Tricon Residential Inc (TCN) 2016 Q1 法說會逐字稿

Good morning. My name is Sean, and I will be your conference operator today. At this time I would like to welcome everyone to the Tricon Capital Q1 analyst call.

(Operator Instructions)

Wojtek Nowak, please go ahead.

Thank you Sean. And good morning everyone, and thank you for joining us to discuss Tricon's results for the three months ended March 31 2016, which were shared in the news release we distributed yesterday.

I would like to remind you that our remarks and answers to your questions may contain forward-looking statements and information about future events and the performance of our business. This information by nature is subject to risks and uncertainties that may cause actual events or results to differ materially. A detailed review of such risk factors is included in our most recent Management's Discussion and Analysis and annual Information Form, which are available on SEDAR.

I would also like to remind everyone that all figures are being quoted in US dollars, unless otherwise stated.

Please note this is call is available by webcast at triconcapital.com, and a replay will be accessible until May 19, 2016. Lastly, please note that during this call we will be referring to a supplementary conference call presentation which we have posted on our website. If you haven't accessed it already, it will be a useful tool to help you follow along during the call. You can find the presentation in the Investor section of the triconcapital.com under news and events.

With that, I will turn the call over to Wissam Francis, our Chief Financial Officer, for a review of our financial results; followed by Gary Berman, our Chairman and Chief Executive Officer, who will discuss our operational results and provide a strategic overview of our investment verticals.

Thank you Wojtek, and good morning everyone.

We're trying something new this quarter by adding a slide presentation to follow along with our prepared remarks. This was done in response to feedback from some of our shareholders; and as such, please let us know if you find this support helpful, or if there are other ways in which we can improve in how we report and communicate.

Moving on to our financial results, Q1 was a strong quarter for us, as we started 2016 with continued assets under management growth and operational successes across all of our verticals. Let me recap some of the key highlights for the quarter. Our AUM increased by 26% year over year, and currently stands at $2.8 billion, or CAD3.6 billion. Since Q4 of 2015, assets under management increased by 4% as the result of new investments in all verticals during the quarter. On slide 5 of the conference call presentation, we show the change in our AUM over the past quarter. Let me outline the major changes.

In Tricon Housing Partners, our land and home-building investment vertical, we added a new land investment in Queen Creek, Arizona. In Tricon American Homes, our single-family rental platform, we added 410 net new homes to the portfolio. In Tricon Lifestyle Communities, our land-lease business, we closed on five new communities in the quarter. And in Tricon Luxury Residences, our new Class A multifamily rental development vertical, we added a new Canadian project at 57 Spadina in Toronto, and continued development of our three existing projects.

This growth in AUM was offset by distributions received from THP1 US, which distributed $79 million of cash in the quarter, including $54 million directly to Tricon. Most of the proceeds came from the sale of Faria Preserve land asset, which we announced in March.

Turning over to slide 6, where we outlined the various components of adjusted revenue -- contractual fees for the quarter were stable compared to Q1 2015. Positive contributions came from the Viridian Separate Account investment, a commitment fee on the new Queen Creek investment, and the new TLR projects, which generated development management fees in Canada and equity supervision fees in the US. These were offset by lower fee revenue from legacy private investment vehicles, which are in harvest mode, and a lower fees from Johnson attributed to the timing of sales, which Gary will elaborate on later.

At Tricon Housing Partners, investment income decreased to $7.9 million compared to $12.4 million in Q1 2015. This was mainly driven by lower valuation gains on investments compared to the prior year, when various projects attained significant development milestones that positively affected their valuations. In addition, investment income decreased due to lower investment balances as distributions were received and investments were realized.

At Tricon American Homes, investment income consists of two key components. Investment income excluding fair value gain and NCI was $8.6 million compared to $4.5 million last year -- a solid gain of 91% mainly related to growth in the portfolio. The other component was a fair value gain of $9.4 million compared to $19.5 million last year. You may recall that last year we obtained BPO valuations for over 2,000 homes as we prepared for our first securitization transaction. This was a more precise valuation method, which yielded a strong valuation gain compared to a more conservative HPI valuation method we used in Q1 2016. And so, while this year result is solid in its own right, it is not a true apples-to-apples comparison with prior year.

