Thursday, October 14, 2021

Here’s the best new asset class in real estate: Tricon Residential CEO

 Written by Thomas Hum for yahoo!finance

The housing market continues to be characterized by low inventories and soaring prices, with year-over-year deceleration not expected until January 2022. Within this hot real estate market, Tricon Residential (TCNGFTCN.TO) President and CEO Gary Berman believes that the best new asset class may be single-family rental properties.

“Single-family rental — we think this is potentially the best new asset class in real estate, both for investors and consumers,” Berman told Yahoo Finance Live. “And it provides an unbelievable opportunity for consumers as well who may be struggling in the pandemic with affordability.”

Berman joined Yahoo Finance Live on Tricon Residential’s U.S. listing day to discuss the state of the housing market as well as the forward outlook for real estate investment in areas such as the Sun Belt. A Toronto-based real estate company which has also been trading publicly in Canada, Tricon Residential invests in single-family rental and multi-family rental homes, and owns about 33,000 properties across the U.S. and Canada.

The company focuses on the middle market, Berman said, and invests heavily in properties located in the Sun Belt.

“People are challenged looking for housing during the pandemic, and we provide what we think is a hotel-ready product and a maintenance-free lifestyle with affordable rent. And we think it's exactly what the market needs,” Berman said. “And it's a real win, a real victory, we think, both for the consumer or renter and obviously our investors as well.”

Insatiable demand' for housing

The California housing market is expected to remain solid if the pandemic is kept under control, but structural challenges may still persist. Existing single-family home sales in the state are forecasted to decline 5.2 percent from 2021 to 2022, and California’s median home price is also expected to rise 5.2 percent to $834,400 next year. This follows a projected 20.3 percent increase to $793,100 in 2021.

According to Berman, in order to satisfy the “insatiable demand” currently seen in the housing market, Tricon Residential is going to focus on doubling its single-family rental holdings.

“Right now, we own about 25,000 single family homes throughout the Sun Belt. We want to double that to 50,000 homes over the next three years,” he said. “And really, at the end of the day, there's so much demand for what we're doing. It's a high-class problem.”

For Rent sign in front of new house
'For Rent' sign in front of new house on the real estate market.

Real estate throughout the pandemic

With eviction moratoriums formally ending in states around the country such as California, Berman said that Tricon Residential remains cognizant of the challenges that its customer base has been and continues to experience as the economic ramifications of the pandemic persist.

“A priority at the company [is] what we call self-governed or limited renewal increases,” Berman said. “So our renewal increases during the pandemic have been anywhere from 0 percent to maybe 5 percent in an environment where we could probably be passing on renewal increases of 10 percent to 12 percent.”

In the long run, he said, striving for low turnover benefits both the company’s tenants as well as its investors.

“We're really trying to put ourselves in the shoes of our residents and really drive the best low turnover model we can,” Berman said. “We don't want to force our residents out of their homes. We want them to stay with us and really be long-term renters. And we think in the long-term, that's the best thing for investors as well.”

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