Tricon Residential Inc (TCN) 2021 Q4 法說會逐字稿

Good morning, ladies and gentlemen. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Tricon Residential's Fourth Quarter and Full Year 2021 Analyst Conference Call. (Operator Instructions)

I'd now like to hand the conference over to your speaker today, Wojtek Nowak, Managing Director of Capital Markets. Thank you, and Please go ahead.

Thank you, Abby. Good morning, everyone. Thank you for joining us to discuss Tricon's results for the 3 and 12 months ended December 31, 2021, which were shared in the news release distributed yesterday. I'd 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, EDGAR and our company website. Our remarks also include references to non-IFRS 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 on our website and a replay will be accessible there following the call. Lastly, please note that during this call, we will be referring to a supplementary presentation that you can follow by joining our webcast or you can access directly through our website. You can find both the webcast registration and the presentation in the Investors section of triconresidential.com under News and Events.

With that, I will turn the call over to Gary Berman, President and CEO of Tricon.

Thank you, Wojtek, and good morning, everyone. By all accounts, 2021 was a breakout year for Tricon Residential as we harness powerful demand trends to deliver on our business plan and implement bold strategic initiatives. None of this would have been possible without our world-class team and their commitment to excellence, integrity and teamwork in serving our residents and communities. I cannot be prouder of the many talented people who make our company such a great place to work.

Let me share with you some of these achievements on Slide 2. First, we achieved our 3-year core FFO per share target 1 year ahead of schedule with a compounded annual growth rate of 40% over 2 years compared to the 10% target we initially set out. We did this while reducing our balance sheet leverage by nearly half over the course of 2 years and during a pandemic and related recession. We also achieved records in same home turnover, occupancy, rent growth and NOI margin in our single-family rental or SFR business. Our growth plan was supported by over $2 billion of new third-party equity capital commitments, making 2021 the most prolific year of fundraising in Tricon's history. From there, we completed one of the largest U.S. real estate IPOs and Canadian follow-on offerings in history, raising $570 million in gross proceeds.

All of this activity culminated in a monster year for our stock with TCN delivering a 72% total return to common shareholders. Even more impressive is our history of delivering shareholder value over the long term with a 10-year compounded annual return of 20%. And finally, above all else, we did this while staying true to who we are at the core, a people-first company. We prioritized the well-being of our residents by continuing to self-govern on renewal rent increases and by launching Tricon Vantage, a market-leading program to help our residents achieve their financial goals and facilitate access to home ownership.

Now let's turn to Slide 3 for a summary of our Q4 2021 results. Our net income from continuing operations was $127 million, that's up 67% year-over-year, and earnings per diluted share was $0.46, up 28% year-over-year. Our core FFO increased by 10%, while core FFO per share was $0.15 or 12% lower than the prior year. A big driver of the variance was our deleveraging process, which resulted in a diluted share count, that's 24% higher than last year. Last year's number also benefited from a $7 million tax recovery, and without this item, FFO per share would have been up 7.5% even with the higher share count. On a full year basis, our core FFO per share and AFFO per share were up 12% and 18% respectively in 2021, again, notwithstanding significant deleveraging over the course of the year.

We remain hyper-focused on growth, acquiring over 2,000 single-family rental homes and was typically a softer quarter of home sales. Tricon's proportionate share of total NOI increased by 18% and same home NOI grew by 10.3% compared to last year. We achieved a record high same home NOI margin of 68.3% driven by consistently high occupancy, record low turnover of 16%, and strong rent growth of 8.8% on a blended basis. We also had stellar results in private funds and advisories, new joint ventures, record Johnson development fees and performance fees from legacy for-sale housing funds, all contributed to significant year-over-year growth in core FFO from fees. And with the benefit of our U.S. IPO, we reduced leverage to 35% net debt to assets and 7.8x net debt to adjusted EBITDA compared to 43% and 9.8x in Q3.

Moving to Slide 4. In our adjacent residential businesses, U.S. multi-family rental continues to perform very well with same property NOI up nearly 21% year-over-year and now solidly above pre-pandemic levels. For-sale housing had another outstanding quarter, distributing over $18 million of cash to Tricon. And Canadian multi-family is progressing on its development pipeline with over 1,000 apartment units on track to be delivered in 2022. Lastly, The Selby located in downtown Toronto achieved stabilization in Q4 with 98% occupancy rate. We're also pleased to introduce full year guidance for the first time. Our SFR same home NOI growth for 2022 is expected to be 7% to 9% compared to 7.2% for 2021 and to be driven by same home revenue growth of 7% to 9% and same home expense growth of 6.5% to 8.5%. Our guidance assumes a combination of strong rent growth trends with new lease growth in the mid-teens and renewals around 5% to 6%, occupancy in the 97% to 98% range, turnover near 20%, and ancillary revenue growing by 10% to 15%.

In our guidance, we assume relatively elevated bad debt at 1.5% to 2%, gradually trending down over the course of the year. Our operating cost guidance assumes property tax growth in the high single digits as our homes have appreciated in value considerably and mid-single-digit inflation in other expense items as we continue to navigate an inflationary environment. Second, we expect to acquire over 8,000 homes during the year as we remain focused on growth and squarely on track to reach 50,000 homes by 2024. If we assume an average acquisition price of $340,000, slightly above Q4 of $335,000 and 65% financing in our SFR joint venture vehicles, Tricon's equity requirement at a 1/3 share is approximately $300 million.

Finally, we expect core FFO per share to be $0.60 to $0.64, representing nearly 9% growth year-over-year at the midpoint. I would note that our diluted share count is currently 14% higher than the weighted average in 2021, and so the implied growth in our total core FFO is about 20% to 30%. This is driven by the aforementioned growth in our total SFR portfolio and same home NOI, relatively stable fee revenue and overhead costs compared to Q4 levels, albeit with lower projected performance fees and higher interest expenses commensurate with the growth of the overall portfolio. We are very excited about the year ahead, not only because of the operating trends we are seeing, but also because of the tremendous opportunity to positively impact the lives of our residents.

Turning to Slide 5, I'd like to share with you some details of our recently announced Tricon Vantage program. This is a suite of programs and resources available to our U.S. residents to help them achieve their financial goals, including the goal of home ownership if they so choose. At the core of this program is our long-standing practice of self-governing on renewal rent increases with annual rent increases for existing residents typically set at rates below market. In addition, Tricon Vantage includes educational tools to help residents plan and achieve their financial goals. A credit builder tool that helps residents improve their credit scores. We are pleased to report that over 1,200 residents have enrolled in this program so far. Our resident and home purchase program that gives qualifying residents the first opportunity to purchase the home they're renting if Tricon elects to sell it. Our resident emergency assistance fund, which is awarded over $350,000 to over 100 families since inception.