At Tricon Lifestyle Communities, investment income was $1.3 million compared to $0.2 million for Q1 2015, as we grew the portfolio from 1 park to 10 parks and enhanced operation of the new acquisitions. At Tricon Luxury Residences, our new Class A purpose-built rental vertical, investment income was $1.3 million, primarily a result of fair value gain recognized on the McKenzie in Dallas as construction commenced on the project in Q1. The completion of entitlements, closing of the construction loan, and start of construction represents significant [development] milestones and derisking events for the project.

Slide 7 provides a bridge of our adjusted revenues to adjusted EBITDA and earnings. In terms of corporate operating expenses, compensation expense increased by $1.2 million from last year to $5.7 million in Q1 2016. The increase was largely related to expanding our team to support our four investment verticals for future growth. We expect total compensation expense to remain between $5 million to $6 million per quarter over the near term. General and administrative expense was $1.4 million in Q1 2016, largely consistent with Q1 2015, and is expected to remain near this level over the coming quarter.

Adjusted EBITDA was lower by $9.1 million, largely because of the fair value gain at TAH. Let me emphasize this point: if we strip out the fair value gain, we actually had a great quarter with adjusted EBITDA increasing by $1 million year over year. For the same reasons mentioned earlier, our adjusted earnings per share decreased year over year. Let me remind everyone that we had a higher number of common shares outstanding following the bought deal share offering completed in Q3 2015. We issued approximately 13.2 million common shares for gross proceeds of CAD150 million and deployed the net proceeds into new investment opportunities that are expected to be accretive to earnings per share over time.

Lastly, on slide 8 we provide a summary of our liquidity position. We have access to a credit facility of $235 million to deploy into growth initiatives within our four various verticals. As of March 31, 2016, approximately $77 million was drawn on the facility, and we had close to $30 million of cash at the corporate level for a net debt balance of $47 million. Another significant source of liquidity for us is THP1 US. We received $54 million from our core investment in the funding Q1, and we're still on track to receive another $200 million or thereabouts between now and 2018.

The next major project to track is Rockwell, a condominium project at Pine and Franklin in downtown San Francisco. The project is nearly sold out and approaching the end of construction, with closing and cash distributions expected by early 2017. And this is expected to be another major source of cash contributions at Tricon similar to Faria Preserve. Finally, at Tricon American Homes, following quarter end the dedicated warehouse credit facility was upsized from $300 million to $400 million, giving us ample runway to grow the portfolio, with approximately $280 million drawn as of Q1 2016.

At this point I'll turn the call over to Gary, who will provide additional insight into our business verticals.

Thank you, Wissam.

I would like to walk you through some of our achievements this quarter and talk about the growth prospects for each of our verticals, starting with Tricon Housing Partners on slide 10. Q1 was a solid quarter for THP, particularly from a cash flow generation perspective. As Wissam mentioned, our THP1 US co-investment received $54 million, primarily as a result of the completed sale of Faria Preserve, the land investment within the Greater Bay portfolio. In less than three years, Tricon has received a total of $186 million of distributions from its $260 million investment in THP1 US.

THP also closed on a $15 million land investment in Queen Creek in the Southeast Valley of Phoenix, Arizona. This is a relatively small investment, but we wanted to give you some insight into how we think about deals and what we're looking for. Slide 11 provides additional detail on this investment. It entails the purchase of a fully zoned 120-acre parcel of land in Queen Creek, an affluent suburb of Phoenix. We were fortunate to acquire this land from receivership at a fairly advanced stage of development with all entitlements in place and no need for offset infrastructure.

As you can see from the aerial photo, the land is surrounded by existing development and retail amenities. It is well located along the transportation corridor of Ellsworth Road, approximately 3.5 miles south of the Loop 202 Freeway, and less than one mile north of the Queen Creek marketplace, an 800,000 square-foot retail and entertainment node. The site is also a short drive to the Price Road corridor, a major employment node that is home to Intel, Orbital Science, [Via Van], and Wells Fargo. This land is many ways like a hole in the donut, with many development surrounding it. The only undeveloped area that you can see in the photo is a restricted flight path for the Mesa Gateway, a small regional airport.

