Q1 2022 Invitation Homes Inc Earnings Call
Welcome to the invitation homes first quarter 2022 earnings conference call. My name is Ruby and I'll be your moderator for today's call. If you would like to ask a question. During the presentation. Please press star followed by one on your telephone keypad.
I'll now hand over to your Hi, Scott Mclaughlin begin Scott. Please go ahead.
Good morning, and welcome.
I'm here today from invitation homes with Dallas, Tanner, our President and Chief Executive Officer.
Charles Young Chief operating officer and.
And Ernie Freedman Chief Financial Officer.
During this call we may reference our first quarter 2022 earnings release and supplemental information.
This document was issued yesterday after the market closed and is available on the Investor Relations section of our website at Www Dot I N V H Dot com.
Certain statements we make during this call may include forward looking statements relating to the future performance of our business financial results liquidity and capital resources and other non historical statements, which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially.
From those indicated in any such statements.
We describe some of these risks and uncertainties in our 2021 annual report on Form 10-K , and other filings, we make with the SEC from time to time.
Invitation homes does not update forward looking statements and expressly disclaims any obligation to do so.
We may also discuss certain non-GAAP financial measures during this call you.
You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures in Yesterdays earnings release.
With that let me turn the call over to Dallas.
Thanks, Scott and good morning to those of you joining us today, we believe the fundamental <unk> remain as strong as ever for our business and I'm pleased by our team's solid execution that achieved our first quarter results.
On the heels of invitation homes 10 year anniversary. It is clear that we built a great real estate business that own and operate or at least product with first rate service.
But that's just the foundation is our success is determined by the genuine care and the Premier experience, we provide to our residents every day and the loyalty and trust our residents place in us.
We see this evidenced by our average resident tenure of nearly 32 months occupancy of over 98% with extraordinary resident retention and work order satisfaction scores of over $4 seven out of five.
To the nearly 1 million residents, who made a house a home with us and especially to all of our associates.
For 10, great years.
I often speak about how our homes are attracted to our resident demographic. There is not only growing but whose preferences continue to evolve. This continues to play out with a large population surge of younger adults just beginning to approach our average resident age of 39 years old are.
A common theme within this millennial cohort is that they want to look for here, meaning they want more choice and flexibility in their lives, including how and where they live.
The pandemic accelerated this shift with many people choosing to move from tight quarters.
Higher cost cities to working from home in a new location with great schools, and a higher quality of life.
More recently, the macroeconomic environment, including rising mortgage rates has met leasing is often a more affordable option annoying.
According to recent data from John Burns leasing all of it was over 12% more affordable on average than owning a home within our markets. These factors in more led to unprecedented demand for our product, which has been intensified due to a lack of available high quality well located homes.
At invitation homes, we're proud to be a part of the solution to this imbalance by offering choice and flexibility within housing.
One way we are operating this is through our partnerships with homebuilders across the country.
As well as through our recently announced ventures with rock point the pathway homes.
I'll start with our builder relationships, which are helping to add new residential housing supply and expand choice for consumers, where it's needed the most.
Our current approach keeps development risk off of our balance sheet and partners us with some of the best in the business to selected by new homes and great locations. We've talked a lot about our preferred relationship with Pulte homes, which continues to progress towards our goal of buying 7500 homes over the next several years. We're also working with other national regional.
In local homebuilders through these relationships as at the end of the first quarter, we build a pipeline of nearly 2000, new homes and in a disciplined way, we're adding more every month.
Most of these projects were helping builders bring online will include a mix of owner occupied and four leased homes, which underscores our firm belief that everyone should have the choice to live in a great neighborhood, whether they lease or own. So we're proud to be bringing not just new homes, but new and diverse mechanic communities to life.
Another example is our latest rock point joint venture, which we announced last month to specialize in premium location higher price point homes for lease.
These halls will offer superior locations within our markets and open up investment opportunities, where we have limited or no current product.
And they also provide us an opportunity to invest in additional projects with our homebuilder partners.
Phoenix for example that might be a home in a submarket like Scottsdale or in the play Noma Submarket of Dallas.
In turn we believe residents of these always may want a higher level of convenience and lithium entities and choose to spend more on ancillary and other services.
We expect the new JV to begin buying home soon with us, earning asset and property management fees. In addition to our share of income as we target this new premium segment.
Another example is our investment in pathway homes pathway works directly with aspiring homeowners to identify and purchase a home.
Operating in the opportunity to lease their home first with an option to buy at a later date if they choose.
Pathway has started acquiring homes and as well on the way to providing residents the choice to lease today with the flexibility to buy tomorrow, if they so desire.
To further our commitment to choice and flexibility in response to the ongoing strong demand for our homes for lease we plan to keep growing our portfolio. This year, we plan to leverage our multichannel acquisition strategy, our proprietary acquisition IQ technology, and our localized in markets to help us grow prudently where pricing total risk.
Adjusted returns and scale make the most sense where.
We're targeting total gross acquisition, including through our JV <unk> $2 billion. This year, we continue to make good progress so far in that regard with plenty of opportunities still in front of us.
In summary, whether it's through our growth our homebuilder relationships or strategic partnerships. We're very proud of our 10 year history of providing choice and flexibility in housing.
Along with a best in class resident experience that allows our residents to live freer.
Although half of this great company and fantastic team I couldnt be more excited about the opportunities in the next 10 years will bring as we remain committed to being part of the overall housing solution.
Asian needs and with that I'll pass it on to Charles our Chief operating officer.
Thank you Dallas as Dallas mentioned this year is off to a strong start with solid fundamentals, helping our teams achieve high retention attractive rate growth strong occupancy and above all premier resident service.
Let's walk through the first quarter operating results in more detail.
Our same store NOI growth remained over 10% for the third quarter in a row coming in at 11, 7% in the first quarter of 2022.
Same store core revenues grew nine 4% driven by average monthly rental rate growth of eight 3% and a 47, 1% increase in other income.
Average occupancy remains strong at 98, 1% for the first quarter, which marks 18th consecutive months that occupancy yesterday at or above 98%.
Meanwhile, resident turnover remains at historic lows with first quarter turnover at four 6%.
Demand continues to increase compared to prior to the prior year, we have seen increasing traffic to our website for prospective residents, including over 20% increases in the number of new website visitors Penn favorites and virtual tours.
We believe this demand as evidenced by our leasing activity with new lease rate growth of 14, 8% for the quarter and renewal rate growth up nine 7%. This drove blended rent growth of 10, 9% up 550 basis points year over year.
We continue to take a balanced look at our renewal rates each month compared to market rents as a result, we believe we have a sizable loss to lease nearing 20% with our average rent across the portfolio of almost $2100 significantly below current market rates.
