Tricon Residential Inc

TSX:TCN

Earnings Call Transcript 2020-Q1

[Operator]

Thank you for standing by, and welcome to the Tricon Capital First Quarter 2020 Analyst call. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Managing Director of Capital Markets, Wojtek Nowak. You may begin.

[Wojtek Nowak, Managing Director of Capital Markets]

Thank you, Jesse. Good morning, everyone, and thank you for joining us to discuss Tricon's results for the 3 months ended March 31, 2020, which were shared in the news release distributed yesterday. I would 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 and our company website. Our remarks also include references to non-GAAP 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 via webcast at triconcapital.com, and a replay will be accessible there following the call. Lastly, please note that during this call, we will be referring to a supplementary conference call presentation posted on our website. If you haven't already accessed it, it will be a useful tool to help you follow along during the call. You can find the presentation in the Investor Information section of triconcapital.com under Events and Presentations. With that, I will turn the call over to Gary Berman, President and CEO of Tricon.

[Gary Berman, President, CEO & Director]

Thank you, Wojtek, and good morning, everyone. I hope you're all healthy and staying sane during these crazy times we find ourselves in. Let's jump right into the presentation on Slide 2. It's been a very busy first quarter for our team as we completed our transformation to a rental housing company, with a complete revamp of our financial disclosure, including the adoption of consolidated accounting, a realignment of our operating structure and a new name for our company, Tricon Residential, which I will speak to in a minute. For our headline results, we reported core FFO per share of $0.13 or CAD 0.18, which increased 160% from the prior year and speaks to the growth in our rental income streams. From an IFRS perspective, we reported a loss of $0.21 per share compared to income of $0.16 last year, which was largely driven by an $80 million fair value write-down of our for-sale housing investments. As you know, this business has been underperforming compared to our expectations and given the added uncertainty of COVID-19, we thought it was prudent to write these Assets down to an achievable value in the current environment. It's been our goal to deemphasize this legacy business, and it now represents less than 3% of our assets.More importantly, our core rental businesses performed very well this quarter, with single-family rental posting same home NOI growth of 5.5% and the U.S. multifamily business focused on expanding occupancy, which reached 94.4% in the quarter. And our first Canadian multifamily asset, the Selby, is now 88% occupied and is approaching full stabilization. Wissam and Kevin will provide you with more insights into our results. But before we go there, I wanted to share with you some of the background of our transformation to a rental housing company, which has been in the making for the better part of a decade. Slide 3 is a walk down memory lane for many of us. Over the years, we organized our company under numerous investment verticals that were all part of our journey to building a leading rental housing platform. While the strategy was simple, it became complicated with the use of investment entity accounting as well as naming conventions were very familiar to Tricon, but less so to external parties. We knew this needed to change and over the past 2 years, have refined our residential strategy to focus purely on single-family and multifamily rental with an integrated technology-enabled operating platform, unifying these 2 businesses. The culmination of our efforts is the launch of a new brand and a company name, Tricon Residential. Let's move to Slide 4 and begin with who we are today. Tricon is a rental housing company focused on the middle market demographic. It's really that simple. And now with our move to consolidated accounting and revamped disclosure, which is more in line with our peers, Tricon looks very much like a traditional real estate company, or a REIT. Like our new name, our new logo reflects both our heritage and our vision for the future. The additional Residential illustrates our singular focus and our understanding that our residents are the foundation of everything we do. The 3 bars of our logo correspond with the 3 pillars of our brand: culture, community and connectivity. They also represent our 3 priorities: our employees, our residents and our partners in that order. We believe that by prioritizing our team members, they in turn will be inspired and empowered to take care of our residents and make a positive impact on local communities. When our residents are satisfied, they rent with us longer. They are more likely to treat our properties as their own, and they're more willing to refer new customers. We've realized that the best way to drive returns for our investors and shareholders is to ensure our team and residents are fulfilled.In keeping with our unified brand, we've realigned our corporate structure with a leadership team that spans across Canada and the United States and across our business segments. I'm delighted to announce the appointment of Jon Ellenzweig, Kevin Baldridge and Sherrie Suski to the Tricon C-suite and wanted to congratulate them on their well-deserved promotions. As part of our rebranding, we wanted to share with you our new purpose statement and guiding principles. First, our purpose statement on Slide 5. Imagine a world where housing unlocks life's potential. Imagine a world where housing unlocks life's potential. This is our why statement. Why Tricon employees wake up every morning to come to work? Why are we proud to say we work at Tricon? This statement is intended to be aspirational. It's a moving target. It's something we may never achieve, and it can mean different things to different people. For example, it could mean imagine a world where we can simplify lives for residents. Imagine a world where we can give time back to our residents, so they can focus on what's truly important. Imagine the possibilities if we can create a platform to do good. And imagine, for example, if we can invest in modular housing and make housing more affordable and safeguard workers.Let me give you a more literal example. Imagine you're home sitting in your pajamas. And I know at least 1 person on this call is probably in their pajamas. You're sitting in your pajamas and you want to rent a home. You go to our website and you're interested in 123 Elm Street in Atlanta. You activate our self-showing app. You provide us with your us with your credit card information, your driver's license. And then the next day, you go and see the property. You take a selfie of yourself when you get to the door that matches the driver's license, the door automatically opens, no keys, no touch. Then you peer inside. And what do you see? You see freshly coated walls, sparkling floors and appliances. You don't have to worry about a mortgage. You don't need to fight a down payment. You walk around the home, everything is pristine. You know you don't need to go to Home Depot to fix anything. And you don't have to get on your hands and knees to scrub it. That's what we mean by imagining a world where housing unlocks life's potential. Now you can focus on what's truly important. And by doing so, we can give you back time. If our purpose statement is our why, then our guiding principles are the how. Let's move on to Slide 6. The guiding principles you see on this slide serves as a core set of values that guide our daily judgment. And over time, they've become our key success factors. Our goal was to come up with a set of values that guides how we conduct ourselves and which're also relatable to everyone at the firm from our maintenance techs to our investment team. The reason we are sharing this with you is because we believe alignment and culture have a significant impact on operational performance. When our team is inspired and empowered to take care of our residents, our residents will be happier. And when our residents are fulfilled, we believe it translates into better results for our shareholders and investors. I would like to call to your attention the third principle, ask questions, embrace problems and thrive on the process of innovation. In the interviews we conducted with approximately 40 senior leaders across the firm to determine our key traits, everyone spoke about the importance of curiosity and innovation. And how is a tech-enabled real estate company where capital, ideas, people and technology all exist under 1 roof, we have a distinct competitive advantage that needs to be sustained. Now let's turn to Slide 7. Earlier, I mentioned the middle market is a key aspect of our strategy. The middle market relates to both our single-family and multifamily offerings, and we believe it is a winning strategy, especially in today's environment where governments are asking people to self-shelter. Across the U.S. Sunbelt, we're providing essential shelter for the workforce. We define the middle market as households earning between $60,000 and $100,000 per year, paying rents of $1,000 to $1,800 per month. This means our residents have a rent to income ratio of about 20% on average, giving them ample cushion to weather economic hardship. For our shareholders, we offer exposure to a relatively affordable part of the rental spectrum as compared to other U.S. publicly traded peers, which generally cater to renters at a premium price points. We believe our business model is defensive and is designed to perform well in good times and in more challenging times, like today. Before I move on to Slide 8, can I please ask everyone to put their phones on mute? I'm getting some interference. Please put your phone on mute.On Slide 8, we wanted to point out how the workforce is being supported by record levels of government stimulus. The onetime relief payments and unemployment insurance top-ups provided under the U.S. CARES Act equate to over $4,000 per month -- per household per month during the 4-month period of the stimulus package. This is not only a much higher amount than our typical monthly rent of $1,200 to $1,500, but in some cases, the stimulus exceeds what someone would earn if they were employed. I've talked about how our business is inherently defensive and well positioned to withstand the current downturn. But let's talk briefly about what we are doing internally to weather the storm on Slide 9. The first thing we always do is focus on our team. By mid-March, we were able to transition almost all of our employees to work-from-home, including our call center, and we haven't skipped a beat. We worked diligently and very quickly to come up with policies and procedures to take care of our residents and ensure that they are living in a safe environment. We also wanted to limit physical contact to keep you safe and obviously our investments in technologies, such as virtual showings and self-tours, have proven to be prescient.For our residents, much like our peers, we've temporarily halted evictions and waived late fees in April and May. We are also offering flexible payment plans but only to residents experiencing financial hardship. In terms of our investments, we have paused the acquisition of single-family rental homes to preserve cash, but also for practical reasons as it is difficult to conduct inspections and other closing and renovation activities in the current environment. We've also paused the value-add CapEx program in a U.S. multifamily portfolio for similar reasons.In our Toronto developments, life continues more or less as normal. Construction is progressing at our 3 sites and is largely being funded by construction loans. With that, I will pass the call over to Wissam Francis, our CFO, to discuss our financial results. And again, I would ask everybody on the call, all the speakers, to please make sure your phone's on mute. Thank you.

