UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2023
Commission File Number 001-40889
 
TRICON RESIDENTIAL INC.
(Exact name of Registrant as specified in its charter)
 
N/A
(Translation of Registrant’s name)
7 St. Thomas Street, Suite 801
Toronto, Ontario, Canada M5S 2B7
(416) 925-7228
(Address and telephone number of registrant’s principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F   ☐             Form 40-F  ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐
INCORPORATION BY REFERENCE
Exhibits 99.1 and 99.2 of this Form 6-K are incorporated by reference as additional exhibits to the registrant’s Registration Statement on Form F-10 (File No. 333-260043).
 
DOCUMENTS INCLUDED AS PART OF THIS REPORT


 




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   Tricon Residential Inc.
Date: August 8, 2023   By: /s/ David Veneziano
    Name: David Veneziano
    Title: EVP, Chief Legal Officer and Corporate Secretary





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CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
Unaudited (in thousands of U.S. dollars)
NotesJune 30, 2023December 31, 2022
Assets
Non-current assets
Rental properties4$11,933,335 $11,445,659 
Equity-accounted investments in multi-family rental properties521,422 20,769 
Equity-accounted investments in Canadian residential developments6116,052 106,538 
Canadian development properties7157,597 136,413 
Investments in U.S. residential developments8145,690 138,369 
Restricted cash161,485 117,300 
Goodwill29,726 29,726 
Deferred income tax assets1075,080 75,062 
Intangible assets6,081 7,093 
Other assets101,866 96,852 
Derivative financial instruments167,853 10,358 
Total non-current assets12,756,187 12,184,139 
Current assets
Cash120,387 204,303 
Amounts receivable25,333 24,984 
Prepaid expenses and deposits32,262 37,520 
Total current assets177,982 266,807 
Total assets$12,934,169 $12,450,946 
Liabilities
Non-current liabilities
Long-term debt14$5,025,984 $4,971,049 
Due to Affiliate15259,563 256,824 
Derivative financial instruments1660,139 51,158 
Deferred income tax liabilities10606,716 591,713 
Limited partners' interests in single-family rental business2,000,803 1,696,872 
Long-term incentive plan2124,139 25,244 
Performance fees liability2240,319 39,893 
Other liabilities28,988 30,035 
Total non-current liabilities8,046,651 7,662,788 
Current liabilities
Amounts payable and accrued liabilities153,622 138,273 
Resident security deposits77,993 79,864 
Dividends payable1815,823 15,861 
Current portion of long-term debt14801,561 757,135 
Total current liabilities1,048,999 991,133 
Total liabilities9,095,650 8,653,921 
Equity
Share capital192,120,518 2,124,618 
Contributed surplus24,352 21,354 
Cumulative translation adjustment11,845 6,209 
Retained earnings1,677,091 1,638,068 
Total shareholders' equity3,833,806 3,790,249 
Non-controlling interest4,713 6,776 
Total equity3,838,519 3,797,025 
Total liabilities and equity$12,934,169 $12,450,946 
                            

The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Approved by the Board of Directors
David Berman                    Michael Knowlton
Page 2 of 41


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited (in thousands of U.S. dollars, except per share amounts which are in U.S. dollars, unless otherwise indicated)
For the three months ended
For the six months ended
NotesJune 30, 2023
June 30, 2022(1)
June 30, 2023
June 30, 2022(1)
Revenue from single-family rental properties11$197,457 $155,135 $385,966 $293,923 
Direct operating expenses (65,002)(50,739)(127,109)(96,254)
Net operating income from single-family rental properties132,455 104,396 258,857 197,669 
Revenue from strategic capital services12$10,750 $20,387 $25,871 $32,798 
Income from equity-accounted investments in multi-family rental properties5202 170 350 330 
Income (loss) from equity-accounted investments in Canadian residential developments6869 (98)292 (113)
Other income132,614 372 6,373 3,421 
Income from investments in U.S. residential developments87,322 3,002 13,355 7,307 
Compensation expense21(21,848)(22,737)(42,222)(50,989)
Performance fees expense22(692)(15,117)(537)(27,681)
General and administration expense(22,202)(13,905)(37,451)(26,780)
Transaction costs(949)(5,482)(7,997)(7,701)
Interest expense17(79,374)(45,864)(155,746)(82,718)
Fair value gain on rental properties4123,752 395,835 135,646 695,407 
Fair value gain on Canadian development properties7— 874 — 874 
Fair value (loss) gain on derivative financial instruments and other liabilities16(19,569)156,487 (16,460)127,125 
Amortization and depreciation expense
   
(4,280)(3,584)(8,545)(6,991)
Realized and unrealized foreign exchange gain163 100 131 39 
Net change in fair value of limited partners’ interests in single-family rental business(69,528)(112,003)(79,724)(204,235)
(83,520)338,050 (192,535)427,295 
Income before income taxes from continuing operations$59,685 $462,833 $92,193 $657,762 
Income tax expense - current10(782)(1,104)(1,900)(1,566)
Income tax expense - deferred10(12,135)(56,125)(14,124)(100,468)
Net income from continuing operations$46,768 $405,604 $76,169 $555,728 
Income before income taxes from discontinued operations
   3, 5
— 18,735 — 35,612 
Income tax expense - current
3
— — — — 
Income tax expense - deferred
3
— (7,479)— (11,023)
Net income from discontinued operations— 11,256 — 24,589 
Net income$46,768 $416,860 $76,169 $580,317 
Attributable to:
Shareholders of Tricon45,335 415,835 72,294 578,182 
Non-controlling interest1,433 1,025 3,875 2,135 
Net income$46,768 $416,860 $76,169 $580,317 
Other comprehensive income
Items that will be reclassified subsequently to net income
Cumulative translation reserve4,898 (7,488)5,636 (3,902)
Comprehensive income for the period$51,666 $409,372 $81,805 $576,415 
Attributable to:
Shareholders of Tricon50,233 408,347 77,930 574,280 
Non-controlling interest1,433 1,025 3,875 2,135 
Comprehensive income for the period$51,666 $409,372 $81,805 $576,415 
Basic earnings per share attributable to shareholders of Tricon
Continuing operations20$0.17 1.47 $0.26 2.02 
Discontinued operations20— 0.04 — 0.09 
Page 3 of 41


Basic earnings per share attributable to shareholders of Tricon$0.17 $1.51 $0.26 $2.11 
Diluted earnings per share attributable to shareholders of Tricon
Continuing operations20$0.16 0.82 $0.26 1.41 
Discontinued operations20— 0.03 — 0.08 
Diluted earnings per share attributable to shareholders of Tricon$0.16 $0.85 $0.26 $1.49 
Weighted average shares outstanding - basic20273,787,761 274,598,588 273,789,959 274,345,001 
Weighted average shares outstanding - diluted20275,565,254 311,913,232 275,584,117 311,929,796 
(1) Certain comparative figures have been adjusted to conform with the current period presentation. Refer to Note 2 for further details.

The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 4 of 41


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited (in thousands of U.S. dollars)
Notes Share capital Contributed surplus Cumulative translation adjustment Retained earnings Total shareholders' equity Non - controlling interest Total
Balance at January 1, 2023$2,124,618 $21,354 $6,209 $1,638,068 $3,790,249 $6,776 $3,797,025 
Net income— — — 72,294 72,294 3,875 76,169 
Cumulative translation reserve— — 5,636 — 5,636 — 5,636 
Distributions to
non-controlling interest		— — — — — (5,938)(5,938)
Dividends/Dividend
reinvestment plan
18, 19
2,173 — — (31,634)(29,461)— (29,461)
Repurchase of common shares
19
(7,112)— — (1,637)(8,749)— (8,749)
Stock-based compensation
19, 21
911 3,970 — — 4,881 — 4,881 
Shares reserved for
restricted share awards		19(72)— — — (72)— (72)
Tax adjustment for equity issuance costs10— (972)— — (972)— (972)
Balance at June 30, 2023$2,120,518 $24,352 $11,845 $1,677,091 $3,833,806 $4,713 $3,838,519 
Balance at January 1, 2022$2,114,783 $22,790 $22,842 $893,379 $3,053,794 $7,275 $3,061,069 
Net income— — — 578,182 578,182 2,135 580,317 
Cumulative translation reserve— — (3,902)— (3,902)— (3,902)
Distributions to
non-controlling interest		— — — — — (3,842)(3,842)
Dividends/Dividend
reinvestment plan
18, 19
2,556 — — (31,740)(29,184)— (29,184)
Stock-based compensation
19, 21
601 1,886 — — 2,487 — 2,487 
Preferred units exchanged
15, 19
8,015 — — — 8,015 — 8,015 
Shares reserved for
restricted share awards		(68)— — — (68)— (68)
Tax adjustment for equity issuance costs— (972)— — (972)— (972)
Balance at June 30, 2022$2,125,887 $23,704 $18,940 $1,439,821 $3,608,352 $5,568 $3,613,920 
The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Page 5 of 41


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (in thousands of U.S. dollars)
For the three months ended
For the six months ended
NotesJune 30, 2023June 30, 2022June 30, 2023June 30, 2022
CASH PROVIDED BY (USED IN)
Operating activities
Net income$46,768 $416,860 $76,169 $580,317 
Adjustments for non-cash items26(19,887)(370,047)(11,680)(488,863)
Cash paid for AIP, LTIP and performance fees, net of equity contribution
21, 22
(637)(4,056)(7,652)(13,099)
Advances made to investments
5, 6, 8
(7,555)(10,219)(9,710)(14,169)
Distributions received from investments
5, 6, 8
3,081 26,154 9,256 38,474 
Changes in non-cash working capital items2634,899 41,459 18,387 38,350 
Net cash provided by operating activities from continuing operations56,669 84,134 74,770 121,613 
Net cash provided by operating activities from discontinued operations— 16,017 — 19,397 
Net cash provided by operating activities$56,669 $100,151 $74,770 $141,010 
Investing activities
Acquisition of rental properties4(243,588)(843,001)(363,652)(1,462,897)
Capital additions to rental properties4(43,521)(78,511)(90,062)(157,779)
Disposition of rental properties458,783 21,274 101,684 31,055 
Additions to fixed assets and other non-current assets(20,428)(10,550)(26,412)(19,311)
Net cash used in investing activities from continuing operations(248,754)(906,262)(378,442)(1,599,575)
Net cash used in investing activities from discontinued operations— (4,526)— (9,357)
Net cash used in investing activities$(248,754)$(910,788)$(378,442)$(1,608,932)
Financing activities
Lease payments
   
(1,443)(566)(2,712)(1,259)
Repurchase of common shares19— — (8,749)— 
Proceeds from corporate borrowing138,000 98,000 176,000 197,000 
Repayments of corporate borrowing(18,098)(49,424)(18,196)(68,200)
Proceeds from rental and development properties borrowing197,769 1,541,438 589,872 1,936,935 
Repayments of rental and development properties borrowing(209,011)(889,118)(656,161)(891,636)
Addition of interest rate caps derivative 16(4,006)— (4,974)— 
Dividends paid18(14,680)(14,884)(29,499)(29,133)
Change in restricted cash(31,412)(20,781)(44,185)(35,018)
Contributions from limited partners129,901 167,235 253,150 361,023 
Distributions to limited partners(16,474)(16,214)(28,943)(28,308)
Distributions to non-controlling interests(549)(1,647)(5,938)(3,842)
Net cash provided by financing activities from continuing operations169,997 824,615 219,665 1,448,006 
Net cash used in financing activities from discontinued operations— (10,576)— (10,444)
Net cash provided by financing activities$169,997 $814,039 $219,665 $1,437,562 
Effect of foreign exchange rate difference on cash91 (135)91 (71)
Change in cash during the period(21,997)3,267 (83,916)(30,431)
Cash - beginning of period142,384 143,196 204,303 176,894 
Cash - end of period$120,387 $146,463 $120,387 $146,463 
Supplementary information
Cash paid on
Income taxes$11,405 $825 $12,455 $872 
Interest$70,562 $38,143 $143,295 $70,424 
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 6 of 41



1.    NATURE OF BUSINESS

Tricon Residential Inc. (“Tricon” or the “Company”) is an owner and operator of a growing portfolio of approximately 37,000 single-family rental homes located primarily in the U.S. Sun Belt and multi-family apartments in Canada. The Company also invests in adjacent residential businesses which include residential development assets in the United States and Canada. Through its fully integrated operating platform, the Company earns rental income and ancillary revenue from single-family rental properties, income from its investments in multi-family rental properties and residential developments, as well as fees from managing strategic capital associated with its businesses.

Tricon was incorporated on June 16, 1997 under the Business Corporations Act (Ontario) and its head office is located at 7 St. Thomas Street, Suite 801, Toronto, Ontario, M5S 2B7. The Company is domiciled in Canada. Tricon became a public company in Canada on May 20, 2010 and completed an initial public offering of its common shares in the U.S. on October 12, 2021. The Company’s common shares are traded under the symbol TCN on both the New York Stock Exchange and the Toronto Stock Exchange.

These condensed interim consolidated financial statements were approved for issue on August 8, 2023 by the Board of Directors of Tricon.

2.    BASIS OF PRESENTATION

The following is a summary of the significant accounting policies applied in the preparation of these condensed interim consolidated financial statements.

Basis of preparation and measurement

Preparation of consolidated financial statements

The condensed interim consolidated financial statements are prepared on a going-concern basis and have been presented in U.S. dollars, which is also the Company’s functional currency. All financial information is presented in thousands of U.S. dollars except where otherwise indicated.

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), including International Accounting Standard 34, Interim Financial Reporting ("IAS 34"), on a basis consistent with the accounting policies disclosed in the Company's annual financial statements. They should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2022.

The accounting impact of the Company's businesses and their presentation in the Company's consolidated financial statements are summarized in the table below.
Page 7 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






ACCOUNTINGPRESENTATION
Business segmentAccounting assessmentAccounting methodologyPresentation in Balance SheetPresentation in Statement of Income Presentation of Non-controlling interest
Single-Family Rental
Tricon wholly-ownedControlled subsidiaryConsolidationRental propertiesRevenue from single-family rental propertiesN/A
SFR JV-1Controlled subsidiaryConsolidationLimited partners' interests
(Component of liabilities)
SFR JV-HDControlled subsidiaryConsolidation
SFR JV-2Controlled subsidiaryConsolidation
Multi-Family Rental
U.S. multi-family(1)
Divested in October 2022Equity methodDivested in October 2022Income from discontinued operations from January 1, 2022 to June 30, 2022N/A
Canadian multi-family:
592 Sherbourne
(The Selby)		Investments in associateEquity methodEquity-accounted investments in multi-family rental propertiesIncome from equity-accounted investments in multi-family rental propertiesN/A
Canadian residential developments
The Shops of
Summerhill		Controlled subsidiaryConsolidationCanadian development properties
Other incomeN/A
The James (Scrivener Square)N/A
57 Spadina
(The Taylor)		Investments in associateEquity methodEquity-accounted investments in Canadian residential developmentsIncome from equity-accounted investments in Canadian residential developmentsN/A
WDL - Block 8 (Maple House)Joint ventureEquity methodN/A
WDL - Block 20 (Oak House)Joint ventureEquity methodN/A
WDL - Blocks 3/4/7 (Cherry House)Joint ventureEquity methodN/A
WDL - Block 10 (Birch House)Joint ventureEquity methodN/A
6-8 Gloucester (The Ivy)Joint ventureEquity methodN/A
Queen & Ontario (ROQ City)Joint ventureEquity methodN/A
Symington (The Spoke)Joint ventureEquity methodN/A
KT Housing Now(2)
Joint ventureEquity methodN/A
U.S. residential developments
THPAS Holdings JV-1 LLCInvestments in associatesEquity methodInvestments in U.S. residential developmentsIncome from investments in U.S. residential developmentsN/A
THPAS Development JV-2 LLCInvestments in associatesEquity methodN/A
For-sale housingInvestments in associatesEquity methodN/A
Strategic Capital(3)
Private funds GP entitiesControlled subsidiaryConsolidationConsolidatedRevenue from strategic capital servicesN/A
Johnson development managementControlled subsidiaryConsolidationConsolidatedComponent of equity
(1) On October 18, 2022, the Company completed the sale of its remaining 20% equity interest in the U.S. multi-family rental portfolio (Note 3).
(2) On June 23, 2023, the Company entered into a new joint venture investment, KT Housing Now Six Points LP, with its partner, Kilmer Group (Note 6).
(3) Strategic Capital was previously reported as Private Funds and Advisory.



Page 8 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







Changes to comparative figures

Certain comparative figures have been adjusted to conform with the current period presentation, as shown in the table below. There was no impact on the net income and comprehensive income of the Company as a result of this change in presentation.

(in thousands of U.S. dollars)As previously reported
Reclassify income to discontinued operations(1)
Reclassify
tax expense - deferred to discontinued operations(2)
As adjusted
For the three months ended June 30, 2022
Income from equity-accounted investments in multi-family rental properties$18,905 $(18,735)$— $170 
Income before taxes from discontinued operations— 18,735 — 18,735 
Income tax expense - deferred from continuing operations(63,604)— 7,479 (56,125)
Income tax expense - deferred from discontinued operations— — (7,479)(7,479)
(in thousands of U.S. dollars)As previously reported
Reclassify income to discontinued operations(1)
Reclassify
tax expense - deferred to discontinued operations(2)
As adjusted
For the six months ended June 30, 2022
Income from equity-accounted investments in multi-family rental properties$35,942 $(35,612)$— $330 
Income before taxes from discontinued operations— 35,612 — 35,612 
Income tax expense - deferred from continuing operations(111,491)— 11,023 (100,468)
Income tax expense - deferred from discontinued operations— — (11,023)(11,023)
(1) In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the Company reclassified the prior-period income from equity-accounted investments in U.S. multi-family rental properties as discontinued operations, separate from the Company's continuing operations (Note 3).
(2) The Company reclassified previously recorded deferred income tax expense relating to U.S. multi-family rental properties from continuing operations to discontinued operations (Note 3).


Accounting standards and interpretations adopted

Effective January 1, 2023, the Company has adopted amendments to IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors to improve accounting policy disclosures and to help users of the financial statements distinguish between changes in accounting estimates and changes in accounting policies. The Company also adopted amendments to IAS 12, Income Taxes ("IAS 12"), which requires companies to recognize deferred tax on transactions, such as leases and decommissioning obligations, that on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The adoption of these standards did not have a significant impact on the Company's consolidated financial statements.

Accounting standards and interpretations issued but not yet adopted

In January 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements ("IAS 1"), to provide a more general approach to the classification of liabilities based on the contractual arrangements in place at the reporting date. In November 2022, the IASB further amended IAS 1 to clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability as current or non-current. This amendment is effective for annual reporting periods beginning on or after January 1, 2024.

There are no other relevant standards, interpretations or amendments to existing standards that are not yet effective that are expected to have a material impact on the consolidated financial statements of the Company.
Page 9 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







3.    DISCONTINUED OPERATIONS

On October 18, 2022, the Company sold its remaining 20% equity interest in its U.S. multi-family rental portfolio (held through Tricon US Multi-Family REIT LLC), for total proceeds of $219,354, which resulted in a loss on sale of $856, net of transaction costs.

The Company reclassified the prior-period income from equity-accounted investments in U.S. multi-family rental properties as discontinued operations, separate from the Company's continuing operations. The profit or loss of the discontinued operations was as follows:

For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)20222022
Revenue $33,391 $65,192 
Expenses(22,259)(43,141)
Fair value gain on U.S. multi-family rental properties 82,540 156,009 
Net and other comprehensive income $93,672 $178,060 
Tricon's share of net income at 20%
$18,735 $35,612 
Income tax expense - deferred(7,479)(11,023)
Net income from discontinued operations$11,256 $24,589 

The table below provides a summary of the Company's cash flows attributed to the discontinued operations.

For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)20222022
Net cash provided by operating activities from discontinued operations$16,017 $19,397 
Net cash used in investing activities from discontinued operations(4,526)(9,357)
Net cash used in financing activities from discontinued operations(10,576)(10,444)
Change in cash during the period from discontinued operations $915 $(404)

4.    RENTAL PROPERTIES

Management is responsible for fair value measurements included in the financial statements, including Level 3 measurements. The valuation processes and results are reviewed and approved by the Valuation Committee once every quarter, in line with the Company’s quarterly reporting dates. The Valuation Committee consists of individuals who are knowledgeable and have experience in the fair value techniques for the real estate properties held by the Company. The Valuation Committee decides on the appropriate valuation methodologies for new real estate properties and contemplates changes in the valuation methodology for existing real estate holdings. Additionally, the Valuation Committee analyzes the movements in each property’s (or group of properties') value, which involves assessing the validity of the inputs applied in the valuation.

The following table presents the changes in the rental property balances for the six months ended June 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance
$11,445,659 $7,978,396 
Acquisitions(1)
363,652 2,362,185 
Capital expenditures
90,062 326,460 
Fair value adjustments(2)
135,646 858,987 
Dispositions
(101,684)(80,369)
Balance, end of period$11,933,335 $11,445,659 
(1) The total purchase price includes $1,368 (2022 - $3,021) of capitalized transaction costs in relation to the acquisitions.
Page 10 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(2) Fair value adjustments include realized fair value gains of $26,134 for the six months ended June 30, 2023 and realized fair value gains of $12,997 for the year ended December 31, 2022 on the single-family rental properties.

The Company used the following techniques to determine the fair value measurements included in the condensed interim consolidated financial statements categorized under Level 3.

Single-family rental homes

Valuation methodology

The fair value of single-family rental homes is typically determined based on comparable sales primarily by using adjusted Home Price Index (“HPI”) and periodically Broker Price Opinions (“BPOs”), as applicable. In addition, homes that were purchased in the last three to six months (or homes purchased in the year that are not yet stabilized) from the reporting date are recorded at their purchase price plus the cost of capital expenditures.

BPOs are quoted by qualified brokers who hold active real estate licenses and have market experience in the locations and segments of the properties being valued. The brokers value each property based on recent comparable sales and active comparable listings in the area, assuming the properties were all renovated to an average standard in their respective areas. The Company typically obtains a BPO when a home is first included in a securitization or other long-term financing vehicle.

Adjusted HPI is used to update the value, on a quarterly basis, of single-family rental homes that were most recently valued using a BPO for purposes of use in a long-term financing, and if no BPO has been obtained, adjusted HPI is used for homes acquired more than six months prior to such quarter. The HPI is calculated based on a repeat-sales model using large real estate information databases compiled from public records. The HPI was calculated as at May 31, 2023 for rental homes acquired prior to April 1, 2023 and has been adjusted based on management's judgment informed by recent transactions and other relevant factors. The quarterly HPI change is then applied to the previously recorded fair value of the rental homes. The data used to determine the fair value of the Company’s single-family rental homes is specific to the zip code in which the property is located.

Adjusted HPI growth during the quarter was 1.3%, net of capital expenditures (2022 - 5.6%). There were 1,403 homes valued using the BPO method during the quarter (2022 - 2,484 homes). The combination of the HPI and BPO methodologies resulted in a fair value gain of $123,752 for the three months ended June 30, 2023 (2022 - $395,835).

Adjusted HPI growth for the six months ended June 30, 2023 was 1.4%, net of capital expenditures, compared to 10.1% in the prior period. There were 1,403 homes valued using the BPO method during the period (2022 - 2,484 homes), and the combined methodologies of HPI and BPO resulted in a fair value gain of $135,646 for the six months ended June 30, 2023 (2022 - $695,407).

Sensitivity

The adjusted HPI change during the quarter was 1.3% (2022 - 5.6%). If the change in the adjusted HPI increased or decreased by 2.0%, the impact on the single-family rental property balance at June 30, 2023 would be $171,045 and ($171,045), respectively (2022 - $147,752 and ($147,752)).

5.    EQUITY-ACCOUNTED INVESTMENTS IN MULTI-FAMILY RENTAL PROPERTIES

Following the Company's divestiture of its interest in the U.S. multi-family rental portfolio in October 2022, the Company's equity-accounted investments in multi-family rental properties consist of an investment in associate ("592 Sherbourne LP", operating as "The Selby"), a 500-unit class A multi-family rental property in Toronto, over which the Company has significant influence.

Page 11 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The following table presents the change in the balance of equity-accounted investments in multi-family rental properties for the six months ended June 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance$20,769 $199,285 
Distributions(178)(3,824)
Income from equity-accounted investments in multi-family rental properties(1)
350 40,144 
Disposition of equity-accounted investment in U.S. multi-family rental properties (Note 3)
— (213,493)
Translation adjustment(2)
481 (1,343)
Balance, end of period$21,422 $20,769 
(1) Of the $40,144 income from equity-accounted investments earned during 2022, $38,594 was attributable to U.S. multi-family rental properties and reclassified to income from discontinued operations (Note 3).
(2) For the six months ended June 30, 2023, the USD/CAD exchange rate moved from 1.3544 as at December 31, 2022 to 1.3240 as at June 30, 2023, resulting in a foreign currency translation adjustment of $481. In the prior year, the USD/CAD exchange rate moved from 1.2678 as at December 31, 2021 to 1.3544 as at December 31, 2022, resulting in a foreign currency translation adjustment of $1,343.