On the expense side as everyone knows just want everything cost more than the current inflationary environment, but through the efforts of our teams. We were pleased to hold same store core operating expense growth of four 5% during the first quarter year over year.
The two biggest contributors to the increase were property taxes, which were up four 3% along with repair and maintenance expense, which was up 18, 9% primarily due to the challenging comparison to prior year and higher costs lower turnover. Meanwhile continues to help offset some of these rising costs with a 12, 4%.
Client from last year.
To help us control costs, we continue to seek efficiencies through tech enhancements. This includes our mobile maintenance App that we launched last year, which has been a big win win for our residents and us using their smartphone residents can easily send us photos and videos of their service needs, allowing our technicians to better prepare when they are.
In turn this significantly reduces the need for follow up visits, resulting in higher customer satisfaction, and allowing our service technicians to be more productive for.
For the first time the number of maintenance request, we received from digital methods exceeded those from our call Center and we expect the mobile maintenance has to continue to drive this shift.
I am pleased to see technology make our processes more efficient while remembering it's our people who make the difference. Thanks to the continued strong demand for our homes, our strategic execution and above all the efforts of our associates to put our residents first we stand on great footing for peak season, I'd like to thank our teams for another successful quarter.
I'll now turn the call over to Ernie our Chief Financial Officer.
Thank you Charles.
Today I will discuss the following three topics balance.
Balance sheet and capital markets activity.
Load by our investment activity during the quarter.
Before closing with our first quarter financial results.
First balance sheet and capital markets activity.
At the end of March we priced our third public bond offering that totaled $600 million.
The operating advances our stated objective to actively manage our maturity ladder.
And in particular addresses our 2025 and 2026 debt maturities in a measured and prudent manner by harnessing the advantages of the investment grade ratings, we received last year.
The new 10 year bonds mature in 2032, when we have no other debt currently maturing.
Because the offering closed in early April its impact is not reflected in our March 31 financial statements or supplemental schedules.
However, we have provided the pro forma impact on certain of our metrics in a footnote to supplemental schedules to be and to see.
In January we converted the remaining $141 million principal balance of our convertible notes into approximately six 2 million shares of common stock.
We also utilized our ATM program during the first quarter to help fund our growth objectives.
This included the sale of $2 1 million shares at an average price of just over $41 a share.
Totaling $85 million of gross proceeds that settled during the quarter.
Along with approximately $15 million in additional proceeds from the sale of about 400000 shares that settled just after quarter end.
At the end of the first quarter, our net debt to EBITDA ratio was 6.0 times.
This is achieved the top of our targeted range of five five to six times and represents a more than one turn reduction from first quarter of last year.
We ended the first quarter of 2022 with nearly $1 $5 billion of liquidity.
Including approximately $467 million of cash and the full capacity of our $1 billion revolver available.
I will now cover my second topic, which is our investment activities.
During the first quarter, we acquired a total of 822 homes for $341 million through several acquisition channels. This.
This included 519 wholly owned homes for $218 million at an average five 3% cap rate.
As well as 304 homes for $123 million through our joint ventures.
During the quarter, we sold 141 wholly owned homes for $52 million.
Finally, I'll walk you through my third topic, which is our first quarter 2022 financial results.
Core <unk> per share increased 13, 5% year over year to <unk> 40.
Primarily due to NOI growth and interest expense savings.
<unk> per share increased 11, 9% year over year to 35 cents.
Our full year 2022 guidance remains unchanged from the initial guidance we set in February .
In conclusion were pleased to see this year off to another strong start.
With fundamentals continuing to favor single family rental and many people choosing to lease a professionally managed how many great location.
We believe we are well positioned to continue to provide strong financial results, while providing the best overall resident experience.
That operator, please open the line for questions.
If you would like to ask a question. Please press star followed by one on your telephone keypad now when preparing to ask your question. Please ensure you are on mute locally if you change your mind. Please press star followed by two.
Our first question is from Rich Hill of Morgan Stanley . Your line is now open. Please go ahead.
Hey, guys I'll leave the bad debt questions to someone else, but I did want to focus on acquisitions for a second.
I think our original forecast was $1 $5 billion of balance sheet acquisitions for 'twenty. Two that's certainly what we model I think on a run rate basis, you're pretty far off that pace in <unk>. So maybe we can just talk through the cadence of <unk> and <unk> and if you think that $1 $5 billion is still the right level to be thinking about.
Yes, rich Asa and limit is there any I'll start and I'll pass it over to Dallas I'll remind folks that were 50% ahead of our pace of last year and the first quarter of last year, our total acquisitions for $233 million. This year. We came in at close to 350. So it's typically seasonal for us rich at the first quarter is a little bit slower in the fourth quarter and in the past has been a little bit slower and things really ramp.
And the second and third quarters for us, but I'll turn it over to Dallas to provide any more color. There, yes earnings right. The first quarter is typically a little bit slower out of the gate because of the activity that tends to kind of not occur towards the end of the previous year.
The other thing I would add rich is we added.
A little over 450, new homes into our build a pipeline in the first quarter just under contract. So youre not seeing that come through the numbers as well so actually pretty happy with where we are kind of early in the year to earnings point I think we're also seeing really good momentum on the builder side, both in our strategic partnerships with companies like Pulte.
And then again in our merchant build program locally so.
We're in a good spot and I think we'll start to see a little bit of that velocity increase quarter over quarter.
Got it and so maybe just one follow up question on the revenue side of the equation.
And I'm going to ask a sort of a direct question about what the earn in benefit that's building for 23 years and I'm, sorry, if you disclosed loss to lease.
Didn't hear it.
But could you maybe talk through what you think the earn in so what's already baked for same store revenue per 23, and the reason I asked the question is you know your your new lease spreads are really good you turnovers relatively low very low. So it does suggest to me that there is a lot of big same store revenue are already in for 'twenty, three 'twenty four and maybe even 25, so I just.
I bumped up maybe unpack that a little bit more ernie as much as possible without putting you in a position where I'm asking you to guide.
Well I'm, just glad I'm not asking for 26 and 27 also that ratio. If you go all the way out to 2000.
Your supposition is correct Charles had mentioned in his call script that our loss lease continues to run at almost 20%.
And importantly, we've seen some people have talked about this I think you as well our renewal rates continue to accelerate for US we saw a modest acceleration good acceleration over the first part of the year and certainly big accelerates over last year, but our renewal rates are not where our new lease rates are and then that's purposeful in terms of what we think is the right thing to do in this environment, where we're at and said another way.