[Wissam Francis, Executive VP & CFO]

Thank you, Gary, and good morning, everyone. Let me start with Slide 10 and reiterate the 5 key priorities we have introduced last year. These include growing our core FFO per share at a compounded annual rate of 10% over a 3-year period, raising approximately $1 billion of third-party capital, growing book value per share by reinvesting our free cash flow into accretive growth opportunities, reducing our leverage and improving our financial reporting. You can see these priorities represented in a graphical dashboard on Slide 11, similar to prior quarters.Again, our FFO and fundraising growth targets are over a 3-year time horizon, and we remain focused on hitting these targets, notwithstanding the current economic challenges presented by COVID-19. Our goal of reducing leverage to 50% to 55% debt to assets also remains intact but will take a little longer, given the current situation. We intend to achieve this through third-party asset sales, including the ultimate syndication of our U.S. multifamily portfolio. Our last priority was to improve reporting, something that is well on track with the launch our new revamped MD&A and financials accompanied by our move to consolidated accounting. This leads me to Slide 12, where we provide more details on Tricon's revamped disclosure, where I'm very excited to share with you. Our transition from an investment company to an owner and operator of rental housing results in our need to transition from investment entity accounting to consolidated accounting. Section 3 of our new MD&A focuses on these consolidated results. We will continue to show the detailed performance of our business units under Section 4 of our MD&A. However, the focus is on Tricon's proportionate share of operating metrics to help you understand our share of those results. Additional new features that we would like to highlight, including the introduction of AFFO and CapEx disclosure, enhanced detail regarding our debt maturities profile, detailed market-level metrics, overhead efficiency analysis and comprehensive details regarding our government projects. On behalf of the company's Board of Directors and the rest of our senior management team, I would also like to thank our accounting teams, both in Toronto and Orange County, for the amazing work and sacrifices made to complete this exceptional task and delivering this enhanced disclosure. At the bottom of the slide, I'd like to draw your attention to some of our key metrics for the quarter and highlight a few things. First, our transition to our rental housing company has allowed us to achieve tremendous growth in operating metrics that are highly relevant to real estate investors, such as core FFO and AFFO per share, which acts as a proxy for free cash flow. Second, the move to consolidated accounting provides us more transparency and allows the reader to understand the expansiveness of our balance sheet with $6.5 billion of assets or CAD 9.2 billion. Third, our AFFO of $0.10 per share, which translates to CAD 0.13, provides us with ample cushion to support our quarterly dividend of CAD 0.07 per share. This equates to an AFFO payout ratio of 47%. Lastly and most importantly, if you were to annualize our FFO or AFFO per share in Canadian dollars, you can appreciate how effective the stock looks at its current share price. Our financial performance this quarter is highlighted by 160% year-over-year growth in core FFO per share. Let's move on to Slide 13, which highlights the drivers that contributed to this growth. First, our single-family rental business delivered 15% growth in NOI, driven by a larger portfolio and strong rent growth. Second, our U.S. multifamily portfolio, which was acquired in June of 2019, was a key contributor as it almost doubled our overall FFO per share for the year. Third, residential developments contributed higher FFO this year as a result of significant milestones being achieved at our Canadian multifamily business, especially at the West Don Lands. And finally, corporate overhead decreased by $1.3 million compared to last year, benefiting from lower accrued AIP and LTIP expense. In addition, this also speaks to our focus on controlling costs as we continue to pursue top line growth with relatively smaller growth in corporate expenses.Turning to Slide 14. When we say Tricon is a rental housing company, this is exactly what we mean. Our consolidated balance sheet is dominated by rental housing, with approximately 96% of total assets generating recurring rent income, with a defensive middle market profile. The remaining 4% represents our development exposure, which is expected to create meaningful value for shareholders over time. Our for-sale housing business, which makes up less than 3% of total assets, generated $51 million of cash in Q1 and are projected to generate approximately $340 million of cash for Tricon over the long term. In addition, our Canadian multifamily developments, which makes up 1.5% of our total assets, are projected to generate $20 million of NOI for Tricon upon stabilization. If you were to apply a cap rate of 4% to this figure and assume 50% debt, you would arrive at a value of 2x to 3x our current book value for these assets. Turning to our debt profile on Slide 15. You can see that our balance sheet is well positioned to weather near-term uncertainty in the debt markets. As of March 31, our liquidity position consists of $500 million credit facility, maturing in July 2022, with approximately $174 million of undrawn capacity. We also had $53 million of unrestricted cash on hand, bringing total availability to $227 million.Our near-term debt maturities include 3 debt instruments in the single-family rental business, totaling $426 million, which have additional maturities in 2020 but are extendable up to 2 years at Tricon's option. Beyond that, we have one credit facility of $114 million maturing in December related to our U.S. multifamily portfolio and provided by a major Canadian financial institution. We are already in active discussions to extend this facility for another year.Lastly, it looks like the ABS market is starting to unfreeze as we saw 2 single-family securitization deals move towards marketing and pricing in the past week, which bodes very well for our plan to complete a securitization later this year. And now, making his formal debut on our conference call as a speaker, weighing in from the left coast, Kevin Baldridge, our new Chief Operating Officer, to discuss the operational highlights.

[Kevin Baldridge, Chief Operating Officer]

