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Tricon Launches $2 Billion Joint Venture to Buy U.S. Homes

Toronto-based Company Has Deals With Sovereign Wealth Fund and State Pension Plan, Will Buy up to 12,000 Single-Family Units
June 28, 2018
Pictured: Tricon American Homes' headquarters in Orange County, CA.

Toronto-based Tricon Capital Group Inc. said it has signed up one of the world's largest sovereign wealth funds and a similar level state pension plan in the United States for a new fund that has committed $750 million in equity to buy 10,000-12,000 single family homes expected to be valued at roughly $2 billion.

The portfolio of single-family rental homes will be acquired by Orange County, CA-based Tricon American Homes, which already owns and operates about 15,500 homes in 16 core markets in nine states, predominantly in the U.S. Sun Belt, a region that stretches across the southern U.S.

"The entry of two of the largest and most respected global real estate investors into single-family rental is not only a transformational milestone for Tricon, but also a significant endorsement for this burgeoning asset class," said Gary Berman, president and chief executive of Tricon Capital, in a statement.

"The joint venture also provides us with a clear path to scale, enabling our Tricon American Homes platform to grow to 25,000-30,000 homes over the next three years," added Berman.

Tricon did not name the two groups involved.

The National Rental Home Council, which represents about 30 large investors in single-family rental homes, told CoStar News in March there are 16 million single-family homes rented in the United States but institutional investors still only hold about 2 per cent of that stock.

Tricon, as both an investor and asset manager focused on the residential real estate industry in North America, has $7.3 billion of assets under management.

"Our objective since entering the single-family rental industry has been to build up our balance sheet and prove out new businesses in order to ultimately become a bigger and better asset manager; we have taken a major step towards achieving this goal by entering into this joint venture, and in doing so, we believe the earnings potential and financial flexibility that stem from being an asset manager will come back into focus," said Berman.

The joint venture, during the three-year investment period, will serve as Tricon America's dedicated vehicle for acquisitions and will focus on homes in the company's active markets, primarily located in the U.S. Sun Belt.

At the conclusion of the term of the joint venture, Tricon and its two institutional investors have the right to retain their one-third interest in the portfolio either by extending the joint venture term or holding the properties in a new vehicle, which may be managed by Tricon, or to liquidate their positions.

In the case of a liquidation, Tricon has a right of first offer to acquire the investors' stake. Tricon American's existing portfolio and operating platform will remain wholly owned by Tricon and are not part of the joint venture.

Garry Marr, Toronto Market Reporter  CoStar Group   

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