The business plan is to develop about 350 single-family lots and sell these to homebuilders over the next 24 to 36 months. In addition, there are 15 acres of commercial land to be developed. In terms of structure, the project was funded 85% by Tricon and 15% by Community Southwest, a longtime development partner of Tricon, and was underwritten to generate a strong return over its short investment horizon.

Going forward we intend to warehouse land and homebuilding investments on our balance sheet and then syndicate them to third-party investors up front once the projects are further derisked. We plant to focus on two types of investments, as shown on slide 12. The first type is smaller, short duration investments like Queen Creek, which provides us with good visibility into the current cycle and are underwritten to generate higher IRRs, although potentially lower ROI multiples. The second type is longer duration investments in master planned communities and active idle communities. Our preference here is to acquire existing cash flowing assets with lots and homes on the ground, where previous investors taken the greenfield risk to entitle the site, install off-sites, upfront infrastructure, and community amenities, as well as established interest from homebuilders and consumers alike through a lot sales program. By recycling the capital that is distributed from existing land and homebuilding investments back into THP, we intend to maintain steady AUM and related contractual fees while using the gains of profits to grow our three income-producing verticals.

That's a good segue, so let's turn our attention to Tricon American Homes and slide 13. In Q1 2016 we continued to focus on execution at the operating level. I'd like to highlight several key metrics. First, TH achieved its acquisition target by purchasing 482 homes and selling 72 non-core homes, for a net increase of 410 homes in Q1. Second, in-place occupancy of 88% and stabilized occupancy of 95% remained stable compared to year-end 2015. Third, operating margin was maintained at 60% in Q1, which is consistent with the full year of 2015. Forward tenant turnover came in lower than we'd anticipated at 26.7%. Our long-term expectation for turnover is 30% to 33%, meaning residents will stay in our homes for roughly three years. And lastly, TH was able to grow rents by 4.1% in Q1, including 3.6% of renewals and 4.5% on new move-ins.

Tricon American Homes also consolidated its head office operations in Orange County, California. TH now has 250 employees across the US, led by a seven-person executive team, and is continuously strengthening its platform for future growth and operational improvement. In terms of growth objectives, you can see on slide 14 how the TAH portfolio has grown through a disciplined acquisition strategy and geographic expansion since 2012. TAH remains focused on getting efficient scale in its 14 target markets, and remains on pace to acquire 400 net homes in the current quarter. Also, given the current geographic mix, we expect TAH operating margin to remaining at 60%. We see ample growth opportunities in the single-family rental market, given that there are 15 million rental homes in the US, and only 200,000 or so are under institutional ownership. At our current acquisition pace we can double the portfolio in less than five years.

Moving along to Tricon Lifestyle Communities on slide 15, Q1 marked a significant achievement with the acquisition of a portfolio of 5 parks in Arizona, bringing the TLC portfolio to 10 parks with almost 2,500 pads and $86 million of AUM. In Q1 we achieved a lease turnover rate of 3.9% and were able to grow rents by 2.4%, resulting in an average monthly rent of $378 per pad. On slide 16 we show how the new acquisition will impact the TLC portfolio. The acquisition of Sun portfolio was completed at a cost of $34 million, representing a going-in purchase cap rate of 6.7%. It consists of five age-restricted manufactured housing communities and a total of 1,349 pads. In conjunction with the acquisition, TLC secured a financing package with an average advance rate of 65% loan-to-value and a weighted average interest rate of 4.63%. We view this acquisition as a terrific value-add opportunity.

You can see that the in-place occupancy of the parks is only 65%, which is lower than the occupancy of 89% at our existing parks and takes our blended occupancy to about 76%. We essentially received 476 pads for free. And we see significant room to drive NOI by increasing occupancy and rents in this portfolio as TLC implements its enhancement CapEx program and approves the resident experience. We have already demonstrated our ability to do this at Long Haven, and so we're hopeful that we can achieve even better results for the Sun portfolio.