The left coast at the right corner. Thank you, Wissam, and hello, everyone. I'm going to focus on the operational performance of our rental businesses, starting with single-family rental on Slide 16. In Q1, we saw exceptional demand trends, which are continuing into the current quarter. Looking at our same-home NOI performance, which captures over 15,000 homes, you can see that we were able to deliver strong same-home NOI growth of 5.5% compared to last year. Let me break this down. Our same home revenues grew 5.4%, driven by an occupancy increase of 40 basis points as well as average blended rent growth of 6.1%. This rent growth consisted of 7.9% growth on new leases and 5.4% growth in renewals. On the expense side, we reported 5% increase in same-home expenses, largely driven by a 5.6% increase in property taxes as our homes appreciated in value. We also saw a 3.6% increase in repair, maintenance and turnover costs, driven by elevated storm activity. Storm activity resulted in more roof repairs, septic and landscaping jobs.In our same-home portfolio, we completed a total of over 16,000 work orders this past quarter as compared to about 15,000 work orders in the prior year for a 7% increase. The offsetting factor was lower turnover. We reported an annualized turnover rate of 20.9% in Q1 2020, a 170 basis point decrease from Q1 2019. This is a truly remarkable metric and a record low for us. Seasonality often plays a role in keeping turnover lower in Q1, but as the COVID pandemic unfolded into March, it became clear that the government mandate of self-sheltering was benefiting us as residents were looking for the safety of single-family homes. As we zoom out over a longer time horizon, our turnover has generally been trending down, which really points to the success of our middle market strategy, our ability to screen residents better and our focus on customer service. Moving on to our U.S. multifamily rental business, on Slide 17. You will recall that since we acquired the portfolio in Q2 of last year, our focus has been on driving occupancy. In Q1, occupancy increased by 130 basis points compared to last year to 94.4%. This led to a revenue increase of 2.1%. We were able to drive occupancy by giving up a little bit on rent growth. And as you can see, while our renewals increased by 3.4%, the rent growth on new leases was down by 1.7%. Heading into March, we were also proactive in dropping effective rents as the market softened. Our March results were also impacted by a higher bad debt provision that we decided to incur, in response to COVID 19. The higher bad debt expense represented about $300,000 of revenue and NOI impact.On the expense side, we saw an increase of 5% year-over-year with insurance expense being a more significant item. As we have previously mentioned, we have been impacted by materially higher insurance premiums market-wide, with our property insurance costs rising by 27% year-over-year. All in all, NOI has remained flat compared to last year, with much of the drag coming in March as a result of higher concessions and bad debt provisions. If we isolate January and February trends, our rent growth would have been closer to 2%, and NOI growth would have been -- would have seen a 3% year-over-year increase.Let's now turn to Slide 18 to discuss more recent trends. To start, I wanted to highlight some common trends across single-family and multifamily rental. We collected approximately 98% of April rents across both portfolios, which equates to 99% of what we would normally have collected pre-COVID. Rent collections in May are tracking ahead of April at this point in time, as we continue to be proactive with collections and as government stimulus kicks in.Rent referral plans have remained below 1% in single-family rental and around 3% in multifamily rental, consistent with our update in mid-April. As you look at this slide, it's very interesting to see how similar the collection trends have been for these 2 businesses. Both are focused on providing essential shelter to the middle market demographic in attractive Sun Belt markets, and both are showing very defensive characteristics in the current environment.So let's turn to Slide 19, where we talk about recent trends in our single-family rental business. Throughout April and end of May, we continue to see very healthy tension between demand and supply. On the demand side, there has been a tremendous level of activity in all of our call centers and websites. The total number of leads from people looking to rent our homes has increased by 20% year-over-year, while our lease production is up 17% year-over-year. The challenge we face is on the supply side, we simply don't have enough vacant unleased homes. In fact, the last time we had so few vacant homes available was in 2017, when the portfolio is about 1/4 smaller than it is today. We now have only 547 vacant homes, a quarter of which were just recently acquired. The demand we are seeing is stronger than we ever could have imagined. Coupled with limited supply, this is resulting in fewer days on the market for vacant homes and record same-home occupancy and record stabilized total occupancy of 97.4% for both metrics as of the end of April. We were also able to maintain same-home effective rent growth at a very healthy level of 5% through April, with 5.6% growth on new leases and 4.7% growth on renewals. In our U.S. multifamily rental business on Slide 20, I would characterize our recent performance as stable. We have been able to maintain occupancy at 93.6% as of April 30, by proactively adjusting rents in response to local market conditions. The average effective rent was down 6.7% on new leases in April, partly driven by the use of concessions, which are averaging about 2.5 weeks of rent. The offset to that is that our annualized turnover rate is down 7.6% from March to April, resulting in lower turnover costs. We are also preserving cash by deferring our value-add capital program, which amounted to almost $1 million in the first quarter. We have been more aggressive with pricing in April. And now that occupancy has elevated again, and we have a little more visibility, new leasing spreads are down by only 0.9% in May. I also wanted to highlight how important it has been to internalize asset management, the asset management function for the U.S. multifamily portfolio during the quarter. Thanks to the hard work of our asset management team, we were able to respond to the COVID-19 situation quickly and keep our occupancy flat. As asset manager, we were able to proactively adjust rents and devise deferred payment plans, proactively control expenses and implement virtual tours across all our properties, leveraging the technology and know-how from our single-family rental business. On that latter point, we are looking to take it a step further and go from virtual tours to self-guided tours starting in May, using our SFR technology platform. The COVID-19 pandemic has pushed us to implement these features quickly. But they will remain a permanent aspect of our operation, adding convenience and safety to our employees and residents. That concludes our prepared remarks. With that, I will pass the call back to the operator and take questions. And Gary, Wissam and myself will also be joined by Jonathan Ellenzweig, Andy Carmody and Andrew Joyner to answer questions. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Jonathan Kelcher with TD Securities.