6.    EQUITY-ACCOUNTED INVESTMENTS IN CANADIAN RESIDENTIAL DEVELOPMENTS

The Company has entered into certain arrangements in the form of jointly controlled entities and investments in associates for various Canadian multi-family rental developments. Joint ventures represent development properties held in partnership with third parties where decisions relating to the relevant activities of the joint venture require the unanimous consent of the partners. These arrangements are accounted for under the equity method.

On June 23, 2023, the Company entered into a new joint venture investment, KT Housing Now, made in partnership through KT Housing Now Six Points LP. As at June 30, 2023, the Company recorded assets of $4,313 and no liabilities during the quarter for KT Housing Now Six Points LP. Tricon's share of net assets of KT Housing Now Six Points LP was $2,157 and no income was earned by the joint venture during the quarter.

The following table presents the change in the balance of equity-accounted investments in Canadian residential developments for the six months ended June 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance$106,538 $98,675 
Advances(1)
6,666 13,360 
Distributions(2)
— (10,212)
Income from equity-accounted investments in Canadian residential developments292 11,198 
Translation adjustment(3)
2,556 (6,483)
Balance, end of period$116,052 $106,538 
(1) Advances from equity-accounted investments in Canadian residential developments for the six months ended June 30, 2023 includes advances for The Ivy, Oak House (Block 20), ROQ City (Queen & Ontario), The Spoke (Symington) and KT Housing Now.
(2) Distributions from equity-accounted investments in Canadian residential developments for the year ended December 31, 2022 represent sales proceeds from the Company's divestiture of two-thirds of its original 30% equity ownership in ROQ City (Queen & Ontario) to its institutional partner.
(3) For the six months ended June 30, 2023, the USD/CAD exchange rate moved from 1.3544 as at December 31, 2022 to 1.3240 as at June 30, 2023, resulting in a foreign currency translation adjustment of $2,556. In the prior year, the USD/CAD exchange rate moved from 1.2678 as at December 31, 2021 to 1.3544 as at December 31, 2022, resulting in a foreign currency translation adjustment of $6,483.

7.     CANADIAN DEVELOPMENT PROPERTIES

The Company's Canadian development properties include one development project (The James) and an adjacent commercial property (The Shops of Summerhill) in Toronto. The following table presents the changes in the
Page 12 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






Canadian development properties balance for the six months ended June 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance$136,413 $133,250 
Development expenditures17,698 12,686 
Fair value adjustments— (440)
Translation adjustment(1)
3,486 (9,083)
Balance, end of period$157,597 $136,413 
(1) For the six months ended June 30, 2023, the USD/CAD exchange rate moved from 1.3544 as at December 31, 2022 to 1.3240 as at June 30, 2023, resulting in a foreign currency translation adjustment of $3,486. In the prior year, the USD/CAD exchange rate moved from 1.2678 as at December 31, 2021 to 1.3544 as at December 31, 2022, resulting in a foreign currency translation adjustment of $9,083.

The Company earned $350 and $723 of commercial rental income from The Shops of Summerhill for the three and six months ended June 30, 2023, respectively (2022 - $372 and $668), which is classified as other income (Note 13).

8.    INVESTMENTS IN U.S. RESIDENTIAL DEVELOPMENTS

The Company makes investments in U.S. residential developments via equity investments and loan advances. Advances made to investments are added to the carrying value when paid; distributions from investments are deducted from the carrying value when received.

The following table presents the changes in the investments in U.S. residential developments for the six months ended June 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance$138,369 $143,153 
Advances(1)
3,044 15,655 
Distributions(9,078)(37,336)
Income from investments in U.S. residential developments(2)
13,355 16,897 
Balance, end of period
$145,690 $138,369 
(1) Advances to U.S. residential developments for the year ended December 31, 2022 include $2,760 in non-cash contributions related to the syndication of the Company's investment in Bryson MPC Holdings LLC to THPAS Development JV-2 LLC.
(2) There were no realized gains or losses included in the income from investments in U.S. residential developments for the six months ended June 30, 2023 (2022 - nil).

Valuation methodology

The investments are measured at fair value (excluding THPAS Development JV-2 LLC) as determined by the Company’s proportionate share of the fair value of each Investment Vehicle’s net assets at each measurement date. The fair value of each Investment Vehicle’s net assets is determined by the waterfall distribution calculations specified in the relevant governing agreements. The inputs into the waterfall distribution calculations include the fair values of the land development and homebuilding projects and working capital held by the Investment Vehicles. The fair values of the land development and homebuilding projects are based on appraisals prepared by external third-party valuators or on internal valuations using comparable methodologies and assumptions. THPAS Development JV-2 LLC is measured at cost under the equity method and not recorded at fair value as the entity itself is not considered to be an investment entity.

The residential real estate development business involves significant risks that could adversely affect the fair value of Tricon's investments in for-sale housing, especially in times of economic uncertainty. Quantitative information about fair value measurements of the investments uses the following significant unobservable inputs (Level 3):
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






June 30, 2023December 31, 2022
Valuation technique(s)Significant unobservable inputRange
of inputs		Weighted average of inputsRange
of inputs		Weighted average of inputsOther inputs and key information
Net asset value, determined using discounted cash flow

Waterfall distribution model
a) Discount rate (1)
b) Future cash flow
c) Appraised value
8.0% - 20.0%
17.6%
8.0% - 20.0%
17.7%Entitlement risk, sales risk and construction risk are taken into account in determining the discount rate.

Price per acre of land, timing of project funding requirements and distributions.

Estimated probability of default.
1 - 9 years
6.8 years
1 - 10 years
7.2 years
(1) Generally, an increase in future cash flow will result in an increase in the fair value of fund equity investments. An increase in the discount rate will result in a decrease in the fair value of fund equity investments. The same percentage change in the discount rate will result in a greater change in fair value than the same absolute percentage change in future cash flow.

Sensitivity

For those investments valued using discounted cash flows, an increase of 2.5% in the discount rate results in a decrease in fair value of $9,269 and a decrease of 2.5% in the discount rate results in an increase in fair value of $10,927 (December 31, 2022 - ($9,445) and $10,629, respectively).

9.     FAIR VALUE ESTIMATION

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these condensed interim consolidated financial statements is determined on this basis, unless otherwise noted.

Inputs to fair value measurement techniques are disaggregated into three hierarchical levels, which are based on the degree to which inputs to fair value measurement techniques are observable by market participants:

•Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2 - Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset’s or liability’s anticipated life.

•Level 3 - Inputs are unobservable and reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs in determining the estimate.

Fair value measurements are adopted by the Company to calculate the carrying amounts of various assets and liabilities.

Acquisition costs, other than those related to financial instruments classified as FVTPL which are expensed as incurred, are capitalized to the carrying amount of the instrument and amortized using the effective interest method.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The following table provides information about assets and liabilities measured at fair value on the balance sheet and categorized by level according to the significance of the inputs used in making the measurements:
June 30, 2023December 31, 2022
(in thousands of U.S. dollars)Level 1Level 2Level 3Level 1Level 2Level 3
Assets
Rental properties (Note 4)
$— $— $11,933,335 $— $— $11,445,659 
Canadian development properties (Note 7)
— — 157,597 — — 136,413 
Investments in U.S. residential developments (Note 8) (1)
— — 137,097 — — 130,270 
Derivative financial instruments (Note 16)
— 7,853 — — 10,358 — 
$— $7,853 $12,228,029 $— $10,358 $11,712,342 
Liabilities
Derivative financial instruments (Note 16)
$— $60,139 $— $— $51,158 $— 
Limited partners' interests in single-family rental business
— — 2,000,803 — — 1,696,872 
$— $60,139 $2,000,803 $— $51,158 $1,696,872 
(1) Excludes the Company's interest in THPAS Development JV-2 LLC, which is measured at cost under the equity method (Note 8).

There have been no transfers between levels for the six months ended June 30, 2023.

Cash, restricted cash, amounts receivable, amounts payable and accrued liabilities, lease liabilities (included in other liabilities), resident security deposits and dividends payable are measured at amortized cost, which approximates fair value because they are short-term in nature.

10.    INCOME TAXES

For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023
2022(1)
2023
2022(1)
Income tax expense - current$(782)$(1,104)$(1,900)$(1,566)
Income tax expense - deferred(12,135)(56,125)(14,124)(100,468)
Income tax expense from continuing operations$(12,917)$(57,229)$(16,024)$(102,034)
Income tax expense from discontinued operations - current— — $— $— 
Income tax expense from discontinued operations - deferred— (7,479)— (11,023)
Income tax expense from discontinued operations$— $(7,479)$— $(11,023)
(1) Certain comparative figures have been adjusted to conform with the presentation of U.S. multi-family rental properties as discontinued operations, separate from the Company's continuing operations.

The expected realization of deferred income tax assets and deferred income tax liabilities is as follows:
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Deferred income tax assets
Deferred income tax assets to be recovered after more than 12 months$75,080 $75,062 
Deferred income tax assets to be recovered within 12 months— — 
Total deferred income tax assets$75,080 $75,062 
Deferred income tax liabilities
Deferred income tax liabilities reversing after more than 12 months$606,716 $591,713 
Deferred income tax liabilities reversing within 12 months— — 
Total deferred income tax liabilities$606,716 $591,713 
Net deferred income tax liabilities$531,636 $516,651 

Page 15 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The movement of the deferred income tax accounts was as follows:
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Change in net deferred income tax liabilities
Net deferred income tax liabilities, beginning of period$516,651 $364,744 
Charge to the statement of comprehensive income14,124 148,697 
Charge to equity972 1,945 
Other(111)1,265 
Net deferred income tax liabilities, end of period$531,636 $516,651 
The tax effects of the significant components of temporary differences giving rise to the Company’s deferred income tax assets and liabilities were as follows:
(in thousands of U.S. dollars)Investments Long-term incentive plan accrualPerformance fees liability Issuance
costs		 Net operating losses Other Total
Deferred income tax assets
At December 31, 2022$— $8,009 $9,091 $8,723 $43,926 $5,313 $75,062 
Addition / (Reversal)— (590)337 (1,572)2,342 (499)18 
At June 30, 2023$— $7,419 $9,428 $7,151 $46,268 $4,814 $75,080 

(in thousands of U.S. dollars)
InvestmentsRental propertiesDeferred placement fees Other Total
Deferred income tax liabilities
At December 31, 2022$1,505 $589,720 $488 $— $591,713 
(Reversal) / Addition(119)14,703 419 — 15,003 
At June 30, 2023$1,386 $604,423 $907 $— $606,716 

The Company believes it will have sufficient future income to realize the deferred income tax assets.

11.     REVENUE FROM SINGLE-FAMILY RENTAL PROPERTIES

The components of the Company's revenue from single-family rental properties are as follows:
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Base rent$164,099 $127,736 $320,522 $241,459 
Other revenue(1)
11,099 9,997 21,888 18,850 
Non-lease component22,259 17,402 43,556 33,614 
Total revenue from single-family rental properties$197,457 $155,135 $385,966 $293,923 
(1) Other revenue includes revenue earned on ancillary services and amenities as well as lease administrative fees.

12.    REVENUE FROM STRATEGIC CAPITAL SERVICES

The components of the Company’s revenue from strategic capital services (previously reported as revenue from private funds and advisory services) are described in the table below. Intercompany revenues and expenses between the Company and its subsidiaries, such as property management fees, are eliminated upon consolidation. Under certain arrangements, asset-based fees that are earned from third-party investors in Tricon's subsidiary entities are billed directly to those investors and are therefore not recognized in the accounts of the applicable
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






subsidiary. These amounts are included in the asset management fees revenue recognized in the statements of comprehensive income.
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Asset management fees
$2,787 $3,075 $5,544 $6,202 
Performance fees
1,146 8,344 3,708 9,087 
Development fees
6,471 6,156 15,990 12,018 
Property management fees
346 2,812 629 5,491 
Total revenue from strategic capital services
$10,750 $20,387 $25,871 $32,798 

13.    OTHER INCOME

Other income is comprised of the following:

For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
The Shops of Summerhill commercial rental$350 $372 $723 $668 
Income from Bryson - pre-sale— — — 2,753 
Interest income1,549 — 1,549 — 
Interest rate caps derivative2,286 — 6,781 — 
Net operating loss from non-core homes(1,571)— (2,680)— 
Total other income$2,614 $372 $6,373 $3,421 

Page 17 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






14.    DEBT

The following table presents a summary of the Company's outstanding debt as at June 30, 2023:
June 30, 2023
(in thousands of U.S. dollars)Maturity datesCoupon/stated interest ratesInterest rate floorInterest rate cap
Effective interest
rates(1)
Extension options(2)
Total facilityOutstanding balance
Term loan(3),(4)
October 2023
SOFR+2.30%
0.50% SOFR
5.50% SOFR
7.13 %One year$209,532$209,532 
Securitization debt 2017-2(3)
January 2024
3.68%
N/AN/A3.68 %N/A328,394328,394 
Warehouse credit facility 2022
January 2024
SOFR+1.85%
0.15% SOFR
3.25% SOFR
5.10 %One year50,000— 
Securitization debt 2018-1(3)
May 2025
3.96%
N/AN/A3.96 %N/A295,978295,978 
Securitization debt 2020-2(3)
November 2027
1.94%
N/AN/A1.94 %N/A415,776415,776 
Single-family rental wholly-owned properties borrowings1,299,6801,249,680 
SFR JV-1 securitization debt 2019-1(3)
March 2026
3.12%
N/AN/A3.12 %N/A331,707331,707 
SFR JV-1 securitization debt 2020-1(3)
July 2026
2.43%
N/AN/A2.43 %N/A552,441552,441 
SFR JV-1 securitization debt 2021-1(3)
July 2026
2.57%
N/AN/A2.57 %N/A682,956682,956 
Single-family rental JV-1 properties borrowings1,567,1041,567,104 
SFR JV-2 subscription facility(5)
July 2023
SOFR+2.00%
0.15% SOFR
N/A6.83 %One year265,098263,000 
SFR JV-2 warehouse credit facility(6)
July 2024
SOFR+1.99%
0.10% SOFR
3.25% SOFR
5.24 %One year700,000588,061 
SFR JV-2 term loan(3)
October 2025
SOFR+2.10%
0.50% SOFR
4.55% SOFR
6.65 %
Two one years
500,000390,671 
SFR JV-2 securitization debt 2022-1(3)
April 2027
4.32%
N/AN/A4.32 %N/A530,387530,387 
SFR JV-2 securitization debt 2022-2(3)
July 2028
5.47%
N/AN/A5.47 %N/A347,772347,772 
SFR JV-2 delayed draw term loan(3)
September 2028
5.39%
N/AN/A5.39 %N/A200,000194,480 
Single-family rental JV-2 properties borrowings2,543,2572,314,371 
SFR JV-HD warehouse credit facility(7)
May 2024
SOFR+2.00%
0.15% SOFR
2.85% SOFR
4.95 %One year350,000231,317 
JV-HD term loan A(3),(8)
March 2028
5.96%
N/AN/A5.96 %N/A150,000150,000 
JV-HD term loan B(3),(8)
March 2028
5.96%
N/AN/A5.96 %N/A150,000150,000 
Single-family rental JV-HD properties borrowings650,000531,317 
Single-family rental properties borrowings
4.32 %6,060,0415,662,472 
The Shops of Summerhill mortgage
October 2025
5.58%
N/AN/A5.58 %N/A16,31916,319 
Construction facility(9)
June 2026
Prime+1.25%
N/AN/A7.98 %One year173,71922,644 
Canadian development properties borrowings
6.98 %190,03838,963 
Corporate office mortgages
November 2024
4.25%
N/AN/A4.30 %N/A12,78512,785 
Corporate credit facility(10)
June 2025
SOFR+3.10%
N/AN/A7.97 %N/A500,000158,000 
Corporate borrowings
7.70 %512,785170,785 
$5,872,220 
Transaction costs (net of amortization)
(44,249)
Debt discount (net of amortization)
(426)
Total debt
4.44 %$6,762,864$5,827,545 
Current portion of long-term debt(2)
$801,561 
Long-term debt
$5,025,984 
Fixed-rate debt - principal value
3.62 %$4,008,995 
Floating-rate debt - principal value
6.20 %$1,863,225 
(1) The effective interest rate is determined using the ending consolidated debt balances as at June 30, 2023 and the average of the applicable reference rates for the six months ended June 30, 2023. The effective interest rate using the average debt balances and the average of the applicable reference rates for the six months ended June 30, 2023 is 4.39%.
(2) The Company has the ability to extend the maturity of the loans where an extension option exists and intends to exercise such options wherever available. The current portion of long-term debt reflects the balance after the Company's extension options have been exercised.
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(3) The term loan and securitization debt are secured, directly and indirectly, by approximately 28,300 single-family rental homes.
(4) On July 27, 2023, the Company amended the loan agreement to extend the maturity of the term loan by six months to April 2024 (with the option to extend for another six months to October 2024) and increase the commitment value by $100,000 to $309,532. The coupon rate remains unchanged.
(5) On April 10, 2023, SFR JV-2 amended the subscription facility agreement to decrease the commitment value by $144,902 to $265,098. The coupon rate, maturity date and extension option of the facility remained unchanged. Subsequent to quarter-end, this facility was repaid in full.
(6) On July 11, 2023, the homes under this facility were partially refinanced as part of a new securitization (Note 27).
(7) On May 11, 2023, SFR JV-HD amended its warehouse facility agreement to decrease the commitment value by $140,000 to $350,000 and increase the interest rate cap to 2.85% of SOFR. The maturity date and the extension option remained unchanged.
(8) On March 10, 2023, SFR JV-HD entered into two new term loan facilities, each with a total commitment of $150,000, a term to maturity of five years and a fixed interest rate of 5.96%. These facilities are secured by pools of 707 and 696 single-family rental properties. The loan proceeds were primarily used to pay down existing short-term SFR JV-HD debt and to fund the acquisition of rental homes.
(9) The construction facility is secured by the land under development at The James (Scrivener Square).
(10) The Company has provided a general security agreement creating a first priority security interest on the assets of the Company, excluding, among other things, single-family rental homes, multi-family rental properties and interests in for-sale housing. As part of the corporate credit facility, the Company designated $35,000 to issue letters of credit as security against contingent obligations related to its Canadian multi-family developments. As at June 30, 2023, the letters of credit outstanding totaled $5,045 (C$6,680).


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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







The Company was in compliance with the covenants and other undertakings outlined in all loan agreements.

The scheduled principal repayments and debt maturities are as follows, reflecting the maturity dates after all extensions have been exercised:
(in thousands of U.S. dollars)Single-family rental borrowingsCanadian development properties borrowingsCorporate borrowingsTotal
2023$472,532 $113 $200 $472,845 
2024328,394 233 12,585 341,212 
20251,506,027 15,973 158,000 1,680,000 
20261,567,104 22,644 — 1,589,748 
2027946,163 — — 946,163 
2028 and thereafter842,252 — — 842,252 
5,662,472 38,963 170,785 5,872,220 
Transaction costs (net of amortization)(44,249)
Debt discount (net of amortization)(426)
Total debt$5,827,545 

Fair value of debt

The table below presents the fair value and the carrying value (net of unamortized deferred financing fees and debt discount) of the fixed-rate loans as at June 30, 2023.
June 30, 2023
(in thousands of U.S. dollars)Fair valueCarrying value
Securitization debt 2017-2$325,340 $328,236 
Securitization debt 2018-1290,863 295,710 
Securitization debt 2020-2367,694 410,632 
SFR JV-1 securitization debt 2019-1313,276 328,277 
SFR JV-1 securitization debt 2020-1511,639 547,147 
SFR JV-1 securitization debt 2021-1615,680 676,059 
SFR JV-2 securitization debt 2022-1494,172 523,805 
JV-HD term loan A148,828 148,828 
JV-HD term loan B148,828 148,828 
SFR JV-2 securitization debt 2022-2340,002 342,585 
SFR JV-2 delayed draw term loan185,280 193,125 
The Shops of Summerhill mortgage15,869 16,242 
Corporate office mortgages12,374 12,785 
Total$3,769,845 $3,972,259 

The carrying value of variable term loans approximates their fair value, since their variable interest terms are indicative of prevailing market prices.

15.    DUE TO AFFILIATE

Structured entity – Tricon PIPE LLC (the “Affiliate”)

Tricon PIPE LLC (the “Affiliate” or “LLC”) was incorporated on August 7, 2020 for the purpose of raising third-party capital through the issuance of preferred units for an aggregate amount of $300,000. The Company has a 100% voting interest in this Affiliate; however, the Company does not consolidate this structured entity.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






During the year ended December 31, 2022, 4,675 preferred units were exchanged for 554,832 common shares of the Company at $8.50 per share. The exchange reduced the Affiliate's preferred unit liability and the Company's associated promissory note owed to the Affiliate by $4,675. As at June 30, 2023, the Affiliate has a preferred unit liability of $295,325 (December 31, 2022 - $295,325) and a promissory note receivable from Tricon of $295,325 (December 31, 2022 - $295,325).

During the six months ended June 30, 2023, the Affiliate earned interest income of $8,491 (2022 - $8,532) from the Company and recognized dividends declared of $8,491 (2022 - $8,532).

The Company’s obligation with respect to its involvement with the structured entity is equal to the cash flows under the promissory note payable. The Company has not recognized any income or losses in connection with its interest in this unconsolidated structured entity in the six months ended June 30, 2023 (2022 - nil).

Promissory note – between Tricon entities

The promissory note payable to Tricon PIPE LLC (“Promissory Note” or “Due to Affiliate”) recognized on the condensed interim consolidated balance sheets was calculated as follows:

(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Principal amount outstanding$295,325 $295,325 
Less: Discount and transaction costs (net of amortization)(35,762)(38,501)
Due to Affiliate$259,563 $256,824 

The fair value of the Promissory Note was $239,091 as of June 30, 2023 (December 31, 2022 - $225,314). The difference between the amortized cost and the implied fair value is a result of the difference between the effective interest rate and the market interest rate for debt with similar terms.

16.    DERIVATIVE FINANCIAL INSTRUMENTS

The Promissory Note contains a mandatory prepayment option that is intermingled with other options in connection with the preferred units issued by Tricon PIPE LLC (including exchange and redemption rights), as exercising the mandatory prepayment option effectively terminates the other options. Although the exchange and redemption rights exist at the Affiliate level, the Affiliate is unable to issue the common shares of the Company upon exercise of one or all of the rights by either party. As a result, such options, in essence, were deemed to be written by the Company and are treated as a single combined financial derivative instrument for valuation purposes in accordance with IFRS 9, Financial Instruments: Recognition and Measurement. The option pricing model for the derivative uses market-based inputs, including the spot price of the underlying equity, implied volatility of the equity and USD/CAD foreign exchange rates, risk-free rates from the U.S. dollar swap curves and dividend yields related to the underlying equity. The valuation of the derivative assumes a 9.75-year expected life of the investment horizon of the unitholders.

Quantitative information about fair value measurements (Level 2) using significant observable inputs other than quoted prices included in Level 1 is as follows:

Due to AffiliateJune 30, 2023December 31, 2022
Risk-free rate (1)
5.02 %4.46 %
Implied volatility (2)
29.23 %36.53 %
Dividend yield (3)
2.63 %3.01 %
(1) Risk-free rates were from the U.S. dollar swap curves matching the expected maturity of the Due to Affiliate.
(2) Implied volatility was computed from the trading volatility of the Company's stock over a comparable term to maturity and the volatility of USD/CAD exchange rates.
(3) Dividend yields were from the forecast dividend yields matching the expected maturity of the Due to Affiliate.

The Company also has other types of derivative financial instruments that consist of interest rate caps on the Company’s floating-rate debt and are classified and measured at FVTPL. Interest rate caps are valued using model
Page 21 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






calibration. Inputs to the valuation model are determined from observable market data wherever possible, including market volatility and interest rates.

