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Invitation Homes is a leading owner and operator of single-family homes for lease, with a portfolio of approximately 85,000 homes across 16 core markets in the United States . The company focuses on providing high-quality homes in desirable neighborhoods, catering to Americans who prefer leasing over homeownership due to the flexibility and convenience it offers . Invitation Homes operates in markets with strong demand drivers and high barriers to entry, such as the Western United States, Florida, and the Southeast United States, characterized by high rent growth potential . The company employs a vertically integrated operating platform to efficiently acquire, renovate, lease, maintain, and manage homes, including those managed on behalf of joint ventures and third parties . Their business model heavily relies on leasing activities and property management services, integral to their revenue generation strategy, while also emphasizing their commitment to environmental, social, and governance (ESG) initiatives .
- Leasing Activities - Provides single-family homes for lease, focusing on high-quality residences in desirable neighborhoods to cater to individuals and families preferring rental flexibility .
- Property Management Services - Offers comprehensive asset and property management services, including resident support, maintenance, marketing, and administrative functions for owned homes and those managed on behalf of joint ventures and third parties .
- Joint Ventures Management - Manages a significant number of homes owned by unconsolidated joint ventures, providing full property management services to optimize asset performance .
- ESG Initiatives - Emphasizes environmental, social, and governance initiatives as part of strategic business objectives, critical to long-term success .
What went well
- INVH is expanding partnerships with national and regional homebuilders, leading to a strong acquisition pipeline of over 1,000 additional homes, driving future growth opportunities at attractive yields over 6% on cost.
- INVH anticipates blended rent growth to be in the high 4% to low 5% range for the full year, supported by robust demand and strategic balancing of rate and occupancy to maximize revenue and NOI.
- INVH expects renewal pricing to pick up in the fourth quarter due to a return to normal seasonality patterns and increased loss to lease, enhancing revenue growth through higher renewal rates.
What went wrong
- Elevated property tax expenses are expected to increase by 8% to 9.5% year-over-year, impacting operating expenses and leading to cautious outlook until better clarity exists later this year.
- Moderation in key markets like Phoenix and Florida (excluding South Florida) is leading to adjustments in revenue growth expectations, indicating potential challenges in maintaining growth.
- Balancing between occupancy and rental rates may limit revenue growth, as the company adjusts guidance to reflect early signs of market softening and return to seasonality.
Q&A Summary
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Revenue Guidance Reduction
Q: Why reduce same-store revenue guidance?
A: We observed moderation in markets like Phoenix and Central Florida due to price fatigue and increased supply, leading us to reassess and fine-tune our revenue guidance. Most of our portfolio is still performing strongly, with markets like Chicago and Southern California showing new lease rate growth above 5% in Q2. -
FTC Inquiry and Accrual
Q: What's the status of the FTC inquiry and related accrual?
A: We received an FTC inquiry in summer 2021 regarding our business practices during the pandemic. We've cooperated fully and accrued an amount reflecting what we'd consider paying to resolve the matter without admitting liability. We expect no material ongoing impact on our business. -
Capital Deployment and Yields
Q: Expectations for capital deployment and yields?
A: We're continuing our acquisition strategy, focusing on relationships with national and regional builders. We expect yields to remain consistent, achieving deals in the 6% plus range. We have a robust pipeline and are seeing more deal flow than in previous years. -
Renewal Rate Growth Outlook
Q: Confidence in renewal rate growth reaccelerating?
A: Despite a slight moderation in June, we expect renewals to pick up, with asks moving from the mid-6% in the summer to above 7% in October. This is driven by the seasonal increase in loss to lease as we enter the fall. -
R&M Costs Impact on OpEx and CapEx
Q: Details on higher R&M costs impacting OpEx and CapEx?
A: Early heat waves increased repairs and replacements, especially HVACs, leading to higher R&M expenses. CapEx has been running hot, but we're monitoring and focusing on cost controls. AFFO guidance remains unchanged for now. -
Turnover Trends and Costs
Q: Is lower turnover a larger trend affecting costs?
A: Turnover is returning to normal levels post-pandemic and lease compliance cleanup. Turn costs have decreased year-over-year, and we feel good about controlling expenses. In Q2, 17.5% of move-outs were lease compliance-related, down 200 basis points from Q1. -
Property Taxes Below Expectations
Q: Which markets had property taxes below expectations?
