The paragraph is an introduction to the Invitation Homes First Quarter 2025 Earnings Conference Call. The operator welcomes participants and turns the call over to Scott McLaughlin, the Senior Vice President of Investor Relations. Scott introduces the key executives from Invitation Homes, including CEO Dallas Tanner, President and COO Charles Young, CFO Jon Olsen, and CIO Scott Eisen, who are present for the call. He mentions that a question-and-answer session will follow the prepared remarks. Scott discusses the availability of the first quarter 2025 earnings release and supplemental information on their website and highlights that the call may include forward-looking statements and non-GAAP financial measures. These statements may involve risks and uncertainties as outlined in their 2024 annual report and other SEC filings. Dallas Tanner is then invited to begin his remarks.

The paragraph discusses the strong performance of Invitation Homes in the single-family rental market during the first quarter, highlighting metrics such as 97.2% average occupancy and significant year-over-year growth in rent and financial returns. It attributes this success to favorable market dynamics, like demographics and the cost benefits of leasing over owning a home. Despite economic volatility, the company has observed consistent demand for rental homes across different cycles and regions, reinforcing the stability and growth potential of their property cash flows.

The paragraph outlines Invitation Homes' strategy of capital recycling and prudent growth, emphasizing its approach of partnering with homebuilders to reinvest proceeds from property disposals into new homes. During the quarter, the company acquired 577 new homes and sold 454, many to first-time buyers. They are also involved in developing nearly 2,000 additional homes on the West Coast and in Sunbelt markets, offering future growth potential with reduced risk. They continue to explore portfolio acquisitions and focus on investments with a target 6% yield, leveraging economies of scale and operational efficiencies. Despite financial market volatility, Invitation Homes is committed to sustained growth and long-term value through consistent performance and strategic initiatives.

In the first quarter, the company achieved a 3.7% growth in same-store NOI, driven by a 2.5% increase in core revenue, partially thanks to improved leasing rates and reduced bad debt. Additional revenue from smart home and bundled internet services also contributed positively. Operating expenses remained flat, aided by operational efficiencies and favorable weather, resulting in a 2% decrease in repair costs. Turnover expenses dropped by 5.1% due to high lease renewal rates, with renewal rents increasing by 5.2%. Overall, the company experienced a blended rental rate growth of 3.6%, with healthy occupancy at 97.2% and an average resident stay of 38.5 months, demonstrating strong demand and a resident-focused strategy.

The paragraph discusses the performance and outlook of various real estate markets in the U.S., highlighting strong occupancy and rent growth in the western U.S., Midwest, and Southeast, with some supply pressures in Phoenix, Texas, and Florida. In April, blended rent growth was 4%, and occupancy was high at 97.4%, surpassing expectations due to lower turnover. The company is optimistic about maintaining this growth trend through the peak leasing season, despite potential seasonal fluctuations. The paragraph concludes with a transition to Jonathan Olsen, who will discuss the financial results for the first quarter of 2025 and future guidance.

The paragraph discusses the company's financial health and performance. As of March 31, the company had nearly $1.4 billion in liquidity, with a net debt to adjusted EBITDA ratio of 5.3x and no major debt maturing until 2027. The majority of the debt is either fixed rate or unsecured, and most properties are unencumbered. Standard and Poor's reaffirmed the company's BBB credit rating and upgraded its outlook to positive. A recent repricing amendment on a $725 million term loan lowered borrowing costs by 40 basis points and extended maturity to April 2030. For the first quarter, the company reported a core FFO of $0.48 per share and an AFFO of $0.42 per share, representing year-over-year increases of 3.5% and 4%, respectively. The company is optimistic about its future, citing a strong customer base and strategic execution.

The company is reaffirming its 2025 full-year guidance, highlighting a strong business supported by a solid balance sheet, stable operations, and growth initiatives. It maintains a flexible capital position to pursue investments while ensuring disciplined growth and value for shareholders. During the Q&A session, Michael Goldsmith from UBS inquired about a decrease in the renewal rate from 5.2% in the first quarter to 4.5% in April. Charles Young explained that this pattern is typical, with renewal rates peaking in Q1, moderating in the summer, and expected to rise again by year-end. He mentioned that blended lease rates have been increasing monthly since December, aligning with company expectations. Eric Wolfe from Citibank was mentioned as the next in line for questions.