Looking ahead, TLC has already entered into a binding contract to purchase an age-restricted community in Mesa, Arizona, for $8.8 million. The park is comprised of 177 residential pads. And the transaction is expected to close in Q2 2016. In 2016 TLC will continue to execute on an active acquisition pipeline of $100 million mainly in Phoenix, as well as potential new markets in Florida and California. We have done well so far in terms of acquisitions, but this continues to be (technical difficulties)

Ladies and gentlemen, there has been a technical difficulty in today's conference. We will begin momentarily.

It sounds like the call got dropped. We apologize for the technical difficulties. I am going to go back and recap Tricon Luxury Residences, and then we'll go to Q&A.

Back to slide 17 -- Tricon Luxury Residences, a vertical we only officially entered in last year. We're happy to report that we now have four projects closed in a relatively short period of time, two in Canada and two in the US, with a combined AUM of $168 million. On slide 18 you can see our two US developments. At our first US project, the McKenzie in Dallas, entitlements are in place. Construction and financing is closed, and construction is now underway. Our second project, Canals at Grand Park II in Frisco, Texas, is now officially branded the Maxwell. The project closed its construction loan subsequent to quarter end and recently started construction.

On slide 19 we show our two Canadian projects. Our first Toronto-based investment at 592 Sherbourne Street, known as the Selby, is under construction, with the majority of hard cost [now tenanted] prices slightly better than budget. Our second Toronto-based investment at 57 Spadina closed during Q1. This project will be a 36-story development located one-half block south of King Street on Spadina Avenue. Tricon has partnered with a major Canadian pension plan to form a CAD43 million separate account, with Tricon funding 20% of the commitment. Pre-development at 57 Spadina has commenced, with construction expected to start in Q1 2018 once the existing leased premises are vacated.

We continue to focus on growing this vertical. We're currently pursuing an active pipeline of investment in Phoenix and San Diego that are projected to commence development in 2016. We also have several projects in the pipeline in Toronto. TLR's build-to-core strategy is very attractive to third-party institutional investors, as rental apartments are a familiar asset class. As a result, we are seeing a good level of interest from third parties looking to participate in our investments. With the help of third-party capital, we aim to grow TLR towards $1 billion of AUM in the next few years.

Turning to private funds and advisory, which represents our fees from third-party AUM as well as our advisory income streams, you can see on slide 20 that total contractual fees and GP distributions were flat compared to last year, but this was a combination of both positive and negative dynamics. As Wissam mentioned earlier, contractual fees excluding Johnson were up substantially, benefiting from incremental revenue related to Viridian, Queen Creek, and TLR investments. The offset was Johnson revenues, which were lower this quarter compared to last year, as a large commercial land sale was delayed and a number of lot transactions were pushed out into Q2.

We expect Johnson sales to fluctuate quarter to quarter because of the timing of large land parcel transactions, which are episodic in nature and can have a material impact on Johnson's quarterly earnings. Nevertheless, Johnson continues to see resilient home sales across its portfolio of leading master-planned communities, which bodes well for future land sales as homebuilders need to replenish their inventories. Year to date, home sales at Johnson communities were in line with last year's, reflecting successful new product launches at Harvest Green and Sienna Plantation, expansion into the Dallas market through the Viridian acquisition, as well as stable sales at Cross Creek Ranch and Wood Forest.

In conclusion, we are very happy with the product we're making in all of our verticals and excited about their growth prospects. Looking at slide 21, it's remarkable how far we've come in only a few years. Since going public in 2010 we've grown our AUM from just under $1 billion to almost $3 billion today. Our longer-term goal is to reach $5 billion, and we believe we can do that in 3 to 5 years. With our strategy in place, our goal now is to focus on execution and producing a growing stream of predictable cash flows over time.

Lastly, I would like to invite everyone to attend our annual meeting on May 25. You will find the relevant details on slide 22. With that, I will pass the call back to Sean to take questions with other senior members of our management team.

