Tricon Capital reports fourth quarter and year-end results
This is a new company that I am starting to be interested in;it is an asset manager that focuses on real estate.It announced it's results for Q4 and year-end.It's assets for the year were $2.5 billion which is up 34%;it's adjusted EBITDA increased by 45% to $100 million.So adjusted earnings per share increased by 25% to $.71 per share.Tricon is an asset manager with a different business model.They manage assets for third party investors and earn fees from their investment and advisory business.Then they invest largely in single-family rental homes.They seem to acquire complete housing subdivisions and lease them out(on a long and short term basis).They also add improvements to the housing project and increase it's value.Tricon takes it's rental income and increases the value of the property and hence obtains value in two ways.
Tricon Housing
It's two big subsidiaries are Tricon Housing and Tricon American Homes;both are big contributors to earnings.They recorded a 131% increase in income over 2013 from Tricon Housing and 111% increase for Tricon American Homes (TAH).TAH acquired 1700 homes to own 5000 homes and has an 84% occupancy rate and closed on a further $150 million worth of new homes in April 2015.So there is room to increase returns here next year.Also the fair market value of homes owned went up as well.Tricon also acquired in August it's first "manufactured housing community" called Longhaven Estates in Arizona and it generated a little income in 2014.It will likely increase it's contribution in 2015.
A New Acquisition
In April 2014 it acquired a 50.1% interest in a company called Johnson Contractual Fees.It seems to manage houses and housing divisions just as Tricon does.It contributed almost $7 million in contributions in 2014.This could be increased to approximately $30 million in 2015.
Risk Analysis
There are two kinds of risk-- risk from having much of it's assets exposed to the same kind of danger or peril and the risk from having it's stock price exposed to volatility.The first is risk diversification and Tricon is vulnerable here.It gets all of it's income from owning or managing single family rentals in U.S.A.This is alleviated by having it's properties in several states(NorthCarolina,SouthCarolina,Texas and Arizona) with separate jurisdictions.This does reduce the risk somewhat but they need to have more assets in other states or Canada.At the present time this does not represent any immediate danger but it does raise the risk associated with the stock.Tricon does need to look at other jurisdictions.
The second kind of risk comes from the inherent risk in the stock.Are it's financial statistics such that it makes their stock volatile and influenced by outside factors.This risk is measured roughly by the beta of the stock.It is a measure of volatility.Tricon's beta is about .35 which is about the same as Crombie REIT or Cominar REIT.It's assets and equity are much smaller but it's revenues and income are much closer in line.In comparison, another real estate REIT called Innvest with comparable assets has a beta of 1.13 or is three times more volatile.And another comparable is Element Financial which has 11 times the assets but less income;it's beta is 1.03 or 3 times that of Tricon. Also Tricon's shareholder equity and income is much greater than any of the small tier REITs such as Innvest or Interent .It is clear that Tricon is a stable and profitable REIT.This blog predicts that Tricon will continue to be more stable and more profitable than any of the smaller RIETs.Another profitable quarter (reporting in May) may send Tricon up closer to the price of it's most comparable REIT, that is, Crombie REIT.It's price is about $13.50.
Tricon Housing
It's two big subsidiaries are Tricon Housing and Tricon American Homes;both are big contributors to earnings.They recorded a 131% increase in income over 2013 from Tricon Housing and 111% increase for Tricon American Homes (TAH).TAH acquired 1700 homes to own 5000 homes and has an 84% occupancy rate and closed on a further $150 million worth of new homes in April 2015.So there is room to increase returns here next year.Also the fair market value of homes owned went up as well.Tricon also acquired in August it's first "manufactured housing community" called Longhaven Estates in Arizona and it generated a little income in 2014.It will likely increase it's contribution in 2015.
A New Acquisition
In April 2014 it acquired a 50.1% interest in a company called Johnson Contractual Fees.It seems to manage houses and housing divisions just as Tricon does.It contributed almost $7 million in contributions in 2014.This could be increased to approximately $30 million in 2015.
Risk Analysis
There are two kinds of risk-- risk from having much of it's assets exposed to the same kind of danger or peril and the risk from having it's stock price exposed to volatility.The first is risk diversification and Tricon is vulnerable here.It gets all of it's income from owning or managing single family rentals in U.S.A.This is alleviated by having it's properties in several states(NorthCarolina,SouthCarolina,Texas and Arizona) with separate jurisdictions.This does reduce the risk somewhat but they need to have more assets in other states or Canada.At the present time this does not represent any immediate danger but it does raise the risk associated with the stock.Tricon does need to look at other jurisdictions.
The second kind of risk comes from the inherent risk in the stock.Are it's financial statistics such that it makes their stock volatile and influenced by outside factors.This risk is measured roughly by the beta of the stock.It is a measure of volatility.Tricon's beta is about .35 which is about the same as Crombie REIT or Cominar REIT.It's assets and equity are much smaller but it's revenues and income are much closer in line.In comparison, another real estate REIT called Innvest with comparable assets has a beta of 1.13 or is three times more volatile.And another comparable is Element Financial which has 11 times the assets but less income;it's beta is 1.03 or 3 times that of Tricon. Also Tricon's shareholder equity and income is much greater than any of the small tier REITs such as Innvest or Interent .It is clear that Tricon is a stable and profitable REIT.This blog predicts that Tricon will continue to be more stable and more profitable than any of the smaller RIETs.Another profitable quarter (reporting in May) may send Tricon up closer to the price of it's most comparable REIT, that is, Crombie REIT.It's price is about $13.50.
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