[Jonathan Kelcher, Analyst]

First question, just on -- I guess the -- as some of the states are starting to open up and you guys paused on the new home buying, when do you think you'll start o have back up again?

[Gary Berman, President, CEO & Director]

We're going to take all of Q2 off. So we're pausing acquisitions through Q2. And when I say that, we did have some Q1 acquisitions that were delayed that we'll close in the Q2. So probably somewhere between 50 and 80 acquisitions from Q1 will trickle into Q2. But apart from that, Jon, we paused. We expect to pause all the way through Q2, and then we're going to reevaluate whether we start buying in Q3 or Q4. My expectation is, we will start buying later in the year, but I can't provide any more guidance on that.

[Jonathan Kelcher, Analyst]

Okay. What sort of signs would you be looking for?

[Gary Berman, President, CEO & Director]

Well, in the past, we've been looking for 800 homes per quarter. In Q1, we were on pace to nearly -- to be close to 800. Going forward, it's hard to know because it also depends, obviously, on the secondary home market, and we're seeing resale listings have some way down. I mean they're down probably anywhere from 25% to 40%. So in an environment where listings are that much lower, it may be tougher for us to hit the volumes. So again, I can't give you any specific guidance, but I think in this environment, given the practical issues associated with renovations, the fact that the resale market, in a sense, is much smaller, it might be hard for us to get 800. But look, as things open up, we'll move right back to 800. And it's also possible that later in the year, there might be a little bit of opportunistic or distressed buying if delinquency rates tick up, and we'll be able to able to take advantage of that as well. And the last thing I would say is, that there may be opportunities outside of the existing home market to really buy from builders. We don't think we're going to see distress from the big homebuilders, but they're certainly going to have a tougher time hitting their order volumes, and they may want to supplement that by selling some of their homes, one at a time, to to single-family rental landlords, like ourselves. So that might be another way to supplement our buying program.

[Jonathan Kelcher, Analyst]

Okay. And then just switching to liquidity. I guess you're still expecting north of $300 million from the for-sale housing. How much of that do you see coming in, in the next sort of 12 to 18 months?

[Gary Berman, President, CEO & Director]

Not much. I mean we've -- that's the whole -- that's one of the reasons we took a significant write-down is that we really pushed out the cash flows the better part of a year. So I mean, look, in this environment, and a lot of what we do remember is land development. We're really at the back of the bus. Builders have to sell homes first and only when they've sold their homes, are they going to need more lots. So it certainly impacts our cash flow. So we don't anticipate a lot of cash flow. There'll be a little bit -- there'll be dribs and drabs over the next 12 and 18 months, but we expect the majority of that $350 million cash flow, I would say, over kind of years 2 to 7. And that's our MD&A disclosure shows you as well. But I think having said that, I mean we've -- up until this point, we've done really well. We syndicated Trinity Falls, we've also sold our master plan, called Fulshear Farms, which is going to generate some cash for us in Q2. But I think apart from that, we're going to be expecting cash flow probably closer to 18 months to 2 years rather than a shorter -- interim period, Jon.