It means we are building up a higher loss of leasing pricing any other residential sector. You may certainly see with other companies in the single family sector like us.
And so it does set us up for a good position in terms of having a longer runway of ABA.
Trend growth because of that as long as market rates continue to be as strong as they are and we're not seeing anything that would tell us otherwise so without giving a specific number for 'twenty three 'twenty four 'twenty five I think as people are thinking about models, it's right to see that we likely have a longer runway of above trend growth because we're comparing against a difficult year from last year, rather than the residential space arent.
Last year other than the residential space of concessions so going on early last year.
And so it does set us up for <unk>.
A nice growth profile over the next few years.
Okay. That's helpful and Ernie just one quick clarification question could you remind me what what.
What recapture of lost leases on them.
Annualized basis.
So let make sure I understand that rich when you say recapture of loss to lease.
Yeah, and basically saying if you lost the lease is 20% how much of that do you think you can gain.
Given year, obviously, youre not going to get 100% of that because you don't have 100% turnover. So I'm really asking the question of how much of that loss lease can you can you can you gain in 'twenty two 'twenty three 'twenty here.
Got it so you know about a quarter of our leases are two year leases. So you won't recaptured on those and then again as long as renewal leases continuing to say behind new lease, which as we had in the first quarter and will likely persist for a while here certainly well you'd have to discount it even further.
Due to some quick math in my head to get to enrich Bale price is probably the recapture rates are lower than you would see in multifamily because of the short term leases and the fact that renewal leases in multifamily are at or exceeding new leases right. Now so that you'd have to discount that in terms of how much you would see captured this year, but it would have to do a little bit of math to get back to you.
I understand thanks, guys.
Okay. Thanks.
Yes.
Our next question is from Derek Johnston of Deutsche Bank. Your line is now open. Please go ahead.
Yes.
Hi, everybody. Thank you.
Yeah. So just on the turnover really seems to hit a new low every quarter.
Are you seeing any indications of a return to normal or could this lower level would be somewhat of a new normal in a post pandemic and maybe higher rate environment and then in that case would it be safe to assume that the natural rate of occupancy could be higher going forward.
Yes, Great question. This is Charles Yeah, we have I'm really proud of how turnover has trended down over the last couple of years honestly and even before the pandemic, we were seeing that come down year over year, we'd like to think a lot of it is around the product and our location and the service. We're providing however, the pandemic has slowed down some of that move out.
And we.
We guided that we thought we'd be a little higher and turnover in 2020 to.
That has not shown up yet to your point and.
We're keeping an eye on and I don't think it will stay at this level like we're seeing right. Now however, I don't think it's going to go.
Go back to where we were previously it's going to be somewhere between.
Given that and given our days to re resident how we performed in the past. We do think that this is 97, 590% oxy business. If we continue to do what we're supposed to.
And so we will see how turnover goes right now it's holding.
I do expect there'll be at some point in the year might come back a little bit, but it's a seasonal metric anyway, and we'll have to see what the Q2 and Q3 paths.
Excellent. Thank you and then just quickly on getting the pathway homes portfolio going with a 46 acquisitions and <unk>.
Aiding aspiring homebuyers in a pretty tight market was encouraging to us. So can you give us some further details on how it works and if you feel that addresses or alleviates any regulatory touch points in terms of assisting residents.
Well I think it's early in terms of alleviating stress points in terms of the lack of supply we face nationally. That's that's a much bigger issue then.
Any of the programs will either support or sponsor ourselves as we grow the business I think more importantly, we're really excited about the progress that they've made.
And getting the product out and in acquiring the resident that is looking for that lease with an option to purchase I do think that we are seeing the marketplace evolve to where the customer does want flexibility and choice I talked a little bit about that in.
In my opening remarks.
There is a cohort of people specifically millennials that are looking for this flexibility and optionality and in our business.
If you look at the way that we structure our leases with some of the ancillary programs or if you look at some of these new ventures, we have to things like pathway. We're trying to design a program that is completely geared towards choice for the consumer and I think there is a strong sentiment in the marketplace that people are looking for some of these non traditional methods to ease into a single.
Experience, whether it be through leasing or through some of these other products. So we're excited is obviously just launched our partners are doing a great job. We're excited to support it to great revenues. It will be a great revenue center for us over time.
And I think it's naturally where the marketplace is starting to evolve its its not as one dimensional as it was say 20 or 30 years ago.
Thanks, guys that's it for me.
Our next.
<unk> is from Jenny Chandni, Luke Chen of Goldman Sachs. Your line is now open. Please go ahead.
Hi, Thank you for taking my question so in terms of.
Thinking long term, how do you think about managing homes as a business for you know basically ended.
Nokia JV partners. So essentially do you think about the body property management and is that something that you could.
Perhaps <unk> down the line.
Yeah, we never say never the one thing as we've looked at the business on itself.
It's not a high margin business generally property management and I think you really do want to have a strategic view as to why you would do that does it help you with your bottom line right can you mitigate costs over some broader subset of homes I think what we've really been focused on is creating an experience for our customers. That's very specific and that we can repeat.
The country through scale and high touch service and so for US if we were to ever entertain that down the road, we'd likely want to provide that same level of service and you could certainly see a world, whereas our ancillary offerings expand and some of the other things that we do with the customer it could be beneficial, but you'd have to have enough scale to where it really made sense I think as our current current viewpoint on it.
Third party space.
There is only so many hours in the day and we'd love to spend our time, making sure that were driving the best returns possible on our capital.
Got it and then on the rock point homes and you know these higher price point homes basically how was the geography different.
Even if it's inside of the same.
Geography.
Is.
Is the location differently you know from your current homes in that you know these quasi super close to transportation Coty doors.
The portfolio that you have how are these higher price point homes different from that standpoint.
It's a great question, one we've talked about a little bit at city and a few of the other conferences, but really it's they are meant to be a little bit more infill little bit higher price point, you might see a little bit higher end finishes we own some of this in our portfolio today.
Parts of the country, where maybe you get priced out of certain categories as well and you can think of markets like Seattle that way in terms of having really interesting opportunities to invest in.
Infill locations that maybe the price points are a little bit higher. It also is a nice complement to our partnerships with our builders and the partners in that space, where they have communities that might be tucked, a little bit more infill at higher price point in segments with with which would be well beyond what our average rents are today and so we view it is completely complementary to what we're doing.
As we've looked at the customer these higher price points of our own portfolio, we see very similar.
Statistics in terms of the types of decisions they make while in our portfolio and.
And we also know that there is a growing a room of preferential that are preferring to lease at these higher price point assets and so for US. We look at it is as a value add really across the chain and not all that different from what we currently own and operate just a little bit higher price points, maybe a little further in.
