The conference call is being held by Invitation Homes for their fourth quarter 2023 earnings. The call is being led by Scott McLaughlin, Senior Vice President of Investor Relations, and will include the CEO, President, CFO, and CIO. The company's earnings release and supplemental information are available on their website. Forward-looking statements and non-GAAP financial measures may be discussed during the call.

The Chief Executive Officer, Dallas Tanner, discusses the company's focus on meeting the needs of their customers and their commitment to making a house a home. He highlights the company's achievements in the past year, including sustainable growth, partnerships with homebuilders, and a significant portfolio acquisition. He also mentions the company's expansion into offering their operating platform to other portfolio owners.

The company believes that providing professional property and asset management services will help them achieve scale, efficiency, and margin expansion. They recently entered into an agreement to manage 14,000 single-family homes, which is expected to drive incremental AFFO and bring in additional revenue from value-add services. They believe this is just the beginning and that professional management will help them build relationships and create a pipeline for future acquisitions. They also expect continued growth in their business due to favorable market conditions.

The lack of new housing supply and strong demand from younger generations have led to a preference for renting over owning. This is reflected in the savings from leasing versus owning, and the company's services, such as the credit reporting program, further enhance the value proposition for renting. The company remains committed to investing in technology and services to improve the resident experience and grow the business. The fourth quarter operating results were positive.

In 2023, the company saw strong growth in same store NOI, occupancy, and resident service. They also achieved several milestones, including a large portfolio acquisition and preparation for third party management services. The local market teams handled these changes well, resulting in efficient onboarding of new homes, engagement with new residents, and rollout of new services. In the fourth quarter, same store NOI grew by 5.6%, bringing the full-year growth to 4.8%. This was driven by a 5.9% increase in same store core revenues, with average monthly rental rate growth of 5.3%, an increase in other income, and improvement in bad debt. The company also saw an increase in new residents' household income. However, same store core expense growth was 10.3%, mainly due to temporary costs related to lease compliance backlog and higher property taxes and insurance expenses.

The repairs and maintenance expense remained stable for the full-year 2023, showing effective cost control. The fourth quarter saw an increase in occupancy and a return to normal seasonal trends for new lease rates. Renewal lease growth was strong, leading to a 4.6% blended rent growth. January 2024 showed continued positive results in occupancy and renewal rent growth, with indications that new lease rates are turning positive in February. The company is well-positioned to capture strong demand and provide the best resident experience. The Chief Financial Officer will provide updates on the investment-grade balance sheet, financial results, and 2024 guidance.

The company had several key accomplishments in 2023, including issuing $800 million in senior notes, receiving ratings upgrades, and improving their liquidity and debt ratios. Their recent financial results showed growth in core FFO and AFFO, driven by higher same store NOI. The company's 2024 guidance includes expected growth in same store NOI and revenue, assuming similar occupancy levels to 2023. Overall, the company's balance sheet and recent performance position them well for future success.

The company expects positive financial growth in 2024, with rent and bad debt improving and expenses increasing. They anticipate higher NOI growth in the second half of the year and have provided guidance for core FFO and AFFO. They plan to acquire homes and recycle capital, and have increased their dividend. The company will also continue to prioritize resident experience and make strategic decisions in the capital markets.

The speaker has concluded their prepared remarks and is now opening the line for questions. The first question is about the company's guidance and what it assumes for new and renewal lease spreads. The speaker, Charles Young, explains that they purposely pushed for occupancy in the fourth quarter to set them up for peak leasing season. They currently have a high occupancy rate and are confident in their ability to maintain renewal spreads. They are also seeing an acceleration in leasing and a healthy blend in January.

The speaker discusses the historical rates pre-pandemic and how they are currently in line with expectations. They feel confident about the acceleration into February and their positioning in the market. They will give an update in March at the Citi conference. The speaker also mentions the weakness in new lease rates in certain markets with high supply, but they are confident in their current level of occupancy and strong demand. They believe their infill portfolio puts them in a strong position to hold their same store able.

The speaker discusses the acceleration of bad debt from January to February and the improvement in bad debt from 2022 to 2023. They also mention the challenges of comparing 2024 bad debt guidance to 2023 actual results, due to the impact of the pandemic on bad debt in the first quarter of 2023.

The company has seen significant improvements in bad debt since the second quarter of 2023. The reasons for the high bad debt in the first quarter no longer exist and the company expects to continue seeing improvements as moratoriums and court backlogs ease. New customer demand in January was at -1.5%, which is stronger than previous years. The company expects demand to continue to increase as peak leasing season begins at the end of the month.

The speaker discusses the high demand and occupancy during the pandemic, comparing it to pre-pandemic years. They mention that demand has slowed down but is still in line with historical levels. They also mention that they have been focused on maintaining high occupancy and have adjusted their renewal rates accordingly.

The speaker discusses the current rental rates and concessions in the market, stating that they are historically strong. They also mention that there are no concessions being offered in their same store portfolio currently. The conversation then shifts to expenses, with the speaker mentioning that they expect to see some moderation in controllable expense growth.

The company experienced a heavy year in terms of turnover and lease compliance backlog, but does not anticipate significant increases in line items. The operations team has made the R&M portion of the business more efficient, and the company expects to continue driving efficiency. The company's entry into third-party management will have benefits for the operating efficiency of the owned portfolio, but this is not factored into their guidance for 2024. The company expects blended rent spreads of high-4% to low-5% for this year, but there is a large affordability gap between the cost to own and the cost to rent. However, there is no degradation in demand and the company is competing for vacant products as they did in previous years.