[Operator]

Your next question comes from Matt Logan with RBC Capital Markets.

[Matt Logan, Analyst]

Gary, could you talk a little bit about your organizational realignments? And what impact do you think it will have on your day-to-day business?

[Gary Berman, President, CEO & Director]

Sure. I'd be happy to. Look, I mean we were doing great up until this point, but I'll tell you, I'll be candid. I mean to run a company with investment in new accounting and then different organizational entities was not easy. I mean we had a corporate parent, and then we had all different types of subsidiaries, some of them had their own policies and procedures. It made it very difficult to talk with one voice internally and externally. As you know, some people described the company as being complex. All of that had to do with the corporate parent-subsidiary operating model and the accounting that went along it. And now that's gone. It all goes away. So now going forward, over the course of this year, everyone becomes Tricon Residential. All of our businesses, our operating business, our property management becomes Tricon Residential. So there's really only going to be 1 brand and 1 website. It makes everything that much easier, and it also allows for, I think, some meaningful efficiencies, right? In terms of everything from procurement, from IT, everything can be done on 1 platform rather than multiple platforms. And so it's going to be much easier to communicate. Everyone is going to feel like they're working for the same team. And it's going to be much, much easier to communicate internally and externally. So we're incredibly delighted about this change. And again, think about everything. Instead of having 4 websites or 5 websites, we have 1 website, and you can see how the efficiencies trickle through.

[Matt Logan, Analyst]

And when do you think we'll see the rebranding take effect this year?

[Gary Berman, President, CEO & Director]

So as of today, if you typed in Tricon Residential, that would be our new corporate website. There would be a new logo and some new bios. But apart from that, everything stays the same until we relaunch our website. And we're intending to relaunch the website at the end of the year, triconresidential.com. It will be a consumer-facing website. Right now, we've got an investment-oriented website, and then we've got consumer-facing websites. So this will -- think about it like Apple. There'll be 1 consumer-facing website, and when we flip the switch and launch that at the end of the year, everything else changes. So everyone, at that point, will get new email addresses, new business cards, new uniforms, new van wraps, new signs, all the way through. So we flip the switch, and we expect that to happen, I would probably say, December, Matt.

[Matt Logan, Analyst]

Looking forward to that. And maybe just changing gears. When we think about your U.S. multifamily platform, how does the pandemic change your views on the time line for rolling out Smart Home technology and the internalization of property management?

[Gary Berman, President, CEO & Director]

On the U.S. side, it really doesn't. Like -- I mean we're looking through it. Our operating results in both businesses have been really good. Our ability to react to this more difficult situation, I think, has been excellent. And so our plans to internalize were really in the -- starting really in '21 and that's what we plan to do. Look, it's going to be tougher for us to maximize performance and operations, given we're relying on 6 different property managers, many of them with different policies and procedures. So it will make it a little tougher this year, but we're looking forward to internalizing next year.And then, Kevin, do you want to answer the question on Smart Home technology. Or Jon -- maybe, Jon, you want to talk about that and then…

[Jonathan Ellenzweig, Chief Investment Officer]

Sure, Gary. Regarding Smart Home, the pandemic has helped us accelerate our plans to leverage some of our technology for things like self-showing. So what we've been able to do during this time is begin to add smart locks to our model suites in select multifamily units. So a resident can now go in and do a Smart Home self-showing, similar technology to what we have in single-family rental and some of our multifamily properties. And we really see that as a way for the future. That was already in our plans once we internalize property management. But given the pandemic, we decided to accelerate that plan. We've seen strong demand and a lot of success in the properties where we've implemented that. So we expect to accelerate that over the course of this year.

[Matt Logan, Analyst]

And in terms of the outlook for the multifamily business over the next few quarters, where do you see the overall portfolio and maybe some commentary on markets like Houston, Orlando?

[Gary Berman, President, CEO & Director]

Jon, do you want to continue?

[Jonathan Ellenzweig, Chief Investment Officer]

Sure. I would say, as you can see from our results that we published related to April and May, I would describe the portfolio as stable and consistent, right? We've been able to really stabilize the occupancy and keep it flat right around 94%. And you saw we did take a dip in rent growth in April, but that's begun to tick up in May, and we're also seeing lower turnover. So I would expect it to be down a little bit from Q1 but really stable over the remainder of this year. In terms of select markets, you'll see from a year-over-year basis, places like Houston and Orlando were down in Q1 2020 versus Q1 2019. For those markets, that was really driven by property taxes, which is really unrelated to the current situation. So Houston property taxes were up by 8% year-over-year. Orlando was up by 10% year-over-year, really as a result of increased asset values. Houston also saw a higher insurance, which went from about 1.5% of revenue to about 2.5% of revenue. Over the remainder of this year and looking at where we are from a delinquency and a rent growth perspective, to your point, I would expect Houston, Orlando and Las Vegas to lag a little bit as a result of exposure to oil for Houston and hospitality for the others, which comes as no surprise. Those industries have obviously been hard hit by this pandemic and might be a little bit slower to recover.

[Gary Berman, President, CEO & Director]

Yes. Jon, if I can just continue, Matt. So I just -- look, we're not going to be able to drive -- from what we know today, we're not going to be able to drive NOI growth in this business over the course of the year, right? I mean we've got 15% exposure to Orlando, 15% exposure at Houston in this portfolio. That's obviously a little bit tougher as a result of the pandemic. Our bad debt might be 100 basis points higher than what it was. It's obviously going to be -- ancillary revenue is going to be impacted. We're not collecting late fees. We're having to use a little bit more concessions to maintain occupancy. So when you look at all of that, I think we'll be doing really well if our NOI is flat over the course of the year, but it might also be down a little bit.