The values attributed to the derivative financial instruments are shown below:
Conversion/redemption optionsExchange/prepayment optionsInterest rate capsTotal
(in thousands of U.S. dollars)
For the six months ended June 30, 2023
Derivative financial (liabilities) assets, beginning of period$— $(51,158)$10,358 $(40,800)
Addition of interest rate caps— — 4,974 4,974 
Fair value loss— (8,981)(7,479)(16,460)
Derivative financial instruments - end of period
$— $(60,139)$7,853 $(52,286)
For the year ended December 31, 2022
Derivative financial (liabilities) assets, beginning of year$— $(230,305)$363 $(229,942)
Derivative financial instruments exchanged into common shares of the Company— 3,299 — 3,299 
Addition of interest rate caps— — 1,034 1,034 
Fair value gain— 175,848 8,961 184,809 
Derivative financial instruments - end of year
$— $(51,158)$10,358 $(40,800)

For the six months ended June 30, 2023, there was a fair value loss on the Due to Affiliate of $8,981 (2022 - fair value gain of $123,525). The fair value loss on the derivatives was primarily driven by an increase in Tricon's share price, on a USD-converted basis, which served to increase the probability of exchange of the preferred units of Tricon PIPE LLC into Tricon common shares.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







17.    INTEREST EXPENSE

Interest expense is comprised of the following:
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Term loan
$2,991 $1,570 $5,017 $3,003 
Securitization debt 2017-2
3,139 3,284 6,303 6,590 
Warehouse credit facility 2022
(63)62 105 108 
Securitization debt 2018-1
2,980 3,076 5,994 6,169 
Securitization debt 2020-2
2,069 2,129 4,158 4,271 
SFR JV-1 securitization debt 2019-1
2,606 2,611 5,213 5,222 
SFR JV-1 securitization debt 2020-1
3,383 3,385 6,768 6,770 
SFR JV-1 securitization debt 2021-1
4,415 4,410 8,830 8,828 
SFR JV-2 subscription facility
4,550 2,947 11,157 5,131 
SFR JV-2 warehouse credit facility
9,648 3,974 17,457 7,267 
SFR JV-2 term loan
7,298 — 14,047 — 
SFR JV-2 securitization debt 2022-1
5,753 5,363 11,505 5,363 
SFR JV-2 securitization debt 2022-2
4,777 — 9,555 — 
SFR JV-2 delayed draw term loan
2,779 — 5,493 — 
SFR JV-HD subscription facility(1)
588 858 2,334 1,384 
SFR JV-HD warehouse credit facility
4,091 1,613 12,546 2,428 
JV-HD term loan A
2,079 — 2,625 — 
JV-HD term loan B
2,079 — 2,625 — 
Single-family rental interest expense
65,162 35,282 131,732 62,534 
The Shops of Summerhill mortgage
224 109 440 218 
Canadian development properties interest expense(2)
224 109 440 218 
Corporate office mortgages
122 112 236 224 
Corporate credit facility
3,245 1,512 3,359 2,565 
Corporate interest expense
3,367 1,624 3,595 2,789 
Amortization of financing costs
4,708 3,139 8,392 5,749 
Amortization of debt discounts
1,376 1,176 2,506 2,332 
Interest on Due to Affiliate
4,246 4,246 8,491 8,532 
Interest on lease obligation
291 288 590 564 
Total interest expense
$79,374 $45,864 $155,746 $82,718 
(1) This facility was fully repaid during the three months ended June 30, 2023.
(2) Canadian development properties capitalized $284 and $393 of interest for the three and six months ended June 30, 2023, respectively (2022 - $437 and $646).

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






18.    DIVIDENDS
(in thousands of U.S. dollars, except per share amounts)
Date of declarationRecord datePayment dateCommon shares issuedDividend amount
per share		Total dividend amountDividend reinvestment
plan ("DRIP")
February 28, 2023March 31, 2023April 17, 2023272,598,588 $0.058 $15,811 $1,131 
May 9, 2023June 30, 2023July 17, 2023272,803,985 0.058 15,823 1,142 
$31,634 $2,273 
March 1, 2022March 31, 2022April 18, 2022273,584,673 $0.058 $15,868 $984 
May 10, 2022June 30, 2022July 15, 2022273,653,385 0.058 15,872 967 
August 9, 2022September 30, 2022October 17, 2022273,760,820 0.058 15,878 472 
November 8, 2022December 31, 2022January 15, 2023273,464,780 0.058 15,861 1,042 
$63,479 $3,465 

The Company has a Dividend Reinvestment Plan (“DRIP”) under which eligible shareholders may elect to have their cash dividends automatically reinvested into additional common shares. These additional shares are issued from treasury (or purchased in the open market) at a discount, in the case of treasury issuances, of up to 5% of the Average Market Price, as defined under the DRIP, of the common shares as of the dividend payment date. If common shares are purchased in the open market, they are priced at the average weighted cost to the Company of the shares purchased.

Brokerage, commissions and service fees are not charged to shareholders for purchases or withdrawals of the Company’s shares under the DRIP, and all DRIP administrative costs are assumed by the Company.

For the six months ended June 30, 2023, 269,138 common shares were issued under the DRIP (2022 - 169,303) for a total amount of $2,173 (2022 - $2,556).

19.    SHARE CAPITAL

The Company is authorized to issue an unlimited number of common shares. The common shares of the Company do not have par value.

As of June 30, 2023, there were 272,803,985 common shares issued by the Company (December 31, 2022 - 273,464,780), of which 272,171,019 were outstanding (December 31, 2022 - 272,840,692) and 632,966 were reserved to settle restricted share awards in accordance with the Company's Restricted Share Plan (December 31, 2022 - 624,088) (Note 21).
June 30, 2023December 31, 2022
(in thousands of U.S. dollars)Number of shares issued (repurchased)Share capitalNumber of shares issued (repurchased)Share capital
Beginning balance272,840,692 $2,124,618 272,176,046 $2,114,783 
Normal course issuer bid (NCIB)(1)
(1,048,680)(7,112)(677,666)(4,580)
Shares issued under DRIP (2)
269,138 2,173 323,048 3,995 
Stock-based compensation exercised (3)
118,747 911 491,341 2,655 
Preferred units exchanged (Note 15)
— — 554,832 8,015 
Shares repurchased and reserved for restricted share awards (4)
(8,878)(72)(26,909)(250)
Ending balance272,171,019 $2,120,518 272,840,692 $2,124,618 
(1) On October 13, 2022, the Company announced that the Toronto Stock Exchange ("TSX") had approved its notice of intention to make a normal course issuer bid ("NCIB") to repurchase up to 2,500,000 of its common shares trading on the TSX, the New York Stock Exchange ("NYSE") and/or alternative Canadian trading systems during the twelve-month period ending on October 17, 2023. During the six months ended June 30, 2023, the Company repurchased 525,267 of its common shares on the TSX and 523,413 shares on the NYSE under the NCIB for $8,749, which reduced share capital and retained earnings by $7,112 and $1,637, respectively. Common shares that were purchased under the NCIB were cancelled by the Company.
(2) In the first six months of 2023, 269,138 common shares were issued under the DRIP at an average price of $8.07 per share.
Page 24 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(3) In the first six months of 2023, 118,747 common shares were issued upon the exercise of 115,283 vested deferred share units ("DSUs").
(4) In the first six months of 2023, 8,878 common shares were reserved at $8.11 per share in accordance with the DRIP with respect to restricted share awards granted in prior years.

20.    EARNINGS PER SHARE

Basic

Basic earnings per share is calculated by dividing net income attributable to shareholders of Tricon by the sum of the weighted average number of shares outstanding and vested deferred share units during the period.
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)For the three months ended June 30For the six months ended June 30
2023202220232022
Net income from continuing operations$46,768 405,604 $76,169 $555,728 
Non-controlling interest1,433 1,025 3,875 2,135 
Net income attributable to shareholders of Tricon from continuing operations45,335 404,579 72,294 553,593 
Net income attributable to shareholders of Tricon from discontinued operations— 11,256 — 24,589 
Net income attributable to shareholders of Tricon$45,335 $415,835 $72,294 $578,182 
Weighted average number of common shares outstanding272,320,468 273,038,745 272,322,666 272,785,158 
Adjustments for vested units1,467,293 1,559,843 1,467,293 1,559,843 
Weighted average number of common shares outstanding for basic earnings per share273,787,761 274,598,588 273,789,959 274,345,001 
Basic earnings per share
Continuing operations$0.17 $1.47 $0.26 $2.02 
Discontinued operations— 0.04 — 0.09 
Basic earnings per share$0.17 $1.51 $0.26 $2.11 

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutive shares. The Company has four categories of potentially dilutive shares: stock options (Note 21), restricted shares (Note 19), deferred share units (Note 21) and the preferred units issued by the Affiliate that are exchangeable into the common shares of the Company (Note 15). For the stock options, the number of dilutive shares is based on the number of shares that could have been acquired at fair value with the assumed proceeds, if any, from their exercise (determined using the average market price of the Company’s shares for the period then ended). For restricted shares and deferred share units, the number of dilutive shares is equal to the total number of unvested restricted shares and deferred share units. For the exchangeable preferred units, the number of dilutive shares is based on the number of common shares into which the elected amount would then be exchangeable. The number of shares calculated as described above is comparable to the number of shares that would have been issued assuming the vesting of the stock compensation arrangement and the exchange of preferred units.

Stock options, restricted shares and deferred share units

For the three months ended June 30, 2023, the Company’s stock compensation plans resulted in 1,777,493 dilutive share units (2022 - 2,570,526), given that it would be advantageous to the holders to exercise their associated rights to acquire common shares, as the exercise prices of these potential shares are below the Company's average market share price for the period. Restricted shares and deferred share units are always considered dilutive, as there is no price to the holder associated with receiving or exercising their entitlement, respectively.

For the six months ended June 30, 2023, the Company’s stock compensation plans resulted in 1,794,158 dilutive share units (2022 - 2,673,550), given that it would be advantageous to the holders to exercise their associated
Page 25 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






rights to acquire common shares, as the exercise prices of these potential shares are below the Company's average market share price for the period.

Preferred units issued by the Affiliate

For the three and six months ended June 30, 2023, the impact of exchangeable preferred units of Tricon PIPE LLC (Note 15) was anti-dilutive, as the associated interest expense, net of tax, and the fair value loss on derivative financial instruments would result in increased earnings per share upon the exchange of the underlying preferred units. Therefore, in computing the diluted weighted average common shares outstanding and the associated earnings per share amounts for the three and six months ended June 30, 2023, the impact of the preferred units was excluded (2022 - included).

(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)For the three months ended June 30For the six months ended June 30
2023202220232022
Net income attributable to shareholders of Tricon from continuing operations$45,335 $404,579 $72,294 $553,593 
Adjustment for preferred units interest expense - net of tax— 4,581 — 9,168 
Fair value gain on derivative financial instruments and other liabilities— (154,877)— (123,525)
Adjusted net income attributable to shareholders of Tricon from continuing operations45,335 254,283 72,294 439,236 
Net income attributable to shareholders of Tricon from discontinued operations— 11,256 — 24,589 
Adjusted net income attributable to shareholders of Tricon$45,335 $265,539 $72,294 $463,825 
Weighted average number of common shares outstanding273,787,761 274,598,588 273,789,959 274,345,001 
Adjustments for stock compensation1,777,493 2,570,526 1,794,158 2,673,550 
Adjustments for preferred units— 34,744,118 — 34,911,245 
Weighted average number of common shares outstanding for diluted earnings per share275,565,254 311,913,232 275,584,117 311,929,796 
Diluted earnings per share
Continuing operations$0.16 $0.82 $0.26 $1.41 
Discontinued operations— 0.03 — 0.08 
Diluted earnings per share
$0.16 $0.85 $0.26 $1.49 


21.    COMPENSATION EXPENSE

Compensation expense is comprised of the following:
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Salaries and benefits$13,965 $13,845 $28,487 $27,869 
Annual incentive plan ("AIP")7,756 4,701 13,633 14,832 
Long-term incentive plan ("LTIP")127 4,191 102 8,288 
Total compensation expense$21,848 $22,737 $42,222 $50,989 

The changes to the balances of the various cash-based and equity-based arrangements during the period are detailed in the sections below.

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






Annual incentive plan
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Cash-based$4,037 $4,428 $6,166 $11,362 
Equity-based3,719 273 7,467 3,470 
Total AIP expense$7,756 $4,701 $13,633 $14,832 


Cash-based AIP expense

For the six months ended June 30, 2023, the Company recognized $6,166 in cash-based AIP expense (2022 - $11,362), of which $6,031 relates to current-year entitlements, and the remainder relates to prior-year adjustments that were paid during 2023.

The following table summarizes the movement in the AIP liability:
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Balance, beginning of period$3,697 $73 
AIP expense6,166 20,307 
Payments(1,842)(16,186)
Translation adjustment88 (497)
Balance, end of period$8,109 $3,697 

Equity-based AIP expense

For the six months ended June 30, 2023, the Company recognized $7,467 in equity-based AIP expense (2022 - $3,470), of which $2,593 (2022 - $1,867) relates to current-year entitlements and $4,874 (2022 - $1,603) relates to the amortization of PSUs, DSUs, stock options and restricted shares granted in prior years, along with the revaluation of PSUs at each reporting date, as the total liability amount is dependent on the Company's share price.

Of the total current-year entitlements, $909 is cash-settled AIP expense related to the PSUs and $1,684 is equity-settled AIP expense related to DSUs, stock options and restricted shares. Of the amortization expenses related to grants in prior years, an expense of $2,363 was recognized for the PSUs and a total expense of $2,511 was recognized in relation to DSUs, stock options and restricted shares.

The following table summarizes the movement in the PSU liability:
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Balance, beginning of period$6,630 $12,064 
PSU expense3,272 1,889 
Payments(4,010)(7,061)
Translation adjustment84 (262)
Balance, end of period$5,976 $6,630 

Long-term incentive plan
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Cash-based$127 $4,091 $102 $7,924 
Equity-based— 100 — 364 
Total LTIP expense$127 $4,191 $102 $8,288 

Cash-based LTIP expense
Page 27 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







For the six months ended June 30, 2023, the Company increased its accrual related to cash-component LTIP by $102 (2022 - increase of $7,924) as a result of an increase in expected future performance fees from Investment Vehicles that will be paid to management when cash is received from each investment over time.

The following table summarizes the movement in the LTIP liability:
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Balance, beginning of period$25,244 $21,431 
LTIP expense102 16,635 
Payments(1,539)(11,685)
Translation adjustment332 (1,137)
Balance, end of period$24,139 $25,244 

Equity-based LTIP expense

For the six months ended June 30, 2023, the Company recorded no equity-based LTIP expense (2022 - $364) related to DSUs granted in prior years. LTIP expense related to income from THP1 US (a U.S. residential development investment) was paid in DSUs vesting in equal tranches over a three- to five- year period commencing on the anniversary date of each grant in past years. The LTIP was amended in 2022 to provide that this expense would be settled in cash only going forward.

Stock option plan

For the six months ended June 30, 2023, the Company recorded a stock option expense under the AIP of $1,945 (2022 - $97).

The following tables summarize the movement in the stock option plan during the six months ended June 30, 2023 and the year ended December 31, 2022.
TSXNYSE
For the six months ended June 30, 2023
Number of optionsWeighted average exercise price (CAD)Number of optionsWeighted average exercise price (USD)
Opening balance - outstanding3,443,770 $10.61 395,953 $8.54 
Granted112,000 11.27 — — 
Exercised(20,000)8.85 — — 
Cancelled(95,000)10.81 — — 
Ending balance - outstanding3,440,770 $10.63 395,953 $8.54 
TSXNYSE
For the year ended December 31, 2022
Number of optionsWeighted average exercise price (CAD)Number of optionsWeighted average exercise price (USD)
Opening balance - outstanding1,985,563 $10.45 31,764 $14.67 
Granted1,466,541 10.81 364,189 8.00 
Exercised(8,334)9.81 — — 
Ending balance - outstanding3,443,770 $10.61 395,953 $8.54 

The following table presents the inputs used to value the stock options granted in 2023:
For the six months ended June 30, 2023
TSX
Risk-free interest rate (%)3.53 
Expected option life (years)5.18 
Expected volatility (%)28.13 
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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







The following table summarizes the stock options outstanding as at June 30, 2023:
June 30, 2023
Grant dateExpiration dateOptions outstandingOptions exercisableExercise price of outstanding options (CAD)Exercise price of outstanding options (USD)
November 14, 2016November 14, 2023530,000 530,000 $8.85 $— 
December 15, 2017December 15, 2024800,000 800,000 11.35 — 
December 17, 2018December 17, 2025401,959 401,959 9.81 — 
December 15, 2020December 15, 2027199,380 132,919 11.50 — 
December 15, 2021December 15, 202825,890 8,630 18.85 — 
December 15, 2021December 15, 202831,764 10,588 — 14.67 
December 15, 2022December 15, 20291,371,541 — 10.81 — 
December 15, 2022December 15, 2029364,189 — — 8.00 
March 6, 2023March 6, 2030112,000 — 11.27 — 
Total3,836,723 1,884,096 $10.63 $8.54 

AIP liability is recorded within amounts payable and accrued liabilities, and the equity component is included in the contributed surplus. The breakdown is presented below.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Amounts payable and accrued liabilities(1)
$14,085 $10,327 
Equity - contributed surplus19,747 15,784 
Total AIP$33,832 $26,111 
(1) This balance includes outstanding PSU liability of $5,976 (2022 - $6,630) and cash-based AIP liability of $8,109 (2022 - $3,697).

LTIP liability and equity components are presented on the balance sheet as follows:
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
LTIP - liability$24,139 $25,244 
Equity - contributed surplus5,471 5,685 
Total LTIP$29,610 $30,929 

22.    PERFORMANCE FEES LIABILITY

The actual amounts of performance fee revenue to be received and paid will depend on the cash realizations of Investment Vehicles and the performance of underlying investments. Recognizing such fee revenue is only permitted when the receipt is highly probable such that a significant amount of the cumulative fee revenue will not reverse. Any corresponding payable to participating unitholders, however, must be recognized by the Company as an expense and a liability in the period in which the change in underlying investment valuation occurs, although the change in the liability is unrealized and is a non-cash expense.

The following table summarizes the movement in performance fees liability for the six months ended June 30, 2023 and the year ended December 31, 2022:

(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Balance, beginning of period$39,893 $48,358 
Contributions from equity holders10 971 
Performance fees expense
537 35,854 
Payments(271)(44,867)
Translation adjustment150 (423)
Balance, end of period$40,319 $39,893 
Page 29 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







For the six months ended June 30, 2023, the Company recorded $42,759 (2022 - $78,670) in connection with employment-related costs, including compensation expense (Note 21) and performance fees expense.

23.    SEGMENTED INFORMATION

Inter-segment revenues adjustments

Inter-segment revenues are determined under terms that approximate market value. For the six months ended June 30, 2023, the adjustment to external revenues when determining segmented revenues consists of property management revenues earned from consolidated entities totaling $47,485 (2022 - $51,968), development revenues earned from consolidated entities totaling $724 (2022 - $767) and asset management revenues earned from consolidated entities totaling $3,952 (2022 - $5,001), which were eliminated on consolidation to arrive at the Company’s consolidated revenues in accordance with IFRS.

(in thousands of U.S. dollars)
For the three months ended June 30, 2023
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1),(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$197,457 $— $— $— $197,457 
Direct operating expenses (65,002)— — — (65,002)
Net operating income from single-family rental properties132,455 — — — 132,455 
Revenue from strategic capital services— — 10,750 — 10,750 
Income from equity-accounted investments in multi-family rental properties— 202 — — 202 
Income from equity-accounted investments in Canadian residential developments— 869 — — 869 
Other income— 350 — 2,264 2,614 
Income from investments in U.S. residential developments— 7,322 — — 7,322 
Compensation expense— — — (21,848)(21,848)
Performance fees recovery— — — (692)(692)
General and administration expense— — — (22,202)(22,202)
Loss on debt modification and extinguishment— — — — — 
Transaction costs— — — (949)(949)
Interest expense— — — (79,374)(79,374)
Fair value gain on rental properties— — — 123,752 123,752 
Fair value gain on Canadian development properties— — — — — 
Fair value loss on derivative financial instruments and other liabilities— — — (19,569)(19,569)
Amortization and depreciation expense— — — (4,280)(4,280)
Realized and unrealized foreign exchange gain— — — 163 163 
Net change in fair value of limited partners’ interests in single-family rental business— — — (69,528)(69,528)
Income tax expense— — — (12,917)(12,917)
Segment net income (loss)$132,455 $8,743 $10,750 $(105,180)$46,768 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.

Page 30 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(in thousands of U.S. dollars)
For the six months ended June 30, 2023
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1)(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$385,966 $— $— $— $385,966 
Direct operating expenses (127,109)— — — (127,109)
Net operating income from single-family rental properties258,857 — — — 258,857 
Revenue from strategic capital services— — 25,871 — 25,871 
Income from equity-accounted investments in multi-family rental properties— 350 — — 350 
Income from equity-accounted investments in Canadian residential developments— 292 — — 292 
Other income— 723 — 5,650 6,373 
Income from investments in U.S. residential developments— 13,355 — — 13,355 
Compensation expense— — — (42,222)(42,222)
Performance fees recovery— — — (537)(537)
General and administration expense— — — (37,451)(37,451)
Transaction costs— — — (7,997)(7,997)
Interest expense— — — (155,746)(155,746)
Fair value gain on rental properties— — — 135,646 135,646 
Fair value loss on derivative financial instruments and other liabilities— — — (16,460)(16,460)
Amortization and depreciation expense— — — (8,545)(8,545)
Realized and unrealized foreign exchange gain— — — 131 131 
Net change in fair value of limited partners’ interests in single-family rental business— — — (79,724)(79,724)
Income tax expense— — — (16,024)(16,024)
Segment net income (loss)$258,857 $14,720 $25,871 $(223,279)$76,169 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.


Page 31 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(in thousands of U.S. dollars)
For the three months ended June 30, 2022
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1)(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$155,135 $— $— $— $155,135 
Direct operating expenses(50,739)— — — (50,739)
Net operating income from single-family rental properties104,396 — — — 104,396 
Revenue from private funds and advisory services— — 20,387 — 20,387 
Income from equity-accounted investments in multi-family rental properties(3)
— 170 — — 170 
Loss from equity-accounted investments in Canadian residential developments— (98)— — (98)
Other income— 372 — — 372 
Income from investments in U.S. residential developments— 3,002 — — 3,002 
Compensation expense— — — (22,737)(22,737)
Performance fees expense— — — (15,117)(15,117)
General and administration expense— — — (13,905)(13,905)
Transaction costs— — — (5,482)(5,482)
Interest expense— — — (45,864)(45,864)
Fair value gain on rental properties— — — 395,835 395,835 
Fair value gain on Canadian development properties— — — 874 874 
Fair value gain on derivative financial instruments and other liabilities— — — 156,487 156,487 
Amortization and depreciation expense— — — (3,584)(3,584)
Realized and unrealized foreign exchange gain— — — 100 100 
Net change in fair value of limited partners’ interests in single-family rental business— — — (112,003)(112,003)
Income tax expense(3)
— — — (57,229)(57,229)
Segment net income from continuing operations$104,396 $3,446 $20,387 $277,375 $405,604 
Segment net income from discontinued operations(3)
— 11,256 — — 11,256 
Segment net income$104,396 $14,702 $20,387 $277,375 $416,860 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.
(3) The comparative period has been reclassified to conform with the current period presentation. Income from equity-accounted investments in U.S. multi-family rental properties, including income tax expense, has been reclassified as discontinued operations, separate from the Company's continuing operations (Note 3).

Page 32 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






(in thousands of U.S. dollars)
For the six months ended June 30, 2022
Single-Family Rental(1)
Adjacent Businesses (1)
Strategic Capital(1)(2)
Corporate(1)
Consolidated results
Revenue from single-family rental properties$293,923 $— $— $— $293,923 
Direct operating expenses(96,254)— — — (96,254)
Net operating income from single-family rental properties197,669 — — — 197,669 
Revenue from private funds and advisory services— — 32,798 — 32,798 
Income from equity-accounted investments in multi-family rental properties(3)
— 330 — — 330 
Loss from equity-accounted investments in Canadian residential developments— (113)— — (113)
Other income— 668 — 2,753 3,421 
Income from investments in U.S. residential developments— 7,307 — — 7,307 
Compensation expense— — — (50,989)(50,989)
Performance fees expense— — — (27,681)(27,681)
General and administration expense— — — (26,780)(26,780)
Transaction costs— — — (7,701)(7,701)
Interest expense— — — (82,718)(82,718)
Fair value gain on rental properties— — — 695,407 695,407 
Fair value gain on Canadian development properties— — — 874 874 
Fair value gain on derivative financial instruments and other liabilities— — — 127,125 127,125 
Amortization and depreciation expense— — — (6,991)(6,991)
Realized and unrealized foreign exchange gain— — — 39 39 
Net change in fair value of limited partners’ interests in single-family rental business— — — (204,235)(204,235)
Income tax expense(3)
— — — (102,034)(102,034)
Segment net income from continuing operations$197,669 $8,192 $32,798 $317,069 $555,728 
Segment net income from discontinued operations(3)
— 24,589 — — 24,589 
Segment net income$197,669 $32,781 $32,798 $317,069 $580,317 
(1) Financial information for each segment is presented on a consolidated basis.
(2) Strategic Capital was previously reported as Private Funds and Advisory.
(3) The comparative period has been reclassified to conform with the current period presentation. Income from equity-accounted investments in U.S. multi-family rental properties,including income tax expense, has been reclassified as discontinued operations, separate from the Company's continuing operations (Note 3).

24.    RELATED PARTY TRANSACTIONS AND BALANCES

Related parties include subsidiaries, associates, joint ventures, structured entities, key management personnel, the Board of Directors (“Directors”), immediate family members of key management personnel and Directors, and entities which are directly or indirectly controlled by, jointly controlled by or significantly influenced by key management personnel, Directors or their close family members.

