Two aspects I require help with: how would you assess its financial health and could you comment on its JV operations? Thanks. Derek.
To assess the company's financial health, we look at its balance sheet. The company has a small cash balance of $142.4M, a decent equity position of $3.8B, a current ratio of 0.2X (quite low), and a high net debt/EBITDA ratio of 11.9X. The company generates a good level of free cash flow, more than is needed for its dividend, however, it issues shares frequently and takes on a lot of debt. Given its real estate holdings, it has a large asset base, but also it carries a significant amount of debt. It is not without its risks, but it generates good cash flow, and is profitable.
The company seldomly forms joint ventures to scale its business and acquiring housing, and via its expected joint ventures the company is anticipating doubling its portfolio of single-family rental homes to 50,000 over the next three years. In 2021, it entered a joint venture arrangement (SFR JV-2) with three institutional investors to acquire single-family rental homes targeting the middle market demographic in the US Sun Belt. TCN serves as the asset manager and property manager of the JV.
Despite its high debt levels, we continue to like the name here.