Income – Land and Homebuilding.
  
  
• Adjusted Net Income decreased 21% YOY to $9.6 million, primarily due to an 89% increase in Interest Expense, in particular to support growth at Tricon American Homes.
  
  
• The Q3 2014 Adjusted Basic EPS and Adjusted Diluted EPS decreased by 39% and 36% YOY to $0.11 and $0.09, respectively, as a result of a 34% and 26% YOY increase in the weighted average share count to 91.0 million from 68.0 million and to 109.6 million from 87.2 million, respectively.

Selected Financial Summary

	At September 30, 2014		At September 30, 2013		% Change
Asset Under Management	$	2,235,427,000	$	1,624,430,000	38%
	Three Months Ended September 30
	2014		2013		% Change
Net Income (Loss)	$	43,400,000	$	(2,218,000)	NM
Adjusted Base Revenue	$	21,639,000	$	17,701,000	22%
Adjusted Base EBITDA	$	16,133,000	$	15,517,000	4%
Adjusted EBITDA	$	19,640,000	$	17,660,000	11%
Adjusted Net Income	$	9,584,000	$	12,110,000	-21%
Basic Earnings Per Share	$	0.48	$	(0.03)	NM
Diluted Earnings Per Share	$	0.40	$	(0.03)	NM
Adjusted Base Earnings Per Share	$	0.11	$	0.18	-39%
Adjusted Diluted Earnings Per Share	$	0.09	$	0.14	-36%
Weighted Average Basic Shares O/S	90,973,738		68,042,566		34%
Weighted Average Diluted Shares O/S	109,571,512		87,227,946		26%
Dividends Per Share	$	0.06	$	0.06	0%

Q3 2014 Operational Highlights:

AUM, Private Funds and Advisory

• Third party AUM at September 30, 2014 rose 32% YOY to $1.1 billion. The increase was attributable to the formation of two new syndicated investment accounts, and was partly offset by distributions from the private funds, in particular THP1 US ("Tricon IX").
  
  
• In Q3 2014, Contractual Fees increased by $1.7 million or 31% YOY primarily as a result of the addition of $2.9 million in fee income earned from the Company's 50.1% interest in Johnson. Net of Johnson, Contractual Fees decreased by $1.2 million due to a one-time catch up fee received on THP2 US ("Tricon XI") in Q3 2013.
  
  
• Johnson contributed $918,000 to Adjusted Base EBITDA, an 84% increase from $497,000 in Q2 2014, as a result of accelerated activity over the summer following weather related delays in the second quarter.

Land and Homebuilding

• Investment Income – Land and Homebuilding fell 6% YOY in Q3 2014. This decrease was primarily due to the declining investment base of THP1 US (formerly "Tricon IX") where the underlying assets continue to be liquidated and proceeds distributed in line with management's expectations.
  
  
• In this regard, the Company received a distribution of US$22.6 million in the quarter from its THP1 US ("Tricon IX") investment. Since the initial investment in Q3 2013 through September 30, 2014, a total of US$65.0 million of cash has been received on the US$261 million investment. Subsequent to quarter end, a further US$5.1 million was realized.
  
  
• On October 20, 2014, the Company closed a US$103.5 million investment to support the planned acquisition, development and sale of 1,079 homes in an age-targeted, resort style community located on the border of North Scottsdale in Phoenix, Arizona. One of Tricon's institutional partners committed US$93.1 million with an additional US$10.4 million being invested by Tricon.

Single-Family Rental (Tricon American Homes)    

• Realized Investment Income – Single-Family Rental: As of September 30, 2014, the SFR portfolio had grown 65% YOY to 4,682 homes. Investment Income of $5.7 million rose 113% YOY and 21% versus Q2 2014, as the portfolio continued to grow and the number of homes occupied rose by 6%. In turn, net operating income of $8.89 million rose 19% versus Q2 2014 reflecting a 60 basis point increase in the NOI Margin to a record 66.2%.
  