And finally, our soon-to-be launched resident down payment assistance program, which will provide qualifying long-term residents with a portion of their down payment should they remain in good standing at which to buy a home. Tricon's ESG strategy is heavily focused on the social component with our residents and our people being top priorities. When families have the stability necessary to achieve financial freedom, entire communities can prosper. We believe that this compassionate approach to serving our residents is not only the right thing to do, but also the primary reason for our high occupancy, low turnover rate and leading resident satisfaction scores.

Let's now turn to Slide 6 to delve deeper into our Q4 portfolio growth. Throughout the course of this year, we accelerated our acquisition program from nearly 800 homes in Q1 to over 2,000 homes in the past 2 quarters, bringing total acquisitions to 6,574 for 2021. At the current pace, we are well positioned to acquire over 8,000 homes in 2022 through our resale and new home channels, including deliveries from our build-to-rent program. To give you some insight as to where these homes are coming from our largest acquisition channel is buying existing homes from the -- through the MLS. In Q4, we also acquired resale homes through non-MLS channels such as iBuyers. You'll note that our average acquisition price has trended higher over time. This is a function of significant home price appreciation in all our markets and expanded buy-box under SFR JV-2, which includes traditionally pricier markets such as Austin, Nashville, Las Vegas and Phoenix and an acquisition program tilted towards generally newer vintage homes, especially with the inclusion of our Homebuilder Direct JV.

Given market rents have also been increasing, our acquisition cap rates remain healthy and are in line with our JV underwriting. And finally, we're excited about our active build-to-rent pipeline, which now has expanded to include over 3,000 rental units in 23 new home communities across the U.S. Sun Belt. What we really like about both of our new home channels through Homebuilder Direct and THPAS JV-1 is that they provide our residents with the ability to live in a brand-new home at an accessible price point, while giving us a maintenance holiday and lower upfront renovation costs.

I would now like to pass the presentation over to Wissam to discuss our financial results.

Thank you, Gary, and good morning, everyone. Our performance in the fourth quarter exceeded our expectations as we capped off what truly was a historical year. We grew our portfolio significantly, while focusing on cost containment and deleveraging. What makes these results even more remarkable is that our dedicated team delivered day in and day out despite the challenging backdrop of labor shortages, inflation, supply chain constraints and a global pandemic.

On Slide 7, we summarize our key metrics for the quarter. Net income from continued operations grew by 67% year-over-year to $127 million. Our core FFO grew by 10% year-over-year to $46 million. Core FFO per share was $0.15 for the quarter. AFFO per share was $0.12 for the quarter, which provides us with ample cushion to support our quarterly dividend, and an AFFO payout ratio of 43%.

Let's move to Slide 8 and talk about the drivers of core FFO per share. On the whole, core FFO grew by 10% year-over-year, but on a per share basis, there was a year-over-year decrease of $0.02. First off, last year's FFO per share included $0.03 tax recovery. So our starting point was relatively high. Second, our single-family rental portfolio, which makes up over 90% of our real estate assets delivered 18% growth in Tricon's proportionate NOI, adding $0.04 to core FFO. This was driven by a 17% increase in revenues as the number of proportionally owned homes grew by 11%, where average monthly rent increased by 9% over last year and ancillary revenues ramped up.

Our operating expenses on the other hand also grew by similar 17% due to portfolio growth and overall cost inflation. Our FFO contribution from fees increased by 132% compared to last year, adding another $0.06 FFO per share. This was driven by new investment vehicles, record development fees from our Johnson subsidiary and strong performance fees from legacy investments. In our adjacent residential businesses, U.S. multi-family rental FFO reflected the 80% syndication of the portfolio earlier in 2021. And as Gary mentioned, the portfolio is performing extremely well. This was coupled with strong results in our for-sale housing business. On the corporate side, we had lower interest expense offset by higher corporate overhead expenses. Some of this relates to the incremental costs associated with our U.S. listing, as well as staffing up for our growth. As we mentioned earlier, our diluted share count this quarter was 24% higher as a result of last year's equity offering to fund growth and reduce our leverage.

Let's turn to Slide 9 to discuss our operating efficiency. Our strategy of managing third-party capital allows us to scale faster and improve operational efficiency. On all fees we earned would allow us to offset a large portion of our corporate overhead expenses. Our recurring fee stream totaled $22 million in the quarter and included asset management fees, property management fees and development fees, but excludes performance fees as they tend to be episodic. Together, these recurring fees covered 71% of our total recurring overhead costs this quarter compared to 42% coverage in the prior period. Ultimately, we expect our fee revenue to cover the majority of our overhead expenses and allow our shareholders to benefit from strong NOI growth contributing directly to the bottom line.

Let's discuss our balance sheet on Slide 10. We have continued to prioritize deleveraging while driving significant growth, all while navigating challenging economic conditions. We have successfully cut our leverage significantly since the start of 2000 with net debt to adjusted EBITDA down to 7.8x in the current quarter and net debt to assets 35%. Much of this was achieved with our U.S. IPO, our prior common equity offering and our preferred equity financing. I do want to thank our shareholders for their support as we were able to accomplish these equity financings and increasing share prices along the way.

Turning to Slide 11 to discuss our debt profile, we will remain focused on addressing near-term debt maturities. We have $225 million in maturities in 2022, most of which is an SFR term loan, which we expect to refinance later on this year. Our liquidity position is also very strong with $677 million in available cash and credit facilities to fund our growth. Slide 12 highlights our performance dashboard that we've updated for you every quarter since we introduced in 2019. I'm thrilled to report that we have not only achieved all these targets, we've exceeded them well ahead of schedule. Our team has worked tirelessly to achieve these important milestones and I'm very proud of all their efforts.

And you didn't think, I'll stop here, did you? On Slide 13, I'm pleased to introduce our updated performance dashboard. Our team once again is raising the bar and setting ambitious targets to drive our incremental shareholder value for 2024. First, we plan to continue growing our core FFO per share with a target of 15% compounded annual growth through 2024. As Gary mentioned earlier, in 2022, there's some dilution from a U.S. IPO, but we expect higher growth in the outer years.

Second, as we have mentioned many, many, many times already, we plan to expand our SFR portfolio to 50,000 homes. And we have the people, the operations and the capital all in place to do so. Next, as we embark on a period of hyper growth over the next 3 years, we plan to stay disciplined and maintain our leverage within the range of 8x to 9x EBITDA. And finally, we've continued to improve our overhead efficiency with a target of 90% of recurring overhead costs to be covered by fee revenue, excluding performance fees. As we set our sights from the future, we are -- we have tremendous opportunities ahead, and we are very excited for 2022 and beyond. One of the most exciting people is certainly Kevin. So let me pass the call over to him to discuss the operational highlights.