So does that give you any guidance does it make it harder from a maintenance standpoint.
I am sorry make it a harder I'm not understanding the question.
I guess, what I'm asking Dallas as you know given that the location is a big differentiator definitely cause us problem in montney.
<unk> point.
Oh no.
Randy.
No. Okay, I'm, sorry, I I it was it wasn't coming through very clear.
No. It still has all the same characteristics, we typically want to try and achieve when acquiring assets.
It could be that it's in a little bit more of a a higher price point segment within those kind of geographies and I'll give you. An example that I mentioned on the call. You know we operate in Phoenix really inside of the major rings right. The two O. Two is the 101 three ways, but there are different geographies within some of those submarkets.
South Scottsdale Submarket for example would fit great into this higher quality price point, where we own plenty of homes in Tempe, which is five to 10 minutes away just a little bit further south so I use that as an example, where it might just be a little bit more infill, but still have the same major arterials.
<unk> school scores and things like that it's just a little bit higher price point segment.
Got it thank you so much.
Youre welcome.
Our next question is from Nicholas Joseph of Citi. Your line is now open. Please go ahead.
Thank you.
Ernie guidance was unchanged, but if you look at the same store numbers. They were ahead of what the full year implies obviously the comps change and we're still early in the year, but how did <unk> trend relative to our guidance assumed and was it.
More of a company policy decision to wait until the middle of the year.
Or are things trending more towards the midpoint.
Yes, Nick I can tell you with a guidance perspective, we are trending a little bit better toward the higher end of the ranges, but it wasn't such a significant outperformance. So we felt this early in the year. It made sense for us to provide a guidance update typically in the past we havent done guidance updates in the first quarter to your point I wouldn't call. It a policy, but just the reality is.
We just provided guidance about 60 70 days ago and this year has been other than a couple nuance things that are kind of offsetting each other has been you know kind of what we expected it to be but as I said, we are we're trending a little bit better than the mid points. It makes sense at this point, we thought to.
To make a material change to guidance seen where we're at in the year is playing out for the most part as we expected at this point.
Thanks, That's helpful. And then can you provide an update to the California lawsuit, where where it is today and kind.
Kind of any updates.
From our conference back in early March.
Yeah, Hi, Nick Dallas, not a lot to update but just kind of by way of summary in late February we elected to remove the California State Court action to Federal Court. So that action now pending in Federal District Court in the Southern District of California. We're currently preparing our motion to dismiss the complaint, which we intend to file shortly.
And it's really in accordance with the court's schedule so under that schedule.
Once we do that the plaintiff has time to respond we have time to respond to that and so it will definitely take us into kind of the middle part of the year.
Outside of that you know as I've said before.
We have we think we have some pretty compelling arguments.
And we're just interested I guess in having our time in court to go into fend ourselves properly.
Thank you.
Thanks, Thanks, Mike.
Our next question is from Jeff Spector of Bank of America. Your line is now open. Please go ahead.
Great. Thank you and first congratulations on the 10 year anniversary.
Thank you Thanks, Jeff question absolutely.
Amazing 10 years.
First question I had was just on Charles.
Charles commented on.
Website traffic.
And it seemed like there was a moderation in the new lease rate growth I guess can you talk about that a little bit tie those together.
Yeah. So.
As I mentioned, we're seeing good demand occupancies maintaining 98%.
And then you look across kind of how we've been progressing in Q1, which is typically a slower period each month on the newly side we've seen improvement.
And so ending on the new lease side in Q1 of 2014 age is really strong and April has continued to accelerate and will be in the <unk>. So it's still early we haven't we're not completely close but we're still seeing good demand going into peak season, maintaining a strong occupancy turnover seems to be holding.
We see nothing but a kind of a good upside going into peak season.
Okay. That's great news, so equal youre, saying youre seeing a acceleration into peak and then I guess any particular market color you could you can add on to that Charles.
Yeah, you know.
It's been strong all around.
Markets are the kind of typical.
Phoenix lead on the new lease side has been really strong in Q1, north of 20% almost 23% north of 23%.
But what's been unique about this market and some of the demand.
Conversations.
Conversations we've had previously around people moving to Florida markets are really stepping up for us So south Florida.
On the newly side north of 20% and as well just around 29.
We're also seeing.
Biggest which has historically been strong that's still strong at 19% Atlanta has been holding well north of 15% in Tampa. So those Florida markets are really kind of in addition to what we've seen.
In.
Historically on the West and the same thing kind of on the renewal side, Phoenix Vegas, South, Florida, Seattle catching up after having some limitations, which is great and we're happy to see that in Atlanta, Tampa are also holding pretty strong on the renewal side. So.
It's great to see our typical markets that have been performing at kind of the top but to see the the.
Eastern Florida to do well.
As nice as well.
Great. Thank you very much.
Our next question is from Neil Malkin of capital One Securities. Your line is now open. Please go ahead.
Okay.
Good morning, everyone or good morning, thanks for the time.
I was wondering if you could talk about ancillary revenues I think previously you mentioned that you had a couple you know pretty pretty significant.
Initiatives Youre working on.
One being the smart.
Rent a.
Our systems and things along those lines can you just give us an update on how those things are going and if there's any more in the in the in the pipeline and what what you're kind of.
See as you're just as an example for Q like 'twenty two.
Quarterly run rate versus 19, given the things that you've done over the last.
A couple of years or plan to initiate that.
Yeah, great. Thanks for the question no. We're really proud of what we've been able to do on the ancillary side, we had our investor day.
Couple of years ago, when we said, we're going to start to build these programs and infrastructure.
Put a team around it they're fabulous team.
They are really executing well.
As you mentioned the kind of the hallmark of the ancillary is our smart home technology, we have that in all of our available homes as well.
Well over half of our homes.
And we continue to add every.
Every month is homes turn but what we've done there also is launch our video doorbell.
Oh.
P switches additional revenue as well as convenience for the resident and we're packaging that really in a nice way. So that's going to give us further growth that's going to go into the numbers that Ernie will talk about in a minute. The other things that we've worked on this year and last year going into this year is our pet programs really optimizing.
What we're doing there as well as thinking about future partnerships, we launched our filter program, which is a win win in terms of better air quality and energy savings for our residents, but it also keeps HV DC costs down for us in terms of overall maintenance.
We have insurance partnerships, we have a pest partnership with Terminix, which is a great partnership and they get a residents get a lower cost than they would find on their own and we get a revenue share with that.
Working on some pilots around utility management and energy as well as landscaping and landscaping is a big one as we look at it because this is a lease obligation that our residents need to do but we can give them a really easy.