  
• Unrealized Investment Income – Single-Family Rental Fair Value Adjustment: The Company recorded a fair value increase of $5.8 million for the quarter. The increase is net of unrealized performance fees potentially payable to operating partners, and after absorbing approximately US$19.5 million spent in capital expenditures during the quarter. Homes owned as of June 30, 2014 increased in value by 5.3% over the quarter. Since inception, the FVA has totaled US$58.2 million or 10.0% of the total cost basis.
  
  
• In August, TAH increased the amount of its dedicated credit facility to US$400 million from US$250 million, which resulted in total one-time commitment and legal fees of $1,084,000. TAH has begun to integrate its property managers and internalize its property management functions. We believe that this integration will make our operations even more efficient and will have the added benefit of facilitating the expected refinancing of our dedicated credit facility through a securitization in early 2015. As of quarter end, homes in nine of 13 markets were internally managed which led to non-recurring integration fees of $234,000 in the quarter.

Manufactured Housing Communities

• In August, 2014 the company acquired its first MHC asset in Phoenix, Arizona for US$14.1 million. Longhaven Estates generated Investment Income of $44,000 from August 27 through September 30.

Subsequent Events

• On October 15, 2014, recipients of dividends elected to receive 71,154 shares under the DRIP for a total amount of $515,000.
  
  
• On October 6 we renewed our annual NCIB, allowing us to repurchase and cancel shares in the open market. This time we changed the terms to allow us to purchase up to 10% of our float or 6.3 million shares from 5% of the total in the previous agreement. We also put an automatic purchase plan in place, to allow our agent to buy in stock, within parameters, when we are in the quiet period. Under this program, and through November 10, we have repurchased 584,000 shares at an average price of $7.74. 
  
  
• On November 11, 2014, the Board of Directors declared a dividend of six cents per share to shareholders of record on December 31, 2014 payable on January 15, 2015.

Conference Call and Webcast

Management will host a conference call at 10 a.m. ET on November 12, 2014, to discuss the results. Please call 1-647-788-4901 or 1-877-201-0168 (Conference ID # 2891632). The conference call will also be accessible via webcast at www.triconcapital.com (go to Investor Information – Events). A replay of the conference call will be available from noon on November 12, 2014 until midnight on November 19, 2014. To access the replay, call 1-855-859-2056 or 404-537-3406, followed by pass code 2891632#.

The Company's Financial Statements and Management's Discussion and Analysis are available on the Tricon website at www.triconcapital.com and have been filed on SEDAR. The financial information is presented in Canadian dollars.

Forward-Looking Statements

This press release may contain forward-looking statements relating to expected future events and financial and operating results and projections of the Company, including statements regarding future plans, objectives or economic performance that involve risks and uncertainties. Forward-looking information and statements are based on management's expectations, intentions and assumptions. If unknown risks arise, or if any of the assumptions underlying the forward-looking statements prove incorrect, actual results may differ materially from management expectations as projected in such forward-looking statements. Examples of such risks include, but are not limited to, the risks disclosed in the Company's final long form prospectus dated May 14, 2010, the risks disclosed in the Company's subsequent final short form prospectuses issued through July 26, 2013 and the risks described in the Company's continuous disclosure materials from time-to-time, as available on SEDAR at www.sedar.com. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

About Tricon Capital Group Inc.

Founded in 1988, Tricon is one of North America's leading residential real estate investment companies. Tricon provides financing to local operators or developers in select markets in the United States and Canada, with a primary focus on housing in growing markets. Our business objective is to invest for investment income and capital appreciation through our Principal Investment business segments and to earn fee income through our Private Funds and Advisory business. We currently have $2.3 billion of assets under management, including approximately 21,100 single-family lots, 13,300 homes and multi-family units and a portfolio of over 4,600 U.S. single-family rental homes. Since inception, Tricon has invested in over 160 transactions for development projects valued at more than $14 billion. More information about Tricon is available at www.triconcapital.com.

SOURCE: Tricon Capital Group Inc.

Margaret Whelan, Chief Financial Officer, Tel: [phone], Email: [email protected]; Jessie Wang, Financial Analyst, Tel: [phone], Email: [email protected]