Hedge fund Land & Buildings has increased its ownership stake in Canadian REIT Tricon Residential, which owns roughly 37,000 single-family rental houses in the United States and Canada. It acquired about 6.2 million shares in the company in the third quarter, according to Land & Buildings securities filings.

In a presentation in October, Land & Buildings, which is known as an activist investor, characterized Tricon as “substantially undervalued,” asserting that poor revenue management and excessive overhead costs have depressed the REIT's earnings and stock price.

Tricon stock has dropped about 9.3% in value since this time last year, but its shares are up 16.2% from a month ago.

Land & Buildings said Tricon's residential properties cater to middle-income households that skew younger, with an average annual income of $97K and an average tenant age of 39.

The company predicts that single-family rentals will see increasing demand from population growth among younger cohorts because, on average, renting is less expensive — about $1K per month — than buying a starter home.

Single-family rents are nevertheless going up. Tricon, Invitation Homes and AMH, all major players in the SFR sector with an aggregate of 180,000 homes, were each able to post more than 6% increases in rent in Q3 compared with a year earlier, The Wall Street Journal reports.

“In such a distorted environment for homebuyers, the case for rental is more compelling than ever,” Tricon CEO Gary Berman said during the company's most recent earnings call.

The newly acquired Tricon stake means it is Land & Buildings' second-largest holding by market value ($45.9M), bested only by its holdings in Apartment Investment and Management Co. ($49.2M). Land & Buildings has $654M in assets under management.