The operator welcomes participants to the Invitation Homes First Quarter 2024 Earnings Conference Call and reminds them that the call is being recorded. Scott McLaughlin, Senior Vice President of Investor Relations, introduces the other members of the Invitation Homes team and mentions that they will be conducting a question-and-answer session with sell-side analysts. He also mentions that the company's first quarter 2024 earnings release and supplemental information are available on their website and cautions that certain statements made during the call may be forward-looking and subject to risks and uncertainties. The company may also discuss non-GAAP financial measures.

In the second paragraph, the speaker, Dallas Tanner, discusses the company's strong start to the year, with high occupancy rates and revenue growth. They also mention their recent partnerships and agreements, which will help grow their property and asset management business. This business offers attractive fees, potential for future home acquisitions, and valuable operational data for the company's own homes and markets.

Invitation Homes is able to leverage its scale and density to improve margins by spreading costs across a larger number of homes. Partners and residents benefit from working with Invitation Homes, as they have access to the company's expertise and can potentially save money through their vendor network and pricing agreements. The company also has a new product pipeline, with plans to acquire 500 new homes from top homebuilders. These acquisitions have a target yield of 6%, with no development risk to the company. Invitation Homes is proud to contribute to creating new housing supply in the communities they serve.

The speaker concludes by expressing satisfaction with the company's performance so far and thanking the associates for their hard work. He then hands over the call to the President and COO, who discusses the first quarter's same-store operating results in more detail. The company saw strong fundamentals and a 4.7% increase in same-store NOI, driven by growth in core revenues and a decrease in bad debt. However, operating expenses also increased, mainly due to property taxes.

The company anticipates higher property tax expenses in the first three quarters of the year, but is pleased to see a reduction in controllable expenses. The turnover rate and turnover expenses remained relatively flat, indicating progress in working through lease compliance backlog. The company is encouraged by the high quality of new residents, with an average income of $158,000 and a 5.6 times income to rent ratio. In the first quarter, renewals grew 5.8% and new leases increased 0.8%, resulting in a blended rent growth of 4.4%. Average occupancy remained strong at 97.6%. Preliminary results for April show a strong start to peak leasing season, with accelerated renewal and new lease rent growth and steady occupancy at 97.5%.

In the first quarter of 2024, the company's occupancy and fundamentals remained strong, allowing them to capture demand in their markets and continue their momentum. The Chief Financial Officer reported a 5.7% increase in core FFO and a 6.8% increase in AFFO, thanks to contributions from a new portfolio and investments in future growth. The company's investment-grade rated balance sheet shows over $1.7 billion in available liquidity and a net debt to adjusted EBITDA ratio of 5.4x, below their targeted range. No debt is due until 2026.

Invitation Homes has a strong balance sheet, with 99.5% of their debt being fixed rate or swapped to fixed rate and 76% of their total debt being unsecured. They recently received a ratings upgrade from Moody's, and believe they are well-positioned for future opportunities. The company has seen an acceleration in new lease rent rates, with some choppiness in the quarter but overall on pace.

The company has successfully increased occupancy and rental rates, and is well-positioned to take advantage of peak season demand. The CEO was asked about regulatory risk and housing affordability, and he acknowledged the high cost of housing in the country and its impact on affordability. He believes that higher mortgage rates and lack of supply are contributing factors, and the company is not advocating for limits on ownership or rent control, but may play a role in addressing the issue.

The speaker discusses their efforts to encourage new housing supply in the market by working with homebuilders to develop new communities with a mix of for sale and for lease options. They also mention the high demand for rental housing and the lower cost compared to owning a home in certain markets. They address attempts to restrict companies like theirs and express their commitment to working with trade associations and advocating for legislation that promotes private capital investment in housing. Their goal is to continue bringing new supply into the market.

The company is working with top professionals in the country and has announced third-party management agreements. During the earnings call, they mentioned that only one of the three portfolios has been onboarded so far, but they expect to see potential upside as they get more time managing them. During the Q&A portion, they were asked about renewal increases for the upcoming months, but no further details were provided.

In the mid-seventh, the company experienced similar or slightly lower results in May and June compared to April, which was a healthy acceleration from Q1. The next question from a KeyBanc Capital Markets representative focused on transaction activity and the company's plans for entering new markets. The CEO mentioned the company's recent acquisition in Nashville and the potential for further M&A activity. The company's new construction projects are also expected to contribute to their full year acquisition guidance. The CEO also highlighted the diversity of the company's recent transactions, with each one being unique in nature.

The company is expanding its business by acquiring management contracts and investing in new home construction projects with capital partners. They are focusing on growing in markets like Nashville, Austin, and San Antonio, and are also building relationships with national and midsized homebuilders like Pulte, Lennar, Horton, and Meritage.

The company is focused on creating more supply for the build for rent product and is working with homebuilders to give them confidence to start new communities. They are also adding to their acquisition backlog and pipeline. The size of the opportunity is large, with 147 million households in the US and only about 500,000 units operated by professional capital. There is no concern for pricing collusion as the market is spread among many companies.

The data on the 97% of single-family rentals that are not professionally owned is not easily accessible. The company has its own data and uses publicly available information to inform their decisions. They are currently focused on expanding their platform to serve other owners of single-family rentals, and see potential for growth in the industry. They expect the percentage of professionally owned single-family rentals to increase over time, similar to the trend in the multifamily industry.

Jon Olsen and Charles Young discuss the expected growth of SFR over the next few decades and the challenges in determining the impact of third-party management on the platform. They also address the slow growth of market rents and attribute it to various factors such as market mix, price points, and degree of upfront renovation. They believe that as more homes are brought onto the platform and results are analyzed, they will be able to provide a better understanding of the potential impact on the bottom line.

