American Homes 4 Rent Q2 FY2025 earnings call

• Operational excellence: Leverage in-house technology to support efficient execution and deliver superior resident experience.
• Portfolio optimization: Data drives asset management and investment decisions on markets, locations, asset type, and quality.
• Prudent capital acumen: Prioritize high-quality investment grade balance sheet for flexibility and access to capital, committed to AMH Development program.
• Second quarter results: Same-Home average occupied days 96.3%, new renewal and blended rental rate spreads 4.1%, 4.4%, 4.3%; Core operating expense growth 3.6%, Same-Home Core NOI growth 4.1%.
• Development: AMH Development delivered 636 homes, initial yields improving on newly delivered homes.
• Acquisitions: Reviewed thousands of properties, some homebuilders showing willingness to negotiate on price.
• Property tax: Favorable Texas property tax relief news positively reflected in updated full year outlook.

For the second quarter, AMH reported net income attributable to common shareholders of $105.6 million or $0.28 per diluted share. On an FFO share and unit basis, Core FFO was $0.47 per share, representing 4.9% year-over-year growth, and adjusted FFO was $0.42 per share, representing 6.3% year-over-year growth. The AMH Development program delivered 636 homes to wholly owned and joint venture portfolios in the second quarter. During the quarter, the team reviewed tens of thousands of potential acquisition properties, ultimately acquiring 5 homes and selling 370 properties for approximately $120 million of net proceeds at an average economic disposition yield in the high 3% range.

• Increased full year Core FFO per share guidance by $0.03 to $1.86 at midpoint, representing 5.1% growth.
• Same-Home core revenue growth midpoint increased by 25 basis points to 3.75%, core expense growth midpoint reduced by 25 basis points to 3.75%, resulting in Same-Home Core NOI growth midpoint increased by 50 basis points to 3.75%.
• Seasonal curve expected flatter than 2024, with leasing deceleration less in the back half of the year, blended spreads remaining in the high 3% area for the balance of the year.

• Property tax appeals and rate changes could impact financial results.
• Uncertainty in acquisition market bid-ask spreads may affect acquisition activity.
• Homebuilder supply and market conditions could influence portfolio performance.
• Regulatory changes at federal, state, and local levels may pose challenges.

Q: Juan Sanabria asked about seasonal changes in the second half of the year versus last year and implications for rate and blended spreads.

A: Chris Lau responded that the seasonal curve has flattened due to lease expiration management, with expected new lease deceleration of 150 basis points this year vs. 600 basis points in 2024.

Q: Jamie Feldman asked about the change in core revenue growth outlook and market conditions.

A: Chris Lau said the increase in core revenue growth was due to improved bad debt outlook and strong leasing activity, with Bryan Smith adding on market-specific performance like strong Midwest and Seattle markets.

Q: Steve Sakwa asked about homebuilder negotiations and development pipeline.

A: Bryan Smith said there's a change in homebuilder willingness to negotiate in some markets, but development pipeline is compared to non-development markets and needs significant price movement for volume.

Q: Eric Wolfe asked about occupancy in July and seasonal curve impact.

A: Bryan Smith and Chris Lau said July occupancy was 96.1%, with less occupancy deceleration due to lease expiration management.

Q: Haendel St. Juste asked about development platform yields and property tax.

A: Bryan Smith discussed development yields being on track with mid-5% range, cost management, and Chris Lau talked about early property tax assessments and long-term run rate expectations.

Q: Adam Kramer asked about dispositions and net debt.

A: Christopher C. Lau said there are opportunities to dispose of freed-up homes, and net debt-to-EBITDA is 5.2x, with capacity for growth opportunities.

Q: Jeff Spector asked about AI and operational excellence.

A: Bryan Smith discussed AI use in leasing, pre-leasing, and future improvements in resident communication and maintenance.

Q: Julien Blouin asked about renewal rates and strategic choices.

A: Bryan Smith said renewal rates are tied to market rates and resident value, with sophisticated pricing and communication.

Q: David Segall asked about turnover rates.

A: Christopher C. Lau said turnover trends are influenced by lease expiration management, with retention rates relatively consistent.

Q: Michael Goldsmith asked about supply impact and ideal occupancy.

A: Christopher C. Lau and Bryan Smith discussed limited supply in most markets and occupancy above pre-COVID levels, with ability to preserve occupancy in changing markets.

Q: Linda Tsai asked about resident income ratios and home sales recovery.

A: Bryan Smith said resident income to rent ratios are strong, and a healthy home sales market would be positive for AMH.

Q: Brad Heffern asked about acquisition front and land market.

A: Christopher C. Lau and Bryan Smith discussed portfolio acquisition opportunities and land market changes, with land pipeline optimized.

Q: Jesse Lederman asked about land options and renegotiation.

A: Bryan Smith and Christopher C. Lau talked about flexible land deal structures and optioning as a tool, considering cost of capital.

Q: Tayo Okusanya asked about regulatory front.

A: Bryan Smith said they monitor regulatory changes, with favorable antitrust legislation and ongoing government affairs efforts.

Q: Jason Sabshon asked about seniors housing and land development.

A: Bryan Smith said no near-term plans for seniors housing, and land development is maintained at a single-digit percentage of the balance sheet.

Q: Austin Wurschmidt asked about lease exploration and seasonal ramp.

A: Bryan Smith and Christopher C. Lau discussed lease expiration management benefits, including increased visibility and reduced back half deceleration, with days to re-resident in the low 40s in Q2.