(Operator Instructions)

Geoff Kwan, RBC Capital Markets.

The first question I had was on the SFR side, the potential securitization. Just wanted to see if you can talk about the potential timing. And, more specifically, if you guys are going to go down that route again, is the consideration maybe more around where the funding costs are playing out in the market or is it maybe a little bit more of having a specific deal size in mind?

Yes, so timing is really probably the back part of this year. We need to acquire more homes, and we're doing that this quarter, to really get the size to a level that makes sense in the market. I think with homes in place this quarter, Q2 -- or in Q2 I should say -- we should be there, Geoff. And then it will obviously take a few months to work through the process. We're looking at time is for the end of the year. And it's part of our -- it's a part of the process we are going through in the ordinary course of business. As you know, we acquire the homes for cash. We then stabilize them. We put them on our credit facility. When we get to a significant scale -- in this case, let's say it's 3,500 homes on the credit facility -- we then can roll it into the securitization trust and lower our cost of capital. So that's the plan.

Maybe ask it a little bit of a different way is, assuming that you get -- or when you guys get to the size to be able to make the economics work for you, how much of -- much do funding costs kind of play into it? Is it, as long as it's a reasonable cost, you guys are okay with it? Or would you look to try to be opportunistic if the funding costs become more favorable?

Certainly we're always going to look at funding cost, but it's also a question of what are the alternatives. And, right now, I think the best opportunity in the single-family rental sector is -- continues to be securitization. So even though spreads have widened, I think, fairly substantially since we did the first deal -- in fact, they could be 100 basis points wider than when we did the deal at LIBOR plus 196 -- it still makes sense. And so I think at those types of rates, Geoff, we will continue to move forward with securitization. The real issue, I think, will be, do we want to continue to float or fix, and that's something we will determine later in the year.

Okay. Great. Thank you.

Dean Wilkinson, CIBC.

Gary, can you just remind me, on the TLR, the funding mechanism for that? Are those separate accounts with a finite life, or is it just an ownership interest that sort of continues on in perpetuity?

For TLR Canada, is a separate account with one of our existing long-standing pension-plan partners. There is no finite life. This is a developed core strategy. These are long-term holds. There's a valuation mechanism where performance fees are paid in year 10, so 10 years after we acquire the site. But it would be a shoulder-to-shoulder hold on our balance sheet with our partner.

Okay. And then, at the 10 years, there is no sunset on that, that shotguns them out or anything like that?

Correct.

And, Dean, in the US, we obviously do not have any third-party investors yet. But that's something we'll work on over time.

Great. And then, just on the unfunded commitment within the principal investments, the $78 million. Am I right to read that, that is fully covered from the net proceeds of THP1, give or take timing issues?

Yes. Yes, that's correct.

And, would there be excess? Or --?

So, when we're projecting and guiding the market that we think there's going to be another $200 million of cash flow from now through the end of 2018, we're taking into account any potential contributions, if that helps you. And there should be additional cash after 2018. We're just guiding from now until 2018. So that's a net number, Dean.

Perfect. Okay, that's a net number. Great. And then, just in Viridian, is the grass dry and are you back on the ground, or is that still sort of working itself out?

I'm going to hand that over to Craig Mode to give you a little more detail as to what's happening on the ground in Viridian.

We have continued to have pretty strong rain events in -- across the Texas markets. But we're past the point where that was really critical and impacting the delivery and timing of lot sales. So we're back actively selling lots to builders at this point in time, and expect pretty significant deliveries through Q2 and Q3 of this year.

So anything that you would've missed in Q1 has just been pushed back out into those quarters?

Correct. Yes, all of those lots are contracted for.

Perfect. And then, my last, in TAH, it looks to me like you've got something in the acquisition capacity of $250 million to $300 million without having to do anything. Am I looking at that right?