[Matt Logan, Analyst]

And maybe rolling it up, when we think about your 3-year FFO growth target of 10% or better, can you tell us if there are any changes to your outlook for the underlying businesses?

[Gary Berman, President, CEO & Director]

No changes. In fact, if you take our Q1 FFO and you annualize it, we already hit the low end of the 3-year target. So like -- I mean we feel great about where we're going to end up in '22. We purposely set that CAGR over a 3-year period. We never said that we would get 10% each year. We say we get 10% CAGR over a 3-year period. And the reason we said that is obviously, it's very hard to look out 3 years, but we figured that there'll be a recession. Nothing like this. I mean obviously, we couldn't predict COVID, but we figured there'd be some kind of downturn. And so we took that into account in coming out with those forecasts, and we still hold to that. We think we'll hit $0.52 to $0.57 in '22. In order to hit those numbers, we were assuming single-family rental NOI growth of 4.5% and multifamily NOI growth of 3%. I mean we're probably not hitting that this year. Maybe it's possible in single-family rental, but even that might be a little short. But then we think -- we look through this and by the time we get into '21, '22, we'll be back. And we still feel very good about our ability to raise third-party capital. So we're really not making any changes to the forecast, just to say that 2020 will be a little bit of a tougher year. And then we should make it back up in '21 and '22, particularly given how strong occupancy is. We've come into this in a really strong position, the occupancy is staying firm, and that's going to give us pricing power as we get out of it.

[Operator]

Your next question comes from Cihan Tuncay with Stifel.

[Cihan Tuncay, Analyst]

Just wanted to drill into the NOI numbers particularly for single family, obviously, a really strong quarter. But I'm just wondering, given the stay-at-home measures and such that have taken place, was there any impact on, like, lower repair and maintenance expenses as well as maintenance Capex, where the contractors were just not going home -- not going out to do work on the sites because of COVID? And if there's any potential bleed through into the subsequent quarters to catch up, if there was any shortfall there?

[Gary Berman, President, CEO & Director]

Kevin, can I turn that over to you?

[Kevin Baldridge, Chief Operating Officer]

Sure. Sure thing, Gary. Yes, what we did during the quarter as we met with all of our vendors and our own people, and we decided to take all the maintenance work orders and bifurcate them into levels. So we have pushed up what we call Level 1 and Level 2. These are work orders that may be somebody's closet doors isn't closing correctly. Well, that can wait. And so we've taken a number of those, and we've put those on hold and those are helping us with lowering our cost and R&M costs during the quarter. And then we'll start catching up. We've actually started catching up on those. But we continue to do what we call emergency work orders, level 4 work orders. We've done them with our own guys, and we've done them with outside vendors. So while we haven't stopped and certainly with the residents that need help inside their homes, we've continued to do those all along. But to your point, we have pushed off, I'd say, probably 30% of work orders that are not essential. And we're going to start picking those up now, really in the next month. We've started picking up on the ones on hold. As far as, CapEx, we have -- we've become -- we've limited kind of the scope. We've also compressed the delegation authority to get much more refined on what we're going to do from -- like we're not spending as much on what we call value-enhancing Capex. We've really taken more of a -- keep it clean, functional and safe approach. So we hope to -- on turn costs, for instance, and even on some of the renovation costs, really save like 20% on a given turn, whether it's a CapEx or an expense.And those -- what's interesting is some of the refinements that we've made because of this, we're going to keep in place in the long term. For instance that delegation of authority, the compression in that and the refined scope levels, so long as there's still the asset is viable, and we keep the long-term value of it and revenue-generating portion of it, we're going to keep it in place and just run a leaner ship. Does that answer your question?

[Cihan Tuncay, Analyst]

Yes.

[Gary Berman, President, CEO & Director]

Cihan, can I just continue -- I just want to continue. I think, look, I think we're going to use this difficult period as an opportunity, as Kevin said. We're going to continue to become more and more efficient in the way we manage our capital expenditures and our R&M process. But one thing you should be aware of, this is a seasonal business, right? I think we've included some really terrific disclosure in our new MD&A on operating expenses and recurring CapEx. You should look at those schedules. And you'll notice that for multifamily and single-family, the numbers are low this quarter. That partly -- it does part -- speak to a little bit of deferral of work orders that will come into Q2, but it's also a lot of it is seasonal. And as we get into Q2 and Q3, as we get into the warmer summer months, that's when we tend to have more HVAC repairs. And so you should expect to see recurring CapEx tick up a little bit in Q2 and Q3 as the weather gets hotter.

[Cihan Tuncay, Analyst]

I appreciate the color there, Gary. And just switching gears to the for-sale housing business. Obviously, you had a distribution and syndication that came through for this quarter. What's the outlook on, if any, if you can speak to at all, for future syndications? And what's the appetite for new mandate wins in that particular segment?

[Gary Berman, President, CEO & Director]

Well, I mean, right at the end of the quarter, we sold another one of our master plans called Fulshear Farms, and that's generating a little bit of cash for us. So that was another win. We also had started a process to sell our interest in some active adult projects. That was essentially under contract and then when COVID hit, that went on pause. So I think that that would have generated more cash for us. I think that's delayed. I can't say when that comes back because that part of the market has definitely taken a hit. And so that was a missed opportunity. Apart from that, we were advancing and wanting to do everything we were planning to do. A lot of the other projects are just going to sell in the ordinary course, right, as we sell homes, as we sell lots and the projects naturally liquidate. So look, I mean we feel great about -- we've taken the write-down, we needed to do that. We feel great about where things are now because for-sale housing is less than 3% of our assets. It's -- we're a rental housing company now. That's what we're focusing on. And so we've really minimized it. We strategically, we achieved everything we wanted to do. And the bonus is, we're still going to generate a lot of cash and performance fees, right? So even after selling 50% of Trinity Falls and taking the write-down, we still believe we're going to generate about $350 million of cash over, let's say, the next 5 to 7 years. That's a substantial amount of money. And so we're in a really good position.