Haendel St. Juste from Mizuho Securities asked a question about the property management platform during a conference call. The speaker, Dallas, mentioned that the company's guidance for the year includes $0.02 from Starwood, which was unexpected by many.

The speaker is curious about the opportunity and fees being charged by the business and wants to know how they plan to scale it up and address potential risks, such as political scrutiny. The company believes that their platform and scale can bring efficiencies and drive down costs for customers in the single-family rental sector. They have been deliberate and purposeful in their approach to this opportunity.

The company is focused on working with professional capital and creating efficiencies in their portfolio for their customers. They believe this will have a compounding effect and allow them to price and procure beneficial opportunities for their residents. They are looking to work with professional capital of scale and believe this will create shareholder earnings. The company's platform is growing and they expect to learn more about how to make it more efficient over time. The question asked was about the acquisition opportunity set for the company at the start of the year.

The company is currently exploring opportunities for acquisitions and growth, especially from owners who are struggling with their portfolios. They are also expecting to see a $0.02 benefit from third-party management fees, which will help improve the efficiency of managing their owned portfolio. There is potential for further growth in the future through adding additional homes to the managed portfolio.

The speaker discusses how efficiency gains are not factored into their guidance and how they plan to adjust their model and take advantage of opportunities. They have received interest from portfolio owners and their goal is to drive value for stakeholders and customers. The speaker also mentions the revenue earn-in, loss to lease, and property tax adjustments.

The speaker discusses the conservative approach they are taking in regards to millage rates and mentions their experience over the last few years. They also mention the sale of a home by Pathway and the progress of their partnership. The speaker notes that Pathway is taking a cautious approach and fine-tuning their business model. They also mention exploring opportunities in shared ownership programming.

The speaker discusses the company's strategy to capture new lease demand and maintain steady renewal rates. They explain that while new lease spreads were down in January due to a conscious effort to lower occupancy, they are now set to capture demand that historically shows up in the summer. The company remains confident in their current occupancy and their ability to capture market demand.

The speaker discusses an acceleration in demand from January to February, with expectations for continued growth into the spring and summer. They decline to provide a breakdown of new versus renewal business in their guide. Another question is asked about cap rates in the MLS market, with the speaker indicating that they can sell their dispositions in the mid-to-high 3s, low-4s, depending on the marketplace. They also mention ongoing dialogue with national and regional builders for potential community deals. Another question is asked about the outlook for disposition cap rates, with the speaker expressing confidence in the high-5s, low-6s range.

Jesse Lederman, a participant in the conference call, congratulates the company on their strong results and asks about their estimate for new home deliveries. He wonders why the number is not even higher and asks if interest rates or competition with primary home buyers are factors. Dallas Tanner and Scott Eisen provide more information, stating that the homebuilder pipeline is growing and they have a strong partnership with Pulte Homes. They also mention that they have 1,800 homes under contract and are close to adding another 1,000 to their pipeline.

The speaker mentions that the builders they have been in dialogue with are recognizing the importance of their business line and having an institutional partner like them helps them continue to grow. He compares their partnership to fleet sales with auto companies. The next question is about the controllable expenses and the speaker explains that there were elevated costs in 2023 due to move-outs and delinquencies, but these will lead to savings in the future and help keep the controllable expenses at a low single-digit growth rate. The main drivers of these expenses are occupancy, property admin, and turn OpEx.

The speaker discusses the costs and challenges associated with turnovers in delinquent properties and mentions that they are stabilizing. They also mention plans to recast a term loan in the future and adjust their swap book accordingly. They express confidence in their relationship with their bank group and access to capital.

The company plans to handle their term loan by being patient, opportunistic, and staying in constant dialogue. They have $800 million in bonds and a $640 million securitization that can be paid off early, but they are holding off in order to have excess cash for flexibility. They are earning 5.3% on their excess cash and will pay off debt based on the market and the forward curve. The $0.03 in the bridge is based on the assumption of paying off debt at a certain time, but the company will ultimately make decisions based on market conditions.

During a conference call, John Pawlowski from Green Street asked the operator about the company's revenue growth guidance. He was confused about their math regarding loss to lease and earn-in. Jonathan Olsen clarified that they present guidance in a range because there are various potential outcomes and they are expecting a more normal market rent growth environment. There is potential for upside, but they will wait and see how the year develops. Another question was asked about churn or turnover and CapEx guidance, but the answers were not included in the paragraph.

The speaker discusses the expected turnover and CapEx for 2024, stating that both are expected to be similar to 2023. They mention a backlog in lease compliance and a strong demand for rentals. They also mention the impact of the recent flooding in the Greater Los Angeles area, stating that it has not had a significant impact on their portfolio. They are still assessing the situation and have a few work orders to address.

The paragraph discusses the company's assessment of potential issues with landscaping and roofs, as well as their response to competition in the build-to-rent market. They also mention their strategy for maintaining high occupancy during the winter months.

The speaker discusses the majority of their portfolio being closer to job centers, while build-to-rent projects are typically further out. They are cautious when taking on these projects as they can affect occupancy and rent growth. However, they see the long-term benefits such as a better resident experience and less capital spent on maintenance. The call concludes with a reminder to reach out with any questions and an invitation to an upcoming conference in South Florida.

This summary was generated with AI and may contain some inaccuracies.