American Homes 4 Rent(AMH) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue growth for Q3 2024 was 4.4% YoY, driven by strong leasing season performance [12] - Same-Home operating expense growth was 2.6% YoY, reflecting effective cost control [12] - Core NOI growth for the quarter was 5.4%, contributing to positive guidance revisions [12] - Core FFO per share and unit grew 6.3% YoY to $0.44, while adjusted FFO per share and unit grew 8% YoY to$ 0.38 [19] - Net income attributable to common shareholders was $73.8 million, or$ 0.20 per diluted share, including $3.9 million in hurricane-related losses [18] - Preliminary October estimates show renewal rate growth of 5.4%, occupancy at 95.2%, and new lease rate growth at 2% [12] Business Line Performance - The development program delivered 753 homes in Q3, with 640 homes added to the wholly-owned portfolio at a cost of approximately$ 250 million [20] - The company acquired 16 properties during the quarter for $5.5 million and sold 256 homes, generating$ 81 million in net proceeds at an average economic yield of 3% [20] - The newly acquired portfolio of 1,700 homes across 13 markets was purchased for $480 million, with expected NOI yields of 6% once stabilized [14][24] Market Performance - The company operates in high-growth markets, with strong demand for single-family rentals due to a national housing shortage [10] - The development program remains on track to deliver 2,300 high-quality attached single-family homes in 2024, with economic yields averaging in the high 5s [14] - The land pipeline of nearly 11,000 lots supports stable and predictable new construction growth [14] Strategic Direction and Industry Competition - The company focuses on creating the best resident experience in the industry, leveraging technology and operational investments [10] - The acquisition of the 1,700-home portfolio aligns with the company's disciplined growth strategy, providing synergistic opportunities with the existing footprint [14][24] - The company continues to monitor the market for additional acquisition opportunities, emphasizing asset quality and location [15] Management Commentary on Operating Environment and Future Outlook - The company expects to face an uncertain environment due to the upcoming election, economic conditions, and weather-related disruptions [13] - Management remains optimistic about long-term business fundamentals, with strong demand for high-quality single-family rentals [10] - The company has revised its 2024 guidance, increasing core FFO expectations to$ 1.77 per share, representing 6.6% YoY growth [23] Other Important Information - The company's net debt to adjusted EBITDA ratio was 5.0x at the end of Q3, with a fully undrawn $1.25 billion revolving credit facility and$ 160 million in cash [21] - The company has reduced its full-year Same-Home core operating expense growth expectations by 100 basis points to 5% [23] - The company's disaster preparedness and response programs helped mitigate hurricane-related losses, with damages primarily consisting of cleanup and minor repairs [18][19] Q&A Session Summary Question: Pricing dynamics for new customers and impact of supply - Demand remains strong, with a temporary moderation in new lease rates due to weather disruptions and seasonality [30][31] - Expectations for new lease rate growth in Q4 are in the low 1% range, with renewal rates in the high 4s to low 5s [31] Question: Bad debt trends - Bad debt in Q3 was in the low 1% range, with full-year expectations remaining at 1% [33] Question: Impact of storms on leasing trends - Weather disruptions temporarily slowed activity, but demand for high-quality single-family rentals remains robust [36][37] Question: Acquisition portfolio yield and value creation - The acquired portfolio has in-place cash flow yields of around 5%, with expected stabilized yields of 6% after optimization [38][39] Question: Occupancy trends and expectations - Occupancy is expected to improve slightly in Q4, with strong momentum heading into 2025 [41][54] Question: Property tax outlook - Property tax growth expectations have been reduced to 6% for 2024, with further moderation expected in 2025 [44][45] Question: Build-to-rent impact on same-store NOI - Build-to-rent properties represent less than 10% of the Same-Home pool, with minimal impact on same-store NOI growth [69][70] Question: Florida property insurance market - The company's insurance renewal for 2025 is expected to be manageable, with premiums increasing in the high single-digit range [98][99] Question: Market rent growth expectations - Market rent growth for 2025 is expected to be in the 3% to 4% range, with the company well-positioned to capture this growth [89]