Yes, that's correct. If you looked at the -- I mean, there's a lot of different ways to look at it, or to skin the cat, just given we've got different verticals. If you look at the capacity on our credit facility and then you look at the capacity on our TAH dedicated warehouse facility, that together is roughly $300 million -- I am rounding. And if you assume that -- and I will be conservative -- that the average all-in cost with renovation of a home is $150,000, that's another 2,000 homes.

Another 2,000. Okay, that's where I was thinking. Perfect. That's all I had. Thanks, guys.

(Operator Instructions)

Jonathan Kelcher, TD Securities.

First, just on the land and housing business, could you maybe give us a little color on your current pipeline there? Do you guys think you will close on a large deal this year?

Yes, we are hoping that we can. These large master-planned communities, Jon, come up from time to time. We obviously can't control when they happen. But, we are the first call. And we are incredibly selective when we do see opportunities. But our hope is that we can acquire one, maybe two per year. So that, I think, is still our plan. And then, in addition to Queen Creek, we've also got one or two other smaller deals that are in the pipe. And our plan, once we get -- if we get to that stage in closing on those deals, then we will syndicate them.

Okay. Are you looking at any big ones right now?

Yes, we are. We are always looking at big ones. I can't comment more than that. But we are -- we always have our feelers out there.

Okay, Fair enough. And then, just turning to the TLC portfolio. If we look at the 65% occupancy you have at the Sun portfolio, how much do you think you can grow it and over what time frame?

I'm going to hand it to Adrian.

I would say -- what we have underwritten that deal, we underwrite all of our parks on a 10-year basis. I think, over time, over a five-year period, we should get, I'd say, 10% increase in our occupancy conservatively. That would be a combination of selling homes, those are brand-new homes, existing inventory homes that we got for free in the portfolio, about 130 homes in total, and as well as leasing new homes as well. I'd say 10% over the next five years is where we would expect to actually hit.

Okay. And that 6.7 cap rate's on the current NOI, right, the in-place NOI?

Yes, it's on the in-place NOI.

Okay. Now, did you guys look at the Carefree portfolio at all, or was that a little bit too much to bite?

Yes, we did. We did look at the Carefree. It was a high-quality portfolio and an exciting opportunity. And we bid on it in a consortium. My understanding is we came second on it. We were just not willing to stretch any further. And so it ended up going for a pretty keen cap rate. But we were in the running.

Okay. That's it for me. Thanks, guys.

Stephen MacLeod, BMO Capital Markets.

I just wanted to follow up on the THP business with respect to slide 12. You've outlined two types of projects. And I just wanted to get a sense as to what the pace of new investments would look like and whether you have a preference for infill versus master-planned communities?

We want to do both because, as the slide speaks to, we want to really combine these kind of shorter-term duration investments where we really get good visibility into the cycle and we can move quickly through them, like Queen Creek, and then the longer-term cash-flowing projects, like Viridian. We are looking for both. We'd love to do one large deal a year and do a handful of smaller deals per year. And by doing that we can basically maintain our AUM in THP and then cycle any profits into the other income-producing verticals.

Okay. So that would be kind of like $150 million to $200 million in annual deployment, is that right?

Yes, that sounds about right. Remember, we are opportunistic. That will ebb and flow. But that sounds reasonable, Steve.

Okay, yes. Just as an average, yes. Okay, great. And you mentioned Rockwell being the next cash flow catalyst on THP1 US. Can you talk a little bit about the timing of those cash flows and what the numbers potentially would look like?

It's a major contributor. I can't give you the exact number, but I would say it's in the ballpark of what we received over time from Faria Preserve. So it's going to be a major contributor. And the timing would probably be very early Q1 2017.

Okay, great. Okay. And then, just turning to the financial statements. The performance fees, there were none in Q1. I'm wondering, do you expect that to continue to be $0 or is that just a function of kind of how things fell out for Q1?

No. I mean, we expect there to be some performance fees this year, and certainly more next year. If you look at THP1 Canada, all the capital now has been repaid. You can see that on the AUM. Any future distributions that come in will generate performance fees. We have one master plan there in Edmonton called Heritage Valley, it's in southwest Edmonton. The master plan there is doing well, but things are slower than they have been. And so I think the timing on the cash flow will be a little bit later than we had thought. And then, we've got other syndicated investments which are nearing in completion, too, which should also generate some performance fees for us this year and maybe next year.