In the normal course of operations, the Company executes transactions on market terms with related parties that have been measured at the exchange value and are recognized in the consolidated financial statements, including, but not limited to: asset management fees, performance fees and incentive distributions; loans, interest and non-interest bearing deposits; purchase and sale agreements; capital commitments to Investment Vehicles; and development of residential real estate assets. In connection with the Investment Vehicles, the Company has unfunded capital commitments of $369,270 as at June 30, 2023. Transactions and balances between consolidated entities are fully eliminated upon consolidation. Transactions and balances with unconsolidated structured entities are disclosed in Note 15.
Page 33 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







Transactions with related parties

The following table lists the related party balances included within the condensed interim consolidated financial statements.
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Revenue from strategic capital services$10,750 $20,387 $25,871 $32,798 
Income from equity-accounted investments in multi-family rental properties202 170 350 330 
Income (loss) from equity-accounted investments in Canadian residential developments869 (98)292 (113)
Income from investments in U.S. residential developments7,322 3,002 13,355 7,307 
Performance fees expense(692)(15,117)(537)(27,681)
Net income recognized from related parties$18,451 $8,344 $39,331 $12,641 

Balances arising from transactions with related parties

The items set out below are included on various line items in the Company’s condensed interim consolidated financial statements.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Receivables from related parties included in amounts receivable
Contractual fees and other receivables from investments managed$21,937 $14,976 
Employee relocation housing loan(1)
1,511 1,477 
Annual incentive plan(2)
33,832 26,111 
Long-term incentive plan(2)
29,610 30,929 
Performance fees liability40,319 39,893 
Dividends payable499 497 
Other payables to related parties included in amounts payable and accrued liabilities73 166 
(1) The employee relocation housing loan is non-interest bearing for a term of ten years, maturing in 2028.
(2) Balances from compensation arrangements are due to employees deemed to be key management personnel of the Company.

The receivables are unsecured and non-interest bearing. There are no provisions recorded against receivables from related parties at June 30, 2023 (December 31, 2022 - nil).

25.    FINANCIAL RISK MANAGEMENT

The Company is experiencing the effect of rising interest rates and inflation, which touches all aspects of its business, including its ability to negotiate contract terms and make investment and financing decisions. The Company is exposed to the following risks as a result of holding financial instruments, as well as real estate assets that are measured at fair value: market risk (i.e., interest rate risk, foreign currency risk and other price risk that may impact the fair value of financial instruments, as well as rental properties and development properties), credit risk and liquidity risk. The following is a description of these risks and how they are managed.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes the risk of changes in interest rates, foreign currency rates and changes in market prices due to other factors, such as changes in equity prices or credit spreads. The Company manages market risk from foreign currency assets and liabilities and the impact of changes in currency exchange rates and interest rates by funding assets with financial liabilities in the same currency and with similar interest rate characteristics, and by holding financial contracts such as interest rate derivatives to minimize residual exposures.

Page 34 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The sensitivities to market risks included below are based on a change in one factor while holding all other factors constant. In practice, this is unlikely to occur, and changes in some of the factors may be correlated - for example, changes in interest rates and changes in foreign currency rates.

Financial instruments held by the Company that are subject to market risk include other financial assets, borrowings and derivative instruments such as interest rate cap contracts.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The observable impacts on the fair values and future cash flows of financial instruments that can be directly attributable to interest rate risk include changes in the net income from financial instruments whose cash flows are determined with reference to floating interest rates and changes in the value of financial instruments whose cash flows are fixed in nature.

The Company’s assets largely consist of long-term interest-sensitive physical real estate assets. Accordingly, the Company’s financial liabilities consist of long-term fixed-rate debt and floating-rate debt. These financial liabilities are recorded at their amortized cost. The Company also holds interest rate caps to limit its exposure to increases in interest rates on floating-rate debt and sometimes holds interest rate contracts to lock in fixed rates on anticipated future debt issuances and as an economic hedge against the changes in the value of long-term interest-sensitive physical real estate assets that have not been otherwise matched with fixed-rate debt. During the six months ended June 30, 2023, the Company recognized other income of $6,781 related to interest rate caps that were in-the-money. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. To limit its exposure to interest rate risk, the Company has a mixed portfolio of fixed-rate and variable-rate debt, with $4,008,995 (68%) in fixed-rate debt and $1,863,225 (32%) in variable-rate debt as at June 30, 2023. If interest rates had been 1% higher or lower, with all other variables held constant, interest expense would have increased (decreased) by:
For the six months ended June 3020232022
(in thousands of U.S. dollars)
1% increase
1% decrease
1% increase
1% decrease
Interest expense$3,583 $(9,596)8,037 (3,330)

Foreign currency risk

Changes in foreign currency rates will impact the carrying value of financial instruments denominated in currencies other than the U.S. dollar, which is the functional and presentation currency of the Company. The Company has exposure to monetary and non-monetary foreign currency risk due to the effects of changes in foreign exchange rates related to consolidated Canadian subsidiaries, equity-accounted investments, and cash and debt in Canadian dollars held at the corporate level. The Company manages foreign currency risk by raising equity in Canadian dollars and by matching its principal cash outflows to the currency in which the principal cash inflows are denominated.

Page 35 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






The impact of a 1% increase or decrease in the Canadian dollar exchange rate would result in the following impacts to assets and liabilities:
For the six months ended June 3020232022
(in thousands of U.S. dollars)
1% increase
1% decrease
1% increase
1% decrease
Assets
Equity-accounted investments in multi-family rental properties$216 $(216)$209 $(209)
Equity-accounted investments in Canadian residential developments1,168 (1,168)980 (980)
Canadian development properties1,586 (1,586)1,396 (1,396)
Investments in U.S. residential developments1 (1)3 (3)
$2,971 $(2,971)$2,588 $(2,588)
Liabilities
Debt521 (521)254 (254)
$521 $(521)$254 $(254)

Foreign exchange volatility is already embedded in the fair value of derivative financial instruments (Note 16), and therefore is excluded from the sensitivity calculations above.

Other price risk

Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as commodity prices and credit spreads. The Company does not hold any financial instruments that are exposed to equity price risk, including equity securities and equity derivatives.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause financial loss for the other party by failing to discharge an obligation.

The Company's exposure to credit risk arises from cash, restricted cash, loans and receivables which are due primarily from associates. Cash and restricted cash are placed only with approved counterparties. For banks and financial institutions, only independently rated parties that meet the minimum credit rating of AA or equivalent are accepted. Through the equity portion of its investments, the Company is also indirectly exposed to credit risk arising from loans advanced by investees to individual real estate development projects. As at June 30, 2023, the Company held cash and restricted cash with regulated financial institutions that met minimum credit rating requirements.

Credit risk also arises from the possibility that residents may experience financial difficulty and be unable to fulfill their lease commitments. A provision for bad debt (or expected credit loss) is taken for all anticipated collectability risks. The Company also manages credit risk by performing resident underwriting due diligence during the leasing process. As at June 30, 2023, the Company had rent receivables of $3,002 (December 31, 2022 – $3,581), net of bad debt, which adequately reflects the Company's credit risk.

Liquidity risk

The real estate industry is highly capital intensive. Liquidity risk is the risk that the Company may have difficulty in meeting obligations associated with its financial liabilities as they fall due. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price. The Company's liquidity risk management includes maintaining sufficient cash on hand and the availability of funding through an adequate amount of committed credit facilities, as well as performing periodic cash flow forecasts to ensure the Company has sufficient cash to meet operational and financing costs. The Company's primary source of liquidity consists of cash and other financial assets, net of deposits and other associated liabilities, and undrawn available credit facilities. Cash flow generated from operating the rental property portfolio represents the primary source of liquidity used to service the
Page 36 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






interest on the property-level debt and fund direct property operating expenses, as well as reinvest in the portfolio through capital expenditures.

The Company is subject to the risks associated with debt financing, including the ability to refinance indebtedness at maturity. The Company believes these risks are mitigated through the use of long-term debt secured by high-quality assets, by maintaining certain debt levels that are set by management, and by staggering maturities over an extended period.

The following tables present the contractual maturities of the Company’s financial liabilities at June 30, 2023 and December 31, 2022, excluding remaining unamortized deferred financing fees and debt discount:
(in thousands of U.S. dollars)
As at June 30, 2023Due on demand and in 2023From 2024
to 2025		From 2026
to 2027		2028 and thereafterTotal
Liabilities
Debt(1)
$472,845 $2,021,212 $2,535,911 $842,252 $5,872,220 
Other liabilities
— 11,871 10,009 15,669 37,549 
Limited partners' interests in single-family rental business
— 872,960 — 1,127,843 2,000,803 
Derivative financial instruments
— — — 60,139 60,139 
Due to Affiliate
— — — 295,325 295,325 
Amounts payable and accrued liabilities
153,622 — — — 153,622 
Resident security deposits
77,993 — — — 77,993 
Dividends payable
15,823 — — — 15,823 
Total
$720,283 $2,906,043 $2,545,920 $2,341,228 $8,513,474 
(1) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise the extension options available on all loans.

(in thousands of U.S. dollars)
As at December 31, 2022Due on demand and in 2022From 2023
to 2024		From 2025
to 2026		2027 and thereafterTotal
Liabilities
Debt(1)
$757,135 $1,949,405 $2,529,240 $542,457 $5,778,237 
Other liabilities
— 10,370 8,620 15,534 34,524 
Limited partners' interests in single-family rental business
— — 851,416 845,456 1,696,872 
Derivative financial instruments
— — — 51,158 51,158 
Due to Affiliate
— — — 295,325 295,325 
Amounts payable and accrued liabilities
138,273 — — — 138,273 
Resident security deposits
79,864 — — — 79,864 
Dividends payable
15,861 — — — 15,861 
Total$991,133 $1,959,775 $3,389,276 $1,749,930 $8,090,114 
(1) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise the extension options available on all loans.


Page 37 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)







The future repayments of principal and interest on financial liabilities are as follows, excluding remaining unamortized deferred financing fees and debt discount:
(in thousands of U.S. dollars)
As at June 30, 2023Due on demand and in 2023From 2024
to 2025		From 2026
to 2027		2028 and thereafterTotal
Principal
Debt(1),(2)
$472,845 $2,021,212 $2,535,911 $842,252 $5,872,220 
Due to Affiliate
— — — 295,325 295,325 
Interest
Debt(1)
133,975 406,307 164,954 24,500 729,736 
Due to Affiliate(3)
8,491 33,962 34,192 120,936 197,581 
Total$615,311 $2,461,481 $2,735,057 $1,283,013 $7,094,862 
(1) Certain mortgages' principal and interest repayments were translated to U.S. dollars at the period-end exchange rate.
(2) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise, where appropriate, the extension options available on all loans.
(3) Reflects the contractual maturity date of September 3, 2032.

The details of the net liabilities are shown below:
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Cash$120,387 $204,303 
Amounts receivable25,333 24,984 
Prepaid expenses and deposits32,262 37,520 
Current assets177,982 266,807 
Amounts payable and accrued liabilities153,622 138,273 
Resident security deposits77,993 79,864 
Dividends payable15,823 15,861 
Current portion of long-term debt801,561 757,135 
Current liabilities1,048,999 991,133 
Net current liabilities$(871,017)$(724,326)

During the six months ended June 30, 2023, the change in the Company’s liquidity resulted in a working capital deficit of $871,017 (2022 - deficit of $724,326). The working capital deficit is primarily due to debts coming due during 2023 and early 2024. The Company is in the process of exploring refinancing options for the securitization debt 2017-2 of $328,394. Subsequent to quarter-end, the Company repaid in full the JV-2 subscription facility of $263,000 with outstanding unfunded equity commitments, reduced the SFR JV-HD warehouse facility commitment value from $350,000 to $140,000 and both extended the maturity date of the term loan by six months to April 2024 (with the option to extend for another six months to October 2024) and increased its commitment value by $100,000 to $309,532.

As of June 30, 2023, there was $158,000 outstanding under the corporate credit facility (December 31, 2022 - nil) and $342,000 (December 31, 2022 - $500,000) of the corporate credit facility remained available to the Company. During the six months ended June 30, 2023, the Company received distributions of $9,256 (2022 - $38,474) from its investments.

Page 38 of 41

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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






26.    SUPPLEMENTARY CASH FLOW DETAILS

The details of the adjustments for non-cash items presented in operating activities of the cash flow statement are shown below:
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Fair value gain on rental properties (Note 4)
$(123,752)$(395,835)$(135,646)$(695,407)
Fair value gain on Canadian development properties (Note 7)
— (874)— (874)
Fair value loss (gain) on derivative financial instruments and other liabilities (Note 16)
19,569 (156,487)16,460 (127,125)
Income from investments in U.S. residential developments (Note 8)
(7,322)(3,002)(13,355)(7,307)
Income from equity-accounted investments in multi-family rental properties (Note 5)
(202)(18,905)(350)(35,942)
(Income) loss from equity-accounted investments in Canadian residential developments (Note 6)
(869)98 (292)113 
Amortization and depreciation expense
4,280 3,584 8,545 6,991 
Deferred income taxes (Note 10)
12,135 63,604 14,124 111,491 
Net change in fair value of limited partners’ interests in single-family rental business
69,528 112,003 79,724 204,235 
Amortization of debt discount and financing costs (Note 17)
6,084 4,315 10,898 8,081 
Interest on lease obligation (Note 17)
291 288 590 564 
Long-term incentive plan (Note 21)
127 4,191 102 8,288 
Annual incentive plan (Note 21)
7,756 4,701 13,633 14,832 
Performance fees expense (Note 22)
692 15,117 537 27,681 
Unrealized foreign exchange gain
(8,204)(2,845)(6,650)(4,484)
Adjustments for non-cash items$(19,887)$(370,047)$(11,680)$(488,863)

The following table presents the changes in non-cash working capital items for the periods ended June 30, 2023 and June 30, 2022.
For the three months ended June 30For the six months ended June 30
(in thousands of U.S. dollars)2023202220232022
Amounts receivable$(2,714)$3,502 $(349)$2,391 
Prepaid expenses and deposits11,821 (1,714)5,258 (12,603)
Resident security deposits(1,136)4,013 (1,871)8,545 
Amounts payable and accrued liabilities26,928 35,658 15,349 40,017 
Changes in non-cash working capital items$34,899 $41,459 $18,387 $38,350 


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Notes to the CONDENSED INTERIM CONSOLIDATED Financial Statements
For the three and six months ended June 30, 2023
 (in thousands of U.S. dollars, except per share amounts and percentage amounts)






27.    SUBSEQUENT EVENTS

SFR securitization transaction

On July 11, 2023, Tricon closed a new securitization involving the issuance and sale of five classes of fixed-rate pass-through certificates with a face amount of approximately $416,000, a weighted average yield of approximately 5.86% and a term to maturity of approximately five years, secured indirectly by a pool of 2,116 single-family rental homes within SFR JV-2. The transaction proceeds were primarily used to pay down the existing short-term SFR JV-2 variable-rate debt.

Quarterly dividend

On August 8, 2023, the Board of Directors of the Company declared a dividend of $0.058 per common share in U.S. dollars payable on or after October 15, 2023 to shareholders of record on September 30, 2023.


Page 40 of 41













































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7 St. Thomas Street, Suite 801 Toronto, Ontario M5S 2B7
T 416-925-7228 F 416-925-7964 www.triconresidential.com
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Non-IFRS measures, forward-looking statements and market industry data
1
Introduction
1.1
Business overview
1.2
The Tricon difference
2
Highlights
3
Consolidated financial results
3.1
Review of income statements
3.2
Review of selected balance sheet items
3.3
Subsequent events
4
Operating results of businesses
4.1
Single-Family Rental
4.2
Adjacent residential businesses
4.2.1
Multi-Family Rental
4.2.2
Residential Development
4.3Strategic Capital
5
Liquidity and capital resources
5.1
Financial strategy
5.2
Liquidity
5.3
Capital resources
6
Operational key performance indicators
7
Accounting estimates and policies, controls and procedures, and risk analysis
7.1
Accounting estimates and policies
7.2
Controls and procedures
7.3
Transactions with related parties
7.4
Dividends
7.5
Compensation incentive plans
7.6
Risk definition and management
8
Historical financial information
Appendix A - Reconciliations


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Non-IFRS measures

This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the unaudited condensed interim consolidated financial statements and accompanying notes for the three and six months ended June 30, 2023 (the "Interim Financial Statements") of Tricon Residential Inc. (“Tricon", "us", "we" or the “Company”), prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“the IASB”) and consistent with the Company's audited annual consolidated financial statements for the year ended December 31, 2022.

The Company has included herein certain non-IFRS financial measures and non-IFRS ratios, including, but not limited to: "proportionate" metrics, net operating income ("NOI"), NOI margin, proportionate same home NOI and NOI margin, funds from operations ("FFO"), core funds from operations ("Core FFO"), adjusted funds from operations ("AFFO"), Core FFO per share, AFFO per share, Core FFO payout ratio, AFFO payout ratio, as well as certain key indicators of the performance of our businesses which are supplementary financial measures. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. We utilize these measures in managing our business, including performance measurement and capital allocation. In addition, certain of these measures are used in measuring compliance with our debt covenants. We believe that providing these performance measures on a supplemental basis is helpful to investors and shareholders in assessing the overall performance of the Company’s business. However, these measures are not recognized under and do not have any standardized meaning prescribed by IFRS as issued by the IASB, and are not necessarily comparable to similar measures presented by other publicly-traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. Because non-IFRS financial measures, non-IFRS ratios and supplementary financial measures do not have standardized meanings prescribed under IFRS, securities regulations require that such measures be clearly defined, identified, and reconciled to their nearest IFRS measure. The definition, calculation and reconciliation of the non-IFRS financial measures and the requisite disclosure for non-IFRS ratios used in this MD&A are provided in Section 4 and Appendix A, and the supplementary financial measures which are key performance indicators presented herein are discussed in detail in Section 6.

The non-IFRS financial measures, non-IFRS ratios and supplementary financial measures presented herein should not be construed as alternatives to net income (loss) or cash flow from the Company’s activities, determined in accordance with IFRS, as indicators of Tricon’s financial performance. Tricon’s method of calculating these measures may differ from other issuers’ methods and, accordingly, these measures may not be comparable to similar measures presented by other publicly-traded entities.

Forward-looking statements

Certain statements in this MD&A are considered “forward-looking information” as defined under applicable securities laws (“forward-looking statements”). This document should be read in conjunction with material contained in the Company’s current Interim Financial Statements along with the Company’s other publicly filed documents. Words such as “may”, “would”, “could”, “will”, “anticipate”, “believe”, “plan”, “expect”, “intend”, “estimate”, “aim”, “endeavor”, “project”, “continue”, "target" and similar expressions identify these forward-looking statements. Statements containing forward-looking information are not historical facts but instead reflect management’s expectations, intentions and beliefs concerning anticipated future events, results, circumstances, economic performance or expectations with respect to Tricon and its investments and are based on information currently available to management and on assumptions that management believes to be reasonable.

This MD&A includes forward-looking statements pertaining to: anticipated operational and financial performance; the Company’s strategic and operating plans and growth prospects; expected demographic and economic trends impacting the Company’s key markets; project plans, costs, timelines and sales/rental expectations; expected performance fees; future cash flows; transaction and development timelines; anticipated demand for residential real estate; the anticipated growth of the Company's rental businesses; the acquisition of build-to-rent projects; the Company’s key priorities over the next three years and the manner in which they might be achieved; expected future acquisitions, acquisition pace, rent growth, operating expenses, occupancy and turnover rates, and capital expenditure programs for single-family rental homes and multi-family rental apartments; rollout of operations programs and resident betterment programs; debt financing and refinancing intentions; continuing increases in
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


interest rates, inflation and economic uncertainty; and the impact and aftermath of the COVID-19 pandemic. The assumptions underlying these forward-looking statements and a list of factors that may cause actual business performance to differ from current projections are discussed in this MD&A and in the Company’s Annual Information Form dated February 28, 2023 (the “AIF”), which is available on SEDAR at www.sedar.com. The continuing impact and aftermath of COVID-19 on the operations, business and financial results of the Company may cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements.

Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by management of the Company as of the date of this MD&A, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company’s estimates, beliefs and assumptions, which may prove to be incorrect, include the various assumptions set forth herein, including, but not limited to, the Company’s future growth potential; results of operations; future prospects and opportunities; demographic and industry trends; no change in legislative or regulatory matters; future levels of indebtedness and prevailing interest rates; the tax laws as currently in effect; the continuing availability of capital and suitable acquisition and investment opportunities; current economic conditions including property value appreciation and overall levels of inflation; and the impact and aftermath of COVID-19.

When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant unknown risks and uncertainties. Forward-looking statements should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements, including, but not limited to, the Company’s ability to execute its growth strategies; the impact of changing conditions in the multi-family housing market; increasing competition in the single-family and multi-family housing market; the effect of fluctuations and cycles in the Canadian and U.S. real estate market; the marketability and value of the Company’s portfolio; the expected future value of the Company's portfolio; changes in the attitudes, financial condition and demand of the Company’s demographic market; rising interest rates and volatility in financial markets; the potential impact of reduced supply of labor and materials on expected costs and timelines; rates of inflation and overall economic uncertainty; developments and changes in applicable laws and regulations; and the impact of COVID-19 on the operations, business and financial results of the Company.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this MD&A. See the AIF and the continuous disclosure documents referenced in Section 7.6 for a more complete list of risks relating to an investment in the Company and an indication of the impact the materialization of such risks could have on the Company, and therefore cause actual results to deviate from the forward-looking statements.

Certain statements included in this MD&A may be considered a “financial outlook” for purposes of applicable securities laws, and as such, the financial outlook may not be appropriate for purposes other than this document. Although the forward-looking statements contained in this MD&A are based upon what management currently believes to be reasonable assumptions (including those noted above), there can be no assurance that actual results, performance or achievements will be consistent with these forward-looking statements. The forward-looking statements contained in this document are expressly qualified in their entirety by this cautionary statement.

When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking statements in this MD&A are made as of the date of this document and the Company does not intend to, or assume any obligation to, update or revise these forward-looking statements or information to reflect new information, events, results or circumstances or otherwise after the date on which such statements are made to reflect the occurrence of unanticipated events, except as required by law, including securities laws.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Market and industry data

This MD&A may include certain market and industry data and forecasts obtained from third-party sources, industry publications and publicly available information as well as industry data prepared by management on the basis of its knowledge of the industry in which the Company operates (including management’s estimates and assumptions relating to the industry based on that knowledge). Management’s knowledge of the North American residential real estate industry has been developed through its experience and participation in the industry. Management believes that its industry data is accurate and that its estimates and assumptions are reasonable, but there can be no assurance as to the accuracy or completeness of this data. Third-party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. Although management believes it to be reliable, the Company has not independently verified any of the data from third-party sources referred to in this MD&A, or analyzed or verified the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying economic assumptions relied upon by such sources.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


1.    Introduction

This Management’s Discussion and Analysis (“MD&A”) is dated as of August 8, 2023, the date it was approved by the Board of Directors of Tricon Residential Inc. (“Tricon", “us", “we” or the “Company”), and reflects all material events up to that date. It should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and related notes for the three and six months ended June 30, 2023 ("Interim Financial Statements"), which were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), including International Accounting Standard 34, Interim Financial Reporting (“IAS 34”). The accounting policies are consistent with the Company’s audited annual consolidated financial statements for the year ended December 31, 2022, available on the Company's website at www.triconresidential.com, on the Canadian Securities Administrators’ website at www.sedar.com, and as part of the Company's annual report (Form 40-F) filed on the EDGAR section of the U.S. Securities and Exchange Commission’s (“SEC”) website at www.sec.gov. Additional information about the Company, including its Annual Information Form, is available on these websites.

The registered office of the Company is at 7 St. Thomas Street, Suite 801, Toronto, Ontario M5S 2B7. The Company’s common shares are traded under the symbol TCN on both the New York Stock Exchange and the Toronto Stock Exchange.

All dollar amounts in this MD&A are expressed in U.S. dollars unless otherwise indicated.

1.1    Business overview

Tricon Residential Inc. (NYSE: TCN, TSX: TCN) is an owner and operator of a growing portfolio of approximately 37,000 single-family rental homes located primarily in the U.S. Sun Belt and multi-family apartments in Canada. The Company also invests in adjacent residential businesses which include residential development assets in the United States and Canada. Through its fully integrated operating platform, the Company earns rental income and ancillary revenue from single-family rental properties, income from its investments in multi-family rental properties and residential developments, as well as fees from managing strategic capital associated with its businesses. Our commitment to enriching the lives of our employees, residents and local communities underpins Tricon’s culture and business philosophy. We provide high-quality rental housing options for families across the United States and Canada through our technology-enabled operating platform and dedicated on-the-ground operating teams. Our development programs are also delivering thousands of new rental homes and apartments as part of our commitment to help solve the housing supply shortage. At Tricon, we imagine a world where housing unlocks life’s potential.

As at June 30, 2023, about 97% of the Company’s real estate assets are stabilized single-family rental homes and the remaining 3% are investments in adjacent residential businesses.

Please refer to the section entitled “Description of the Business” in the Company’s Annual Information Form dated February 28, 2023 (the “AIF”), which is available on SEDAR at www.sedar.com, for a more fulsome overview of Tricon’s business.