Easy and affordable option that makes it a bit of a turnkey. So those are the hallmark of the programs that we're running in 'twenty two but as we look forward. We're building partnerships that we think are going to be real win wins.
Where are our residents as we think about whether it's gym memberships or are convenient food memberships.
In terms of thinking about high speed Internet, which are attractive things to our residents.
<unk>.
These are parts of the business that we hope to have a suite of things that we're building over time, that's going to help to get to that runway I'll give it over to Ernie to talk about kind of where we are in our numbers from ancillary perspective.
You referred to 2019, which was back to them getting to our Investor day, where we thought we'd be at a annualized run rate of about 15% to $30 million a year for ancillary items that team's done a great job to get us ahead of that pace.
We're going to deliver somewhere between 40 and $45 million of ancillary income. This year on 2022. So ahead of the $30 million annualized number we provided three years ago and thats been a ramp up here a little bit as we go through the year. So as we get into the fourth quarter to your question, Yeah, and that number's, probably closer to $12 million plus or minus so that puts us in a.
Good footing for continued growth and that's before any of these new items that Charles has talked about will start earning in later this year as well into next year or two so we do continue to see upside from ancillary income opportunities.
Oh, that's great.
Really great really helpful.
I guess another one for me.
In terms of the pathway and how that's going and maybe how big it could be or how much of a.
Component of the company it could be.
I think some advertisements for other.
Types of programs companies that are similar.
Wondering if.
Impact here you on the I guess market share or are built like addressable market the ability to capture.
You know as much as you maybe.
I had thought or.
So maybe impact your view on how much money to allocate to that or the you know to invest inclines in future funds anything you could talk about on the competitive landscape and how maybe that.
Near term would be great.
Let's just take a step back for a second and think about what that funnel looks like so there's.
Call It roughly 170 million households in the U S of which about $50 million plus or minus are in some form of a rental product today right.
And as you think about you know what.
I mentioned earlier around shifting preferences.
Millennial.
Kind of changes of behavior and the things that we're seeing even though our portfolio with rent to income ratios and things like that there's definitely a customer out there thats looking for flexibility.
Rising mortgage rates are probably only adding to some of these decision points for people right now about maybe putting off potential homeownership with with we'll see where rates go. So all lends itself to platforms and companies that can provide choice I think are going to carry really good momentum through kind of different parts of the cycle. So.
While we're early in our venture down pathways, we're certainly bullish on the prospects of offering choice and maybe a lifecycle for people in terms of the different stages of their lives and what they need and how to suit those needs best.
While helping people stay down payment light I think that's.
A very.
Kind of important characteristics of the types of things that we want to spend our time on which is how do we drive overall costs down for the consumer while creating an experience that looks and feels maybe close to homeownership and so.
We're bullish about where that's going it's early in the process as we disclosed at the end of the first quarter, we had call. It our first 50 homes kind of in that program.
Partners are learning a lot about the customer and I think we'll continue to see some of these shifting.
Opportunities I think the key thing for US is what do we believe that we can do.
Over time and distance and actually provide value through scale and we see this as one or two of those kind of categories, whether it's a rent to own structure.
A sale leaseback structure.
Maybe some of these alternative equity builder programs that are consumer friendly and we're already in the business and it should be an easy thing for us to to part with our offerings down the road.
Okay, Great and then just a little part B of that exact line, maybe I know you're probably limited in what you can say.
You know that we're on a public call, but do you think that this is also something that helps you almost.
Heavy embedded shield toward a legislative scrutiny.
Or you know sort of Twitter headline negative news that you're you're helping people get into homes that sort of added intangible benefit you guys kind of think about.
Well I think on itself, having you know.
An array of products available to consumers is just a good thing for the marketplace, we can't really predict where the shifting political wins are going to be.
B or what theyre going to focus on that we don't spend a lot of time worrying about that just worrying about running our business the right way and finding ways to solve problems that consumers are currently facing so at the end of the day no. We spent a lot of time thinking about great products, great processes. Charles just talked about all the exciting things. We're trying to focus on that are going to curate a better experience for the resident.
We think the results speak for themselves, but we're certainly ready to defend them.
What is that we do which is provide quality product at a much better price than you can find in the marketplace today.
Alright, Thank you for all the insight great quarter.
Thanks Neil.
Our next question is from Austin does Schmidt of Keybanc. Your line is now open.
Go ahead.
Great. Thanks, everybody I was wondering if you guys could provide a little bit of detail and context around the 80 basis point increase in bad debt as a percentage of rental revenue.
And maybe what markets are driving that and is this a concerning trend for you.
Yes, Great question. This is Charles here, let me, let me step back a little bit.
You think back over our collections bad debt second half of the year, we were really seeing a nice gradual improvement in all of our markets, including California.
And some of our residential peers have talked about this but going into Q1, we saw that the rental agencies were a little slow on their payments that were outstanding and you couple that with residents who are waiting on those payments and deciding not to pay that kind of hit us in Q1 is a bit of a surprise, especially in.
February .
And so we were really improving in all markets like I said up until December .
January is always a little off and then February was a bit of surprise now the good news is we bounce back some of those payments started to show up in March and in April .
So a little bit of time left but we've seen a significant increase because of the payments have shown up but you also couple that with what's going on in California, and that April payments and beyond are no longer eligible.
Rental assistance and so the psychology effect of that on the residents as they are starting to pay where they thought they might have a chance to some of them.
Had a chance to wait out for rental assistance. So April is encouraging as I said all other markets are gradually getting back to normal if you think back to kind of how we thought about the year. We knew the first half would be a little more challenging from a collection of bad debt and we thought that the second half is where we start to catch up so we don't see it as a.
A major concern, but we're going to keep an eye on it and we'll see how we progress with California going forward.
Got it.
A helpful clarification, and then I'm just curious if theres anything holding holding you guys back from driving higher turnover and Ernie I believe you said, it's kind of.
You know the renewals you are sending out below new leases is the right thing to do so should we take that as your self limiting increases.
Or or <unk>.
Should we expect and have you assumed that those will continue to increase as we get into the peak leasing season.
Yeah. This is Charles I'll take that one we've really taken a balanced approach and we believe it's the right approach given.
The tenure of our residents living at home families all of that.
Also keep in mind that our renewals are priced 90 days in advance and so if you go back over the last year or more every month, we have improved on our renewal pricing.
And we will continue to get better as we look out to kind of May and June were asking over 10% on our ask and you look at our Q1 renewal spreads at nine 7% as I mentioned on newly side, we've actually seen.
More acceleration in April on renewals into the mid 10% range. So we think there will be continued improvement we will see how high that goes but the goal here is to really take a balanced approach.
