The operator of the Invitation Homes Second Quarter 2024 Earnings Conference Call welcomes participants and introduces the senior executives of the company. The call will include a question-and-answer session with sell-side analysts and may reference the second quarter 2024 earnings release and supplemental information. The executives may make forward-looking statements and discuss non-GAAP financial measures, and the company does not update these statements. Participants can find more information on these measures in yesterday's earnings release.

Dallas Tanner, the Chief Executive Officer of a real estate company, is pleased with the company's performance so far this year. He discusses the current housing market and emphasizes the benefits of leasing a home, such as flexibility, convenience, and access to good schools. He also mentions that the company's portfolio of single-family rental homes makes up a small percentage of the total rental market in the United States.

The past 2 years have seen a significant affordability gap between homeownership and leasing, with the cost of homeownership becoming much more expensive. This is due to a lack of new housing supply and increasing costs such as insurance and property taxes. To address this issue, the company is partnering with homebuilders to build new communities and has a pipeline of nearly 5,000 new homes to be made available for lease in the next few years.

The company's attractive returns are leading the industry and they prioritize their residents by providing exceptional service standards. This includes a 24/7 genuine care service and exclusive customer touch points, which has resulted in strong occupancy and customer retention. They have also expanded their third-party management business and leverage their size and scale for the greater good of their communities, including supporting the American Red Cross and local development of outdoor community spaces.

In the second quarter, the company funded two new brands and thanked their residents and associates for their support. The President and Chief Operating Officer then discussed the same-store operating results, which showed a 3.8% increase in NOI. This was driven by a 4.8% growth in core revenues, primarily due to an increase in average monthly rent and other income, as well as a decrease in bad debt. Core expense also grew by 7.1% in the second quarter.

The increase in property tax and repairs and maintenance expenses, along with higher HVAC spend due to hot weather, impacted the company's second quarter earnings. However, lower turnover and cost control efforts helped offset these increases. Renewal rent and new lease rates both saw year-over-year growth, resulting in a 5% blended rent growth. Occupancy levels were also higher than pre-pandemic levels, but are expected to return to a more normal level as the summer leasing season ends.

The company is expecting to see continued growth in occupancy, and the CFO provided an update on their balance sheet and capital markets. They have a strong liquidity position and a majority of their debt is fixed rate or unencumbered. Their credit rating was recently upgraded and they have no debt reaching maturity until 2026, but they plan to address these maturities later this year.

The company has a proactive approach to managing their balance sheet and plans to repay a securitization and recast their credit facility. They have seen an increase in core FFO and AFFO in the second quarter and year-to-date. They have maintained their same-store NOI growth guidance, but have adjusted their same-store revenue and expense growth guidance. Property taxes remain a concern for the company.

The company has provided limited information on assessed values and expects property tax expense to remain elevated in the third quarter. They have received some positive feedback from smaller tax jurisdictions and are cautiously optimistic about trends in Georgia. The company remains committed to driving sustainable growth and creating value for stockholders. In the second quarter, occupancy was strong at 97.5% and the company is leaning in on occupancy. The reduction of the high end of the same-store revenue guidance may be driven by caution on occupancy and potential move-outs from tenants looking to purchase homes.

The company has seen strong rent growth in the past 5 months, but there has been some moderation in certain markets and they expect some seasonality to impact occupancy. They are aiming to minimize the impact and expect occupancy to increase in the fall. Despite this, the business remains strong and guidance has been adjusted conservatively. The company wants to be transparent about any changes in revenue and expenses.

The speaker discusses how some markets, such as Phoenix and Central Florida, have seen some moderation and price fatigue in the second quarter. However, the majority of the company's portfolio is still performing well, with markets like Chicago, Southern California, and Seattle showing strong growth. The company is also being cautious with expenses in certain markets like Florida, Georgia, and Texas. The speaker acknowledges that the revised revenue guide may have been too conservative and that there is no fundamental shift in the business. When asked about Phoenix and Jacksonville, the speaker mentions that there may be some supply dynamics at play, but it is also possible that pricing has reached its limit in those markets.

The speaker believes that there are some temporary supply shocks in certain markets due to build-to-rent projects and fatigue. However, other markets are still performing well. The company is still in a good position overall due to the long-term supply and demand of single-family homes. The speaker also mentions that there may be more inventory coming into some markets, creating more options. The question then shifts to the company's capital deployment and expectations for the rest of the year, as well as the potential trend for yields over the next 12 months.

The company is meeting its guidance for acquisitions and yield on cost. They are seeing expansion in their relationships and are exploring ways to improve yield on costs. They continue to work with both national and regional builders and have a backlog of potential homes to acquire. They are also looking to expand in Nashville due to their new presence there.

The company's yields and pricing are consistent with their previous guidance, with some markets showing lower or higher rates. They are pleased with their supply and dialogue with builders and are selective in choosing partnerships. Renewals for June were slightly lower than previous months, but still in the high 5s. July and August numbers are not yet available.

The company ended up with a 5.0 blend for a 4.7 target due to some markets dragging down the numbers. The loss to lease is thinner in the summer due to pushing that time of year for years, but it gets wider towards the end of the year. Renewals are expected to increase in the coming months. Turnover was down this quarter and occupancy was stable, but there was a decrease in demand and notice to move-out that led to a decrease in renewal rate growth for June.