1.2    The Tricon difference

I. Superior growth profile

Tricon is focused on disciplined, long-term growth of its single-family rental home portfolio and has a sophisticated acquisition platform that is capable of deploying large amounts of capital across multiple acquisition channels and markets simultaneously. Tricon sources acquisition opportunities of existing homes through traditional channels, including Multiple Listing Service (“MLS”), “iBuyer” direct channels, and portfolio acquisitions. These traditional channels will account for the majority of Tricon’s planned acquisitions over the near term and leverage the Company’s acquisition platform which filters and ranks many listings per year while standardizing hundreds of key underwriting parameters, enabling the Company to efficiently convert listings into offers.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


In an undersupplied housing market, Tricon also believes in adding to the supply of rental homes and providing accessible housing solutions through its three newest home growth channels. These include the development of dedicated “build-to-rent” communities and the acquisition of both scattered new homes and completed single-family rental communities directly from homebuilders. In aggregate, our six existing and new home acquisition channels are expected to provide the Company with sufficient volume to meet its acquisition targets.

II. Differentiated strategic partnership model

Through its differentiated strategic partnership model, Tricon has demonstrated its ability to raise and deploy third-party capital to accelerate growth, improve operating efficiency, and take development off balance sheet. The Company has recently partnered with leading global real estate investors to form three complementary single-family rental joint ventures, each with a unique acquisition strategy that provides residents with more housing options at an accessible price point.
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(1) As at June 30, 2023, Tricon's unfunded equity commitment to these vehicles was approximately $250 million and it is expected to be funded over the next three years.

III. Technology-enabled operating platform

Tricon has developed a technology-enabled platform that supports its growth, provides its residents an elevated living experience, and optimizes operating efficiencies. The Company's proprietary suite of software applications, referred to as “TriApps”, automates many facets of the single-family rental business. More information is available in the AIF.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


2.    Highlights

The following section presents highlights for the quarter on a consolidated and proportionate basis.

On October 18, 2022, the Company sold its remaining 20% equity interest in its U.S. multi-family rental portfolio, held through Tricon US Multi-Family REIT LLC. In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the Company reclassified the prior-period results and cash flows of Tricon US Multi-Family REIT LLC as discontinued operations separate from the Company's continuing operations.

Core funds from operations ("Core FFO"), Core FFO per share, Adjusted funds from operations ("AFFO"), and AFFO per share are non-IFRS financial measures and non-IFRS ratios as identified in Section 6. The Company uses guidance specified by the National Association of Real Estate Investment Trusts ("NAREIT") to calculate FFO, upon which Core FFO and AFFO are based. The measures are presented on a proportionate basis, reflecting only the portion attributable to Tricon's shareholders based on the Company's ownership percentage of the underlying entities and excludes the percentage associated with non-controlling and limited partners' interests. The Company believes that providing FFO, Core FFO and AFFO on a proportionate basis is helpful to investors in assessing the overall performance of the Company’s business. Note that FFO, Core FFO, Core FFO per share, AFFO and AFFO per share are not meant to be used in measuring the Company's liquidity. See “Non-IFRS measures” on page 1 and Appendix A for a reconciliation to the most directly comparable IFRS measures.
For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars, unless otherwise indicated)202320222023
2022(1)
Financial highlights on a consolidated basis
Net income from continuing operations, including:
$46,768 $405,604 $76,169 $555,728 
Fair value gain on rental properties
123,752 395,835 135,646 695,407 
Basic earnings per share attributable to shareholders of Tricon from continuing operations
0.17 1.47 0.26 2.02 
Diluted earnings per share attributable to shareholders of Tricon from continuing operations
0.16 0.82 0.26 1.41 
Net income from discontinued operations
— 11,256 — 24,589 
Basic earnings per share attributable to shareholders of Tricon from discontinued operations
— 0.04 — 0.09 
Diluted earnings per share attributable to shareholders of Tricon from discontinued operations
— 0.03 — 0.08 
Dividends per share
$0.058 $0.058 $0.116 $0.116 
Weighted average shares outstanding - basic
273,787,761 274,598,588 273,789,959 274,345,001 
Weighted average shares outstanding - diluted
275,565,254 311,913,232 275,584,117 311,929,796 
Non-IFRS(2) measures on a proportionate basis
Core funds from operations ("Core FFO")
$42,053 $51,009 $84,209 $94,044 
Adjusted funds from operations ("AFFO")
33,760 40,730 66,808 74,388 
Core FFO per share(3)
0.14 0.16 0.27 0.30 
AFFO per share(3)
0.11 0.13 0.22 0.24 
Select balance sheet items reported on a consolidated basis
June 30, 2023December 31, 2022
Total assets
$12,934,169 $12,450,946 
Total liabilities(4)
9,095,650 8,653,921 
Net assets attributable to shareholders of Tricon
3,833,806 3,790,249 
Rental properties
11,933,335 11,445,659 
Debt
5,827,545 5,728,184 
(1) Certain comparative figures have been adjusted to conform with the current period presentation as income from equity-accounted investments in U.S. multi-family rental properties has been reclassified as discontinued operations, separate from the Company's continuing operations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


(2) Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company's performance. Refer to “Non-IFRS measures” on page 1 and Appendix A.
(3) Core FFO per share and AFFO per share are calculated using the total number of weighted average potential dilutive shares outstanding, including the assumed conversion of convertible debentures and exchange of preferred units issued by Tricon PIPE LLC, which were 310,309,372 and 310,328,235 for the three and six months ended June 30, 2023, respectively, and 311,913,232 and 311,929,796 for the three and six months ended June 30, 2022, respectively.
(4) Includes limited partners' interests in SFR JV-1, SFR JV-HD and SFR JV-2.

IFRS measures on a consolidated basis

Net income from continuing operations in the second quarter of 2023 was $46.8 million compared to $405.6 million in the second quarter of 2022, and included:

•Fair value gain on rental properties of $123.8 million compared to $395.8 million in the second quarter of 2022, attributable to a moderation in home price appreciation within the single-family rental portfolio given the current climate of higher mortgage rates and economic uncertainty.

•Revenue from single-family rental properties of $197.5 million compared to $155.1 million in the second quarter of 2022, driven primarily by growth of 10.0% in the single-family rental portfolio to 36,767 homes, a 7.3% year-over-year increase in average effective monthly rent (from $1,670 to $1,792) and a 1.0% increase in total portfolio occupancy to 95.6%.

•Direct operating expenses of $65.0 million compared to $50.7 million in the second quarter of 2022, primarily reflecting an expansion in the rental portfolio and higher property tax expenses associated with increasing property value assessments, as well as general cost and labor market inflationary pressures.

•Revenue from strategic capital services (previously reported as Revenue from private funds and advisory services) of $10.8 million compared to $20.4 million in the second quarter of 2022, attributable to lower performance fees earned from the Company's legacy for-sale housing projects, along with lower asset management fees and property management fees earned following the sale of Tricon's remaining interest in the U.S. multi-family rental portfolio in the fourth quarter of 2022.

Net income from continuing operations for the six months ended June 30, 2023 was $76.2 million compared to $555.7 million for the period ended June 30, 2022, and included:

•Fair value gain on rental properties of $135.6 million compared to $695.4 million in the prior year for the same reasons discussed above.

•Revenue from single-family rental properties of $386.0 million and direct operating expenses of $127.1 million compared to $293.9 million and $96.3 million in the prior year, respectively, which translated to a net operating income ("NOI") increase of $61.2 million, attributable to the continued expansion of the single-family rental portfolio and strong rent growth.

•Revenue from strategic capital services of $25.9 million compared to $32.8 million in the prior year, for the reasons discussed above, partially offset by higher Johnson development fees from large commercial land bulk sales in the first quarter of 2023.

Non-IFRS measures on a proportionate basis

Core FFO for the second quarter of 2023 was $42.1 million, a decrease of $9.0 million or 18% compared to $51.0 million in the second quarter of 2022. The change was driven by higher borrowing costs incurred to support the expansion of the SFR portfolio, a loss of NOI and fee income from the disposition of the U.S. multi-family rental portfolio, lower acquisition fees associated with acquiring fewer SFR homes and lower performance fees. These items were partially offset by NOI growth in the SFR business and stronger results from U.S. residential developments. During the six months ended June 30, 2023, Core FFO decreased by $9.8 million or 10% to $84.2 million compared to $94.0 million in the prior period, for the reasons noted above.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


AFFO for the three and six months ended June 30, 2023 was $33.8 million and $66.8 million, respectively, a decrease of $7.0 million (17%) and $7.6 million (10%) from the same periods in the prior year. This change in AFFO was driven by the decrease in Core FFO discussed above, partially offset by lower recurring capital expenditures as a result of disciplined cost containment and scoping refinement when turning homes and the absence of recurring capital expenditures from the U.S. multi-family rental portfolio following its sale.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


3.    Consolidated financial results

The following section should be read in conjunction with the Company’s condensed interim financial statements and related notes for the for the three and six months ended June 30, 2023.

On October 18, 2022, the Company completed the sale of its remaining 20% equity interest in its U.S. multi-family rental portfolio that was held through Tricon US Multi-Family REIT LLC. Accordingly, the Company reclassified its prior-year results as discontinued operations separate from the Company’s continuing operations in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations ("IFRS 5").



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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


3.1    Review of income statements

Consolidated statements of income
For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)20232022Variance20232022Variance
Revenue from single-family rental properties
$197,457 $155,135 $42,322 $385,966 $293,923 $92,043 
Direct operating expenses
(65,002)(50,739)(14,263)(127,109)(96,254)(30,855)
Net operating income from single-family rental properties
132,455 104,396 28,059 258,857 197,669 61,188 
Revenue from strategic capital services
10,750 20,387 (9,637)25,871 32,798 (6,927)
Income from equity-accounted investments in multi-family rental properties(1)
202 170 32 350 330 20 
Income (loss) from equity-accounted investments in Canadian residential developments(2)
869 (98)967 292 (113)405 
Other income(3)
2,614 372 2,242 6,373 3,421 2,952 
Income from investments in U.S. residential developments(4)
7,322 3,002 4,320 13,355 7,307 6,048 
Compensation expense
(21,848)(22,737)889 (42,222)(50,989)8,767 
Performance fees expense
(692)(15,117)14,425 (537)(27,681)27,144 
General and administration expense
(22,202)(13,905)(8,297)(37,451)(26,780)(10,671)
Transaction costs
(949)(5,482)4,533 (7,997)(7,701)(296)
Interest expense
(79,374)(45,864)(33,510)(155,746)(82,718)(73,028)
Fair value gain on rental properties
123,752 395,835 (272,083)135,646 695,407 (559,761)
Fair value gain on Canadian development properties— 874 (874)— 874 (874)
Fair value (loss) gain on derivative financial instruments and other liabilities
(19,569)156,487 (176,056)(16,460)127,125 (143,585)
Amortization and depreciation expense
(4,280)(3,584)(696)(8,545)(6,991)(1,554)
Realized and unrealized foreign exchange gain
163 100 63 131 39 92 
Net change in fair value of limited partners’ interests in single-family rental business
(69,528)(112,003)42,475 (79,724)(204,235)124,511 
(83,520)338,050 (421,570)(192,535)427,295 (619,830)
Income before income taxes from continuing operations
$59,685 $462,833 $(403,148)$92,193 $657,762 $(565,569)
Income tax expense from continuing operations
(12,917)(57,229)44,312 (16,024)(102,034)86,010 
Net income from continuing operations
$46,768 $405,604 $(358,836)$76,169 $555,728 $(479,559)
Basic earnings per share attributable to shareholders of Tricon from continuing operations
0.17 1.47 (1.30)0.26 2.02 (1.76)
Diluted earnings per share attributable to shareholders of Tricon from continuing operations
0.16 0.82 (0.66)0.26 1.41 (1.15)
Net income from discontinued operations
— 11,256 (11,256)— 24,589 (24,589)
Basic earnings per share attributable to shareholders of Tricon from discontinued operations
— 0.04 (0.04)— 0.09 (0.09)
Diluted earnings per share attributable to shareholders of Tricon from discontinued operations
— 0.03 (0.03)— 0.08 (0.08)
Weighted average shares outstanding - basic273,787,761 274,598,588 (810,827)273,789,959 274,345,001 (555,042)
Weighted average shares outstanding - diluted(5)
275,565,254 311,913,232 (36,347,978)275,584,117 311,929,796 (36,345,679)
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


(1) Includes income from The Selby (Section 4.2.1).
(2) Includes income from The Taylor, Maple House (Block 8), Birch House (Block 10), Cherry House (Blocks 3/4/7), Oak House (Block 20), The Ivy, The Spoke (Symington), ROQ City (Queen & Ontario) and KT Housing Now (Section 4.2.2).
(3) Includes commercial rental income from The Shops of Summerhill (Section 4.2.2) along with other income generated from interest rate cap derivatives, partially offset by the inclusion of a net operating loss from non-core single-family rental homes, which were disposed of during the quarter.
(4) Reflects the net change in the fair values of the underlying investments in the build-to-rent and legacy for-sale housing businesses (Section 4.2.2).
(5) For the three and six months ended June 30, 2023, the exchangeable preferred units of Tricon PIPE LLC were anti-dilutive (2022 - dilutive). Refer to Note 20 to the Consolidated Financial Statements.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Revenue from single-family rental properties

The following table provides further details regarding revenue from single-family rental properties for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Rental revenue(1)
$186,788 $145,926 $40,862 $366,947 $276,605 $90,342 
Other revenue(1)
10,669 9,209 1,460 19,019 17,318 1,701 
Revenue from single-family rental properties
$197,457 $155,135 $42,322 $385,966 $293,923 $92,043 
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.

Revenue from single-family rental properties for the three months ended June 30, 2023 totaled $197.5 million, an increase of $42.3 million or 27.3% compared to $155.1 million for the same period in the prior year. The increase is attributable to:

•Growth of $40.9 million in rental revenue, driven by portfolio expansion of 10.0% (36,767 rental homes compared to 33,423), and a 7.3% year-over-year increase in average effective monthly rent per home ($1,792 compared to $1,670) attributable to the continued strong demand for single-family rental homes. This strong demand also contributed to a 1.0% increase in occupancy (95.6% compared to 94.6%) notwithstanding the acquisition of 805 vacant homes this quarter.

•An increase of $1.5 million in other revenue driven by portfolio expansion, as well as incremental ancillary revenue from the rollout of the Company's smart-home technology initiative (72% of single-family rental homes were smart-home enabled at June 30, 2023 compared to 61% at June 30, 2022), along with higher resident enrollment in the renters insurance program. These items were partially offset by lower late fees received as a result of improved collections of rental payments, as well as a heightened provision on resident recoveries to reflect actual collections rather than billed amounts (see Section 4.1).

Revenue from single-family rental properties for the six months ended June 30, 2023 totaled $386.0 million, an increase of $92.0 million or 31.3% compared to the prior year. This favorable variance was primarily driven by growth of the rental portfolio, an improvement in the average monthly rent, as well as higher other revenue for the reasons discussed above.

Direct operating expenses

The following table provides further details regarding direct operating expenses of the single-family rental portfolio for the three and six months ended June 30, 2023 and 2022.
For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)2023
2022
Variance2023
2022
Variance
Property taxes
$31,705 $24,017 $7,688 $63,232 $45,754 $17,478 
Repairs and maintenance
7,875 7,221 654 14,781 13,955 826 
Turnover
3,528 2,333 1,195 5,376 4,028 1,348 
Property management expenses
12,626 10,225 2,401 24,782 18,844 5,938 
Property insurance
1,812 1,835 (23)4,445 3,564 881 
Marketing and leasing
636 615 21 1,121 1,201 (80)
Homeowners' association (HOA) costs
3,549 2,072 1,477 6,570 3,903 2,667 
Other direct expense(1)
3,271 2,421 850 6,802 5,005 1,797 
Direct operating expenses
$65,002 $50,739 $14,263 $127,109 $96,254 $30,855 
(1) Other direct expense includes property utilities on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas and electricity are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



Direct operating expenses for the three months ended June 30, 2023 were $65.0 million, an increase of $14.3 million or 28.1% compared to the same period in the prior year. The variance is primarily attributable to:

•An increase of $7.7 million in property taxes driven by 10.0% growth in the size of the portfolio, as well as a higher property tax expense per home arising from significant year-over-year assessed home value appreciation and anticipated tax increases in Tricon's markets.

•An increase of $1.2 million in turnover expense primarily attributable to a higher annualized turnover rate (26.7% in the current period compared to 20.4% in the prior period for the total portfolio) on a larger portfolio of homes which led to an increased volume of work orders, partly offset by effective cost control through scope refinement and higher utilization of in-house maintenance personnel on turn projects.

•An increase of $2.4 million in property management expenses as a result of additional operations personnel hired to manage a growing rental portfolio and inflationary pressures reflecting a tighter labor market.

•An increase of $1.5 million in homeowners' association (HOA) costs driven by growth in the size of the portfolio, with more homes being situated in HOAs as well as increases in annual HOA dues. A heightened level of rule enforcement by HOAs became more prevalent as pandemic-era regulations eased, which also increased violation / penalty fees. This trend is expected to continue in the coming quarters.

•An increase of $0.9 million in other direct expense resulting from the additional costs of supplying access to smart-home technology in more homes and providing renters insurance to more residents (these costs are offset by higher revenue), as well as increased utility costs on vacant homes from higher rates and a growing portfolio.

Direct operating expenses for the six months ended June 30, 2023 were $127.1 million, an increase of $30.9 million or 32.1% compared to the prior year, primarily for the reasons described above.

Revenue from strategic capital services (previously reported as Revenue from private funds and advisory services)

The following table provides further details regarding revenue from strategic capital services for the three and six months ended June 30, 2023 and 2022, net of inter-segment revenues eliminated upon consolidation.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Asset management fees
$2,787 $3,075 $(288)$5,544 $6,202 $(658)
Performance fees
1,146 8,344 (7,198)3,708 9,087 (5,379)
Development fees
6,471 6,156 315 15,990 12,018 3,972 
Property management fees
346 2,812 (2,466)629 5,491 (4,862)
Revenue from strategic capital services
$10,750 $20,387 $(9,637)$25,871 $32,798 $(6,927)

Revenue from strategic capital services for the three months ended June 30, 2023 totaled $10.8 million, a decrease of $9.6 million from the same period in the prior year, mainly attributable to:

•A decrease of $7.2 million in performance fees earned from Tricon's legacy for-sale housing investments in its U.S. residential development portfolio. Performance fees are earned by the Company when third-party investors realize returns that exceed set targets or hurdles within the Investment Vehicles. As such, performance fees are generally episodic in nature and can fluctuate materially on a year-over-year basis.

•A decrease of $2.5 million in property management fees primarily related to the Company's sale of the U.S. multi-family rental portfolio in October 2022.

Revenue from strategic capital services for the six months ended June 30, 2023 totaled $25.9 million, a decrease of $6.9 million from the prior year, largely resulting from the same reasons discussed above, offset by a $4.0 million
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


increase in development fees from Johnson communities primarily driven by incentive fees earned on a large commercial land bulk sale in the first quarter of 2023.


Income (loss) from equity-accounted investments in Canadian residential developments

Equity-accounted investments in Canadian residential developments include joint ventures and equity holdings in development projects, namely The Taylor, Maple House (Block 8), Birch House (Block 10), Cherry House (Blocks 3/4/7), Oak House (Block 20), The Ivy, ROQ City (Queen & Ontario), The Spoke (Symington) and KT Housing Now. The James (Scrivener Square) and The Shops of Summerhill are accounted for as Canadian development properties. The income earned from The Shops of Summerhill is presented as other income.

The following table presents the income (loss) from equity-accounted investments in Canadian residential developments for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30
Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Income (loss) from equity-accounted investments in Canadian residential developments
$869 $(98)$967 $292 $(113)$405 

Income from equity-accounted investments in Canadian residential developments for the three months ended June 30, 2023 was $0.9 million, an increase of $1.0 million from the same period in the prior year. The increase is primarily attributable to fair value gains recognized at The Ivy and Maple House (Block 8) as a result of achieving key development milestones, offset by net operating losses incurred at The Taylor as the building continues its lease-up phase and approaches stabilization. In comparison, the loss in the prior period was driven by incidental operating losses during the pre-demolition phase of various projects across the portfolio.

Income from investments in Canadian residential developments for the six months ended June 30, 2023 was $0.3 million, which increased by $0.4 million compared to the prior year, for the same reasons described above.

Income from investments in U.S. residential developments

The following table presents income from investments in U.S. residential developments for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Income from investments in U.S. residential developments$7,322 $3,002 $4,320 $13,355 $7,307 $6,048 

Income from investments in U.S. residential developments for the three months ended June 30, 2023 was $7.3 million, a year-over-year increase of $4.3 million. The increase was largely reflective of strong demand for new housing following the economic uncertainty and rising interest rates which temporarily dampened housing demand in the prior year. Further, high mortgage rates have created a "lock in" effect which has reduced the availability of existing homes for sale and increased new home sales as a percentage of total home sales.

Income from investments in U.S. residential developments for the six months ended June 30, 2023 was $13.4 million, an increase of $6.0 million from the same period in the prior year. This year-over-year increase is attributable to the reasons mentioned above.

Management continues to monitor the macroeconomic factors that are fundamental to the for-sale housing market, including rising mortgage rates, which could impact consumer demand and pricing, development timelines as well as new for-sale housing supply.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



Compensation expense

The following table provides further details regarding compensation expense for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Salaries and benefitsA$13,965 $13,845 $120 $28,487 $27,869 $618 
Cash-based(1)
4,037 4,428 (391)6,166 11,362 (5,196)
Equity-based3,719 273 3,446 7,467 3,470 3,997 
Annual incentive plan ("AIP")B7,756 4,701 3,055 13,633 14,832 (1,199)
Cash-based127 4,091 (3,964)102 7,924 (7,822)
Equity-based— 100 (100)— 364 (364)
Long-term incentive plan ("LTIP")C127 4,191 (4,064)102 8,288 (8,186)
Total compensation expenseA+B+C$21,848 $22,737 $(889)$42,222 $50,989 $(8,767)
(1) The cash-based AIP figure for the six months ended June 30, 2022 includes one-time allocations for special awards.

Compensation expense for the three months ended June 30, 2023 was $21.8 million, a decrease of $0.9 million or 3.9% compared to the same period in the prior year. The variance is attributable to:

•A decrease of $4.1 million in LTIP expense, driven by a nominal increase in unrealized carried interest as a result of lower fair value gains of underlying Investment Vehicles compared to the prior period. In addition, the comparative period also included the accrual of performance fees payable related to the U.S. multi-family rental Investment Vehicle which was sold in October 2022.

•An offsetting increase of $3.1 million in AIP expense, primarily attributable to a $2.6 million increase in equity-based awards arising from the revaluation of the performance share units liability based on a higher price for the Company's common shares as at period-end. In the three months ended June 30, 2023, the Company's share price on the TSX increased by $1.07 per share, on a USD-converted basis, compared to a decrease of $5.77 per share in the comparative period. The current period expense also reflects a larger equity-based award pool for 2023.

Compensation expense for the six months ended June 30, 2023 was $42.2 million, a decrease of $8.8 million or 17.2% compared to the prior year, attributable to:

•A decrease of $8.2 million in LTIP expense, reflecting a lower cash-based LTIP expense of $7.8 million, for the same reasons noted above.

•A decrease of $1.2 million in AIP expense, driven by a $5.2 million reduction in cash-based awards reflecting special one-time allocations under the AIP in the prior period, as well as reduced planned cash-based award payments for 2023. The AIP accrued expense is typically finalized in the fourth quarter of each year. This decrease was partially offset by an increase in AIP equity-based expense of $4.0 million, which was driven by the same reasons noted above.

Performance fees expense

Performance fees expense reflects amounts that are expected to be paid to key management equity participants who have an equity interest in entities that earn performance fee revenue, whereas LTIP participants do not have said equity interests. In aggregate, cash-based LTIP expense and performance fees expense represent no more than 50% of the performance fees earned from each Investment Vehicle and both are paid to participants if and when the performance fees are in fact realized and paid.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


The following table presents performance fees expense for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Performance fees expense$692 $15,117 $(14,425)$537 $27,681 $(27,144)

Performance fees expense for the three months ended June 30, 2023 was $0.7 million, a decrease of $14.4 million compared to the same period of the prior year, driven by a nominal increase in unrealized carried interest as a result of lower fair value gains of underlying Investment Vehicles. In addition, the U.S. multi-family rental Investment Vehicle was disposed of in the fourth quarter of 2022, resulting in no related performance fees expense being incurred in the current period.

Performance fees expense for the six months ended June 30, 2023 was $0.5 million, a decrease of $27.1 million compared to the prior period, for the same reasons described above.

General and administration expense

The following table presents general and administration expense for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
General and administration expense$22,202 $13,905 $8,297 $37,451$26,780$10,671

General and administration expense for the three months ended June 30, 2023 was $22.2 million, an increase of $8.3 million compared to the same period in the prior year. The increase was primarily driven by $6.6 million of non-recurring costs related to consulting and IT services used to facilitate the major implementation of a new enterprise resource planning system to accommodate portfolio growth and optimize business processes.

General and administration expense for the six months ended June 30, 2023 was $37.5 million, an increase of $10.7 million compared to the prior year, driven by non-recurring costs as noted above as well as additional spending on the continued expansion of the Company's technology-enabled operating platform and increased travel expenses.