In the paragraph, Eric Wolfe asks about the impact of subdued home builder commentary and whether weaker home builder activity might affect partnerships and the shadow supply. Scott Eisen responds by saying that their communication with home builders remains strong, with ongoing engagement at both national and regional levels. They are careful in selecting forward purchase opportunities that align with their locations and demographics, noting some increased dialogue at month's end that allows them to buy small batches of homes. The operator then turns to a question from Steve Sakwa, who inquires about yield hurdles and the adequacy of a 6% yield amid market volatility. Dallas Tanner begins to respond, indicating an increase in deal flow opportunities.

The paragraph discusses a company's current financial strategy, emphasizing its focus on managing yield and cost of capital. The company has been actively selling assets with low cap rates and reinvesting in opportunities with higher returns. They have $1.5 billion in cash and revolving credit, which they can use for further asset disposals. The company is seeking more favorable pricing in the market and considering new development opportunities. They are also focusing on reallocating resources from older to newer properties while managing long-term debt. The paragraph ends with a queue for the next question from Jana Galan of Bank of America.

In the article, Charles Young discusses the progress made in reducing bad debt to a new post-pandemic low, attributing the success to the efforts of the teams and the quality of residents. Despite a positive start to the year, he acknowledges the influence of the macro environment and mentions that certain markets like Atlanta, Chicago, Southern California, and the Carolinas are improving. However, he emphasizes the importance of monitoring court processes and remains cautiously optimistic about continued progress. When asked about leasing trends by Austin Wurschmidt, Young reports that demand remains strong with increased website visits from Q4 to Q1, maintaining occupancy and achieving new lease rate growth each month.

The paragraph discusses the expected trends in leasing and occupancy for the year. It mentions that there is typically an acceleration in new leases during the summer, peaking around June or July. Renewal rates are strong and steady, with a slight moderation in summer but are expected to rise towards the end of the year. Occupancy was stable in the first quarter but is anticipated to decrease slightly as they enter the move-out season. They aim to optimize rent capture during peak leasing. The focus then shifts to a question from Haendel St. Juste about the notably low turnover rates, lower than the previous year, and the potential impact on financial forecasts. Dallas Tanner acknowledges the question and invites Charles to offer additional insights.

The paragraph discusses the high renewal rates of Single-Family Rental (SFR) residents, which have been unexpectedly high compared to other subsectors, except Manufactured Housing (MH). Pre-pandemic renewal rates were in the low to mid-70s, increasing to the high 70s during the pandemic. The paragraph notes that the current housing market dynamics, such as low rates of move-out to homeownership, contribute to residents staying longer. The company sees accelerated new leases as expected, and while they anticipate fewer renewals, they've been renewing earlier in the year than originally planned. The outlook for the summer seems positive, with visibility up to 69 days ahead.

The paragraph discusses the favorable conditions and strong performance in terms of resident retention and occupancy rates for a housing company. Charles Young attributes this to residents enjoying the product, staying longer (up to 38.5 months), and the company providing value-added services. Although turnover is slightly lower than expected, they are prepared for potential increases as they enter the "move out season." Jonathan Olsen adds that while turnover is slightly better than expected, the company is monitoring "days to re-resident" as a key factor influencing occupancy. They anticipate longer days on market as they aim to capture market rates. Overall, the first quarter is successful, residents remain loyal, and the company is optimistic about the upcoming peak season.

In a conference call, Cooper Clark, standing in for Jamie Feldman from Wells Fargo, asked about the strong operational expenses (OpEx) performance in the first quarter, considering any timing-related factors and other numbers not meeting guidance except for the positive insurance renewal update. Charles Young responded by attributing the good OpEx performance to a reduction in repair and maintenance (R&M) costs, driven by milder weather compared to the previous year. He emphasized the company’s effective execution and scale advantages. Additionally, low turnover rates contributed to the decreased R&M costs. John Pawlowski from Green Street then inquired about a significant year-over-year increase in share-based compensation, questioning if a $40 million annual rate was a reasonable expectation. Jonathan Olsen acknowledged the question.

The paragraph discusses changes to the company's share-based compensation program, shifting from periodic performance-based plans to annual performance-based grants. This change is contributing to differences in compensation structures. In response to a question about built-to-rent (BTR) competition, Charles Young notes that supply pressures in markets like Phoenix, Texas, and Central Florida are easing, with deliveries decreasing and absorption improving. While some Western and Midwest markets are performing better, new lease activity and occupancy are stabilizing or increasing in these areas, although the timeline for complete resolution is uncertain.