Charles Young, CEO of a real estate company, answers a question about the impact of a third-party management platform on their portfolio. He explains that the market situation and seasonality have had a greater influence, causing a decrease in occupancy and the need for negotiation. The company is being transparent about this and has seen a slight decrease in occupancy earlier than expected. The next question is about an FTC inquiry, but the company is limited in what they can say due to it being a pending legal matter. They have fully cooperated and have begun discussions for a potential resolution.

The company has been productive in their dialogue with third-party homes and have accrued for contingent liabilities in accordance with GAAP. They do not expect the matter to have a significant impact on their business. The increase in their core FFO guidance is partly due to the upcoming Upward America onboarding. The average length of stay for their properties has been increasing each quarter.

The company is not expecting a peak in business and is confident in its growth potential. They have been operating successfully for several years and expect to continue to do so. They have seen an increase in R&M costs due to early hot weather and their CapEx budget has not changed.

The company's acquisition guidance was impacted by the early onset of hot weather, which led to higher costs in the R&M line for HVAC repairs and replacements. This resulted in a revision to the core FFO guide, but no change to the AFFO guide. The company is focused on cost controls and expects work order volume to decrease after the peak of HVAC season. More updates on the impact of these costs on the AFFO guide will be provided next quarter.

The speaker is asking about the company's plans for acquiring more homes in order to reach their goal of $800 million. The company plans to continue negotiating with homebuilders for partial or full communities, as well as considering purchasing stabilized communities from other BTR developers. The speaker also asks about the expected renewal pricing to pick up in the fourth quarter.

Charles Young responds to Haendel's question about the company's confidence in seeing a recovery in the fourth quarter. He explains that the lack of seasonality in the past few years due to the impact of COVID has made it difficult to accurately predict growth. However, with the return to a more normal seasonal curve and the decrease in loss to lease, they expect to see an increase in numbers in the fall. They do not typically give specific growth expectations for individual markets, but they believe their overall blend for the year will be positive.

The speaker discusses their expectations for the company's performance based on the success of Florida last year and early this year. However, they have seen a moderation in return to seasonality and some markets, such as Florida and Phoenix, are experiencing negotiations and short-term supply due to build-to-rent. They believe this is a natural moderation in markets that have been performing well for a while and they are confident in the overall growth of the business. They also mention the trade-off between rate and occupancy and their focus on optimizing core revenue growth. When asked about property taxes, they specify that some non-Florida and Georgia markets came in below expectations.

The speaker answers a question about property tax guidance in Washington State and Minnesota, clarifying that the revision to the top end of the range is due to actual good guides recorded in the first half. They also mention that their assumptions for property tax expense growth in Florida and Georgia are unchanged, but they have seen signs of cautious optimism in Georgia due to lower assessed values. The next question is about the incremental supply in markets like Florida and who is doing the building. The speaker and another person agree that there are build-to-rent operators and regional and national homebuilders that are willing to deal on pending pipeline due to a slowdown in homebuyers and some operators rethinking their projects.

The company has been able to acquire new properties in Phoenix, Tampa, and Orlando, but it is difficult to determine how much of this is due to increased demand. There has been a decrease in turnover recently, but it is uncertain if this will continue. The company has been working on lease compliance, which has led to higher turnover in the past year. However, turnover is returning to normal levels. The company has also seen an increase in R&M expenses due to weather.

The company's turn costs and other expenses have decreased due to a downward trend. This has contributed to a healthy occupancy rate and the teams are executing well. The lease compliance move-out rate has also decreased, although it is still significant. The company is confident in their ability to control what is within their control. In terms of acquisitions, the company has a certain hurdle rate that they are trying to achieve.

The company is currently achieving deals in the 6-plus percent range and will evaluate their cost of capital and potential acquisitions as interest rates and market conditions change. The CEO acknowledges that their revised guidance may have been too conservative and they were surprised by the reaction, but they do not see underlying weakness in their business.

The speaker explains that the company's recent trend of moderation in certain markets was due to customer price fatigue, and that their backlog of 2,700 homes is expected to be delivered over the next 8 quarters. The homes are delivered in batches of 8-10 per month, with 691 expected to be delivered in the second half of this year. This staggered delivery schedule is more efficient for leasing purposes.

The speaker discusses the company's strategy of gradually leasing out homes in a community rather than having them all vacant at once. They also mention their guidance for blended rent growth for the rest of the year and their focus on balancing rate and occupancy to maximize revenue and NOI. They emphasize their transparency and confidence in their business.

The speaker, Charles Young, is responding to a question about the company's confidence in renewals during the slower part of the year. He explains that there is always a spread between what they ask for and what they actually achieve, but they expect renewals to increase over time. He also mentions that some markets are softening while others are seeing strong rate growth. Overall, the company wants to go into the summer with a good position.

The speaker discusses the current occupancy rate and predicts that it will return to normal levels in a couple of months. They also mention that renewals are expected to increase and that demand is still strong. They thank the audience for their support and look forward to upcoming conferences.

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