Interest expense

The following table provides details regarding interest expense for the three and six months ended June 30, 2023 and 2022 by borrowing type and nature.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Corporate borrowings$3,367 $1,624 $1,743 $3,595 $2,789 $806 
Property-level borrowings65,386 35,391 29,995 132,172 62,752 69,420 
Due to Affiliate4,246 4,246 — 8,491 8,532 (41)
Amortization of deferred financing costs, discounts and lease obligations6,375 4,603 1,772 11,488 8,645 2,843 
Total interest expense$79,374 $45,864 $33,510 $155,746 $82,718 $73,028 
Weighted average interest rate(1)
4.39 %2.84 %1.55 %
(1) The weighted average effective interest rates are calculated based on the average debt balances and the average applicable reference rates for the six months ended June 30, 2023.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Interest expense was $79.4 million for the three months ended June 30, 2023, an increase of $33.5 million compared to $45.9 million for the same period last year. The variance is primarily attributable to an increase of $30.0 million in interest expense on property-level borrowings. This increase was driven by incremental net debt of $0.7 billion incurred to support the expansion of the single-family rental portfolio and an increase of 1.58% in the weighted average interest rate (in Q2 2023 vs. in Q2 2022) resulting from higher benchmark interest rates.

Interest expense was $155.7 million for the six months ended June 30, 2023, an increase of $73.0 million compared to $82.7 million in the prior period. The variance is primarily attributable to the year-over-year increase in property-level borrowings and the increased interest rates, as discussed above.

Fair value gain on rental properties

The following table presents the fair value gain on rental properties held by the Company for the three and six months ended June 30, 2023 and 2022.
For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Fair value gain on rental properties
$123,752 $395,835 $(272,083)$135,646 $695,407 $(559,761)

Fair value gain on single-family rental properties was $123.8 million for the three months ended June 30, 2023, compared to $395.8 million for the same period last year. For the six months ended June 30, 2023, the fair value gain totaled $135.6 million, compared to $695.4 million from the prior year. The fair value of single-family rental homes is determined based on comparable sales, primarily by using the adjusted Home Price Index (“HPI”) methodology and periodically Broker Price Opinions (“BPOs”), where applicable. Refer to Note 4 in the condensed interim consolidated financial statements for further details.

Home values in the U.S. Sun Belt markets have increased over the past several years driven by a number of factors, including strong population and job growth, an acceleration of migration trends driven by the pandemic, historically low mortgage rates during 2020 and 2021, and an overall shortage of new housing supply. However, higher mortgage rates and rising economic uncertainty beginning in the second half of 2022 led to a deceleration in home price growth and in some cases, a decline in certain markets over the course of 2022 and into 2023. While home prices in Tricon's markets have improved in more recent months, mainly as a result of improved consumer confidence and a continued shortage of housing supply, the pace of home price appreciation remains well below that in the comparative period. Adjusted HPI growth in the quarter was 1.3% (5.2% annualized), net of capital expenditures, compared to 5.6% (22.4% annualized) in the same period in the prior year, driving lower fair value gains in the current period.

Fair value (loss) gain on derivative financial instruments and other liabilities

The following table presents the fair value (loss) gain on derivative financial instruments and other liabilities for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Fair value (loss) gain on derivative financial instruments and other liabilities
$(19,569)$156,487 $(176,056)$(16,460)$127,125 $(143,585)

For the three months ended June 30, 2023, the fair value adjustment on derivative financial instruments and other liabilities changed by $176.1 million to a loss of $19.6 million compared to a gain of $156.5 million in the same period in the prior year. The fair value loss on derivative financial instruments in the second quarter was primarily driven by a $16.4 million loss on the exchange and redemption options associated with the preferred units issued by Tricon PIPE LLC. An increase in Tricon's share price, on a USD-converted basis, served to increase the probability of exchange of preferred units of Tricon PIPE LLC into Tricon common shares. The remaining fair value loss recorded in the quarter was attributed to a decrease of $3.2 million (2022 - $1.6 million gain) on the Company's interest rate caps derivative, driven by the expiration of the JV-HD cap and the lower time value of other interest rate
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


caps. As most of the Company's interest rate caps have a remaining term of one year or less, the cap instruments decreased in value as they approach maturity.

For the six months ended June 30, 2023, the fair value loss on derivative financial instruments and other liabilities increased by $143.6 million to $16.5 million compared to a $127.1 million gain in the same period in the prior year, for the same reasons discussed above.

Net change in fair value of limited partners’ interests in single-family rental business

Limited partner ownership interests in the Company's single-family rental joint ventures, "SFR JV-1", "SFR JV-HD" and "SFR JV-2", are in the form of non-controlling limited partnership interests which are classified as liabilities under the provisions of IFRS. The following table presents the net change in fair value of limited partners' interests in the single-family rental business for the three and six months ended June 30, 2023 and 2022.
For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Net change in fair value of limited partners’ interests in single-family rental business$(69,528)$(112,003)$42,475 $(79,724)$(204,235)$124,511 

For the three months ended June 30, 2023, the change in fair value of limited partners' interests in the single-family rental business was $69.5 million compared to $112.0 million for the same period in the prior year, representing a decrease of $42.5 million. This decrease primarily reflects a $40.3 million decline in the fair value gain attributed to the limited partners' interests during the period and a $20.2 million increase in interest and other expenses, partially offset by an $18.0 million increase in NOI.
For the six months ended June 30, 2023, the change in fair value of limited partners' interests in the single-family rental business was $79.7 million compared to $204.2 million for the same period in the prior year, representing a decrease of $124.5 million. The factors driving this change are consistent with those discussed above.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Income tax expense from continuing operations

The following table provides details regarding income tax expense from continuing operations for the three and six months ended June 30, 2023 and 2022.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Income tax expense - current
$(782)$(1,104)$322 $(1,900)$(1,566)$(334)
Income tax expense - deferred(1)
(12,135)(56,125)43,990 (14,124)(100,468)86,344 
Income tax expense from continuing operations
$(12,917)$(57,229)$44,312 $(16,024)$(102,034)$86,010 
(1) Deferred income tax expense for the three and six months ended June 30, 2022 has been adjusted to conform with the current period presentation as a result of the reclassification of prior-year results of the U.S. multi-family rental investment as discontinued operations separate from the Company's continued operations in accordance with IFRS 5.

For the three months ended June 30, 2023, income tax expense from continuing operations was $12.9 million, compared to $57.2 million of income tax expense in the same period in the prior year. This variance was primarily driven by significantly higher fair value gains recognized on single-family rental properties in the comparative period, which led to a much higher deferred income tax expense.

For the six months ended June 30, 2023, income tax expense from continuing operations was $16.0 million, a decrease of $86.0 million compared to $102.0 million in the prior year, driven by the decrease in the deferred tax expense for the reason noted above.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


3.2    Review of selected balance sheet items
As at
(in thousands of U.S. dollars)
June 30, 2023December 31, 2022
Assets
Non-current assets
Rental properties$11,933,335 $11,445,659 
Equity-accounted investments in multi-family rental properties21,422 20,769 
Equity-accounted investments in Canadian residential developments116,052 106,538 
Canadian development properties157,597 136,413 
Investments in U.S. residential developments145,690 138,369 
Restricted cash161,485 117,300 
Goodwill29,726 29,726 
Deferred income tax assets75,080 75,062 
Intangible assets6,081 7,093 
Other assets101,866 96,852 
Derivative financial instruments7,853 10,358 
Total non-current assets12,756,187 12,184,139 
Current assets
Cash120,387 204,303 
Amounts receivable25,333 24,984 
Prepaid expenses and deposits32,262 37,520 
Total current assets177,982 266,807 
Total assets$12,934,169 $12,450,946 
Liabilities
Non-current liabilities
Long-term debt$5,025,984 $4,971,049 
Due to Affiliate259,563 256,824 
Derivative financial instruments60,139 51,158 
Deferred income tax liabilities606,716 591,713 
Limited partners' interests in single-family rental business2,000,803 1,696,872 
Long-term incentive plan24,139 25,244 
Performance fees liability40,319 39,893 
Other liabilities28,988 30,035 
Total non-current liabilities8,046,651 7,662,788 
Current liabilities
Amounts payable and accrued liabilities153,622 138,273 
Resident security deposits77,993 79,864 
Dividends payable15,823 15,861 
Current portion of long-term debt801,561 757,135 
Total current liabilities1,048,999 991,133 
Total liabilities9,095,650 8,653,921 
Equity
Share capital2,120,518 2,124,618 
Contributed surplus24,352 21,354 
Cumulative translation adjustment11,845 6,209 
Retained earnings1,677,091 1,638,068 
Total shareholders' equity3,833,806 3,790,249 
Non-controlling interest4,713 6,776 
Total equity3,838,519 3,797,025 
Total liabilities and equity$12,934,169 $12,450,946 

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Rental properties

The table below presents the changes in the fair value of rental properties by business segment for the six months ended June 30, 2023 and the year ended December 31, 2022.

(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance
$11,445,659 $7,978,396 
Acquisitions
363,652 2,362,185 
Capital expenditures
90,062 326,460 
Fair value adjustments
135,646 858,987 
Dispositions
(101,684)(80,369)
Balance, end of period
$11,933,335 $11,445,659 

Rental properties increased by $0.5 billion to $11.9 billion as at June 30, 2023, from $11.4 billion as at December 31, 2022. The increase was driven by:

•Acquisition of 1,214 single-family rental homes for $363.7 million, partially offset by the disposition of 358 homes as part of Tricon's normal-course disposition program of non-core homes; these homes had an aggregate carrying value of $101.7 million at the time of disposition.

•Capital expenditures of $90.1 million, of which $48.6 million was attributable to the initial renovation of recently acquired single-family homes, and the remainder to capital improvement activities during turns.

•Fair value gain of $135.6 million on the single-family rental portfolio, driven by strong demand for single-family rental homes, as previously discussed, combined with limited new and resale housing supply in the Company's Sun Belt markets. While home prices in Tricon's markets were relatively flat from December 2022 through February 2023, prices have subsequently improved.

Canadian development properties

The table below presents the change in Canadian development properties, which are comprised of The James (Scrivener Square) and The Shops of Summerhill, for the six months ended June 30, 2023 and the year ended December 31, 2022.
(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance$136,413 $133,250 
Development expenditures17,698 12,686 
Fair value adjustments— (440)
Translation adjustment3,486 (9,083)
Balance, end of period
$157,597 $136,413 

Canadian development properties increased by $21.2 million to $157.6 million as at June 30, 2023 compared to $136.4 million as at December 31, 2022. The increase was primarily driven by $17.7 million of development expenditures attributable to the ongoing construction of The James.

Investments in U.S. residential developments

The table below presents the change in investments in U.S. residential developments for the six months ended June 30, 2023 and the year ended December 31, 2022.

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(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance$138,369 $143,153 
Advances
3,044 15,655 
Distributions(9,078)(37,336)
Income from investments in U.S. residential developments
13,355 16,897 
Balance, end of period
$145,690 $138,369 

Investments in U.S. residential developments increased by $7.3 million to $145.7 million as at June 30, 2023 compared to $138.4 million as at December 31, 2022. The increase was driven by $13.4 million of investment income from legacy for-sale housing investments driven by continuing solid housing demand fundamentals and advances of $3.0 million to the Company's build-to-rent Investment Vehicles as communities within these vehicles continue through their early stages of development. This was partially offset by distributions of $9.1 million from maturing assets within the legacy for-sale housing portfolio.

Equity-accounted investments in Canadian residential developments

The table below presents the change in equity-accounted investments in Canadian residential developments for the six months ended June 30, 2023 and the year ended December 31, 2022.

(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance$106,538 $98,675 
Advances6,666 13,360 
Distributions— (10,212)
Income from equity-accounted investments in Canadian residential developments292 11,198 
Translation adjustment2,556 (6,483)
Balance, end of period
$116,052 $106,538 
Equity-accounted investments in Canadian residential developments increased by $9.5 million to $116.1 million as at June 30, 2023 compared to $106.5 million as at December 31, 2022. The increase was primarily attributable to advances of $6.7 million to finance development activities across the portfolio and a favorable foreign exchange translation adjustment of $2.6 million.

Debt

The following table summarizes the consolidated net debt position of the Company.
As at
(in thousands of U.S. dollars)
June 30, 2023December 31, 2022Variance
Single-family rental properties borrowings$5,662,472 $5,744,425 $(81,953)
Canadian development properties borrowings38,963 21,095 17,868 
Corporate borrowings170,785 12,717 158,068 
$5,872,220 $5,778,237 $93,983 
Transaction costs (net of amortization)(44,249)(49,404)5,155 
Debt discount (net of amortization)(426)(649)223 
Total debt per balance sheet(1)
$5,827,545 $5,728,184 $99,361 
Cash and restricted cash(281,872)(321,603)39,731 
Net debt(2)
$5,545,673 $5,406,581 $139,092 
(1) Excludes Due to Affiliate.
(2) Non-IFRS measure; see “Non-IFRS measures” on page 1 and Section 6.

Net debt increased by $0.1 billion to $5.5 billion as at June 30, 2023, from $5.4 billion as at December 31, 2022. The variance was primarily attributable to:

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


•An increase in corporate borrowings of $158.1 million and a decrease in cash and restricted cash of $39.7 million, which were primarily attributable to debt repayments of $82.0 million to achieve lower leverage on certain Investment Vehicles, acquisitions of single-family rental homes of approximately $68.0 million and property tax payments of $45.0 million during the first two quarters of 2023.

•An increase of $17.9 million in Canadian development properties borrowings as construction activities for The James (Scrivener Square) increased during the first half of the year.

•An offsetting decrease of $82.0 million in single-family rental properties borrowings, driven primarily by the debt repayments noted above.

The weighted average interest rate applicable to debt owed by the Company as at June 30, 2023 was 4.39%. The following table summarizes the debt structure and leverage position as at June 30, 2023:
(in thousands of U.S. dollars)
Debt structureBalance% of total
Weighted average interest rate(1)
Weighted average time to maturity (years)
Fixed$4,008,995 68.3 %3.55 %3.34
Floating 1,863,225 31.7 %6.13 %2.13
Total/Weighted average$5,872,220 100.0 %4.39 %2.96
(1) The weighted average effective interest rates as shown in the table above were based on average debt balances for the period ended June 30, 2023. The weighted average effective interest rates based on consolidated outstanding debt balances as at June 30, 2023 were 3.62% and 6.20% for fixed-rate debt and floating-rate debt, respectively.

During the second quarter, the outstanding JV-HD subscription line facility was fully repaid with investor equity. In addition, on May 11, 2023, the Company amended its SFR JV-HD warehouse facility agreement to decrease the commitment value by $140.0 million to $350.0 million and increase the SOFR interest rate cap from 2.60% to 2.85%.

As at June 30, 2023, Tricon's near-term debt maturities included the JV-2 subscription facility of $263.0 million, which was repaid in full subsequent to quarter-end with investor equity, and a term loan of $209.5 million pertaining to the wholly-owned single-family rental portfolio. On July 27, 2023, the Company extended the maturity of the term loan by six months to April 2024 (with the option to extend for another six months to October 2024) and amended the agreement to increase the commitment value by $100.0 million to $309.5 million. The coupon rate remains unchanged.

Tricon's debt maturities as at June 30, 2023 are presented below, assuming the exercise of all extension options.
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* Reflects the maturity dates after all extensions have been exercised. The Company is currently in the process of exercising extension options, where appropriate, on all near-term maturing loans.

3.3    Subsequent events

SFR securitization transaction

On July 11, 2023, Tricon closed a new securitization involving the issuance and sale of five classes of fixed-rate pass-through certificates with a face amount of approximately $416 million, a weighted average yield of approximately 5.86%and a term to maturity of approximately five years, secured indirectly by a pool of 2,116 single-family rental homes within SFR JV-2. The transaction proceeds were primarily used to pay down the existing short-term SFR JV-2 variable-rate debt.

Quarterly dividend

On August 8, 2023, the Board of Directors of the Company declared a dividend of $0.058 per common share in U.S. dollars payable on or after October 15, 2023 to shareholders of record on September 30, 2023.





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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


4.    Operating results of businesses

Management believes that information concerning the underlying activities within each of the Company’s operating businesses is useful for investors in understanding the Company’s overall performance, and this section presents key operating highlights for the quarter and for the year on a business-by-business basis. Management monitors the underlying activities within those businesses using non-IFRS measures and Key Performance Indicators ("KPIs"). A list of these measures and KPIs, together with a description of the information each measure reflects and the reasons why management believes the measure to be useful or relevant in evaluating the underlying performance of the Company’s businesses, is set out in Section 6. The supplemental measures presented herein are not recognized under IFRS and should not be construed as alternatives to net income determined in accordance with IFRS as indicators of Tricon’s financial performance. Tricon’s method of calculating these measures may differ from other issuers’ methods and, accordingly, these measures may not be comparable to similar measures presented by other publicly-traded entities.

The financial results and performance metrics in Section 4 and where indicated throughout this document reflect Tricon’s proportionate results, unless otherwise stated, as described in Section 6. Refer to “Non-IFRS measures” on page 1 and to Appendix A for IFRS reconciliations of financial information. The number of rental homes, properties or units quoted in Section 4 are presented in aggregate.

4.1    Single-Family Rental

Business update

The Company's single-family rental business continued to benefit from favorable demographic shifts driven by new household formation as well as population, job and wage growth in U.S. Sun Belt markets. Meanwhile, an imbalance continues to persist between the demand for affordable single-family homes, both for homebuyers and renters, and the supply of new construction. This imbalance, coupled with inflationary cost pressures, and higher mortgage rates which have dramatically increased the cost of owning versus the cost of renting, has made homeownership less attainable and increased demand for rental homes. Tricon’s relatively affordable single-family rental homes provide a much-needed alternative for those seeking the benefits of a home without the added cost of ownership.

These dynamics contributed to the Company's continued strong operating performance, including same home occupancy of 97.5%, same home resident turnover of 19.2% and same home blended rent growth of 7.4% during the quarter (comprised of 9.8% growth on new move-ins as well as 6.6% growth on renewals). The demand for Tricon's rental homes (as measured by leads per available home) remains above pre-pandemic and prior-year levels; however, the rent growth on new move-ins has normalized towards pre-pandemic levels as a result of resident turnover skewing towards residents with shorter tenure. The Company continues to balance market rent growth appreciation and its embedded portfolio loss-to-lease with its continued efforts to self-govern and moderate rent growth for existing residents as a key component of its Single-Family Resident Bill of Rights and ESG strategy.

Acquisitions and dispositions update

In response to strong resident demand, the Company acquired 805 homes (247 wholly-owned homes for $81.3 million and 558 homes owned through joint ventures for $181.4 million) during the quarter at an average cost of $326,000 per home, including closing costs and up-front renovations, for a total acquisition cost of $263 million (of which Tricon's proportionate share was approximately $137 million). The average acquisition cost per home of $326,000 increased by 2.5% sequentially from $318,000 in Q1 2023, driven by continued scarcity in the supply of homes. Year-over-year, the average acquisition cost per home decreased by 10.4% from $364,000 in Q2 2022. The decrease was partly due to home prices moderating amidst rising mortgage rates and partly due to Tricon generally buying homes at a discount to list price to achieve a higher blended cap rate at or above the cost of long-term financing.

While the supply of available homes continues to increase in line with seasonal trends, Tricon plans to reduce its acquisition pace to ~400 homes in each of the third and fourth quarters with the aim of completing the investment program for SFR JV-2 and JV-HD with lower leverage than previously anticipated (see "Forward-looking statements" on page 1). During the quarter, Tricon also disposed of 201 homes (193 wholly-owned homes for $67.7
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million and eight homes owned through joint ventures for $2.4 million) for a total of $70.1 million as part of its normal-course disposition program for non-core homes. Tricon's proportionate share of dispositions was approximately $68 million. The homes were typically sold via the retail home-sale channel, at an average price of $349,000 per home, in line with their IFRS fair value. Tricon expects to continue disposing of non-core homes as a means of recycling capital towards acquisition of newer homes in its core markets.

For the six months ended June 30, 2023, the Company acquired 1,214 homes at an average cost of $323,000 per home, including closing costs and up-front renovations, for a total acquisition cost of $393 million (of which Tricon's proportionate share was approximately $177 million). For the six months ended June 30, 2023, Tricon disposed of 358 homes at an average price of $328,000 per home.

OPERATING RESULTS – PROPORTIONATE TOTAL PORTFOLIO

For the periods ended June 30Three monthsSix months
(in U.S. dollars)20232022Variance20232022Variance
Operating metrics(1)
Tricon wholly-owned rental homes14,637 15,034 (397)14,637 15,034 (397)
SFR JV homes 22,130 18,389 3,741 22,130 18,389 3,741 
Rental homes(2)
36,767 33,423 3,344 36,767 33,423 3,344 
Occupancy95.6 %94.6 %1.0 %95.3 %93.5 %1.8 %
Average monthly rent$1,792 $1,670 $122 $1,780 $1,653 $127 
(1) The operating metrics reflect Tricon's proportionate share of the total portfolio, other than the number of rental homes which is presented in aggregate. The occupancy and average monthly rent are KPIs and are defined in Section 6.
(2) Tricon's proportionate share of rental homes for the period ended June 30, 2023 was 21,656 (2022 - 20,910).

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)2023
2022
Variance% Variance2023
2022
Variance% Variance
Rental revenue(1)
$107,981 $94,356 $13,625 14.4 %$213,754 $183,960 $29,794 16.2 %
Other revenue(1)
5,330 5,496 (166)(3.0 %)10,427 10,451 (24)(0.2 %)
Total revenue from rental properties
113,311 99,852 13,459 13.5 %224,181 194,411 29,770 15.3 %
Property taxes
18,066 15,743 2,323 14.8 %36,433 30,689 5,744 18.7 %
Repairs and maintenance
4,286 4,795 (509)(10.6 %)9,052 9,976 (924)(9.3 %)
Turnover
1,581 1,312 269 20.5 %2,542 2,373 169 7.1 %
Property management expenses
6,858 6,543 315 4.8 %13,774 12,372 1,402 11.3 %
Property insurance
1,350 1,291 59 4.6 %2,834 2,579 255 9.9 %
Marketing and leasing
319 303 16 5.3 %588 568 20 3.5 %
Homeowners' association (HOA) costs
1,879 1,238 641 51.8 %3,557 2,435 1,122 46.1 %
Other direct expenses(2)
1,774 1,440 334 23.2 %3,601 2,941 660 22.4 %
Total direct operating expenses
36,113 32,665 3,448 10.6 %72,381 63,933 8,448 13.2 %
Net operating income (NOI)(3)
$77,198 $67,187 $10,011 14.9 %$151,800 $130,478 $21,322 16.3 %
Net operating income (NOI) margin(3)
68.1 %67.3 %67.7 %67.1 %
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.
(2) Other direct expenses include property utilities on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas, and electricity are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.
(3) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.
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Total portfolio NOI increased by $10.0 million or 14.9% to $77.2 million in the second quarter of 2023 compared to $67.2 million in the second quarter of 2022, as revenue expansion outpaced expense growth.

Rental revenue increased by $13.6 million or 14.4% during the quarter, driven primarily by a 7.3% increase in the average monthly rent ($1,792 in Q2 2023 vs. $1,670 in Q2 2022), a 1.0% increase in occupancy (95.6% in Q2 2023 vs. 94.6% in Q2 2022) and 3.6% portfolio growth (Tricon’s proportionate share of rental homes was 21,656 in Q2 2023 compared to 20,910 in Q2 2022).

Direct operating expenses increased by $3.4 million or 10.6% during the quarter, reflecting incremental costs incurred on a larger portfolio of homes, higher property taxes attributable to home price appreciation, and increased homeowners' association (HOA) costs reflecting higher dues and heightened enforcement of HOA rules. Other direct expenses also contributed to the variance, reflecting higher costs of providing smart-home technology to residents and increased utility costs driven by higher rates. These increases were partially offset by a decrease in repairs and maintenance expense as a result of the Company's focus on cost containment.

OPERATING RESULTS – PROPORTIONATE SAME HOME PORTFOLIO

The same home portfolio includes homes that have been stabilized since September 30, 2021 as per the NAREIT guidelines (see Section 6).

For the same home portfolio, blended rent growth for the quarter was 7.4% (including 9.8% on new leases and 6.6% on renewals), accompanied by a 0.5% decrease in occupancy to 97.5% from 98.0% recorded in the comparative period. While management expects the pace of rent growth to decelerate over time, the continued supply-demand imbalance, along with embedded portfolio loss-to-lease (estimated by management to be approximately 15% of market rents), is expected to drive healthy rent growth for the next few quarters (see “Forward-looking statements” on page 1). The Company's continued focus on resident retention has resulted in maintaining relatively low annualized turnover of 19.2% compared to 18.9% in the same period of the prior year. These KPIs are defined in Section 6.
For the periods ended June 30Three monthsSix months
(in U.S. dollars)20232022Variance20232022Variance
Operating metrics - same home(1)
Tricon wholly-owned rental homes12,777 12,777 — 12,777 12,777 — 
SFR JV homes 9,001 9,001 — 9,001 9,001 — 
Rental homes21,778 21,778 — 21,778 21,778 — 
Occupancy97.5 %98.0 %(0.5 %)97.4 %97.9 %(0.5 %)
Annualized turnover rate19.2 %18.9 %0.3 %17.7 %17.5 %0.2 %
Average monthly rent$1,733 $1,624 $109 $1,720 $1,607 $113 
Average rent growth - renewal6.6 %6.3 %0.3 %6.6 %6.3 %0.3 %
Average rent growth - new move-in9.8 %18.0 %(8.2 %)10.0 %17.8 %(7.8 %)
Average rent growth - blended7.4 %8.4 %(1.0 %)7.3 %8.4 %(1.1 %)
(1) The operating metrics reflect Tricon's proportionate share of the same home portfolio, other than the total number of homes comprising the same home portfolio which is presented in aggregate.