A: Washington State and Minnesota came in below expectations, leading to a revision in our property tax guidance. Assumptions for other markets like Florida and Georgia remain unchanged. -
Average Stay Duration
Q: Is the 3-year average stay peaking?
A: We don't expect the average stay to peak at 3 years. Our West Coast markets are approaching 4 to 5 years in average stay. We anticipate customers will continue to stay longer due to housing supply-demand imbalances. -
Acquisition Guidance and Pipeline
Q: How will you achieve acquisition guidance?
A: We'll continue direct negotiations with builders for partial and full community purchases and may acquire full communities from developers. Our backlog includes 2,700 homes, with 691 expected to be delivered in the second half of this year. -
Supply Dynamics in Key Markets
Q: Who is adding supply in markets like Florida?
A: Both build-to-rent operators and national homebuilders are increasing supply due to slower homebuyer demand from higher mortgage rates. This contributes to supply sensitivity in markets like Phoenix, Tampa, and Orlando.
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Given that you've slightly reduced the midpoint of your same-store revenue growth guidance and acknowledged a potential overreaction to this adjustment, can you elaborate on the factors causing this moderation and how you plan to mitigate potential weakness in specific markets?
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With property tax expense expected to grow 8% to 9.5% year-over-year, and significant exposure in Florida and Georgia, how confident are you in managing these costs, and what strategies are you implementing to address potential risks from higher assessments?
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You mentioned achieving a 6% or better yield on cost for your build-to-rent projects; considering rising construction costs and market dynamics, how sustainable is this yield, and what measures are you taking to ensure these returns are maintained over the next year?
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As your average resident stay exceeds 3 years and approaches 4 to 5 years in some markets, how do you balance the benefits of high occupancy and retention with the potential impact on rent growth due to reduced turnover?
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While the expansion of your third-party management business has contributed to earnings, leading to an increase in core FFO guidance, can you discuss the profitability of this segment relative to your core operations and how you plan to scale it without affecting overall margins?
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Same-Store NOI Growth: Midpoint at 4.5% .
- Same-Store Revenue Growth: Midpoint adjusted down by 12.5 basis points to 4.875% .
- Same-Store Expense Growth: Midpoint improved by 50 basis points to 5.75% .
- Core FFO Guidance: Midpoint raised by $0.01 to $1.87 per share .
- Property Tax Expense Growth: Expected 8% to 9.5% .
- Blended Rent Growth: Anticipated in the high 4s to low 5s .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Blended Rate Growth: Expected in the high 4s to low 5s percentage range .
- Renewal Rent Growth: For May and June, in the mid-7s percentage range, similar to April at 6.0% .
- Cap Rate on Homebuilder Acquisitions: Targeting approximately 6% .
- Insurance Costs: Not expected to exceed mid- to high teens growth .
- Property Tax Expenses: Higher in the first three quarters, normalizing in Q4 .
- Occupancy and Rent Growth: High occupancy at 97.6% in Q1 .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Same-Store NOI Growth: 3.5% to 5.5% .
- Core FFO Guidance: $1.82 to $1.90 per share .
- AFFO Guidance: $1.54 to $1.62 per share .
- Same-Store Core Revenue Growth: 4.5% to 5.5% .
- Same-Store Core Expense Growth: 5.5% to 7% .
- Property Tax Expense Growth: 8% to 10% .
- Insurance Expense Growth: Mid- to high-teens .
- Bad Debt as a Percentage of Rental Revenue: 65 to 95 basis points .
- Home Acquisitions: $600 million to $1 billion .
- Capital Recycling: $400 million to $600 million .
- Occupancy: Similar to 2023 results .
- CapEx: Expected to grow at an inflationary rate .
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: N/A
- Guidance: The documents do not contain information about the Q3 2024 earnings call for Invitation Homes, so specific guidance metrics for this period are unavailable.
Competitors mentioned in the company's latest 10K filing.
- Larger investors, including private equity funds and other REITs, seeking to capitalize on the same market opportunity
- Individual investors and small private investment partnerships looking for one-off acquisitions of investment properties
- Large and small private equity investors, public and private REITs, and other sizable private institutional investors competing for portfolios
- Other lessors of single-family properties, apartment buildings, and condominium units
- Institutional investors, including other REITs, specialty finance companies, public and private funds, savings and loan associations, banks, mortgage bankers, insurance companies, institutional investors, investment banking firms, financial institutions, governmental bodies, and other entities
- Individual private home buyers and small-scale investors