Invitation Homes Inc (INVH) Q1 2024 Earnings Call Transcript Highlights: Robust Growth Amidst ...
Same-Store NOI Growth: Increased by 4.7% in Q1 2024.
Same-Store Core Revenue Growth: Grew 5.6% year-over-year.
Average Monthly Rental Rate Growth: Increased by 4.6%.
Other Income Increase: Rose by 15.9%, primarily from value-add offerings.
Same-Store Core Operating Expenses: Increased by 7.4% year-over-year.
Property Tax Expense Growth: Expected to be higher in the first three quarters of 2024.
Controllable Expenses: Decreased by 0.5% year-over-year.
Turnover Rate: Remained flat at 5.2% compared to last year.
Turnover Expense: Decreased by 2.4% year-over-year.
Renewal Rent Growth: Grew 5.8% in Q1 2024.
New Lease Rate Growth: Increased by 0.8% year-over-year.
Blended Rent Growth: 4.4% in Q1 2024; accelerated to 5.2% in April 2024.
Average Occupancy: Strong at 97.6% in Q1 2024; held steady at 97.5% in April 2024.
Core FFO per Share: Increased 5.7% year-over-year to $0.47.
AFFO per Share: Rose 6.8% year-over-year to $0.41.
Net Debt to Adjusted EBITDA Ratio: 5.4x as of March 31, 2024.
Liquidity: Over $1.7 billion available through cash and credit facilities.
Debt Maturity: No debt reaching final maturity until 2026.
Debt Structure: 99.5% fixed rate or swapped to fixed rate; 76% unsecured.
Credit Rating: Upgraded by Moody's to Baa2.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Invitation Homes Inc (NYSE:INVH) reported strong same-store NOI growth of 4.7% in Q1 2024, driven by high occupancy and accelerated lease rent growth.
The company successfully integrated 14,000 third-party managed homes, enhancing its management platform and demonstrating operational efficiency.
Invitation Homes Inc (NYSE:INVH) expanded its new product pipeline with contracts to build approximately 500 new homes, indicating robust future growth prospects.
The company's strategic partnerships with high-quality investors and large homebuilders are expected to drive long-term growth and operational synergies.
Invitation Homes Inc (NYSE:INVH) maintained a strong balance sheet with over $1.7 billion in available liquidity and a stable investment-grade rating, positioning it well for future opportunities.
Negative Points
Same-store core operating expenses increased by 7.4% year-over-year, primarily due to a significant rise in fixed expenses like property taxes.
The company faces ongoing regulatory risks and public scrutiny over housing affordability and property management practices, which could impact operations.
Despite strong operational performance, the company noted some market-specific challenges, such as deceleration in certain high-growth areas like Phoenix and Las Vegas.
There is a potential risk associated with the integration and management of a rapidly increasing number of third-party managed homes.
The competitive landscape for acquiring new homes from builders is intensifying, which could affect yield on cost and overall acquisition strategy.
Q & A Highlights
Q: In the past, you've talked about starting to push rate around the Super Bowl, so mid-February. So it seems like this year, it kind of maybe took a step back -- maybe these rates are going to take a step back in March, before, your recent comment that they accelerated in April. So just trying to get a sense of kind of the sequential trajectory of the new lease rent trends during the quarter and into April? And if there was any factors that was influencing maybe some of the choppiness, which has resulted in where it is now, it seems kind of on pace. A: Charles D. Young - Invitation Homes Inc. - President & COO: We've seen a really healthy acceleration through the quarter. We got occupancy up from 97.1% to 97.6% for the quarter, which is really healthy. And then we started pushing rates in January in anticipation for February to jump. So from January to February, we went up over 300 basis points, continue to push into March to the high 2s. And looking at April here in the high 3s, that's all new lease rent growth. The blend has also accelerated the last 3, 4 months as we anticipated. What's really great though is, we're still 97.5% occupied and we're seeing further acceleration into May. So we set ourselves up really nicely to capture the demand that comes this time of year in peak season.