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For the three months ended June 30
(in thousands of U.S. dollars)2023% of revenue2022% of revenueVariance% Variance
Rental revenue(1)
$78,770$73,415$5,355 7.3 %
Other revenue(1)
3,3363,618(282)(7.8 %)
Total revenue from rental properties
$82,106100.0 %$77,033100.0 %$5,073 6.6 %
Property taxes
13,30016.2 %12,10715.7 %1,193 9.9 %
Repairs and maintenance
3,6224.4 %3,7704.9 %(148)(3.9 %)
Turnover
1,0131.2 %1,1221.5 %(109)(9.7 %)
Property management expenses
4,6135.6 %4,3815.7 %232 5.3 %
Property insurance
9841.2 %8781.1 %106 12.1 %
Marketing and leasing
1380.2 %1050.1 %33 31.4 %
Homeowners' association (HOA) costs
1,2831.6 %9411.2 %342 36.3 %
Other direct expenses(2)
1,1251.4 %1,0251.3 %100 9.8 %
Total direct operating expenses
26,07824,3291,749 7.2 %
Net operating income (NOI)(3)
$56,028 $52,704$3,324 6.3 %
Net operating income (NOI) margin(3)
68.2 %68.4%
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.
(2) Other direct expenses include property utilities on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas and electricity are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.
(3) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

For the six months ended June 30
(in thousands of U.S. dollars)2023% of revenue2022% of revenueVariance% Variance
Rental revenue(1)
$155,896 $146,335 $9,561 6.5 %
Other revenue(1)
6,352 7,145 (793)(11.1 %)
Total revenue from rental properties
$162,248 100.0 %$153,480 100.0 %$8,768 5.7 %
Property taxes
26,291 16.2 %23,920 15.6 %2,371 9.9 %
Repairs and maintenance
6,818 4.2 %7,772 5.1 %(954)(12.3 %)
Turnover
1,676 1.0 %2,078 1.4 %(402)(19.3 %)
Property management expenses
8,907 5.5 %8,649 5.6 %258 3.0 %
Property insurance
1,965 1.2 %1,765 1.1 %200 11.3 %
Marketing and leasing
260 0.2 %211 0.1 %49 23.2 %
Homeowners' association (HOA) costs
2,384 1.5 %1,909 1.2 %475 24.9 %
Other direct expenses(2)
2,251 1.4 %1,996 1.3 %255 12.8 %
Total direct operating expenses
50,552 48,300 2,252 4.7 %
Net operating income (NOI)(3)
$111,696 $105,180 $6,516 6.2 %
Net operating income (NOI) margin(3)
68.8 %68.5 %
(1) All rental and other revenue is reflected net of bad debt. The Company has reserved 100% of residents’ accounts receivable balances aged more than 30 days, less the amount of residents' security deposits on hand.
(2) Other direct expenses include property utilities on vacant homes and other property operating costs associated with ancillary revenue offerings. Utility expenses including water, sewer, waste, gas and electricity are borne by the resident when a home is occupied; such expenses are only incurred by Tricon when a home is vacant or is being turned.
(3) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

Total revenue for the same home portfolio increased by $5.1 million or 6.6% to $82.1 million in the second quarter of 2023 compared to $77.0 million for the same period in the prior year. This favorable change was primarily attributable to the following:

•Rental revenue – Rental revenue was $78.8 million compared to $73.4 million in the comparative period, representing an increase of 7.3%. This favorable variance was primarily attributable to an increase of 6.7% in the average monthly rent per occupied home ($1,733 in Q2 2023 compared to $1,624 in Q2 2022),
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partially offset by a 0.5% decrease in occupancy from 98.0% to 97.5%. In addition, rental revenue in the current period benefited from the Company's successful collection efforts, which reduced bad debt expense to 0.9% of revenue compared to 1.8% in the comparative period.

•Other revenue – Other revenue was $3.3 million compared to $3.6 million in the second quarter of 2022, a decrease of 7.8%. This decrease was attributable to lower late fees driven by improved collections on regular rental payments as discussed above. The lower ancillary fee income was further reduced by a heightened provision on resident recoveries to reflect the actual collections rather than billed amounts. This overall decrease in other fee income was partially offset by higher resident enrollment in the Company's renters insurance program and higher fees earned from smart-home offerings intended to enhance the resident experience, including keyless access, smart thermostats, and a suite of in-home sensors (approximately 59% of same home properties or 12,848 homes were smart-home enabled in the current quarter compared to 49% or 10,757 homes in the same period in the prior year).

Same home operating expenses increased by $1.7 million or 7.2% to $26.1 million in the second quarter of 2023 from $24.3 million during the same period in 2022. The variance is largely attributable to the following:

•Property taxes – Property taxes were $13.3 million compared to $12.1 million in the comparative period, an increase of 9.9%, reflecting significantly higher year-over-year home value assessments as well as lower property taxes being accrued in the comparative period. The current period's tax accrual was based on 2022 assessments, calibrated for anticipated changes in property assessed values, as well as expected millage rates. Tricon continues to work with a property tax consultant to monitor tax assessments and appeal them where appropriate.

•Repairs and maintenance – Repairs and maintenance expense was $3.6 million compared to $3.8 million in the comparative period, a decrease of 3.9%. This favorable change was attributable to the Company's focus on cost management, which was evidenced by refining and managing work scopes as well as undertaking a higher number of work orders in-house, both of which led to the overall decrease in expense.

•Turnover – Turnover expense was $1.0 million compared to $1.1 million in the comparative period, a decrease of 9.7%. This favorable variance was attributable to the Company's continued focus on cost containment to offset inflationary cost pressures on labor, materials and external vendor spend.

•Property management expenses - Property management expenses were $4.6 million compared to $4.4 million in the comparative period, an increase of 5.3%. This increase was driven by higher property management personnel costs reflecting a tight labor market.

•Homeowners' association ("HOA") costs – Homeowners' association costs were $1.3 million compared to $0.9 million in the comparative period, an increase of 36.3%. The rise in HOA expense was driven by increases in annual HOA dues and a heightened level of rule enforcement by HOAs as pandemic-era regulations eased, which also increased violation / penalty fees. This trend is expected to continue in the coming quarters.

•Other direct expenses – Other direct expenses were $1.1 million compared to $1.0 million in the comparative period, an increase of 9.8%. This is primarily driven by the additional costs of providing smart-home technology to more residents as discussed above, as well as increased utility costs from higher rates and vacancy compared to the prior-year period.

Same home NOI increased by 6.3% to $56.0 million in the second quarter of 2023 compared to $52.7 million in the second quarter of 2022. Same home NOI margin decreased slightly to 68.2% from 68.4% in the same period in the prior year as year-over-year revenue growth was offset by higher expense growth, mainly in property tax, HOA costs and other direct expenses as discussed above.
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4.2    Adjacent residential businesses

4.2.1    Multi-Family Rental

Tricon's multi-family rental business segment includes one Class A high-rise property in downtown Toronto known as The Selby. There are ten other properties in downtown Toronto that are currently under development or lease-up and are discussed in Section 4.2.2.

The Selby

Rental market conditions continued to be strong in downtown Toronto in the second quarter of 2023 buoyed by supportive demand fundamentals. Occupancy and annualized turnover at The Selby remained stable at 97.8% and 32.0%, respectively. Blended rent growth moderated to 7.0% during the quarter, in part driven by a continuing reduction in the number of leases being renewed that had low pandemic-era rents or lease incentives in place. Overall leasing activity remains steady and new-lease rent growth remains robust.

The Selby generated net operating income for the quarter of C$0.4 million, an increase of 5.2% compared to the same period in the prior year.

For the periods ended June 30Three monthsSix months
(in Canadian dollars)20232022Variance20232022Variance
Number of properties1 1 — 1 1 — 
Number of units500 500 — 500 500 — 
Occupancy97.8 %98.0 %(0.2 %)97.6 %98.0 %(0.4 %)
Annualized turnover rate32.0 %32.0 %— %27.2 %27.6 %(0.4 %)
Average monthly rent$2,760 $2,505 $255 $2,739 $2,472 $267 
Average rent growth - renewal5.5 %14.7 %(9.2 %)5.5 %14.2 %(8.7 %)
Average rent growth - new move-in9.9 %15.4 %(5.5 %)9.8 %11.3 %(1.5 %)
Average rent growth - blended7.0 %15.1 %(8.1 %)6.8 %12.9 %(6.1 %)

For the three months ended June 30
(in thousands of Canadian dollars, unless otherwise indicated)20232022Variance% Variance
Total revenue from rental properties
$651 $613 $38 6.2 %
Total direct operating expenses
244 226 18 8.0 %
Net operating income (NOI)(1),(2)
$407 $387 $20 5.2 %
Net operating income (NOI) margin(2)
62.5 %63.1 %
Net operating income (NOI)(1),(2)
US$303 US$303 US$— — %
For the six months ended June 30
(in thousands of Canadian dollars, unless otherwise indicated)20232022Variance% Variance
Total revenue from rental properties
$1,286 $1,199 $87 7.3 %
Total direct operating expenses
477 449 28 6.2 %
Net operating income (NOI)(1),(2)
$809 $750 $59 7.9 %
Net operating income (NOI) margin(2)
62.9 %62.6 %
Net operating income (NOI)(1),(2)
US$600 US$590 US$10 1.7 %
(1) All dollar amounts in this table represent Tricon's 15% share of the operating results.
(2) Non-IFRS measures; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



4.2.2    Residential Development

Tricon's residential development business segment currently includes (i) new Class A multi-family rental apartments in Canada that are in the development and construction stages and one income-producing property that is not yet stabilized, (ii) build-to-rent, dedicated single-family rental communities in the United States with the intention to operate as part of the single-family rental portfolio upon stabilization, and (iii) legacy investments in for-sale housing development projects predominantly in the United States.

As at
(in thousands of U.S. dollars)
June 30, 2023December 31, 2022
Canadian residential developments$232,297 $221,250 
U.S. residential developments145,690 138,369 
Net investments in residential developments$377,987 $359,619 
Net investments in residential developments as a % of total real estate assets3 %3 %

Canadian residential developments

The Company is one of the most active rental developers in downtown Toronto. During the quarter, the City of Toronto selected a joint venture between Tricon and its partner, Kilmer Group, to develop a 29-story, 725-unit purpose-built rental apartment community ("KT Housing Now") in Toronto's Etobicoke City Center neighborhood. This apartment community, which will be built to meet zero-carbon sustainability standards, will offer 70% of its units at market rental rates and 30% at rents set at 80% of the City of Toronto's average monthly rent, adding much- needed affordable housing supply for workforce families. The project is eligible for the Canada Mortgage and Housing Corporation's ("CMHC") Rental Construction Financing Initiative, which provides attractive financing terms to rental housing projects that meet certain affordability criteria. Including this new development, Tricon now has ten projects totaling 5,005 units, comprising of nine projects in pre-construction or under construction and one income-producing property (The Taylor) that is not yet stabilized as at June 30, 2023.

The Taylor's attractive location, bold design and amenity-rich offerings continue to be well-received by prospective residents in the second quarter. The Taylor's occupancy and rent performance continues to track ahead of budget, with 254 leases signed as of June 30, 2023 (representing 89% lease-up) at average monthly rents of C$4.63 per square foot. Once lease-up stabilization occurs, The Taylor will transition from the residential development business segment to Tricon’s multi-family rental business segment.

The Company's portfolio also includes an existing commercial property, The Shops of Summerhill, adjacent to The James development project.

As at June 30, 2023, the carrying value of Tricon's net assets in its Canadian multi-family development portfolio was $232.3 million. The following table summarizes the net assets by stage of development.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


June 30, 2023December 31, 2022
(in thousands of U.S. dollars)Tricon's share of property value
Tricon's share of debt and lease obligations(1)
Tricon's share of net working capital and other items
Tricon's net assets (2)
Tricon's share of property value
Tricon's share of debt and lease obligations(1)
Tricon's share of net working capital and other items
Tricon's net assets (2)
Projects in pre-construction(3)
$17,141 $(11,958)$387 $5,570 $14,361 $(11,432)$185 $3,114 
Projects under construction(3)
363,225 (172,710)(11,775)178,740 305,443 (125,843)(9,714)169,886 
Project in lease-up(4)
59,045 (32,594)(199)26,252 56,687 (28,910)(1,145)26,632 
Stabilized commercial property(5)
36,405 (16,242)1,572 21,735 35,586 (15,972)2,004 21,618 
Total$475,816 $(233,504)$(10,015)$232,297 $412,077 $(182,157)$(8,670)$221,250 
Equity-accounted investments in Canadian residential developments$318,219 $(194,618)$(7,549)$116,052 $275,664 $(161,153)$(7,973)$106,538 
Canadian development properties, net of debt157,597 (38,886)(2,466)116,245 136,413 (21,004)(697)114,712 
Total$475,816 $(233,504)$(10,015)$232,297 $412,077 $(182,157)$(8,670)$221,250 
(1) Tricon's share of debt and lease obligations of $233,504 (December 31, 2022 - $182,157) consists of $198,454 of land and construction loans (net of deferred financing fees) and $35,050 of lease obligations under ground leases (December 31, 2022 - $148,694 and $33,463, respectively).
(2) Represents Tricon's share of development properties and other working capital items, net of debt and lease obligations.
(3) The Company started construction on the The Spoke (Symington) project in Q1 2023. Comparative figures have been reclassified to show the current status of the project as under construction.
(4) Includes The Taylor, which began generating rental income during Q4 2022 and has not yet stabilized.
(5) Represents The Shops of Summerhill, an adjacent commercial property to The James development project.

Projected units and timelines are estimated based on current project plans which are subject to change. Refer to page 1, "Forward-looking statements". Although the portfolio experienced pressures on construction timelines and costs associated with the current inflationary environment, the Company leveraged its strong trade relationships to minimize construction delays and reduce the impact of cost increases.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Investments in U.S. residential developments

The Company’s U.S. residential developments include the development of dedicated single-family communities, and legacy investments in for-sale housing, including land development and homebuilding projects.

Tricon develops single-family rental communities through its two joint venture partnerships with the Arizona State Retirement System which have a total equity commitment of $950 million. The total portfolio comprising both joint venture partnerships currently consists of 2,227 build-to-rent units under development across 14 communities in Texas, California and Nevada. These investments in single-family rental communities represent $22.8 million of Tricon’s $145.7 million total U.S. residential development investments at fair value.

The Company’s legacy for-sale housing investments are structured as self-liquidating investments with cash flows generated as land, lots or homes are sold to third-party buyers (typically large homebuilders or commercial developers in the case of land and end consumers for homebuilding). These investments represent $122.9 million of Tricon’s $145.7 million total U.S. residential development investments at fair value.

In aggregate, the Company's U.S. residential development investments represent 1.1% of the Company's total assets and are expected to generate approximately $272.2 million of net cash flow to Tricon, with the majority anticipated over the next five years (see “Non-IFRS measures and forward-looking statements” on page 1).

During the second quarter of 2023, these assets generated $4.1 million of distributions to Tricon, including $1.1 million of performance fees.

(in thousands of U.S. dollars)Advances
to date
Distributions to date(1)
Tricon's fair value of investment
Projected distributions net of advances remaining(2)
Investments in U.S. residential developments
$545,471 $554,144 $145,690 $272,214 
(1) Distributions include repayments of preferred return and capital.
(2) Projected distributions are based on current project plans which are subject to change. Refer to page 1, "Forward-looking statements".

The scheduled time frame for Tricon to receive the projected net distributions remaining, which is based on current project plans and subject to change (refer to page 1, "Forward-looking statements"), is as follows:

(in thousands of U.S. dollars)1 to 2 years3 to 5 yearsMore than 5 yearsTotal
Projected distributions net of advances remaining
$39,520 $157,190 $75,504 $272,214 
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


4.3    Strategic Capital

Through its Strategic Capital business, Tricon earns fees from managing third-party capital co-invested in its real estate assets. Activities of this business include providing asset management, property management and development management services. The Company intends to continue raising and managing third-party capital to generate scale and drive operational synergies, diversify its investor base, capitalize on opportunities that would otherwise be too large for the Company, reduce its balance sheet exposure to development activities, and enhance Tricon’s return on equity by earning asset management and other fees.

Tricon manages third-party capital for 13 of the top 100 largest institutional real estate investors in the world (source: “PERE Global Investor 100” ranking, October 2022) and is currently ranked 40th globally and second in Canada (compared to 53rd globally and second in Canada in 2022) among global real estate investment managers based on the institutional equity raised since 2018 (source: "2023 PERE 100" manager ranking, June 2023).
Performance overview

The following table provides details of revenue from Strategic Capital services for the three and six months ended June 30, 2023 and 2022, including inter-segment revenues eliminated upon consolidation.

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Asset management fees(1)
$2,787 $3,075 $(288)$5,544 $6,202 $(658)
Performance fees(2)
1,146 8,344 (7,198)3,708 9,087 (5,379)
Development fees(3)
6,471 6,156 315 15,990 12,018 3,972 
Property management fees(4)
346 2,812 (2,466)629 5,491 (4,862)
Revenue from strategic capital services
10,750 20,387 (9,637)25,871 32,798 (6,927)
Asset management fees(5)
$2,097 $2,514 (417)3,952 5,001 (1,049)
Property management fees (6)
3,901 7,717 (3,816)7,406 12,672 (5,266)
Fees eliminated upon consolidation5,998 10,231 (4,233)11,358 17,673 (6,315)
Total FFO(7) impact from fees
$16,748 $30,618 $(13,870)$37,229 $50,471 $(13,242)
(1) Ranges typically from 0.5-2% of committed or invested capital throughout the lives of the Investment Vehicles under management.
(2) Calculated as approximately 20% (in most cases) of net cash flow after investors’ capital has been returned, together with a pre-tax preferred return on capital of, typically, between 8% and 10%.
(3) Calculated as 2-5% of the sales price of single-family lots, residential land parcels and commercial land within master-planned communities, and 4-5% of overall development costs of Canadian multi-family rental apartments.
(4) Includes 4-7.75% of rental revenue from multi-family rental properties, build-to-rent single-family homes and other ancillary fees.
(5) Asset management fees earned from the limited partners of the single-family rental joint ventures are eliminated upon the consolidation of these Investment Vehicles; however, such fees are accounted for within Tricon's proportionate Core FFO.
(6) Property management fees (including acquisition fees calculated at 1% of pre-renovation costs and leasing fees) earned from the limited partners of the single-family rental joint ventures are eliminated upon the consolidation of these Investment Vehicles. Such fees are accounted for within Tricon's proportionate Core FFO. The details of property management fees are as follows:
For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Leasing fees $2,883 $3,106 $(223)$5,653 $5,050 $603 
Acquisition fees $1,018 $4,611 $(3,593)$1,753 $7,622 $(5,869)
Property management fees$3,901 $7,717 $(3,816)$7,406 $12,672 $(5,266)
(7) Non-IFRS measure; see “Non-IFRS measures” on page 1, Section 6 and Appendix A.

The following table provides details of the total FFO impact from Strategic Capital services:
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Asset management fees
$4,884 $5,589 $(705)$9,496 $11,203 $(1,707)
Performance fees
1,146 8,344 (7,198)3,708 9,087 (5,379)
Development fees
6,471 6,156 315 15,990 12,018 3,972 
Property management fees
4,247 10,529 (6,282)8,035 18,163 (10,128)
Total FFO impact from fees
$16,748 $30,618 $(13,870)$37,229 $50,471 $(13,242)


Asset management fees

Tricon earns asset management fee revenue on $2.3 billion of fee-bearing capital across its business segments. Asset management fee revenues for this quarter were $4.9 million compared to $5.6 million in the second quarter of 2022. The decrease was primarily driven by the sale of the U.S. multi-family rental portfolio which was completed on October 18, 2022. Accordingly, in the second quarter there were no asset management fees from the U.S. multi-family rental portfolio as opposed to $0.5 million in the same period in the prior year.

Performance fees

Performance fee revenues for the second quarter were $1.1 million compared to $8.3 million in the prior year comparative period which included relatively high performance fees earned from Tricon’s legacy for-sale housing investments. The Company earns performance fees once targeted returns are achieved by Investment Vehicles and records them only to the extent that it is highly probable that a significant amount of the cumulative revenue recognized will not reverse. Consideration for these services is variable as it is dependent upon the occurrence of a future event that includes the repayment of investor capital and a predetermined rate of return.

(in thousands of U.S. dollars)1 to 2 years3 to 5 yearsMore than 5 yearsTotal
Estimated future performance fees (1)
$25,000 $124,000 $38,000 $187,000 
(1) Estimated future performance fees are calculated pursuant to current business plans, which involve estimating future cash flows from operations and eventual sale, less construction and development costs, to determine the quantum and timing of funding requirements and cash distributions for each Investment Vehicle. Such estimated future performance fees are discounted based on expected time horizons and risk (including the risks set out in the AIF and the risk that future performance does not align with assumptions noted under the heading "Forward-looking statements" on page 1), and presented above before the deduction of any amounts paid to employees under the LTIP and performance fee expense to unitholders of the participation arrangements. Forward-looking information; see page 1.

Development fees

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
The Johnson Companies (“Johnson”)$5,110 $4,561 $549 $13,294 $9,257 $4,037 
Tricon Development Group ("TDG")1,361 1,595 (234)2,696 2,761 (65)
Development fees$6,471 $6,156 $315 $15,990 $12,018 $3,972 

Development fee revenues in the second quarter increased by $0.3 million, driven primarily by an increase in Johnson commercial land sales compared to the same period in the prior year. This was partially offset by a decrease in fees from Canadian residential developments by $0.2 million, driven by the decrease in the foreign exchange rate year-over-year.

Property management fees

The Company earned $4.2 million in property management fees in the quarter through its rental operating platform, representing a $6.3 million decrease from the comparative period. This decrease was driven primarily by a reduction in acquisition fees as a result of fewer acquisitions of SFR homes, as well as lower property management fees following the divestiture of Tricon's interest in the U.S. multi-family rental portfolio which occurred on October 18, 2022.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



Corporate overhead efficiency

Fees earned from managing third-party capital allow Tricon to improve operating efficiency and offset corporate overhead expenses. The following table provides details of the Company's net overhead expenses for the three and six months ended June 30, 2023 and 2022:

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Total FFO impact from fees (excluding performance fees)
$15,602 $22,274 $(6,672)$33,521 $41,384 $(7,863)
Salaries and benefits
(13,965)(13,845)(120)(28,487)(27,869)(618)
Cash-based AIP expense
(4,037)(4,428)391 (6,166)(11,362)5,196 
General and administration expense in Core FFO(1)
(13,313)(11,742)(1,571)(26,903)(22,853)(4,050)
Recurring gross overhead expenses
$(31,315)$(30,015)$(1,300)$(61,556)$(62,084)$528 
Overhead expenses, net
(15,713)(7,741)(7,972)(28,035)(20,700)(7,335)
Total FFO impact from fees (excluding performance fees) as a percentage of recurring gross overhead expenses
50 %74 %(24 %)54 %67 %(13 %)
(1) See Appendix A for reconciliation to general and administration expense per the Company's Interim Financial Statements.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


5.    Liquidity and capital resources

5.1    Financial strategy

The Company seeks to maintain financial strength and flexibility by lowering its cost of debt and equity capital and minimizing interest rate fluctuations over the long term. Some key elements of Tricon’s financing strategy are:

•Using various forms of debt such as fixed-rate or floating-rate bank financing and unsecured debentures with conversion features, and attempting to stagger the maturity of its obligations. The Company typically purchases interest rate caps to limit its exposure to variable interest rate increases.

•Using convertible or exchangeable securities where the principal can be redeemed by the issuance of common shares at the Company’s option.

•Where appropriate, raising equity through the public or private markets in the U.S. and Canada to finance its growth and strengthen its financial position.

5.2    Liquidity

Tricon generates substantial liquidity through:

•Stable cash flow received from our single-family rental business.

•Cash distributions from operating cash flow generated by our multi-family rental businesses.

•Cash distributions from land, lot and home sales in our legacy for-sale housing business.

•Fee income from our Strategic Capital business.

•Repatriation of capital extracted through refinancings.

•Cash distributions generated from the turnover of assets with shorter investment horizons.

•Syndicating investments to private investors and thereby extracting Tricon's invested capital.