[Cihan Tuncay, Analyst]

And then maybe just an update on the -- you guys had talked about it previously, but just an update on the syndication process of the Canadian multifamily development project, please.

[Gary Berman, President, CEO & Director]

The Canadian or the U.S.?

[Cihan Tuncay, Analyst]

Sorry, the U.S.

[Gary Berman, President, CEO & Director]

Yes. Yes, sure. We had made substantial progress pre-COVID. We had essentially agreed to terms with 2 of the largest institutional investors in the world. COVID hit, and then everyone put pens down. We did the same. Look, when you stop making acquisitions, they stop making acquisitions. That's what you would expect in this environment. But I would say recently, within last week or 2, these groups and all the private investors we're talking to are starting to come back. They're now saying, let's relook at things, let's re-underwrite. So we're still optimistic that we're going to be able to syndicate the assets. It's just a question of the price. I think that the price in the terms will probably be a little bit different than what we had agreed to in this newer, more difficult environment. But I will say that the demand for rental housing assets, multifamily and single-family has probably never been stronger. The trends we saw pre-COVID are going to accelerate and the way these investors are looking at things, I mean where are they going to put their money? As you know, hospitality and retail are extremely tough, office is tougher. And so the only thing that's really left is beds and sheds. And that was a trend we saw. It's going to continue. And so they're telling us, look, the first thing we want to look at is your U.S. multifamily portfolio. And so we're still optimistic, but we're only going to do it if it makes sense for us.

[Operator]

[Operator Instructions] Your next question comes from Mario Saric with Scotiabank.

[Mario Saric, Analyst]

Just 2 quick questions. First, on the SFR business. One of the thesis, kind of, coming into the asset class is that it's a relatively new asset class. It doesn't have the history and a lot of people were looking to see how it would perform during an economic downturn or a crisis. And we're here now in the first, kind of, couple of data points for your portfolio and then others as well have been pretty positive in terms of rent collection and how resilient it is. How do you think about this crisis perhaps accelerating the appetite institutionally for SFR product going forward? And then I guess based on your experience with the previous JV, what do you think about timing, in terms of influx of capital coming into the asset class? And whether that's accelerated because of this or not?

[Gary Berman, President, CEO & Director]

So Mario, look, this is a blessing in disguise. We don't want to take advantage of a difficult situation. So I don't mean that in any other way, but we've always said that in order for this business to really get tested, to reiterate it, it had to go through a downturn and we're managed as a downturn, right? So -- and you're seeing in this environment, apart from technology companies, which are seeing big demand online, this is one of the very few businesses where you're seeing demand accelerate. That's unheard of in this environment. Actually, all our demand drivers are up. And I would tell you that probably the only asset class that comes out of this a winner is single-family rental. Multifamily will be neutral. Industrial is probably neutral from where it was. Single-family comes out as a winner, and demand for this asset class is absolutely going to explode. It's going to explode. We won't -- we'll have to duck, there'll be so much money coming at us. We're already getting inbounds all the time. Even in the last 2 or 3 weeks, people who want to just give us money. So we're in a really good position. This asset class made a ton of sense pre-COVID. Now in an environment where people are that much more concerned about health and safety, along with the demographic trends as older millennials form families and need more space. And now, obviously, because of the significant downturn, it's going to be much tougher for people to buy homes and they're going to have to recapitalize. All of those trends are huge positives for single-family rental, along with probably deurbanization. So this is the asset class of the future. It's what everybody wants. And we're going to come out of this the big winner.

[Mario Saric, Analyst]

And I guess as you're kind of "ducking" with all the capital that potentially could come in, you're 60% deployed roughly in your existing fund. How do you -- Like how do you think about correlating perhaps an increased urgency by other institutions to deploy capital into the asset class versus kind of completion of full deployment in your existing funds? Like is there a chance that the demand might be sooner than what's optimal for you?

[Gary Berman, President, CEO & Director]

No, probably not because, look, I mean we're good partners, and we essentially have an exclusivity with Texas Teachers and Singapore on one by one acquisition opportunities. And I mean the last thing we want to do, given all the support they've shown us, is to do anything that would compromise that. So it's part of our values that I just talked about. We'll do what is right, not what is easy. We'll never impact our long-term reputation to do something in the short-term that's profitable. We just won't do that. So yes, there's a lot of money coming at us, but it's got to be done -- we've got to take those opportunities in a thoughtful way and without compromising existing relationships. So my hunch is we need to get through the existing joint venture, and we're going to do that very profitably. And as we do that, we can then start thinking about creating other product lines and then bringing in different investors. I think the one thing we've learned is that single-family rental isn't necessarily one product. If you think about multifamily, there's multiple opportunities. There's opportunistic, there's obviously core, core plus, value add, build to core. And single-family rental has that as well. And so we think there's an opportunity over time to create these different buckets and attract capital based on those risk return parameters and, therefore, increase our ownership in management of homes, but not in the very, very short term, Mario, because I think we've got to take care of the existing joint venture first.

[Mario Saric, Analyst]

Got it. And you kind of alluded to it earlier on in terms of being on pause for Q2 and then maybe restarting in Q3, Q4 in terms of that fund. What's the general appetite for exceeding the 800 per home quarter guideline, like this? If the availability is there? Can you really materially meet that up?