And be thoughtful around our resident experience and keep a resident who has good paying in the home for a long time, a 10% increase is really good now we have that.
That loss to lease and as things turn we will capture that and we're going to keep pushing and improving the renewal rates when we can capture it.
No very helpful. And then just this last follow up to that is can you walk through the puts and takes around the impact that lower turnover has on guidance versus the increase that you assume for the full year. Because obviously you know on one hand, you're recapturing that much higher new lease rate than what you're achieving on renewals.
But on the flip side, you're incurring higher turn cost you know and perhaps frictional vacancy. So how do those two kind of balance out and depending on how that plays out.
And in the moment, if we have lower turnover, it's gonna have a better impact for our results and that will have higher occupancy because we'll have lower downtime from vacant units.
And we will have lower expenses, because it will be avoiding turnover costs and then it just really just depends on what the differences between that renewal rate you are getting in that new lease rate in terms of the long term earn in from that.
Bill has pointed out as everyone I'm sure has seen our new lease rates have been higher than our renewal rates for a period of time. So we think it's the right call from an economics perspective, we think it's the right call in terms of dealing with with our with our with our residence.
And for Us as Charles alluded to in the beginning of the of all of your questions, where bad debt came in a little bit higher than we would have expected at the beginning of the year here in the first quarter were more than offsetting that by better rate, we're doing better on the rate side than we expected to both on new lease as well as on renewals, we had high expectations, but we've exceeded those expectations in the first quarter nickel.
Turning to trend that way and we've done a little bit better on occupancy as well for the reasons I just described.
Very helpful. Thanks, guys.
Our next question is from Brad Hoffman of RBC capital markets. Your line is now open. Please go ahead.
Yeah. Thanks, good morning.
Acquisition cap rates I noticed they ticked up by about 30 basis points from the low end of third quarter I'm curious has competition abated at all.
Or what else would you attribute that change too.
Still early to say that there is an argument around rising mortgage rates and creating some new supply.
It comes down to kind of shift mix and what we're seeing in the marketplace generally I wouldnt read too much into it either way.
But the early in the year as I mentioned earlier on the call. There is a little less supply than you typically see you see the spring and summer seasons, you typically see your supply creep up we will keep an eye on it and keep you guys posted but you know right now going in cap rates still pretty good.
Okay got it.
Then on the third party homebuilder pipeline I know it went up a few hundred homes for last quarter. The 22 deliveries went up as well, but I saw the 23 went down and then there were a 167 cancellation. So I was wondering if you could just give some color on the puts and takes there.
Yes. It is in the 23 and the cancellations are lineup with each other there was one project that we're moving forward with the builder and as they were completing the work on zoning. It turned out it wasn't going to work out for us and that's one of the nice things. We like about this program is that there is that flexibility to get locked into something that may not work. So we don't expect cancellations this quarter, but we did happen to have when they canceled until 'twenty three deliver.
That was the project ended up canceling on us.
We'll just move forward and as you saw we grew the pipeline pretty robustly beyond that.
Okay. Thank you.
Yeah.
Our next question from Ken you can call them back. Your line is now open. Please go ahead.
Hey, guys. Thanks for taking the questions. So just kind of going back to acquisitions in the quarter could you just walk us through your expected yields.
Get back the envelope map five 3% cap rate same store NOI margin of 70% Youre rents roughly 30% higher than your existing so just kind of curious what sort of rent growth you're baking in going forward.
On new acquisitions.
Yes.
Well I think it's safe to say that like in your models.
It varies by market and your year, one assumptions are going to be a little bit more aggressive than your other assumptions, but at the end of the day kind of mid to high single digits, probably for you one is kind of.
But your base case, and then you just got it you have to mirror the product with the sub market and everything else that you are buying so it can it can kind of go from there.
But you're right in that.
Those are really healthy cap rates going in considering where rate growth has been and where it's likely going.
It could be pretty good yields you're skewing your suite.
Yes.
Got it and then shifting gears here I guess specific to markets. So take a look at Denver and Seattle, There's no improvement quarter over quarter in occupancy I'm. Just curious is this still a function of our renovation is taking longer than expected.
It's been a really a function of two things one is that we continue to buy in those markets into yet as we talked about last quarter. We've made some improvements across many of our markets in terms of being able to write it down a little bit quicker, but theres still some challenges in the with regards to ER.
Getting the vendors onboard our gcs to help us with that and those are two markets, where we've seen a little bit more challenged but we're starting to make some good steps in moving the right direction for both of those.
Got it and just one final one for me is to insurance expenses were up five 1% year over year same store.
What should we kind of expect for the balance of the year, given you're supposed to hear about it.
Yes, we actually had a pretty flat renewal with regards to.
Our property insurance, which is the vast majority and certain liability lines or low double digits, but the vast majority of the cost coming through on insurance is in the property line. So I think you actually see that get a little bit better as we get through the rest of the year because we still had the first two months of the year that we're comparing to the prior insurance policy New insurance policy on the property side is flat year over year. So I think youll see some improvement in our year.
Year insurance growth will decline from what you saw in the first quarter.
Got it takes some time guys.
Thank you.
Our next question is from Colin Santa Barbara of BMO Capital. Your line is now open. Please go ahead.
Hi, Thanks for the time just wanted to.
Touch on the builder relationships and the contracts there could you just remind us how the pricing works.
When you lock in the prices per homes, and how that fluctuates if at all with <unk>.
<unk> cost of capital, particularly on the debt side.
Yeah, so from a high level typically what we do is we'll structure an agreement where we lock in pricing.
Prior to the obviously the project getting going through zoning and some of those entitlement work as Ernie mentioned earlier.
We have a little bit of some protections built in for both our builder partner and for US. So in a rising cost environment. We have an out if things get to a point, where we're not comfortable with what that price needs to be based on a variety of what I would call kind of open book factors and then on the flip side. If we are able to be costs in a couple of key areas we share in some.
Those wins in our in our entry point gets a little bit better so.
We try to make these contracts is flexible for us and for our partner as we can while locking in conviction that we're all in on the opportunity subject to that range in pricing in that range is pretty tight in terms of where final pricing ends up and then we've already.
Do what you would imagine we underwrote.
Initially to call it a worst case scenario that we like the price.
No matter, what within that kind of specific range. So.
So far so good in terms of the majority of how these structures are gone and then we're reviewing.
A lot of other projects right now so excited about what the future will hold.
Thank you and then just to follow up.
On the qui Tam issue.
Recognizing your confidence and what May have happened in California going forward, but curious if you've had any indications or a potential.