Okay, great. And then, finally, on the TAH portfolio -- and you may have mentioned this on the slides and I may have missed it, and I apologize if that's the case. I just wanted to get your sense as to what you are expecting in terms of reasonable expectations for rent increases, NOI margin, occupancy rates from where we are today.

Yes, I think we're going to be stable. I think our NOI margin was 60% in Q1 and it was 60% for the full year for 2015. That might fluctuate a little bit from quarter to quarter because sometimes it's seasonal. But on the full year, we would expect 60% with the existing geographic mix. On occupancy, from a stabilized perspective, we would continue to expect to be at 95%. We are seeing lots of demand.

And I forget what your other -- rent increases. On rent increases, we have had more of an occupancy bias, Steve. So we averaged about 4% in Q1, which is healthy, but we have had more of an occupancy bias. I think we will continue to be able to do roughly 3% to 4% for the year as well.

Okay. That's great. Okay. Thank you very much.

(Operator Instructions)

Jimmy Shan, GMP.

Just a follow-up on the occupancy bias comment. Just kind of wondering as to how you think about the tradeoff between pushing the rents and pushing turnover? And is the view that maybe the goal is to reduce the turnover rate as opposed to being aggressive on the rents?

Yes, that's right. One of the things that really drives this business and allows us to achieve margins that are very similar to multifamily is the turnover. You want to keep people in their homes for as long as possible. And so you are better off to keep the turnover lower than really push rents. We don't think it makes sense to be greedy. But, obviously, if you are at 95% or 96%, then we can start to get a little bit more aggressive. But, at the end of the day, we would rather have lower turnover than risk -- than take chances with higher rents and have more people move out.

So from a same-store NOI growth perspective then, how do you think that will play out on the stabilized assets over the next 12 months?

Yes, I think the growth on a same-store basis -- and by the way, that's something we need to spend more time on, Jimmy, in terms of -- and I will add that the whole -- all our peers have been doing a lot of work with Green Street to try to come up with common or standard metrics for the industry so when we report results, they are apples to apples across our peers. And so we are going to be coming up with metrics which really define same-store and core portfolios, which will help you as you think about it. But I think, from a same-store perspective, I would expect -- again, I would expect revenue to increase 3% to 4%, as I said to Steve, and for our margin to hold steady.

Okay. All right. And then, turning to the discussion on the BPO validation versus the HPI. It's been a year since most of the assets have been BPO valued. If the whole portfolio were to be valued under that methodology today, how likely do you think it will be higher than the current value using HPI? And how much higher do you think it will be, if that's the case?

I am guessing. I think it would be higher, Jimmy, but I can't give you a more specific answer than that. Obviously, we'll have to do BPOs again when we do the next securitization at the end of the year, and that will give us obviously a lot more insight. But without actually doing them, I can't tell you.

Okay. In terms of the non-core assets, how would the values compare?

On the non-core -- you mean between BPO and (multiple speakers)?

Yes, the sale proceeds versus the value that you have.

In Q1, we were a little above -- the actual sales were a little bit higher than the carrying value, or the fair market value.

Okay. Okay. Lastly, just to confirm. On the liquidity side -- at the corporate level you have $180 million -- $188 million. And then, at the TAH level it's $167 million. So, combined, you have something like $350 million to deploy, not including the cash flows coming from TPH1 US?

Yes, that's correct.

Right. And the intent is to fully draw on those lines in the next 12 months?

Not necessarily fully draw our corporate credit facility, but certainly we would draw on the TH warehouse facility. And then, again, once we get critical scale on the TH warehouse facility, we would then move that into a securitization trust.

Right. Okay. Okay, thank you.

There are no further questions at this time. I turn the conference back to the presenters.

Thank you, Sean. I would like to thank all of you on the call for your participation. We look forward to speaking to you in August when we discuss our results for Q2 2016.

This concludes today's conference call. You may now disconnect.