Q: I know you get asked this question a lot but the Wall Street Journal article the other day brought up regulatory risk again and then generated some more questions. So I was just curious from your perspective, what you're advocating for that you think would help the housing affordability issues. If it's not limits on ownership or rent control, what do you think would improve housing affordability and what role are you going to play in that? A: Dallas B. Tanner - Invitation Homes Inc. - Co-Founder, CEO & Director: Clearly, the cost of housing in the country is a bit high generally. And it keeps getting worse, particularly due to higher mortgage rates and lack of supply. Now what we can do is our best to encourage that new supply coming into the market, which is why we're working with so many of our homebuilder partners, helping them start large new communities that often include a mix of for sale and for lease housing. And you have to remember, there's 47 million households in the U.S. that rent something somewhere. It's about 1/3 of the country. And it's been that way really for decades. And so it's also important to remember that -- we learn this from our residents, they tell us time and time again that they want choice and flexibility of leasing a home. And it's at a significantly lower cost than owing it.
Q: Jon, is there any context that you can give for the incremental contribution from the new third-party management agreements to earnings? I know you're obviously not changing the guidance but just some sort of scale on that would be great. A: Jonathan S. Olsen - Invitation Homes Inc. - Executive VP, CFO & Treasurer: As you point out, we had guided to $0.02 of earnings contribution from third-party management. Included in that guide were both the Starwood and the Nuveen agreements. The Upward America agreement that we announced yesterday is not in there. I think it's also important to note, however, that only 1 of those 3 portfolios has been onboarded at this stage, just the Starwood portfolio, the Nuveen portfolio is scheduled to be onboarded in mid-May and then Upward America sometime in the third quarter. So I think as we approach those onboarding dates, we get better and better visibility into the operating metrics specific to those portfolios of homes and we'll have better insight into what we think the potential is.
Q: Charles, I don't know if you had touched on the renewal increases that had maybe gone out for kind of the April, May, June and maybe even July period. So any commentary around that would be great. A: Charles D. Young - Invitation Homes Inc. - President & COO: We went out for May and June in the mid-7s, which was similar, maybe just slightly lower from what we did with April and we ended up April at 6.0%, which was accelerating from all of Q1. So still healthy as you look back on any historical means.
Q: Just have a question related to transaction activity. And I was hoping you could provide some additional comments around the more significant entrance into Nashville, whether or not you're looking at other new markets to enter. And then just more broadly about activity in the transaction market and whether you think there's enough in the pipeline to kind of hit that full year acquisition guidance. A: Dallas B. Tanner - Invitation Homes Inc. - Co-Founder, CEO & Director: We went back into Nashville as part of a transaction last summer, that allowed us to get a significant amount of more scale in that marketplace. I think we feel very good about our guidance ranges. No change there. And remember, with the new construction that we're building, it's lumpy. It comes in at different times of the year. And we certainly are looking at some M&A and having discussions. And I think you've seen we've been extremely active in the last 6 months with the 20,000 units that we brought on.
Q: Just sticking on the 3PM theme. Just curious about how you think about the overall size of the opportunity. Is there any basic math you could share on what the accretion would be if you add, let's say, 10,000 homes or just whatever metric or you'd like to talk to? And just going back to the previous question about regulation, we've obviously seen some negative headlines for the industry about collusion or whatever on pricing. Is there any concern for you guys that as you take on more responsibility of it and you manage third-party assets and it's all in 1 system that you could be -- come under threats there or risks around pricing for the industry? A: Dallas B. Tanner - Invitation Homes Inc. - Co-Founder, CEO & Director: Juan, thanks for your questions. I'm going to try to hit them in a few different ways. And then I would say, Jon, feel free to add anything on the economics. Look, I think -- and we talk about this over and over and over. You have to remember the size and scale of the U.S. housing footprint. We have about 147 million households that own or lease something in the U.S. today. I mentioned earlier, 47 million of those lease. If you look at the single-family rental dynamic in the U.S., there's somewhere between, call it, 15 million-ish homes
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
