Invitation Homes Inc. Q3 FY2024 earnings call

• Third quarter results reflect the hard work of teams to maintain high occupancy, control costs, and provide an outstanding resident experience, with residents staying an average of nearly 38 months. - Assisted residents impacted by recent hurricanes using mobile maintenance app and local vendor network. - Market demand for home leasing is strong with 110,000 households leasing with Invitation Homes. - Rapid expansion into third-party management and joint venture business, with over 25,000 homes managed. - Value-add services on track to achieve over $60 million in gross revenues this year. - Discussed same-store leasing results: renewal rent growth 4.2%, new lease rent growth 1.7%, blended rent growth 3.6%, and same-store NOI growth 3.9%.

In the third quarter, same-store core revenues grew 3.6% year-over-year, primarily driven by a 3.7% increase in average monthly rent, a 10 basis point year-over-year improvement in bad debt, and a 2.4% increase in other income. Same-store core expenses increased 3.1% year-over-year, resulting in a 3.9% year-over-year increase in same-store NOI. Occupancy averaged 97% during the third quarter, nearly the same as the prior year. Preliminary October same-store leasing results showed average occupancy at 96.5%, renewal rent growth at 3.7%, new lease rents contracted 1.4%, and blended rent growth at 2.2%.

• Raised midpoints of core FFO and AFFO per share guidance ranges by $0.01 to $1.88 and $1.59 per share respectively, with year-over-year growth of 6.2% and 6% for core FFO and AFFO. - Narrowed same-store NOI growth guidance and maintained 4.5% midpoint. - Revised expectations for more moderate same-store revenue growth in the second half of 2024 and significantly improved same-store expense growth expectations due to favorable property tax information from Florida and Georgia.

• Supply and absorption pressures in certain markets like Tampa, Orlando, Phoenix, and Dallas, affecting new lease pricing. - Hurricane-related damages and their potential impact on operations and costs, though insurance coverage and established playbook help manage risk.

Q: Sequential occupancy decline in the third quarter and spread performance, especially in markets facing build pressure?

A: Charles Young mentioned supply pressure in some markets causing competition on price, but turnover remains low and demand strong, expecting to absorb quickly.

Q: Capital deployment and yield expectations on new development purchases?

A: Scott Eisen said deal flow from builders is good, seeing transactions around 6% cap rate, and active dialogue with builders in various growth markets.

Q: Thoughts on next year's growth potential, including earn-in and loss to lease?

A: Jon Olsen said they'll hold off on detailed next year talk but mentioned earn-in around 2%.

Q: Diversifying portfolio in markets with builder concessions?

A: Dallas Tanner and Scott Eisen discussed balancing portfolio with different market opportunities, active dialogue with builders in growth markets like Phoenix, Vegas, etc.

Q: Impact of new supply in markets?

A: Dallas Tanner said new supply in some markets is temporary, renewal business is strong, and demand remains strong in other areas.

Q: Incremental changes in revenue growth guidance?

A: Jon Olsen said softness emerged in June, more visibility into supply pressures led to revision in guidance.

Q: Renewal book performance and price sensitivity?

A: Charles Young said renewal book is great, seeing acceleration in renewal growth from November, with some markets having price sensitivity but overall optimistic.

Q: Storm costs and insurance?

A: Jon Olsen explained about named windstorms, insurance coverage, and deductibles varying by location.

Q: Other income and third-party management income?

A: Jon Olsen said third-party management income was about $15 million quarterly, other income affected by occupancy dip.

Q: NOI margins and FTC settlement impact?

A: Jon Olsen said FTC settlement has no ongoing impact on business, margin expansion related to higher occupancy and efficiency.

Q: Renewal ask and realized renewals difference?

A: Charles Young said ask varies per market, seeing acceleration in renewal growth from November.

Q: Cap rates on new acquisitions?

A: Scott Eisen said transactions with builders are around 6% cap, stabilized communities in 5.5% cap range.

Q: Use of funds and cost of capital?

A: Dallas Tanner said balanced approach with bond deals, recycling, and third-party capital, focusing on growth and efficient processes.

Q: Impact of election outcomes on business?

A: Dallas Tanner said state issues are key, with focus on rent control in California and monitoring other state races.