Investigations are questioning by anybody on those same issues that had been alleged in California, and other geographies outside of California.
No we have not.
Great. Thank you.
Thanks.
Our next question is from Dennis Mcgill Zelman. Your line is now open. Please go ahead.
Yeah.
Alright, Thank you guys.
Ernie can you just remind us what the definition of how you guys calculate loss to lease just mathematically with the the way you're estimating the both the market and the latest rate you're using there.
Yeah. So we just take where we see current market rates across our portfolio. It's a little trickier for us in the multifamily space because each of already 2000 homes is unique.
But each each month, we reprice a good chunk of those through a renewal process and so we take a snapshot of R. R.
Our revenue management system as to where we think market rates are and so we're comparing that market rate number to where our current rents are in our portfolio based on the leases that are enhanced leases that are signed and people living in those homes.
And that would include anyone that just signed at least essentially being mark to market so anybody that.
That wasn't signed in the recent period.
It would be higher than that portfolio average.
Yeah, that's why we have a loss to lease yes, where we're taking the leases in hand as they are for the quarter were there at compared to where market rates are so they werent certainly in an environment now that people are signing leases now are <unk>.
Higher than the ones that were expiring.
Yeah, Yeah that I understand that I'm, just saying, obviously that you have signed leases in the quarter and that was one theory would be mark to market those new leases does the 20% loss to lease treat those as mark to market or exclude those from the comparison.
No because leases in January are potentially had some market increases. So we look at it all the leases Dennis so absolutely we're looking to them to the most recent releases.
Okay got it that's helpful.
And then going back to just the rock point JV the new one.
Previously in the past that it always been I think generally thought of in the industry that higher priced homes were a little more challenging to get the right yield the right return how do you guys think about that is I didnt evolution for you to to get to.
I believe you can get the same yield and return on these homes is the lower priced homes or is there a different kind of risk reward balance that you're looking at there.
Yes, it does.
To be clear they are a little bit different from a return profile, so and we've been pretty clear about this we kind of see these homes coming in in that kind of low fours to mid fours from a cap rate perspective.
The other key thing here Dennis is.
Like more expensive product does not equal bigger product. That's also an important differentiator you want to make sure that from an operating perspective keep your square footage is in check so that you don't get into trouble, having bigger homes. It costs more to turn and obviously on your rent on a per square foot basis, you're going to be a little bit more elevated but from a from a total year.
<unk> perspective from a customer perspective from an ancillary opt in kind of services perspective, we're really intrigued by this customer and then we're going to look to get a little bit smarter in the category through our partnership with rock point, and hopefully well into the future and to that point Dennis that's one of the reasons why we're doing this at a joint venture because we are in property management fees in asset management fees that help.
Offsetting the lower initial yield that we'd expect to get on these films as Dallas described and then we also have the opportunity to earn a promote we think the risk adjusted return on a per home basis is going to be compelling compared to our regular portfolio, but we do recognize that it was probably slightly lower yielding home at the outset, but that's offset by our opportunity to earn fees and actually puts us in a position with the price strong reckoned.
<unk>.
We might be doing on our balance sheet.
Yes, It makes sense and then one more quick one for you Ernie It looked like there was some movement in the swaps during the quarter, maybe taken a little bit more floating at this point versus before is that just timing or can you maybe just walk through what the impact was of that.
Yes, that's exactly timing, we priced our bond offering on March 25th and we broke the swap that was associated with the debt we're going to pay off at that time. So we didn't take any pricing risk or interest rate risk, but we actually didn't close on the bonds until April 5th Thats. When we received the cash.
So we get right back to where we were before in terms of basically being 90, 899% hedged. We just had over the quarter. It looks like it went down to 92% because we broke the swap before the bonds actually closed a few days later.
Makes sense.
Okay. Thanks, Good luck guys.
Thanks.
Yeah.
Our next question is from <unk>.
Your line is now open. Please go ahead.
Hey, Thanks for taking my question.
Ernie I wanted to go back and clarify what.
Was the bad debt assumption.
The improvement in bad debt.
Part of the year and what is that now has that changed at all in light of what's going on in southern California.
Yeah, we ended last year in the fourth quarter at about one 1% bad debt was what we reported we thought we'd have a number that was closer to that we thought it would go up a little bit as Charles mentioned earlier, you may have heard January 10, and December tend to be ones that are a little bit more.
Challenge for bad debt versus the rest of the year. So what surprised US was the February activity. So we thought we'd be a little bit higher than the one one but not as high as the one eight that we reported yeah too early to say at this point a handoff of our full year.
Expectations for bad debt has changed as Charles alluded to where we seem to be getting back on track as we got into March as we're seeing April I, certainly don't want to call. It a year of this early and if we were surprised in February I hope it won't be surprised later in the year or maybe it will be surprised to the upside what I will say as I mentioned really hand out we're doing better on the rate side in the occupancy side, it's certainly helping to offset that.
So we therefore feel very good about our guidance and I don't change what I said earlier that we're trending towards the higher end of our guidance range when it comes to something like revenues.
Got it got it understood okay.
On the list of Blue keeps going to court is that going to clustered DNA at all you're comfortable with the range still here.
The reason for the pickup perhaps upper end, there might be a little bit more on the G&A side.
And now it's kind of gone through the process. We expect that when you say, it's going to court, we have to file we will file our motion to dismiss but then there'll be some activity that happens beyond that of Dallas described.
So we're not seeing anything different at this point that would tell us we need to do anything differently with our guidance, we feel very good about where we're at with the with the case, but it's going to be a process but.
Nothing should be read into into that other than we talked about.
Got it got it okay. Thanks.
Maybe one for you here.
Certainly seen a lot in this industry evolved here the last 10 years more recently, though it seems like the industry do you guys wait a bit.
The difference in terms of the narrative with the oversight of the regulation.
<unk>.
Lately. It appears there's been a bit of a shift hearing more of the we're helping to solve their housing needs you have the pathway JV I guess I'm curious are you at the point now where maybe the industry will start getting a bit more offensive in the messaging and dictating the messaging of bps versus having someone else to get the messaging.
Which I guess you had a point now where it seems like sometimes the value proposition of the quality of the homes, what you're providing often gets muffled by all the other chatter going on around us.
Yeah.
I mean, we obviously are aware of kind of shifting narratives that are out there, but they they shift and I think that's the key thing. If you go back we are celebrating our 10 year.
This month then.
10 years ago. The narrative was we were saving housing companies like ours that were coming in and we talked about this a little bit at our event, we used to have neighbors come up and give us big hugs for fixing.
Fixing dilapidated homes that were in their neighborhood.