The paragraph discusses the current state and outlook of a company's market engagement and third-party management program. It indicates a slowdown in new market deliveries, but the markets are still seeing a balanced supply and demand dynamic despite changes in mortgage rates, particularly in regions like Atlanta, Carolina, Chicago, California, Seattle, and Denver. Demand remains strong, and the company is optimistic about navigating the market conditions. In response to a question from Brad Heffern of RBC, Dallas Tanner explains that while the third-party management program initially saw significant progress, there has been a lull since mid-last year. Tanner attributes this pause to a focus on strategic partnerships that align with the company's business goals, indicating they are selective about expanding their client base. The company is content with maintaining its current three clients unless new strategic opportunities arise to increase this number.

The paragraph discusses the resilience of the Single-Family Rental (SFR) sector, particularly during economic downturns. Julien Blouin from Goldman Sachs asks about the defensiveness of the SFR sector in the event of a deteriorating macroeconomic environment. Dallas Tanner responds by highlighting factors that make SFR appealing, including affordable leasing compared to ownership, space, access to yards, proximity to transportation, and good school districts. These factors make SFR a viable option for families seeking quality of life at a lower cost, thus enhancing the sector's resilience.

The paragraph discusses the attractiveness and resilience of Invitation Homes in the rental market. It highlights that compared to multifamily options, Invitation Homes offers more affordable rent per square foot and added value for those accommodating additional family members. The customer base is divided into three categories: those renting out of necessity, due to a transitional life event, or by preference. The company considers itself defensive in uncertain market conditions and sees opportunities for growth, supported by favorable economic conditions on both revenue and expense fronts. Despite past challenges like property tax increases due to rapid home price appreciation, these are now turning into financial advantages. The company has shown resilience through previous economic cycles. The paragraph concludes with a transition to a question from Richard Hightower of Barclays.

The paragraph discusses the impact of mortgage rates and homeownership demand on Invitation's business. Dallas Tanner acknowledges that while the for-sale housing market faces challenges, Invitation's business remains robust due to a significant number of U.S. households. Even with low mortgage rates, they maintain high occupancy rates. If mortgage rates drop, leading to increased homeownership, they see it as positive. Typically, 18% to 27% of their customers move out to buy homes, which they view as part of the natural housing process. While current high retention and renewals are temporary positives, increased homeownership would benefit the overall market.

The paragraph discusses the current state of the real estate market, noting an increase in resale supply and more available options for buyers, which is viewed positively. It highlights the relationship between home price appreciation and rent increases, indicating that as asset values rise, rents typically do too. There is a focus on betting on predictability in the market. Additionally, a question is addressed about the rise in property management expenses, which have increased by 80 basis points when comparing the first quarter of 2025 to the first quarter of 2024. Jonathan Olsen explains that the increase is due to headcount additions and technology investments made to support new third-party management clients, which were onboarded the previous year.

Charles Young is asked about potential cost increases during the peak leasing season, particularly concerning HVAC and appliance replacements due to proposed tariffs. He acknowledges that the situation is being closely monitored, but it is too early to determine the exact impact. Young highlights that the company's large scale, size, and national partnerships provide them with competitive pricing, which may help mitigate potential cost increases. He emphasizes that while HVAC and appliances are areas to watch, labor costs are a larger part of their expenses. He also notes that their business does not heavily rely on material costs since they are not building new homes. Overall, Young acknowledges the situation's fluidity and stresses ongoing vigilance.

In the paragraph, Dallas Tanner discusses the company's strategy for expanding its market presence, focusing on scaling operations within existing markets such as Phoenix, Atlanta, and Miami for greater cost efficiency. While they are looking to enter new markets, they emphasize strengthening their presence in Sunbelt and Southeast markets due to their favorable growth prospects. Linda Tsai from Jefferies asks about the expected occupancy rate for fiscal year 2025, and Charles Young responds, noting that high occupancy was observed in Q1, but as they enter the move-out season, turnover is expected to increase slightly, leading to a decrease in occupancy.

In the call, the speaker notes that they are trying to capture more of the market rate, acknowledging that the increased supply compared to the COVID periods might keep them on the market longer. They expect a rise in days to be resident year-over-year but plan to absorb the present supply well. Although some decline in market presence is anticipated, this is accounted for in their projections, with expectations for improvement later in the year. In the Q&A session, Jason Sabshon inquires about increased move-outs due to lower mortgage rates and homebuilder incentives. Charles Young responds that move-outs for purchasing homes remain low and stable despite homebuilders buying down rates, and they will continue monitoring the situation. The call concludes with Dallas Tanner thanking participants and employees, highlighting a successful quarter, and mentioning an upcoming event at Nareit.

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