Invitation Homes Inc. — 2024 Q1

Sure. This is Charles. Appreciate the question. Look, we've seen a really healthy acceleration through the quarter. As we talked about last quarter, we had solved for occupancy coming out of last year as we had some lease compliance turnover that spiked. We did exactly what we said we were going to do. 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, as you're talking about, for February to jump. So from January to February, we went up over 300 basis points, continued 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.

Yes, really appreciate the question. 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.

Sure. So I think it's important to note that, 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.

Yes. I had mentioned it. 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.

Yes. I'll -- this is Dallas. I'll start and then I'll ask Scott to add anything that he'd like to it. But first and foremost, 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 Scott can give you more color on the ground with what we're seeing real time in terms of the opportunities. I think we feel very good about our guidance ranges. No change there.

Sure. And just to address your questions about markets. I mean Nashville is a good example where we're adding new homes in that market, both through third-party management agreements and also some communities that we are buying as well. And so that's just an example of something that we're trying to take the market where we were undersized before but clearly, we're getting some good scale in the near run and we hope to grow there more over time. We have other markets that we're also eyeing that we're going to get exposed to through the third-party management contacts and -- contracts and we're hoping to see more like in Austin and San Antonio, for example, as markets.

Juan, thanks for your questions. I'm going to try to hit on 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.

Yes. I think the other part of your question is the right question. The answer is, at this stage of the game, we don't have a shorthand rubric that we can share in terms of how to think about every X thousand homes brought on the platform through third-party management.

Yes. I think I wouldn't look at it as a culprit. If you go back outside of the COVID years, we're trending above where we've been historically on both new lease and renewals. So on a blended rate and we're more occupied than we've ever been. And people underestimate the value of that occupancy to our NOI growth. And so look, I think we're just seeing back to normal kind of seasonality. And coming off of COVID, it feels like it's a slowdown. But the reality is, it's still really healthy. To your point, though, there are certain markets that were really humming during the pandemic and they're coming back to earth a little bit, Phoenix and Vegas being a couple of those that we've talked about.

Yes. And John, this is Dallas. So I just want to add a couple of things that were just sort of anecdotal that I know you're aware of. With new home construction making up about 30% of the overall kind of home transaction market, people are just staying put a little bit longer, too. And I think you're seeing some of that even in our peers' information. And then we also -- I think Charles sort of mentioned this in a different way, but we just -- we also don't have as much loss to lease as some of the other books of business that might be out there. We had quite a bit of rate growth, which to Charles' point, puts us as at a much better denominator.

Yes. Thanks for the question. Look, we have about $3.1 billion of debt maturing in 2026. That, as we talked about, I think, on the last call is comprised of 2 debt instruments. It's $610 million of our last remaining floating rate securitization IH 2018-4 and the $2.5 billion term loan component of our 5-year bank facility.

Thanks, Haendel. You're right in that Texas doesn't represent a very big portion of our business. Look, I hate to speculate on any comment that I don't have sort of the full context of. We're active at both state and local levels in Texas and other markets. And everything we're hearing on the ground is pretty pro-housing and pretty friendly in terms of where state legislatures are and things that they want to focus on.

Yes. Look, I think as we onboard these portfolios, obviously, we need to add some heads in the field; we need to add some heads in the back office; and we need to make some technology investments. I don't anticipate that we're going to be perfect at this coming out of the gate. The good news is, as we've talked about, this is a really attractive, high-margin business for us. But just as we spent years optimizing our balance sheet, optimizing our operating platform, iterating towards a better outcome and sort of a better structure, we're going to be doing the same with respect to the third-party property management business.

Yes. Thanks for the question. I think, obviously, we have not revised guidance. We continue to feel very comfortable with our expectations for where blended rate growth will shake out over the course of the year. What we've said is, we expect the blend to be high 4s, low 5s.

Sorry, the April blend of 5.2%, just to clarify.

Yes. I would say that -- this is Scott Eisen. Great question. From our perspective, a majority of what we're doing right now is with the homebuilder direct purchasing. We're doing very little on the MLS right now. We focus most of our efforts on growing our third-party management business and also focusing on doing more deals with our homebuilder partners.

Yes. We're seeing that typical kind of acceleration into -- on the new lease side into the summer. And we usually peak somewhere in June, maybe July. It varies year by year, whether new lease will overtake renewals. I can't predict that this year. I don't think I've said that, but we typically see that you're going to see new lease accelerate, peak in the summer and renewals will stay steady throughout the year.

Yes. So great question. Thank you. There is nothing left that would cause insurance to come in higher. We, working with our insurance brokers, sort of formed an early view and that was reflected in our initial guidance over the course of kind of our annual trips to London and Bermuda to meet with underwriters and sort of help explain all the reasons why our business have a number of really attractive risk -- built-in risk mitigants, coupled with the fact that reinsurance treaties came in much more constructive than last year, we were really pleased with the outcome there. I think at the end of the day, however, insurance is a relatively small line item for us. So there's not a ton in it.

I'll let Jon answer anything in terms of the kind of margin expansion. But for us, if you go back and look at our business pre-pandemic, we were moving turnover down year-over-year. It really kind of bottomed out during the pandemic. But we're back on that track where we're just really healthy turnover and a lot of that is driven by having high renewals. And it's a balance of some of the tailwinds that we've talked about in the industry, but also a big part of our Genuine Care and how we serve the resident and people want to stay with us longer, getting over 3 years now, with California getting closer to 5 years. It's a really healthy position.

This is Dallas. And anything I don't cover, Scott, if you would like to add anything, please do. I think taking a step back, one thing that's come full circle and been evident to us as we've started growing a lot of these relationships over the last several years has been sort of the following. One, I think the homebuilder industry recognizes a need for for-lease product. They have a number of customers that come through that can't qualify for mortgage but they want to be in great communities with access to good schools, et cetera.

Conor, it's Scott Eisen. The only other thing I would add here is, look, a builder, it gives them confidence to take on a larger project and create more homes when they know that Invitation Homes is going to be buying a portion of that project. And so as a result, maybe they might only start a 200-home community but with us as their partner, they might start a 300-home community.

Really good question. And I appreciate you following up, Buck, because maybe I didn't answer this very well in the question before. It centers around predictability. We have predictability in our operating margins. We have predictability in showing up and closing. We have a really great track record in the market with M&A and with the ability to close when asked to. Our operating margins, which, by the way, I think would add to a lot of the inbound interest we've had in 3PM, are an attractive thing for investors and I think they're an attractive thing for operators in the marketplace.

We thank everyone for attending our call. We're grateful for your participation. We look forward to seeing everybody at Nareit in June. Thank you for your time today.