Thank you, Wissam. Appreciate that. Good morning, everyone. When I take a moment to reflect on this past year, I get an overwhelming sense of pride for what has been accomplished. For me personally, these results speak to the strength and dedication of our team who continue to put our residents first, while navigating our rapid pace of growth. Things just keep getting better and better, and I could not be more excited for what's ahead.

Let's talk about the components of our same home NOI growth of 10.3% this quarter, starting on Slide 14. Our same home total revenue growth of 8.9% was driven by rental revenue increasing 7.9%. This was made up of a 6.7% increase in average rent, a 30 basis point uptick in occupancy, as well as an 80 basis point decrease in bad debt from 2.7% of revenue to 1.9%. Even at 1.9%, it is more elevated than we'd like and is a result of our resident friendly approach throughout the pandemic. Our rent growth profile remains strong with blended rents increasing 8.8% during the quarter, supported by an impressive 19.1% increase on new move-ins and 5.7% increase on renewals.

Since we've been self-governing on renewals for the past few years, we estimate that we have accumulated at least 15% to 20% loss-to-lease in our portfolio, creating a runway for significant rent growth ahead. Our other revenue line, which includes ancillary fees also grew meaningfully, up 42% from last year as we resumed collection of late fees and rolled out Smart Home and Renters Insurance programs. We see a path to increasing this number by over 30% per home compared to current levels as we continue to roll out these and other ancillary services over the next few years.

Let's turn to Slide 15 to discuss the key same home expense variances. Property taxes, which account for almost 50% of operating expenses continue to trend higher tracking a significant home price appreciation we are witnessing in our markets. With the benefit of successful appeals, we have managed to keep property tax growth to 5.6% this quarter and 4.6% for the full year. Repairs and maintenance expenses were also elevated this quarter as we return to a higher level of maintenance calls post-COVID. Our work order volume was up 5%, while labor and materials inflation added about 8% of the cost of each work order, even with the benefit of bulk purchase discounts.

On the other hand, turnover expense was flat as our turnover rate decreased by 630 basis points from last year, largely offsetting the underlying inflation pressures in this line item. On the property management side, we're seeing the benefits of scale as we are managing 28% more homes compared to last year using our centralized and tech-enabled operating platform, which results in a lower cost per home. Property insurance costs have also increased, driven by rising premiums across the industry, which we hope to mitigate over time greater scale diversification. And marketing and leasing is down meaningfully due to strong demand, higher physical occupancy and lower resident turnover. As we look ahead, we expect inflationary pressures to continue in our business. And we remain focused on what we can control, harvesting operating efficiencies through technology and process improvements, providing superior resident service and driving economies of scale.

Let's now turn to Slide 16 for an update on more recent leasing trends. I continue to be amazed by the strong demand for our product with a level of interest from prospective residents continues to vastly exceed the number of homes we have available for rent. The substantial demand coupled with our loss-to-lease allowed us to continue pushing rents on new move-ins by over 19% in January. Meanwhile, rent growth on renewals is inching up over 6% and our overall blended rent growth has remained at a healthy 8.3% in January. At the same time, occupancy remains at a record high of 97.9%. On the whole, the robust trends that have carried us through the past year remain in place and set us up well for great results in 2022.

Now I'll turn the call back over to Gary for closing remarks.

Thank you, Kevin. Let's conclude on Slide 17. If there's one thing you should take away from our story today is that the factors that have driven our performance and value creation over the past year continue to be in place. First and foremost is our focus on growth. By partnering with leading global real estate investors, Tricon has a clear path to increasing its SFR portfolio to 50,000 homes by the end of 2024. We have the balance sheet, operating platform and third-party capital in place to achieve this target with confidence. And we believe that favorable tailwinds in our industry should drive strong operating performance for years to come. Our growing portfolio, coupled with strong same home results should also translate into meaningful NAV appreciation for shareholders.

And second, let's not forget about our adjacent businesses, which account for about 6% of our balance sheet, but represent a meaningful source of upside and potential cash flow to supercharge our SFR growth. These include our Canadian multi-family build-to-core business, a 20% interest in a high-quality multi-family portfolio located in the Sun Belt and legacy for-sale housing assets. These businesses are all benefiting from a robust housing market, and we believe they could ultimately be worth 2x our IFRS carry value and represent $1.1 billion of value for our shareholders. Should we monetize these assets over time, we would use the proceeds to pay down debt or grow our SFR portfolio and in the process simplify our business.

That concludes our prepared remarks. I would like to express our gratitude to our employees, our many long-standing shareholders, private investors and capital market partners for their ongoing support throughout our journey. We believe we're in a golden decade for housing and for SFR in particular. And as we look ahead to the future, we plan to use this tremendous opportunity to create significant value for our investors, make our business a platform to do good, elevate the lives of our employees and residents and inspire the broader industry to do the same.

I will now pass the call back to Abby to take questions. Wissam, Kevin and I will also be joined by Jon Ellenzweig and Andrew Joyner to answer questions.

(Operator Instructions) We will take our first question from Chandni Luthra with Goldman Sachs.

Congratulations and a strong finish to the year.

Thank you.

So given the level of home price appreciation, you obviously talked about your own acquisition price was up 7% sequentially. And keeping your parameters or sort of staying within the middle market and a certain box size in mind, are you finding it harder to acquire homes? And what's been the cap rate that you acquired homes in fourth quarter? Did it change much from 3Q, if you could perhaps give us some context around that?

Sure. Well, I would say there's been a very slight degradation cap rates, let's say, over a year. And the way I would describe that to you is if you assume home price appreciation of 20% and rent growth, let's say, of 10%, your cap rate will come down by about 20 basis points. So for example, we've seen acquisitions, let's say, in Atlanta, where in the past, maybe a year or 2 ago, we would have acquired those homes at a 5.5% cap rate, maybe today we're acquiring them at a 5.3% cap rate. But even with -- having said that, we have no shortage of opportunity. We've had no issue hitting. And in fact, we had a better quarter than we expected. We had no issue hitting getting to 2,000 homes in what's normally a weaker quarter, a weaker period because obviously, less people are listing their homes after Thanksgiving or Christmas.

And we continue to hit the cap rates that are outlined in our JV underwriting. So just wait for that call to go. So -- and just to spell that out for you, the cap rates in JV-2, nominal cap rates are between 5% and 5.5%, Homebuilder Direct JV are closer to 5%. The economic cap rates for both joint ventures are actually very similar in the high 4% range, high 4% range. So we've continued to hit high 4% since launching JV-2 and Homebuilder Direct now for several quarters, and we don't expect that to change going forward. If anything, there may be now a slight pickup in rent vis-a-vis home prices as we look forward to '22 and maybe into '23, and if that happens, we don't actually see higher cap rates.