[Gary Berman, President, CEO & Director]

Yes. I think we're going to continue to keep that pace because, again, our joint venture partners have been very prescriptive in the way they wanted to underwrite this and manage it both on pace and both in terms of cap rates. And we probably just want to continue with those underwriting parameters and keep going. So even though if we had more capital, I think we could go a lot faster in a normal environment. We'll get through this, and I think we'll reevaluate. I did say earlier, though, that it is obviously tougher today, much tougher today potentially to hit 800 because your resale market, again, we're just getting the numbers now, but that resale market might get cut in half. It's going to be down certainly in many markets, 25% to 40%. So in that type of environment, when resales are impacted that much, it is going to be tougher to drive acquisition volume. So I think we have to go back more to normal, where I think we can say, yes, we can do 1,600 a quarter. Otherwise, 800 seems to be more of a limit in this environment.

[Mario Saric, Analyst]

Got it. Okay. And then regarding your single-family rental portfolio. It's early days in terms of the crisis, but is there anything that you can point to that has really stuck out relative to internal expectations, both on the upside and downside in terms of surprises with the operation of the portfolio today?

[Gary Berman, President, CEO & Director]

I'm going to turn that over to Kevin.

[Kevin Baldridge, Chief Operating Officer]

Mario, for us, we just continue to be amazed at the amount of demand that we have. Even we're looking at this daily, we're looking at number of leads, conversion rates, leases compared to a prior month compared to the same time last year. And even if you take our numbers, our leads and leases per available home, we're still higher than we were this time last year and we're higher than February by 30%, but that could be a lot of that seasonality. So even with our reduced available number of homes, we still have these high levels of interest in the homes. We've also been pleasantly surprised by the collection rate. As we mentioned, we -- in April, we collected 99% of what we normally collect. I think we're like 1.8% delinquent now for the money that we billed in April. So just -- and what we've done is, we've had -- we've taken a very -- a one-on-one approach with each one of our residents. We've let them know that we're here for them. We want them to feel safe in their homes. We'll put them on a deferral plan, but these are not -- and so we're empathetic, but at the same time, we're not waiving any rent. And we've found that people want to pay their rent. And they also don't want to get too far behind, and we don't want to let them get too far behind because we've known in the past that if somebody gets behind by 2 months, it's really hard for them to make it up. And so we've structured these plans so that the new rents, including the catch up, is only up by 10% to 15% of what they were paying before. And so we think we're going to keep all of these residents in place.And we just -- we've been enthused to see how people really want to live up to their obligations. So the portfolio performed extremely well. We have waived late fees, and we waived them in April and May. And then in select cases, we've allowed people out of their leases. I think it's like 0.25%, like 51, 60 people there, they said, we just can't. We can't do this. We need to move in with parents or other relatives. And so we've let them out of the lease. So we've waived some early lease terminations, but we've made an agreement and they've left their security deposits with us. So we've just really been surprised with the upside. There hasn't been a downside that we've seen. As you mentioned, it's early days. So we'll see what October brings.

[Mario Saric, Analyst]

Okay. Do you have any sense right now in terms of how long the -- I may have missed it at the start of the call, but how long the renewal rent freeze may be intact for?

[Kevin Baldridge, Chief Operating Officer]

So how long the renewal rent freeze is in place? Is that what you're asking?

[Mario Saric, Analyst]

Yes.

[Kevin Baldridge, Chief Operating Officer]

Yes. So we -- from a rent freeze, we really just affected that to 1 month, and that was for the month of June. When renewals went out in the middle of April, we did give people an option to have a 0% rent increase, but we're also mindful at the same time of our expiration schedules. So what we offered people, for instance, in -- for the month of June, that's coming up, if people wanted a 0% rent increase, they could -- it would only be on leases that were like 13, 14 or 15 months because those are one we wanted leases to expire. Most of the -- a 12-month lease, we offered like a 1% to 3% rent increase. So still want to be sensitive to the time that we're in, but we're also protective of our expirations. Because of our occupancy right now, we're 97.5% average occupancy throughout the month, in same-home.For the July, we've been -- we haven't provided a 0% rent increase at this point. We're back up to like 1% to 3%. So nowhere near -- as you know, we self-govern our increases to 6%. So we're not proposing any of those because of the environment that we're in, but we think it's fair to get 1% to 2% to 3%, depending on the market. So rent freeze, we haven't been mandated to do any rent freezes. We've done them of our own volition and we think that it's the right thing to do for the month of June. But I think what you might be referring to are the eviction mandates. And so those are starting to lift in some of the states, and we're talking internally about what do we do with that? Do we start them back up? Do we not? Do we wait? And so that we're in discussions about that right now.

[Mario Saric, Analyst]

Okay. My last question, just on your disclosed book value per share. Am I correct in understanding that it includes some value for the asset management franchise now?

[Gary Berman, President, CEO & Director]

The book value share of 11. Yes, the book value per share is CAD 11.75. Yes, I suppose it does a little bit, Mario, because some of the fees that we earn in the single-family rental joint venture, for example, are consolidated within the SFR business. So from that perspective, there would be a little bit of value there. But otherwise, the majority of the fee stream is outside of the balance sheet.

[Mario Saric, Analyst]

Got it. Okay. So on a quarter-over-quarter basis, Q1 versus Q4, it's a fairly apple-to-apples calculation.

[Gary Berman, President, CEO & Director]

Fairly, not -- yes, the disclosures -- I mean the disclosure is different, and it's going to take a bit of patience. So we -- a bit of time, and we appreciate your patience because the disclosure has moved around. I mean, the overall numbers are similar, but the geography where some of those numbers has moved. That's the way Wissam explains it to me because I always get my head around it. But it's not -- it's close, but it's not apples to apples.

[Operator]

There are no further questions at this time.

[Gary Berman, President, CEO & Director]

Okay. Thank you, Jesse. I would like to thank all of you on the call for your participation. And we look forward to speaking to you at our Annual Meeting in July and then again in August when we discuss our Q2 results. Bye-bye.

[Operator]

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