The speaker discusses how the company's new lease and renewal rates are above historical levels and occupancy is higher than ever before. They mention that some markets, like Phoenix and Vegas, are starting to slow down but overall, the company is in a healthy position. They also note that there has been a slowdown in people moving to Florida and Texas, but the company is still in a good position compared to the multifamily market. The speaker, John, and Dallas both believe that the company is in a good position and are confident in their future growth.

The speaker discusses the current state of the home construction market and how it is impacting their business. They mention that people are staying in their homes longer, resulting in less loss to lease. The company is focusing on renewals and capturing as much rate growth as possible. The speaker also mentions their plans for the balance sheet and debt strategy, including addressing $3.5 billion of interest rate swaps coming due next year. They do not provide specific details on potential earnings or accretion/dilution.

In 2026, the company has $3.1 billion of debt maturing, consisting of a floating rate securitization and a term loan from a bank facility. The company has enough cash to pay off the debt, but is not in a rush to do so as the interest rate on the debt is lower than the interest earned on the cash. The company is also in the process of recasting its bank facility and has plenty of time to make decisions. Some swaps will expire in November, which may align with the repayment of the floating rate debt. The company does not plan on replacing the floating rate debt with anything other than fixed rate debt.

The speaker is discussing the recent article from the Wall Street Journal about the Republican governor of Texas calling for legislative action to protect families in the housing market. The speaker, who is based in Texas, is unsure of the impact this may have on their plans to add to their portfolio in the state. They mention that they are active in both state and local levels in Texas and other markets, and have had recent wins in other states. They also acknowledge that housing is a social issue and the affordability issues in the country are largely supply-driven. The speaker is cautious about speculating on political matters and notes that headlines can often be taken out of context.

The company is focused on providing housing and creating lifestyle flexibility for a large number of consumers. They are also working on building relationships with state and local governments to be part of the solution to the housing problem. The company is disappointed with a recent article that misrepresented their efforts. During a recent earnings call, Jon mentioned that the fees received from management contracts are being offset by investment spending. This spending is necessary for onboarding new portfolios and includes hiring more staff and investing in technology.

The speaker acknowledges that there may be some challenges in the third-party property management business in the beginning, but it is a high-margin and attractive business for the company. They expect to make the margins even higher as they become more efficient. During a recent call, they did not revise their guidance for 2024, but they feel comfortable with their expectations for blended rate growth to be in the high fours to low fives.

The speaker is pleased with the company's first quarter results and feels they are in line with their expectations for the year. They have focused on acquisitions from homebuilders and are targeting a 6% yield on these transactions. They are also still in the market for disposals at a four-ish cap rate. Analysts on the call congratulated the company on their performance.

During a recent conference, it was noted that new move-in rent growth is expected to exceed renewal rent growth this summer, following a typical trajectory. The acceleration is predicted to be around 300 basis points from April, in line with previous years. Renewals may moderate slightly in the summer due to lower loss to lease, but overall, the acceleration is in line with expectations. The company is also seeing positive results in terms of occupancy and new lease rent growth. The insurance renewal was also mentioned in the Sup, but no details were provided on any changes in coverage or terms.

Jon Olsen, the speaker, was asked if there was anything that could push insurance back up to the initial guidance range of mid-to-high teens growth. He responded that there was nothing left that could cause insurance to come in higher. He also mentioned that insurance is a relatively small line item for the company and that the positive insurance renewal was due to a combination of market environment and the benefits of their business, such as not being coastal and having the ability to asset manage on a house-by-house basis. He also highlighted the scale of their business, with an average insurance cost per home in Florida being less than $1,000.

The speaker, Charles Young, responds to a question about any changes to their policy structure or limits. He mentions that there were no changes made and then goes on to address the first part of the question about how renewals will affect margins. He mentions that they have been successfully reducing turnover and have high renewals due to their genuine care for residents. This has led to high occupancy and a good opportunity for growth in the lifestyle market. Another speaker, Dallas, adds that they expect renewals to continue to be a significant part of their business. A question is then asked by Conor Peaks from Deutsche Bank.

Dallas Tanner discusses the economics behind homebuilders and why companies like Invitation Homes can get higher yields compared to homebuilders selling to individual buyers. He mentions that homebuilders recognize the need for rental properties and view companies like Invitation Homes as a more efficient option. Additionally, Invitation Homes can help alleviate the burden of cost for homebuilders and provide a derisking opportunity for their future plans. There is a natural symmetry between professional capital and the for-lease business, similar to what is seen in the multifamily industry.

At the regional level, Invitation Homes can help smaller builders by reducing costs and creating certainty for the production of new housing units. This partnership is similar to car manufacturers selling to both retail and rental companies. For builders, working with Invitation Homes gives them confidence to take on larger projects and save on sales and marketing costs. Invitation Homes typically receives more home deliveries per month from builders compared to their retail sales.

The speaker explains that their company's predictability in operating margins and ability to close deals is what sets them apart from others in the market. They also have a track record of successful M&A and are seeing immediate margin improvements for their partners in the 3 p.m. sector. This is largely due to their scale.

The speaker discusses the current state of their business, which is 97.5% occupied and experiencing mid-5s revenue growth. They highlight their positive outlook for the next few years, as well as their strong relationships with homebuilders and their focus on working with professional and trustworthy partners. They also mention their ability to seamlessly integrate new housing supply into the market and create a strong total return profile for their shareholders. The call concludes with the speaker thanking their team and expressing confidence in the future of Invitation Homes.

Dallas Tanner expresses gratitude to everyone for attending the conference call and looks forward to seeing them at NAREIT in June. The operator then concludes the call and thanks everyone for their participation.

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