That's great color. And just switching gears to your PSA segment a little bit. So performance fee was almost $4 million in the quarter. Besides for-sale housing, were there any other drivers, and then how should we think about that going forward? And then as an extension, what drove higher development fee, and how should we think about that in 2022?

Yes. So performance fees are obviously episodic. They will ebb and flow from period to period. All the performance fees in Q4 came from our legacy for-sale housing funds, including Cross Creek Ranch, which is getting to the -- towards the end of its life. And so you should continue to expect the performance fees in the next couple of years are largely going to come from our for-sale housing funds, right? And where I would guide you, I mean this is just a guide. But based on what we've shown in our MD&A, we're looking at about $5 million of performance fees this year and next year, okay, in -- [$5] million in '22 and $5 million in '23, we might be able to do better than that, but that's where we're kind of loosely guiding. Your next question -- sorry, Chandni, what was your next question?

Development fees?

Development fees. Yes. So development fees on Johnson, I think partly explain the beat, and we're probably $2.5 million higher than they normally are. And so I would not use Q4 development fees as a run rate, probably $2.5 million higher than where they typically are. Johnson had, I mean, an outstanding year. It's too bad that Larry Johnson didn't get to see it, but the best quarter on record. And lot sales, I mean, this business, as you know, is booming, lot sales are incredibly robust, particularly in Texas. And lot sales -- lot sale pricing was up about 20% year-over-year. So that -- all of those things together, I think explain why fees were so much higher than the previous year-over-year comparison. But we would not expect that going forward, although we haven't seen any real change in conditions, they continue to be very, very strong.

Your next question comes from Nick Joseph with Citigroup.

How are you thinking about pushing renewals in 2022? Obviously, you've self-governed and continue to do so, but just given the higher inflationary environment, where could those move to?

I think we moved them up to where we want them to be, Nick. You've seen the move from Q4 to Q1 as we talked about in January. So they're right now in the 6% range. They might move a touch higher, but I think we'll probably be about 6% for the year. So again, that would be kind of the upper end of where we've been guiding in our formal guidance. But I think we can assume roughly 6%, maybe a touch higher in 2022. And we get there by really trying to look at where is wage growth. We're broadly seeing wage growth of 4% to 8%. And so we think 6% is fair. Again, this is part of our ESG program to self-govern to make sure that our rents are typically below market to keep our residents in our homes as long as possible, and we think we're striking the balance at 6%.

And then I think on Slide 17, you talked about the adjacent residential businesses. Are there any plans to monetize any of them in 2022?

Well, the legacy for-sale housing business just obviously gradually monetizes over time. So that we'll see some more monetization this year and obviously, over the next several years. That business naturally liquidates as we sell lots or homes. Canadian build-to-core multi-family, no, we're not looking at any monetization until that portfolio has stabilized and delivered. So -- and that's going to take roughly a few years. But we are having conversations. We are starting to explore with our institutional partners in the U.S. multi-family portfolio to discuss a recap. So we are exploring that. I can't really tell you anything more than that. If something were to happen, it's possible that it could be a later half '22 event, but again, we're only exploring it.

And would the recap be more likely or an outright sale of the remaining JV interest?

I can't really say at this point, but I think it -- I'd probably lean more towards a recap.

Your next question comes from Rich Hill with Morgan Stanley.

I wanted to maybe follow up on that question on pushing renewals. If I'm thinking about your business right, you have very low turnover, which is a great thing. But how long do you think it's going to take you to capture that healthy loss-to-lease in your portfolio? Is it really like a 4- to 5-year period of time to capture it, given you're not pushing renewals, new leases are high, but your turnover is low?

Yes. Rich, that's the way we're thinking about it. I mean the turnover -- I mean, we never thought we ever see turnover below 25%, let alone 16% where it's been in December and January, did push up a little bit higher in February at about 18%, and as we talked about, we're guiding to about 20%. So if you assume 20% for '22, then we think it's going to take the better part of 4 or 5 years to capture that loss-to-lease. And I think the loss-to-lease, again, I think we're being somewhat conservative there at 15% to 20%. It's probably at the upper end of that range, if not higher.

Okay. Got it, guys. And the reason I was focused on that is that if I'm looking at your '24 FFO per share target, which I appreciate. So thank you for that. That's a pretty healthy 20% growth off of our published '23 AFFO estimates. So I guess what I'm getting at here, is there a scenario where you have really, really strong FFO growth for much longer than maybe the market is anticipating because you do have all this embedded growth. So yes, it's not like you can capture all of it in '22, but does it -- is there a scenario where growth is sustained and very strong for 3, 4, 5 years?

Absolutely. And the thing I can tell you is it's -- there's a lot of focus, obviously, on the same home guidance. But the thing you have to remember is that our same home portfolio is only about 60% of our total portfolio, right? And that may compare to our peers who are, let's say, 85% or 90%. So what's really driving the growth is -- what's really driving the growth in FFO per share is the acquisition volume, right? That's where you're really going to see a decrease in total NOI. So again, I mean, we're guiding to 7% to 9% NOI growth, let's say 8% at the midpoint, but if you saw in Q4, our actual total proportionate NOI was up 18%, right? So that's really the number I think to focus on.

And I think because of the growth in the acquisitions, which, again, 8,000 this year and maybe over time that -- it grows from there, you're going to see some pretty significant growth in FFO per share overall, plus significant growth in the fees in the private funds and advisory business that accompanies that growth and acquisitions.

Yes. Got it. That's helpful, Gary. And just one more question, if I may. You have a differentiated product type compared to your peers in terms of what type of consumer that you target. There's been a lot of dialog about lower income consumers struggling a little bit here because of inflationary pressures. But I also note your rent to disposable income is very low. So can you maybe just walk us through how you balance pushing rents with rent to disposable income? I know I'm asking a complicated question. Also I'm asking how affordable are your homes? I think they're affordable, but has that changed with inflationary pressures?

Well, and I'll start and maybe Kevin, you're welcome to kind of chime in. But no, I mean, we haven't really seen a big change in the underwriting. I mean if you look at the rent to income right now, it's about 22%, 23%. So we think there's significant cushion or margin there for -- and so we feel we're in a really good place with the underwriting. Our residents on the whole are in a good place. And so we're not worried about that at all. I mean our bad debt is a little bit elevated. And I think Kevin can talk to this, but that's largely because I think we've taken a very empathetic approach to dealing with our residents during the pandemic, right? So, but we're not seeing -- for the most part, we're not really seeing any pressure. Our average household income is about $85,000. I think we're in the sweet spot, Rich, really deal with this kind of middle market resident. They definitely have the ability to afford our product and over time, if they're earning more income to pay higher rent. So we're not really seeing any real pressure. Kevin, do you want to add any more color on the bad debt?