To enable us to react to attractive acquisition or investment opportunities and deal with contingencies when they arise, we typically maintain sufficient liquidity at the corporate level and within our key operating platforms. Our primary sources of liquidity consist of cash and a corporate credit facility.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Contractual obligations

The following table presents the contractual maturities of the Company’s financial liabilities at June 30, 2023, excluding remaining unamortized deferred financing fees and debt discount:

(in thousands of U.S. dollars)
As at June 30, 2023
Due on demand
and within the
year		From 1 to 2
years		From 3 to 4
years		From 5 years
and later		Total
Liabilities
Debt(1)
472,845 2,021,212 2,535,911 842,252 5,872,220 
Other liabilities
— 11,871 10,009 15,669 37,549 
Limited partners' interests in single-family rental business
— 872,960 — 1,127,843 2,000,803 
Derivative financial instruments
— — — 60,139 60,139 
Due to Affiliate
— — — 295,325 295,325 
Amounts payable and accrued liabilities
153,622 — — — 153,622 
Resident security deposits
77,993 — — — 77,993 
Dividends payable
15,823 — — — 15,823 
Total
$720,283 $2,906,043 $2,545,920 $2,341,228 $8,513,474 
(1) The contractual maturities reflect the maturity dates after all extensions have been exercised. The Company intends to exercise the extension options available on all loans.

Working capital

As at June 30, 2023, Tricon had a net working capital deficit of $871.0 million, reflecting current assets of $178.0 million, offset by current liabilities of $1.0 billion. The working capital deficit primarily results from three facilities (a term loan, a securitization and a subscription facility) with an aggregate outstanding balance of $800.9 million maturing in the next twelve months. On July 27, 2023, the Company extended the maturity of the term loan by six months to April 2024 (with the option to extend for another six months to October 2024) and amended the agreement to increase the commitment value by $100.0 million to $309.5 million. The coupon rate remains unchanged. Subsequent to the quarter-end, the subscription facility of $263.0 million was repaid in full with investor equity. Lastly, the Company is currently exploring options to refinance the securitized financing before its maturity in early 2024. The Company has determined that its current financial obligations and working capital deficit are adequately funded from the available borrowing capacity and from operating cash flows.

As of June 30, 2023, there was $158.0 million outstanding under the Company's corporate credit facility with $342.0 million remaining undrawn on that facility.

5.3    Capital resources

Debt structure

Management mitigates interest rate risk by maintaining the majority of its debt at fixed rates. The impact of variable interest rate increases or decreases is discussed in the Company’s financial statements. Management also mitigates its exposure to fixed-rate interest risk by staggering maturities with the objective of achieving even, annual maturities over a ten-year time horizon to reduce Tricon’s exposure to interest rate fluctuations in any one period. The Company’s long-term debt structure is presented in Note 14 of the Company's interim financial statements, which information is incorporated herein by reference, and further summarized in Section 3.2 of this document.

The Company provides financial guarantees for land loans and construction loans in its residential development business.

As at June 30, 2023, the Company was in compliance with all of its financial covenants.



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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



Equity issuance and cancellations    

The Company’s Dividend Reinvestment Plan (“DRIP”) provides eligible holders of common shares with the opportunity to reinvest their cash dividends paid on the Company’s common shares to purchase additional common shares at a price equal to the average market price (as defined in the DRIP) on the applicable dividend payment date, less an applicable discount of up to 5% determined by the Board from time to time.

As at June 30, 2023, there were 272,803,985 common shares issued by the Company, of which 272,171,019 were outstanding and 632,966 were reserved to settle restricted share awards in accordance with the Company's Restricted Share Plan. In addition, the Company had 3,836,723 outstanding stock options and 2,352,163 outstanding deferred share units (DSUs).

On October 13, 2022, the Company announced that the TSX had approved its notice of intention to make a normal course issuer bid ("NCIB") to repurchase up to 2,500,000 of its common shares trading on the TSX, the NYSE and/or alternative Canadian trading systems during the twelve-month period ending on October 17, 2023. During the six months ended June 30, 2023, the Company repurchased 525,267 of its common shares on the TSX and 523,413 shares on the NYSE under the NCIB for $8.7 million, all of which were repurchased in the first quarter. The repurchased common shares were subsequently cancelled.

The following table summarizes the Company's equity capital structure at June 30, 2023 and December 31, 2022:

June 30, 2023December 31, 2022Variance
Common shares outstanding(1)
272,171,019 272,840,692 (669,673)
Restricted common shares632,966 624,088 8,878 
Number of basic common shares issued272,803,985 273,464,780 (660,795)
Outstanding stock options3,836,723 3,839,723 (3,000)
Outstanding deferred share units (DSUs)2,352,163 2,419,824 (67,661)
Common shares underlying exchangeable preferred units34,744,118 34,744,118 — 
(1) Common shares outstanding as at June 30, 2023 includes 269,138 common shares issued under the Dividend Reinvestment Plan ("DRIP") during the year.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023




6.    Operational key performance indicators

The non-IFRS financial measures, non-IFRS ratios and KPI supplementary financial measures discussed throughout this MD&A for each of the Company’s business segments are calculated based on Tricon's proportionate share of each portfolio or business and are defined and discussed below. The presentation on a proportionate basis reflects only the portion attributable to Tricon's shareholders based on the Company's ownership percentage of the underlying entities and excludes the percentage associated with non-controlling and limited partners' interests. The Company believes that providing these measures on a proportionate basis is helpful to investors in assessing the overall performance of the Company’s business. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance; however, they do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly-traded entities. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS. See “Non-IFRS measures” on page 1 and Appendix A.

Single-family and multi-family rental

•Net operating income ("NOI") represents total revenue from rental properties, less direct operating expenses and property management expenses. NOI excludes non-property specific and indirect overhead expenses, interest expense and non-core income or expenses such as gains or losses on the disposition of rental properties. Tricon believes NOI is a helpful metric to evaluate the performance of its rental business and compare it to industry peers.

•Net operating income ("NOI") margin represents net operating income as a percentage of total revenue from rental properties.

•Occupancy rate represents the total number of days that units were occupied during the measurement period, divided by the total number of days that the units were owned during the measurement period (excluding units held for sale). Management believes occupancy is a main driver of rental revenues and that comparing occupancy across different periods is helpful in evaluating changes in rental revenues.

•Annualized turnover rate during the period represents the number of resident move-outs divided by the weighted average number of rental units (excluding units held for sale) in the period, annualized for a twelve-month period. Management believes the annualized turnover rate impacts occupancy and therefore revenue, as well as the cost to maintain the rental portfolios.

•Average monthly rent represents average monthly rental income per unit for occupied units and reflects the impact of rent concessions amortized over the life of the related leases. Tricon believes average monthly rent reflects pricing trends which impact rental revenue over time.

•Average rent growth during the period represents the percentage difference between the monthly rent from an expiring lease and the monthly rent from the next lease and reflects the impact of rent concessions amortized over the life of the related lease. Leases are either renewal leases, where a current resident chooses to stay for a subsequent lease term, or a new lease, where a previous resident moves out and a new resident signs a
•lease to occupy the same unit. Average rent growth drives average monthly rent and management finds it is useful to evaluate changes in rental revenue across periods.
•“Same home” or “same home portfolio” includes homes that were stabilized 90 days prior to the first day of the prior-year comparative period as per the guidelines of the National Rental Home Council. It excludes homes that have been sold, homes that have been designated for sale and homes taken out of service as a result of a major renovation. This same home portfolio is defined on January 1 of each reporting year. Based on this definition, any home currently included in the same home portfolio will have satisfied the conditions described above prior to September 30, 2021, and those homes have been held in operations throughout the full periods presented in both 2022 and 2023.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



Strategic Capital (previously reported as private funds and advisory)

•Total fee revenue represents total asset management, property management, development management and performance fees earned, excluding inter-company fees earned.

•Assets Under Management (“AUM”) includes balance sheet capital invested in the Company's principal investments and capital managed on behalf of third-party investors and is a helpful measure in evaluating the Company’s ability to grow and manage strategic capital. AUM is calculated as follows:

ASSETS UNDER MANAGEMENT
Principal Assets Under Management
Single-family rental, multi-family rental and Canadian residential developmentsFair value of rental and development properties plus unfunded commitment
U.S. residential developmentsFair value of invested capital plus unfunded commitment
Third-Party Assets Under Management
Single-family rental, multi-family rental and Canadian residential developments
Fair value of rental and development properties plus unfunded commitment
U.S. residential developments
For-sale housing
Outstanding invested equity and unfunded commitment
Build-to-rentOutstanding invested equity and project-level funded debt plus unfunded commitment

Company operating performance

Funds from operations (“FFO”), core funds from operations (“Core FFO”) and adjusted funds from operations ("AFFO") are metrics that management believes to be helpful in evaluating the Company's operating performance, considering the recent expansion of its residential rental portfolio. These are metrics commonly used by securities analysts, investors and other interested parties in the evaluation of real estate entities, particularly those that own and operate income-producing properties. Management believes that providing these performance measures on a supplemental basis is helpful to investors in assessing the overall performance of the Company’s business.

•FFO represents net income excluding the impact of fair value adjustments and amortization of intangibles arising from business combinations. The Company's definition of FFO reflects all adjustments that are specified by the National Association of Real Estate Investment Trusts ("NAREIT"). In addition to the adjustments prescribed by NAREIT, Tricon excludes any fair value gains that arise as a result of reporting under IFRS, except for fair value gains arising from Tricon's U.S. residential developments business which are intended to act as a proxy for cash generation.

•Core FFO presents FFO as a normalized figure, adjusting for transaction costs, convertible debentures interest, interest on Due to Affiliate, fees eliminated upon consolidation, non-recurring and non-cash items.

•AFFO represents Core FFO less recurring capital expenditures, which represent ongoing costs associated with maintaining and preserving the quality of a property after it has been renovated.

•Effect of FFO, Core FFO and AFFO from discontinued operations is presented on a combined basis with continued operations.

Tricon’s method of calculating FFO is substantially in accordance with NAREIT’s recommendations, but may differ from other issuers’ methods and, accordingly, may not be comparable to FFO reported by other issuers.

Core FFO and AFFO per share amounts are calculated based on the weighted average common shares outstanding in the period, assuming the conversion of all potentially dilutive shares (including convertible debt and exchangeable preferred units) to show the full dilutive impact to shareholders.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



Core FFO and AFFO payout ratios are calculated by dividing dividends declared for the period by Core FFO and AFFO, respectively, which are indicative of the Company's ability to fund dividend payments using cash from operations.

Net debt

Net debt represents the Company's total current and long-term debt per its financial statements, less its cash and restricted cash. Management believes it is a helpful liquidity measure to reflect the Company's ability to meet all of its obligations simultaneously if they were due immediately.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


7.    Accounting estimates and policies, controls and procedures, and risk analysis

Refer to the Company’s MD&A for the year ended December 31, 2022, which is available on SEDAR at www.sedar.com and on the Company’s website at www.triconresidential.com, for detailed discussions of accounting estimates and policies, controls and procedures, and risk analysis.

7.1    Accounting estimates and policies

The Company’s accounting policies are described in Notes 2 and 3 to the consolidated financial statements for the year ended December 31, 2022, and any changes thereto are described in Note 2 to the Interim Financial Statements for the three and six months ended June 30, 2023.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Refer to Note 4 to the consolidated financial statements for the year ended December 31, 2022 for details on critical accounting estimates.

7.2    Controls and procedures

Management, including our President & Chief Executive Officer and Executive Vice-President & Chief Financial Officer, assessed the design and effectiveness of internal control over financial reporting (“ICFR”) and disclosure controls and procedures (“DC&P”) as at June 30, 2023. In making its assessment, management used the Committee of Sponsoring Organizations of the Treadway Commission Framework in Internal Control – Integrated Framework (2013) to evaluate the design and effectiveness of internal control over financial reporting. During the first quarter of 2023, the Company completed the initial phase of its new enterprise resource planning ("ERP") implementation and migrated its general ledger onto the new system. In connection with this implementation, the Company modified the design and documentation of its internal control processes and procedures relating to the new system. Other than these ERP system implementation changes, there have been no other changes in the Company's internal controls over financial reporting that occurred during the six months ended June 30, 2023. Based on our evaluation within this framework, management has concluded that both ICFR and DC&P were effective as at June 30, 2023.

Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

7.3    Transactions with related parties

Senior management of the Company own units, directly or indirectly, in certain legacy Investment Vehicles, as well as common shares of the Company. Refer to Note 24 in the Company's interim financial statements for further details concerning the Company’s transactions with related parties.

7.4    Dividends

On August 8, 2023, the Board of Directors of the Company declared a dividend of $0.058 per common share in U.S. dollars payable on or after October 15, 2023 to shareholders of record on September 30, 2023.

7.5    Compensation incentive plans

Complete details concerning the Company’s compensation plans are set out in the Company’s most recent Management Information Circular, available on SEDAR at www.sedar.com and on the Company’s website at www.triconresidential.com.

7.6    Risk definition and management

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


There are certain risks inherent in the Company’s activities and those of its investees, which may impact the Company’s financial and operating performance, the value of its investments and the value of its securities. The Company’s Annual Information Form dated February 28, 2023 and its MD&A for the year ended December 31, 2022, which are available on SEDAR at www.sedar.com and on the Company’s website at www.triconresidential.com, contain detailed discussions of these risks.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


8.    Historical financial information

The following tables show selected IFRS measures for the past eight quarters. The comparative period results have been recast in conformity with the current period presentation to show the results from the U.S. multi-family rental subsidiary as discontinued operations separate from the Company's continuing operations.

For the three months ended
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)June 30, 2023March 31, 2023December 31, 2022September 30, 2022
Financial statement results
Net operating income from single-family rental properties from continuing operations$132,455 $126,402 $122,522 $116,305 
Total revenue from continuing operations(1), (2)
208,207 203,630 195,713 283,239 
Net income from continuing operations46,768 29,401 55,883 178,786 
Net (loss) income from discontinued operations— — 1,829 (2,335)
Net income46,768 29,401 57,712 176,451 
Basic earnings per share from continuing operations0.17 0.10 0.19 0.65 
Basic (loss) earnings per share from discontinued operations— — 0.01 (0.01)
Basic earnings per share0.17 0.10 0.20 0.64 
Diluted earnings per share from continuing operations0.16 0.08 0.11 0.49 
Diluted (loss) earnings per share from discontinued operations— — 0.01 (0.01)
Diluted earnings per share0.16 0.08 0.12 0.48 

For the three months ended
(in thousands of U.S. dollars, except per share amounts which are in U.S. dollars)June 30, 2022March 31, 2022December 31, 2021September 30, 2021
Financial statement results
Net operating income from single-family rental properties from continuing operations$104,396 $93,273 $83,355 $75,704 
Total revenue from continuing operations(1), (2)
175,522 151,199 142,077 126,093 
Net income from continuing operations405,604 150,124 110,439 174,347 
Net income from discontinued operations11,256 13,333 16,538 27,539 
Net income416,860 163,457 126,977 201,886 
Basic earnings per share from continuing operations1.47 0.54 0.41 0.80 
Basic earnings per share from discontinued operations0.04 0.05 0.06 0.13 
Basic earnings per share1.51 0.59 0.47 0.93 
Diluted earnings per share from continuing operations0.82 0.54 0.40 0.80 
Diluted earnings per share from discontinued operations0.03 0.05 0.06 0.12 
Diluted earnings per share0.85 0.59 0.46 0.92 
(1) Total revenue from continuing operations includes revenue from single-family rental properties and revenue from strategic capital services.
(2) The comparative periods prior to March 31, 2022 have been reclassified to conform with the current period presentation. Resident recoveries previously recorded in direct operating expenses have been reclassified to revenue from single-family rental properties with no impact to net operating income.

Over the past two years, the Company’s single-family rental business benefited from a number of trends that have been accelerated by the COVID-19 pandemic, including in-migration and strong population growth in U.S. Sun Belt markets, favorable demographic shifts driving new household formation, as well as a shift towards work-from-home employment with families prioritizing larger living spaces. Meanwhile, the supply of new housing was constrained by ongoing challenges related to securing entitlements for new lots and by a shortage of labor and materials, including pandemic-related supply chain bottlenecks. This imbalance, coupled with inflationary cost pressures and higher mortgage rates, has made home ownership less attainable and increased demand for rental homes.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023



Notwithstanding the foregoing, beginning in late 2022, Company performance began to be impacted by macro-economic factors such as rising interest rates and general inflation, as well as overall uncertainty in financial markets and moderating rent growth. Some of these factors also led the Company to slow its SFR home acquisition pace, in order to preserve capital for more attractive opportunities in the future, which slowing also had an impact on performance.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


Appendix A - Reconciliations

Management considers NOI, NOI margin, Core FFO, Core FFO per share, AFFO and AFFO per share to be key measures of the Company's operating performance (see Section 6 for definitions and page 1 for discussion of non-IFRS measures).

RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND AFFO

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Net income from continuing operations attributable to Tricon's shareholders
$45,335 $404,579 $(359,244)$72,294 $553,593 $(481,299)
Fair value gain on rental properties
(123,752)(395,835)272,083 (135,646)(695,407)559,761 
Fair value gain on Canadian development properties
— (874)874 — (874)874 
Fair value loss (gain) on derivative financial instruments and other liabilities
19,569 (156,487)176,056 16,460 (127,125)143,585 
Limited partners' share of FFO adjustments
64,017 109,887 (45,870)70,614 195,883 (125,269)
FFO attributable to Tricon's shareholders
$5,169 $(38,730)$43,899 $23,722 $(73,930)$97,652 
Core FFO from U.S. and Canadian multi-family rental
195 2,505 (2,310)386 4,826 (4,440)
Income from equity-accounted investments in multi-family rental properties
(202)(170)(32)(350)(330)(20)
(Income) loss from equity-accounted investments in Canadian residential developments
(869)98 (967)(292)113 (405)
Current income tax adjustment
1,900 — 1,900 1,900 — 1,900 
Deferred income tax expense
12,135 56,125 (43,990)14,124 100,468 (86,344)
Interest on Due to Affiliate
4,246 4,246 — 8,491 8,532 (41)
Amortization of deferred financing costs, discounts and lease obligations
6,375 4,603 1,772 11,488 8,645 2,843 
Equity-based, non-cash and non-recurring compensation(1)
4,241 18,845 (14,604)7,217 38,794 (31,577)
Other adjustments(2)
8,863 3,487 5,376 17,523 6,926 10,597 
Core FFO attributable to Tricon's shareholders
$42,053 $51,009 $(8,956)$84,209 $94,044 $(9,835)
Recurring capital expenditures(3)
(8,293)(10,279)1,986 (17,401)(19,656)2,255 
AFFO attributable to Tricon's shareholders
$33,760 $40,730 $(6,970)$66,808 $74,388 $(7,580)
Core FFO payout ratio(4)
38 %31 %7 %38 %34 %4 %
AFFO payout ratio(4)
47 %39 %8 %47 %43 %4 %
Weighted average shares outstanding - diluted
310,309,372 311,913,232 (1,603,860)310,328,235 311,929,796 (1,601,561)
(1) Includes non-recurring transaction costs and non-cash performance fees expense. Performance fees expense is accrued based on changes in the unrealized carried interest liability of the underlying Investment Vehicles and hence is added back to Core FFO as a non-cash expense. Performance fees are paid and deducted in arriving at Core FFO only when the associated fee revenue has been realized.
(2) Includes the following adjustments:
        
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Transaction costs
$949 $5,482 $(4,533)$7,997 $7,701 $296 
Non-recurring general and administration expense
6,635 — 6,635 6,635 — 6,635 
Amortization and depreciation expense
4,157 3,584 573 8,422 6,991 1,431 
Realized and unrealized foreign exchange gain
(163)(100)(63)(131)(39)(92)
Lease payments on right-of-use assets
(1,443)(566)(877)(2,712)(1,259)(1,453)
Core FFO adjustments to income from investments in U.S. residential developments
— (656)656 — (450)450 
Non-controlling interest's share of Core FFO adjustments
(158)(201)43 (354)(420)66 
Limited partners' share of Core FFO adjustments
(1,114)(4,056)2,942 (2,334)(5,598)3,264 
Total other adjustments
$8,863 $3,487 $5,376 $17,523 $6,926 $10,597 
(3) Recurring capital expenditures represent ongoing costs associated with maintaining and preserving the quality of a property after it has been renovated. Capital expenditures related to renovations or value-enhancement are excluded from recurring capital expenditures.
(4) Core FFO and AFFO payout ratios are computed by dividing dividends declared for the period by Core FFO and AFFO, respectively. Prior to
November 8, 2021, dividends were declared and paid in Canadian dollars; for reporting purposes, amounts recorded in equity were translated to U.S. dollars using the daily exchange rate on the applicable dividend record date.

RECONCILIATION OF RECURRING SINGLE-FAMILY RENTAL PROPORTIONATE CAPITAL EXPENDITURES
TO CONSOLIDATED PORTFOLIO CAPITAL EXPENDITURES BY PERIOD

(in thousands of U.S. dollars)Q2 2023Q1 2023Q4 2022Q3 2022Q2 2022Q1 2022
Recurring capital expenditures, proportionate total portfolio(A)$8,275$9,093$8,037$10,750$9,788$8,796
Renovation, value-enhancing and disposition capital expenditures, proportionate total portfolio23,41518,29130,29540,86833,94128,475
Total capital expenditures, proportionate total portfolio$31,690$27,384$38,332$51,618$43,729$37,271
Limited partners' share of capital expenditures(1)
11,83119,15729,74148,99034,78241,997
Total capital expenditures by period$43,521$46,541$68,073$100,608$78,511$79,268
(1) Represents the limited partners' interest of the capital expenditures in SFR JV-1, SFR JV-2 and SFR JV-HD.

RECONCILIATION OF SINGLE-FAMILY RENTAL TOTAL PORTFOLIO RECURRING CAPITAL EXPENDITURES TO RECURRING CAPITAL EXPENDITURES IN AFFO

(in thousands of U.S. dollars)Q2 2023Q1 2023Q4 2022Q3 2022Q2 2022
Recurring capital expenditures, single-family rental proportionate total portfolio
(A)$8,275$9,093$8,037$10,750$9,788
Recurring capital expenditures from adjacent residential businesses
1815110471491
Recurring capital expenditures in AFFO
$8,293$9,108$8,147$11,221$10,279

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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


RECONCILIATION OF QUARTERLY CONSOLIDATED CAPITAL EXPENDITURES TO CONSOLIDATED SINGLE FAMILY RENTAL PROPERTIES

(in thousands of U.S. dollars)June 30, 2023December 31, 2022
Opening balance
$11,445,659 $7,978,396 
Acquisitions
363,652 2,362,185 
Total capital expenditures by period
Q1
46,541 79,268 
Q2
43,521 78,511 
Q3
— 100,608 
Q4
— 68,073 
Total capital expenditures
90,062 326,460 
Fair value adjustments
135,646 858,987 
Dispositions
(101,684)(80,369)
Single-family rental properties balance per financial statements, end of period
$11,933,335 $11,445,659 

RECONCILIATION OF SINGLE-FAMILY RENTAL TOTAL AND SAME HOME NOI

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)
2023202220232022
Net operating income (NOI), proportionate same home portfolio
$56,028 $52,704 $111,696 $105,180 
Net operating income (NOI), proportionate non-same home
21,170 14,483 40,104 25,298 
Net operating income (NOI), proportionate total portfolio
77,198 67,187 151,800 130,478 
Limited partners' share of NOI(1)
55,257 37,209 107,057 67,191 
Net operating income from single-family rental properties per financial statements
$132,455 $104,396 $258,857 $197,669 
(1) Represents the limited partners' interest in the NOI from SFR JV-1, SFR JV-2 and SFR JV-HD.


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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023


RECONCILIATION OF CANADIAN MULTI-FAMILY RENTAL NOI

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)
2023202220232022
Net operating income (NOI), proportionate portfolio
$303 $303 $600 $590 
Other expenses, proportionate portfolio
(101)(133)(250)(260)
Income from equity-accounted investments in Canadian multi-family rental properties per financial statements
$202 $170 $350 $330 

RECONCILIATION OF PROPORTIONATE GENERAL AND ADMINISTRATION EXPENSE IN CORE FFO

For the periods ended June 30Three monthsSix months
(in thousands of U.S. dollars)20232022Variance20232022Variance
Proportionate general and administration expense in Core FFO
$13,313 $11,742 $1,571 $26,903 $22,853 $4,050 
Non-recurring general and administration expense6,635 — 6,635 6,635 — 6,635 
Cash lease payments
(1,443)(566)(877)(2,712)(1,259)(1,453)
Proportionate general and administration expense
18,505 11,176 7,329 30,826 21,594 9,232 
Limited partner's share of general and administration expense
3,697 2,729 968 6,625 5,186 1,439 
General and administration expense per financial statements
$22,202 $13,905 $8,297 $37,451 $26,780 $10,671 

TOTAL ASSETS UNDER MANAGEMENT
June 30, 2023
December 31, 2022
(in thousands of U.S. dollars)
Balance
% of total AUM
Balance
% of total AUM
Third-party AUM
$8,292,044 50.8 %$8,120,344 50.7 %
Principal AUM
8,037,876 49.2 %7,882,908 49.3 %
Total AUM
$16,329,920 100.0 %$16,003,252 100.0 %
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023

















































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7 St. Thomas Street, Suite 801 Toronto, Ontario M5S 2B7
T 416-925-7228 F 416-925-7964 www.triconresidential.com
Page 51 of 51
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