Tricon Residential Recapitalizes a $1.3B US Portfolio

Canadian investor Tricon Residential has completed the recapitalization of a US portfolio. The firm entered into a joint venture with two institutional investors, which have purchased a combined 80% stake in the firm’s 23-property residential portfolio. Tricon will retain a 20% interest in the portfolio, which has a total value of $1.3 billion.

Tricon will use $425 million from the recapitalization to pay off outstanding debt and for general corporate purposes. This will reduce its debt exposure by 500 basis points to approximately 50% net debt/assets. The move “significantly enhances its balance sheet flexibility,” according to the firm. Tricon closed the transaction at the end of last year, and the deal was reflected on its balance sheet as of December 31, 2020.

In addition to the recapitalization, Tricon is also working with its new institutional partners to form a joint venture to acquire multifamily properties in the US. The partnership would target assets in the Sun Belt to diversify and scale the portfolio. The firm has been targeting assets in the Sunbelt region since early last year. In January 2020, the firm acquired 700 properties in Nashville for $210 million, saying that the Sunbelt is home to about 40% of all US households and is expected to see 60% of household growth over the next decade. The firm said that it was targeting the region because of long-term population growth. The pandemic has only accelerated those trends.

This is not Tricon’s first venture with institutional partners. In August of 2020, a syndicate of investors led by Blackstone Real Estate Income Trust is making a $300 million preferred equity investment in Toronto-based Tricon Residential, with BREIT acquiring $240 million of the preferred equity. Like this recapitalization, Tricon also used proceeds from that transaction to payoff its corporate credit facility, reducing its proportionate leverage by 500 basis points to 56% net debt/assets excluding convertible debentures.