Yes. On the bad debt, we have, as Gary said, we've taken a very resident-friendly approach. And we've even after the moratoriums had expired, we offered rent forgiveness programs, rent relocation programs for cohort of people and really trying to keep people in their homes. And we found that some people were unresponsive, and so we're going to be taking a more conventional approach to collections coming forward, and so we'll see bad debt going down. And that's really one of the reasons why it's higher in California, especially, California is very resident-friendly.

We still can't charge late fees here in California. It takes -- if we want to file any kind of notices, it takes a lot longer. So we're going to be working through that in the coming quarters, and I think we're going to see bad debt come down. But as far as underwriting, we still -- we turned down maybe 49% to 50% of applicants that apply with us. So we are scrutinizing the people that are coming in. We've seen the FICO scores stay even, the rent to income stay even. So we feel very good about the resident profile that we have. And we think we'll get back down to the same kind of bad debt levels pre-COVID in the next 3 to -- 3 quarters.

Your next question comes from Mario Saric with Scotiabank.

You have introduced guidance for the first time, and here we are talking about 2024. On that front, can you talk about like the 17% CAGR in FFO per share reflected in the '24 guidance, which is pretty strong. Can you talk about whether that's kind of evenly split between '23 and '24 or do you expect the per share growth to accelerate upon development completion, for example, in Canada?

It's lower in 2022 because we have the overhang of the U.S. IPO and then we assume relatively consistent FFO per share growth in '23 and '24. So the growth to get to that kind of 17% or 15% to 17% CAGR is a little bit more back-ended between '23 and '24, but it's consistent between those 2 years.

Got it. Okay. And then what type of same-store NOI growth are you looking at in '23 and '24 that underpin [the quarter]?

Yes. Our -- again, I mean, we're not providing any formal guidance here, Mario. So I just want to preface that. But I think in our internal model to get to those numbers, we're actually assuming lower same home NOI growth probably in the kind of 6%, maybe 5.5% to 6% range, which is what it's been over the longer term for us and our business. So we're not assuming 10% as we did in Q4, 7% to 9% formal guidance for this year. Only -- to get to that level of growth, we only need same home NOI growth probably at 5% to 6%.

Makes sense. And then as you mentioned, acquisitions are a big driver of the growth given 50% to 60% of the portfolio in same property. What kind of acquisition spread do you think you can continue to achieve given the rates that come up here a little bit, cap rates have come down a little bit. So when you look out over the next 2 years, what's a reasonable acquisition cap rate spread in your model?

We think it's going to be -- well, I mean I think the acquisitions, as we talked about before, we think is an evergreen opportunity. So the biggest challenge for us is not the market, it's actually the operations. It's staffing up in order to manage those acquisitions. So we're very confident that we're going to hit the 8,000 acquisitions this year at the cap rates, I was talking about, which are kind of low to mid-5s on an economic basis, high-4s, very high-4s. We think we can hold that all the way through to the extent that higher mortgage rates ultimately impact the for-sale housing market, it is possible that cap rates might move up a little bit, but we're not assuming that. We're assuming that they continue to be where they are, and we'll buy 8,000 homes this year and maybe 10,000 homes, 8,000 to 10,000 homes in the next couple of years to get to the 50,000.

Perfect. Okay. And then in terms of 2022, your floating rate debt on a proportionate basis is about 25% of the total [debt] primarily on the credit facilities. Internally, how many fed rate hikes are you guys projecting in '22, and kind of where do you see that floating rate debt exposure going over the course of '22?

Mario, it's Wissam. So I'll tell you a couple of things. We are actively in the market to do a securitization deal as we speak, that will actually take out some of that floating rate debt that you're talking about that you're seeing in there. Most of that floating rate debt that you have is in the warehouse facility, a subscription facility, and we're going to take that out this year. We're expecting to close that in first or second week of April. The rates that we're seeing on that specific deal is around, let's say, 3.5%, 3.6%, put that in perspective, it's the last securitization deal that we did was 2.57% and the one before that was at 1.94%. So we've obviously seen a jump in rates.

Having said that, we've always said we're going to maintain -- we're really focused on overall leverage targets of 8x to 9x EBITDA, as well as making sure that we focus on fixing for a longer term for as long as we can. So we expect to have some impact, but that's already been factored in our 2022 FFO targets.

Perfect. Okay. My last question. I think, Gary, you mentioned an equity requirement for SFR JV-2 in the $300 million range for the year. What -- can you just remind us of what your total expected equity requirement to fund co-investments in all of your funding routes for '22, including any incremental equity required to complete developments in Canada which I think is pretty minimal?

Yes. So -- and Wissam, feel free to chime in. Yes. So for -- based on the 8,000 homes we discussed at $340,000 a door, we're looking at about $300 million. Now some of that could be funded by sub-line. So that, I would say, is kind of a maximum number. So it's about $300 million. We think we need about another $50 million for the other adjacent businesses, including Canadian multi-family development. So that leaves us about $350 million gross. And then we're generating AFFO of roughly $150 million, less $75 million of dividends.

So if you kind of net off the AFFO after dividends, it leaves us requiring about $275 million of capital for the year. And obviously, that can -- that could easily be funded through our liquidity, like our liquidity right now is more than double that. So we're in a very -- obviously, a very comfortable position to fund that growth. As I was saying in an earlier comments, to the extent that we have some monetizations from our adjacent businesses, that could also be used to fund the growth, but we feel we're in a really good place and certainly don't need to tap the market today.

And on the adjacent business in the U.S. on the multi-family side in consideration of the sale or recap, are there any structural agreements in place with the investors who [bought previously 80%] in terms of purchase price and cap rates and so on and so forth or it was based on market?

No. I mean, listen, we need their buy-in to be able to do anything, right? We've entered into a long-term partnership with them. So really to entertain any change in structure, including a recap, we do need their buy-in. So we are exploring that with them. And if that makes sense, and it's something we could pursue, I will say that the portfolio is appreciated massively since we bought it and syndicated it. So we do have, I think a lot of goodwill with our investors, and I think they'd be more likely than not to work with us or accommodate us on some sort of recap. But it would be based on market and there's no specific parameters, I would say, in the contract or limited partnership agreement that would prevent us apart from their permission.

Your next question comes from Brad Heffern with RBC Capital Markets.

On expense growth, I was curious the guidance for '22 came in a little bit higher than your peers, but you said in the prepared comments that you're assuming property tax increases in the high single digits, which I think is higher than what others have assumed. How much visibility do you have into that? And ultimately, do you think that the expense guide is potentially conservative?

