Invitation Homes Inc. Q2 FY2025 earnings call

• Dallas acknowledged flash floods in Texas Hill Country and made donations, and noted Charles Young's departure, with Tim Lobner taking over as COO.
• Average resident tenure was 40 months, renewal rate near 80%, indicating resident satisfaction and strong service platform.
• Acquired just under 1,000 wholly owned homes in the second quarter, leveraging builder partnerships and launching a developer lending program.
• Confident in meeting acquisition guidance of $500 million to $700 million this year, with a robust pipeline and focus on attractive yields.
• Charles discussed revenue growth, bad debt improvement, cost controls, and technology investments driving operational efficiencies.
• Jon highlighted strong balance sheet with $1.3 billion in unrestricted cash, net debt to trailing 12-month adjusted EBITDA ratio at 5.3x, and financial results with core FFO $0.48 per share and AFFO $0.41 per share for the quarter.

In the second quarter, same-store core revenue grew 2.4% year-over-year, core operating expenses rose 2.2%, resulting in 2.5% NOI growth. Blended rent growth was 4%, driven by 4.7% renewal rent growth and 2.2% growth in new leases. July same-store average occupancy was 96.6%, with renewal lease rate growth at 5% and new lease rate growth at 1.3%, leading to a blended lease rate growth of 3.8% for July. Revenue contribution from renewals was over 3/4 of the business.

• Confident in meeting acquisition guidance of $500 million to $700 million in 2025.
• Full year core FFO guidance ranges from $1.88 to $1.94 per share, and AFFO guidance ranges from $1.58 to $1.64 per share.
• No immediate revision to guidance, but monitoring market conditions and future developments.

• Market supply in some areas affecting new lease pricing and occupancy.
• Uncertainties regarding property tax expenses and their growth trajectory.
• Impact of the resale housing market on scattered site supply and rental rates.
• Seasonality effects on new lease growth and occupancy in certain quarters.

Q: Eric Wolfe asked about occupancy deceleration in the back half of the year.

A: Charles Young responded that occupancy is in line with expectations, with seasonal turnover in Q3 and some markets having more supply leading to slightly higher days to re-resident.

Q: Steve Sakwa asked about new lease pricing and acceleration next year.

A: Charles Young said new lease pricing faces pressure due to build-to-rent supply, but deliveries are past peak and expecting improvement, with renewals strong at 5% in July.

Q: Jana Galan asked about transaction markets and dispositions.

A: Charles Young said they see consistent transaction opportunities, engage with homebuilders, and dispositions are mostly to end users in certain markets.

Q: Jamie Feldman asked about buying in active homebuilder markets with supply risk.

A: Dallas Tanner said they focus on long-term risk-adjusted Sunbelt and coastal footprint, get discounts on builder inventory, and underwrite risks on front-end.

Q: Michael Goldsmith's question about BTR supply and scattered site supply.

A: Dallas Tanner said scattered site supply is affected by resale market, and BTR supply is improving with normal absorption, deliveries down next year.

Q: Haendel St. Juste asked about investment book lending program.

A: Charles Young said the program is early days, engaging with developers and brokers, targeting build-to-rent communities.

Q: Jesse Lederman asked about acquisitions not in forward purchase communities.

A: Scott McLaughlin said it was a combination of forward deliveries and one-off builder tape purchases, including JV partner opportunities.

Q: Julien Blouin asked about new lease side seasonality.

A: Charles Young said year unfolds as expected, Q3 balances out, Q4 slows, renewal side strong, blend balances out.

Q: Brad Heffern asked about SFR fundamentals in Southern California.

A: Charles Young said SoCal is a strength with high occupancy, new lease affected by AB 1482, but good portfolio due to limited single-family home supply.

Q: Jade Rahmani asked about Midwest rent growth sustainability.

A: Dallas Tanner said Midwest has seen growth but they focus on long-term risk-adjusted Sunbelt and coastal markets.

Q: Anthony Paolone asked about dispositions and cap rates.

A: Dallas Tanner said they sell in high cap rates and reinvest in low cap rate properties for capital recycling.

Q: Ami Probandt asked about rate cuts and home sales impact.

A: Dallas Tanner said more home volume is a tailwind for their business, creating healthy environment and demand for rentals.

Q: John Pawlowski asked about swap book cost.

A: Jonathan S. Olsen said swaps help make interest expense more knowable, but strategy is to reduce reliance on hedging over time.

Q: Nick Yulico asked about property tax relief.

A: Jonathan S. Olsen said property tax growth should return to historical 4%-5% range, but depends on taxing authority obligations.