Now as you were in a period, where there is rising housing costs and everybody wants to figure out, what's causing theres a lot of times.
Uh huh.
You just the narrative is going to shift I think is the easiest way of saying it like.
We're not too focused on the moment I'm really focused on big picture what is it that we do we buy quality housing we produce quality housing with our partners and the goal is to create flexibility of choice. So if that's a defensive tone I guess you could call it that except that it's really offensive in the sense that we are totally total conviction.
Around the business model, it's been here forever no one's done it professionally and we're going to continue to find ways to do it even better fashion, whether it's through some of these other products and being more maybe I'm sensitive to the fact that downpayment is hard for people to come by sure that just means the industry is evolving and we're happy really to be a participant in that I think we do.
Getting better at talking about what it is that we do beyond just buying great real estate and offering great services. So some of that is the qualitative stuff and it doesn't matter, it's important that as an industry, we get the narrative out there about what it is that we do as companies.
But you know at the end of the day, it's really about just running a great business. The results I think spoken for themselves at least in the five years that we've been public and I think us evolving as a company just shows that we're growing and we're finding ways to invest capital in meaningful ways that I think provide other alternatives for people because the lease isn't for everyone necessarily all the time either so.
We want to explore those avenues and figure out ways to make the company better overtime.
Got it got it.
Keep up the pipe you've come a long way thanks for the time.
Thanks Sandra.
The next question is from Linda Tsai of Jefferies. Your line is now open. Please go ahead.
Hi regarding increased traffic to your website do you have a sense of who the demographics are and if they vary from that plus 120002 income 39 year old.
I guess, that's another way of asking if you see your total addressable market shifting.
Yes going through the website traffic, we don't see those specific demographics, but we do.
C R.
Application traffic come in and that's how we understand.
Household income as well as the age demographics still look similar 39 years old although on the household income. We're seeing continued increase were almost 130000 household income now with our current rents that puts us at almost 555, 4%.
<unk> ratio.
Yes, yes.
Times, plus and so.
Really healthy.
Demographics strong demand as we talked about.
What I would clarify is some of that traffic is our existing residents coming back because we're driving traffic there as well as we're looking to try to build the ancillary part of our business so little nuance to that piece, but overall, we're seeing the same demographic. We also.
Survey our residents that are moving in its a smaller survey, but things haven't really changed there significantly about 80% have lived in a single family before and Thats up slightly from prior quarter.
And the main reasons that they're moving is they're looking for space, which is our business with single family Backyards and extra bedrooms on a price per square foot really affordable and they want to be closer to work and it just it and solidifies our business model that we're in the right locations offering the right products. So we triangulate on all of them.
That information to make sure that we're buying in the right areas and doing the right things.
Thanks, and then is there a way to quantify the cost savings or margin improvement that occurs for mobile maintenance request versus call centers.
Then besides reduced turnover, what do you see as potential margin drivers going forward.
Yes, it's the right question and we're tracking that closely and we're seeing that our productivity of our team is higher where they can get to more.
Orders each day because of that so we haven't we haven't reported yet publicly as to what that's meant from a margin increase perspective in terms of savings will have on personnel and other as well as on maintenance costs. It's the right question and as we have more data and we have.
We're backing we will certainly be able to provide some more color on that.
And we do have data as we track our customer satisfaction scores that come from that are our residents clearly like the experience of the mobile app.
In terms of you reduce the number of trips as Ernie talked about.
That's a quantitative difference that we're seeing in our ratings are always high on our work orders in the.
Kind of the 4647, maybe higher and we're close to $4 nine on them mobile maintenance App, which is really great.
Thanks.
The next question is from Alan Peterson of Green Street. Your line is now open. Please go ahead.
Hey, guys. Thanks for the time just wanted to follow up with an additional rock point J P question.
I appreciate all the insight you guys have provided so far just wanted to see if you could touch on or quantify any differences in how youre thinking about margins between the higher price point homes relative to the rest of the portfolio and is there any change in terms of the.
Statistics on average length of stay or move out to buy trends for those higher price point homes.
Yeah, when we really compare to Alan as those types of homes, we have in our portfolio today. So from a margin perspective on a like for like basis, meaning in the same market.
Would expect you to have higher margins.
A couple of hundred basis points because of the higher rent levels that theyre going to have because it we would expect a similar to maybe just a slightly increased cost with garza repairs maintenance doesn't have higher taxes, but those are those kind of flow through from evaluation perspective. So it was really going to come down to is where the mix of where we buy those homes in terms of where that will be the biggest determinant of overall, how that joint venture does through March.
Perspective.
From that perspective, and then remind me the second part of the question was.
In terms of just average length of stay is it a touch higher or lower relative to the rest of the portfolio or move out to buy trends are that was a touch higher or lower.
Forget for the homes, we have currently in our portfolio, they're pretty consistent where we didn't see him an immaterial difference depending on the market, sometimes you see one's a little bit higher one's a little bit lower than the current portfolio. There wasn't much of a difference there and then again that gave us some conviction and certainly the folks of rock point as it got excited about the opportunity.
Got it thanks, and then just a follow up.
Another question from me in terms of the amount of capital that is looking for.
You know that's a bar today, obviously, it's come under come into the spotlight some regulators and from local politician state politicians, but have you noticed any form of legislation or even new policies. Among homeowners associations that are starting to deter your ability to buy new homes within any given market.
No not really I mean, you occasionally have an issue with the with an association, where maybe they're trying to limit.
The amount of rentals or have some sort of a seasoning period before somebody can do rounds, but no nothing nothing material.
Perfect. That's it for me I appreciate it.
Thank you.
Our final question today is from Jade Rahmani of <unk>. Your line is now open. Please go ahead.
Hi, This is Sarah Obeidi on for Jade.
Are you facing any supply chain issues impacting the business in terms of ability to execute and complete repairs or renovations.
Yes, nothing material in terms of supply chain.
<unk> talked about.
Earlier, theres, a little bit of inflationary pressure on cost.
But in terms of supply chain no. We saw early on in the pandemic. There were some issues around appliances, we had alternate vendors that we could go to that helped that.
As Ernie talked about there's a little bit in some of our markets. As we are buying just trying to get <unk>.
But thats specific to a couple of markets other than that no real major supply chain challenges.
Got it thanks for taking my question.
Thank you.
We have no further questions. So I'll hand back to our high school that closing remarks.
We want to thank everyone for joining the call and we look forward to seeing everybody at NAREIT and Jim. Thanks.
This concludes.
Today's call. Thank you for joining you may now disconnect your line.
Okay.
Uh huh.
Okay.
Yes.
Okay.
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Yes.
Okay.
Yeah.
Okay.
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