I think they're -- I think all of our guidance or maybe an element of conservatism, right? I mean this is the first time we put guidance out. You can never be too sure certainly in the new world that we're in with the economic uncertainty. So we like to under-promise and over-deliver. I would just say that's just kind of a general rule, Brad. But the insight we have really comes from our property tax consultant, who's guided us to high single digits. And the reason for that is obviously, we've seen 20% plus home price appreciation in our portfolio. You can't suck and blow. I mean, at some point, you have to pay some of that back in higher property taxes.

I think the other big thing that has to get taken into account is the market mix, right? There's a big geographic difference in certain cases between us and our peers. And if you look at us, 65% of our homes are in markets that do not have statutory caps, and that might compare to Invitation at 35%, right? So it's a big difference, right? Whether you have homes in California, Florida, Arizona, Nevada, Invitation's got a much bigger concentration in those markets, and therefore, should probably see lower property taxes. That's really the difference. But look, I understand, I think there is some conservatism in there. I hope at the end of the day, we'll know later in the year, obviously, once we start seeing the assessments, hopefully, we can do a little bit better, and it doesn't factor in any appeal of those assessments. And so if we're able to successfully appeal them, we'll do a little better there as well.

Gary, if I could add just quickly is that we do -- we're actively managing that. We appeal roughly 5,000 homes a year. So we're working with our consultants to do that. And then we typically have a 50% to 60% success rate. So it's something that we're actively working on.

Okay. Got it. And then you all obviously saw the Invitation investment in Pathway Homes. I'm curious if you have any interest in pursuing a similar rent-to-own strategy at some point? It seems like it might correspond well with your resident-friendly depots?

No, we don't. I mean, we're very focused on our model, which is we buy homes and we want to hold them. This is a business that is extremely intensive. Scattered site property management is difficult to run. And at the end of the day, we want to hold as many properties as we can. So we don't have any plans to pursue that particular business model, but we think we can accomplish it and really help our residents in different ways, and that's really the point of Tricon Vantage. The biggest thing that we do is just governing on renewals, right? And that really gives our resident stability that allows them to plan for the future. It's probably the most important thing we're doing in our ESG program.

But to the extent -- and we also have a program -- if we ever do sell homes, and we do sell roughly 100 homes a year, we do give a first opportunity to our residents, and we will be unveiling a down payment assistance program hopefully in the second half of the year. So you should see information on that coming soon, which will help longer tenured residents, if they do choose to buy a home, we'll help them there. So we probably prefer to do it that way. If they do want to buy a home, we can prepare them for that through financial literacy training, credit building, down payment assistance, but we probably prefer them to go and buy another home rather than cannibalize their own portfolio and sell their own homes on us.

Your next question comes from Jade Rahmani with KBW.

You talked about providing down payment assistance and your tenant-friendly approach. I was wondering if you might take it a step further, considering the company's expertise in capital markets and securitization and perhaps create a vehicle to provide mortgage finance to any customers that might be interested in purchasing homes. Is that an interesting concept or is there not enough of an installed base that might access such a product?

I think it's an interesting idea, and look, we're always welcome -- we always welcome great ideas. We're all about continuous improvement in learning, but I don't think there's a big enough opportunity to make that work for us. Again, I'm not going to reveal too much about the program yet, but what I will tell you is on the modeling that we did, we felt we could help 500 to 700 families over about 3 years. So if you kind of think about that, it's not a huge opportunity in terms of mortgage financing. You probably could make a business work with that type of volume. So I think you have to be much bigger. And again, we only want to provide a down payment assistance to long-tenured residents, right? They have to be in good standing. It's not for anybody. They have to be with us for a certain period of time, and we'll unveil more of those details later.

In terms of the supply chain environment and with the aggressive acquisition targets, hitting those growth milestones clearly an important part of the story. We're seeing homebuilders push out deliveries significantly. We're seeing cycle times extend probably 25%. So can you talk to what the supply chain are that you're seeing and how it's impacting the business? Is it impact time to renovate homes and therefore, time to lease? Is it causing any curtailment in the build-to-rent delivery strategy?

So Kevin, why don't you talk about the general impact on our business, and then maybe I'll discuss build-to-rent.

Okay. Sure. Thanks. So yes, we did experience some pressures early on when it first started, and we quickly really went and expanded our vendor base and our supplier base. We also started ordering materials a lot sooner, and we began bulk ordering on kind of the heavily used materials like paint and appliances. And we're actually right now taking a step further. We're working with some of our partners to warehouse inventory so that we can bulk buy and have in warehouses where that are run by our partners. So we're not having to rent space. We're not having to add more people. It's something that we're working with our partners. And in terms of supply that our -- all of our carpet, vinyl flooring, smart home controllers, those are all in full supply. Where we continue to feel a little bit of pressure is like in our GE Appliances. So that continues to be a challenge, but we've found ultimate supply sources.

We're working -- we've got a really good relationship with Home Depot and Lowe's that we're able to go to get those appliances. So we've really kind of extended the web, if you will, and have been able to really keep that under control. We -- to take it a step further, we did feel pressure, supply pressure on pricing. And -- but because of these national relationships that we have, we've been able to keep the cost increases to 5%, 6% on rentals and turns and 6% to 8% on repairs and maintenance, where they could have been retail pricing on like flooring and HVAC paint has gone up like 25%. So we've been able to mitigate most of those cost increases.

And I think also we've been able to lower the increased pressure through lower turnover rates. Our work orders done in-house are now up to 70%, and we've centralized our scoping and renovation, scoping for rentals and R&M. And we're also starting to buy slightly newer homes, which we think is going to lower our costs and maintenance going forward.

Yes. So just -- I would just add to that. I think on build-to-rent, I mean, yes, there's no question the homebuilding industry is being dramatically affected by supply chain issues among our building cycle times. We saw increases in costs of about 20% last year. We've heard from some of our bigger private builder partners that they saw cost increases of up to 6% to 7% a month in January and February. And that -- those inflation levels, I would say, are scary and will put -- will ultimately put downward pressure on development yields. So that's something we need to watch very closely. At this point in time, and we're really happy with our build-to-rent portfolio. The development yields are in that kind of 5% to 5.5% range on an untrended basis.

So we think we're getting paid for the risk. But if we continue to see this type of inflation on costs and direct costs, I don't think rents will be able to catch up, and so we will see some degradation in yields. And so that's something we have to watch. We believe a lot in the build-to-rent program. We want to be part of the solution. We want to be able to add more housing to the market, but we won't do it in any cost, right? So if the yields get too thin, then we might need to take a pause, but we'll see how that plays out later in the year.

And what are you seeing on the policy and regulatory side? Are you detecting pressure building from a regulation standpoint and taking some of these actions, down payment assistance, et cetera, proactively, what are you seeing there?

Well, I mean, we're not subject to any inquiries. So I mean we haven't seen anything directly. We're obviously aware of what's kind of more broadly happening in the industry. And we're also sensitive to the fact that there is a lot of negative press on the industry. And so we want to, hopefully, with our peers start to change the narrative to talk about all the positive things this industry is doing for residents, right? It's not only about home ownership, it's also about providing more opportunities for people for different reasons that need to rent homes, and to talk about the product that we provide for residents.

And then also I think to try to help our residents, right? This should not be about extracting value, it should be about creating value for residents. So these are the type of programs we're rolling out. We're incredibly excited about Tricon Vantage. And we hope that these initiatives help inspire the broader industry to do the same.

Your next question comes from Tal Woolley with National Bank Financial.

Thank you for providing the 2024 sort of bridge there. I was just wondering what sort of targets for capital raising from third parties are you looking at to drive that growth?

Jon, do you want to talk about that?

Yes. Sure, Tal. So if you look last year, obviously, 2021 was a record year for Tricon for third-party capital raising across all of our businesses, but in particular, SFR. If you think about JV-2, which we raised, we raised $1.5 billion of capital over $5 billion of equity, over $5 billion of total capital, which gives us firepower for 50,000 to 60,000 homes.

So clearly, that doesn't get us quite to the 50,000. So there could be -- that's for the edge. So there could be another vehicle in the cards between now and the end of 2024. Obviously, thinking about Gary's guidance on where home prices, maybe, call it, $340,000 to $350,000 a home all-in costs, you could see us raising a bigger successor vehicle perhaps both in terms of equity and total capital, but we're not providing specific guidance at this time. I would say, though, we continue to get significant inbound demand from both our existing investor, as well as new investors for single-family rental private investment vehicles. So if we were in the market today, there'll be no shortage of capital available to help us meet our growth guidelines.

And the only thing I would add to that is on our build-to-rent program, THPAS 1, that is now substantially committed. So we are working on a successor vehicle. So that's something that could happen that we could announce in the second half of the year to continue our build-to-rent initiative.

Okay. And then just my next question is just around the Toronto apartment platform. You sold your interest in 7 Labatt. I'm just wondering if you can give a -- what prompted the sale there? And then I'm just also wondering too when you look at some of your longer-dated projects like Queen & Ontario, Block 20 at West Don Lands, how are you feeling about budgets, pro forma returns on some of those dated projects?

Yes. So on the Labatt project, we just had a difference of opinion with our partner on the business plan. We want to go rental wherever we can. This is a kind of long-term hold strategy for us to develop more market rate and in some cases, affordable housing to Toronto, and our partner was more interested in doing a condo. And so that was really the issue. It is often more profitable in the short term to do a condo, but we are taking a longer-term approach in wherever we can try to do rental. So I think that's what happens on 7 Labatt. We still did very well on the exit. So we're happy with where that ended up and got some money back.

On the other projects, I think what's really important is we try to enter into opportunities that are basically shovel-ready, which means we can lock in costs as soon as possible. And so we've seen a little bit of creep -- I mean there's significant hard cost inflation in the market. And we've seen a little bit of creep in our business plans and certainly a little bit in the case of the Taylor, for example, we're probably 3 months behind on delivering that building. But on the whole, we've been able to hold the costs, again, because we've largely been to lock them in right away, and so that's been a real advantage. And then the other thing I would say is on the rent side, I mean, it's been tough in Toronto, as you know, Tal, it's probably along with San Francisco, it's probably been the worst major performing market coming out of the pandemic. But now I would say rents are probably back to pre-pandemic levels.

And so if we're able to lock in our costs, which we generally have been able to do and now rents are back to pre-pandemic, we're essentially back to our untrended development yields underwriting. And so now it's just a question of how much do rents rise from here and where will the trended yields end up? And I've got to believe that with the massive immigration targets, [1.2] million over 3 years, where are people going to live, I expect we're going to see significant rent growth in Toronto over the next few years. And so I think this business is going to do remarkably well. Even on the Taylor, which we're going to be delivering by mid-year, we expect trended development yields probably be in the high 5% range. Just to give you a little bit of insight, market is probably trading at 3.5% or below. So it's going to be another, I think very profitable investment for us.

And your next question comes from Dean Wilkinson with CIBC.

It's probably a question for Wissam who always raises the bar. When you look at the active growth vehicles, I think you disclosed there's about $455 million of unfunded equity. So I just want to circle that back against the $275 million that Gary was talking about. And then just how you're looking at funding that from the credit facility, what kind of home price appreciation would you need in order for that drawdown to be leverage neutral?

I was actually waiting for you, I'm seeing you in a while. So to talk about our commitment first. Gary talked about $300 million in SFR and probably another $50 million from adjacent businesses, that's really for 2022. What you're talking about is MD&A and financials are really looking at unfunded commitment over a period of time. So it's -- you're looking at stretching that out. Look, at the end of the day, even if I look on a 3-year basis as opposed to a 1-year basis, we're still going to need about $500 million of total equity for SFR, $300 million this year, plus a couple of $100 million next year simply because of financing and making sure our leverage stays between 8x and 9x.

And you'd also assume that you're growing AFFO. So Gary mentioned AFFO of $150 million less dividends, you're at $75 million, and then you're also going to be buying more homes throughout the year. So if you model it out, and I could help you with the modeling if you need, we could probably get a lot of the cash in. So we -- our total equity requirement might be as high as maybe $400 million. And we have, as mentioned earlier, $677 million available cash. So we actually find the next couple of years. Now having said all that, we are opportunistic if we think the stock price is where it is and we want to issue equity in an opportunistic way, we will, but we're really managing the growth and leverage at the exact same time. We want to maintain a leverage of 8x to 9x.

Okay. I guess the point was that you don't need a 20% increase again in HPA in order to keep your debt where it is?

No, God, no.

No, we don't. And again, like -- I mean the home price appreciation is really in many ways is kind of an IFRS concept in terms of kind of looking at our NAV. But from an acquisition perspective, it's really about the interplay between home prices or home price appreciation and rent growth. But how does that move over time? And what we do find, Dean, is that they're maybe not in a year or in a period, but over time, over a couple of years, several years, there's an extremely high correlation between home price appreciation and rent growth.

So as a result, we think the cap rates will stay fairly constant looking forward over the next few years. So look, we can't predict home price appreciation. I would tell you it's got to stabilize at some point. It's still running hot into January and February. But we've got to believe that with mortgage rates up now at 4% and significant inflation in delivering new homes on the homebuilding cost side, at some point, the market is going to -- the price appreciation is going to slow. So that would be our prediction over time that you're not going to have 20% home price appreciation forever, that is not sustainable, and it will slow down probably in the back half of this year and into '23. But that won't -- in some ways, that might help us because there'll be an opportunity for rents to catch up.

Right. But I guess we've kind of been having this conversation for a couple of years and at some point it's got to slow as well maybe into the year. Just going into scale, do you have the internal infrastructure now in place to go from [30,000 to 50,000]. Can that ramp up quickly or would you need to do some sort of larger expansion in order to kind of get to your ultimate goal?

We've scaled up. I mean, there's been a big -- I mean, if you look at this, the company has grown dramatically over the last year or 2 and also in head count in order to prepare for the growth we're going -- we're incurring right now. So we are at a point right now where we can easily accommodate at least 2,000 homes a quarter, right? So we're already there, right? We did 2,000 homes in Q3 and Q4. We're guiding to 1,800 and 2,000 homes in Q1. We've got the team in place to accommodate that.

If we were to go faster than that, and let's say we wanted to go to 3,000 homes, we'd obviously have to increase the hiring again, right? Because a tech, for example, can only do 3 or 4 homes a day, right? So if you have 5,000 or 10,000 homes, you do need to add more bodies over time. So the operation is in place right now to handle the acquisitions, but I would say that over time, we do need to increase the hiring in order to handle the higher volume. And so what I would guide to is we're probably going to increase our headcount by about 25% this year, right, again, in order to accommodate the 8,000 homes. And that's why we are guiding, I think in our formal comments too, if you look at the overhead and the FFO schedule, we're guiding to about $30 million a quarter throughout this year, which is a big jump from Q3, but that is to accommodate the higher headcount for this growth.

Your next question comes from Jonathan Kelcher with TD Securities.

Just on the -- if I look at your Q4 acquisitions, the average rents for those houses were about 2,000. Has there been any change in your target tenant profile?

Not really. I think that -- I mean, the rents you're seeing -- first of all, remember, we've got significant loss-to-lease in our portfolio, right? We've been talking about that being 15% and 20%, but that's probably conservative. So that's why when you see our in-place rents compared to the new acquisitions, you see that big difference. That is the loss -- that is the loss-to-lease. The other factor is that in our new acquisition program under JV-2 and Homebuilder Direct, we are buying homes in pricier markets that have higher rents, right? So if we're buying homes in Austin or Las Vegas or Phoenix, those markets do have higher home prices and commensurate with that higher rents. So that's typically what you're seeing.

Okay. So those markets would also have higher median family incomes, is that the way to think about it?

Yes, they typically would, right, because across the board, we are underwriting rent to income in that kind of 22%, 23% range, and so that's really consistent across our markets. It might be a little bit different in California, where it is much more expensive, but typically, that's pretty steady across the markets.

Okay. And then just on the maintenance CapEx that did jump on an annualized basis, pretty good in Q4. Was there anything one-time in there or what do you think -- what's a good run rate for that going forward?

Yes. Kevin, do you want to start with that and maybe I'll continue.

Yes. On our CapEx, one of the things that happened in Q4 is we took a proactive stance on replacing a bunch of HVAC units that were aging out. We thought it would be better to do it on our own time versus some of these units breaking in the middle summer in Phoenix, right, where it costs more. So we replaced 60 units for the same home portfolio in Q4, like [$565,000]. So that affected it by the $100 a unit for the quarter. And then on top of that, we did see about a 38% increase in the number of homes requiring some form of CapEx. And a lot of that is due to still coming out. We're comparing against a period where we were still slower due to the pandemic. And so now we're back to full tilt, and so the numbers of -- the number of work orders happening, whether it's R&M or CapEx has increased. So that was the bigger driver, and then there was a 7% to 8% just inflation factor that went into that. And so those are really the biggest drivers.

And then I'll just add to that, Jon. I would say that as we look ahead to 2022 with the new same home portfolio, which will be recomposed, it will include homes from JV-1, which are newer homes. And so as a result of that, we do expect that the cost to maintain on the same home portfolio will come down over the course of '22 because of the introduction of newer homes, and that's the hope. And we probably say we'll probably be in the high-2,000s rather than the low-3,000s.

A nice split, obviously, between R&M and...

Yes. That's R&M and recurring CapEx cost to maintain.

Your next question comes from Chris Koutsikaloudis with Canaccord.

Just a quick question here on the fair value of your SFR portfolio. It equates to a value of about $274,000 per home. I'm just wondering if you think that's fairly reflective of current home prices or if that might be a little bit conservative?

Yes. Sure, Chris, and great to speak with you. Yes, I would say we think it's more on the conservative side. Again, a couple of things. As Gary and Wissam talked about earlier, you saw a meaningful ramp-up in home price appreciation over the course of 2021 that we've seen continue in many markets in 2022. And our valuation models lag a little bit because of the nature of [BPOs], which are back, we're looking in a transaction. So you see that as well.

And then secondarily, we're using a kind of home by home or HPA BPO methodology. You can also look at the fair market value on a cap rate basis, which we don't do for IFRS purposes. But given where you're seeing single-family rental portfolios trading and that would support the higher per market value as well. So I think our preference is to be on the conservative side for that metric.

Yes. And just to give you more context on that, Chris, the implied cap rate right now in the portfolio is about 4.7%, right? So we would see that's actually very conservative compared to where we see private market portfolios trade in many cases in the low-3s, never mind in the 4s, but in the low-3s. And the reason for that is that when people are looking at portfolios, there tends to be a significant amount of loss-to-lease. So they're factoring that in, in valuing the portfolio. And so at 4.7%, that's extremely conservative, especially factoring in the loss-to-lease, which as we said, is minimum 15% to 20%, right? So there's a pretty big delta there between what we're seeing in the private markets and the public markets.

And your next question comes from Mario Saric with Scotiabank.

Sorry, guys, just one more quick one for me. Coming back to the Canadian [multi REIT development], can you just remind us of what the cumulative fair value gain you've taken on that portfolio today?

Do you remember that?

No, I could get back to you. I don't have the number off the top of my head. But we haven't taken many gains. Most of the gains have been -- as the property goes through development, we take -- we keep it at book cost, which is what we've done. And as the property mature and they pass the 75% mark, we get external appraisals done. The Selby, we've done an appraisal this year, so some of the gains there, but the cumulative gain since the beginning, I don't have.

We did $20 million this year.

Yes. We're talking about...

$20 million in the year. So, I don't -- Mario, let Wissam get back to you, but I'm going to guess it's around $40 million, $40 million, $50 million, I don't think it's a huge number.

All right. And, Wissam, the [75%] of that construction completion in our [total are leasing]?

Yes, we usually do it at construction completion. We switched our methodology from cost plus to fully externally appraised on a completion less cost to complete.

And there are no further questions at this time. I'll turn the call back over to Gary Berman, President and CEO of Tricon Residential for closing remarks.

Thank you, Abby. I would like to thank all of you on this call for your participation. We look forward to speaking with you again in May to discuss our Q1 results.

And ladies and gentlemen, this concludes today's conference call. We thank you for your participation, and you may now disconnect.