Q3 2023 Invitation Homes Inc Earnings Call

Speaker 1: Greetings and welcome to the invitation homes third quarter 2023 earnings conference call. All participants are in listen only mode at this time. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. As a reminder this conference is being recorded. At this time I would like to turn the conference over to Scott McGwacklin Senior Vice President of Investor Relations. Please go ahead.

Greetings and welcome to the invitation homes third quarter 2023 earnings conference call all.

All participants are in listen only mode. At this time should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

As a reminder, this conference is being recorded.

At this time I would like to turn the conference over to Scott Mclaughlin Senior Vice President of Investor Relations. Please go ahead.

Speaker 2: Good morning and welcome. I'm here today from invitation homes with Dallas Tanner, chief executive officer, Charles Young, president. Good morning.

Good morning, and welcome him here today from invitation homes with Dallas Tanner, Chief Executive Officer.

Charles Young <unk>.

President and Chief operating officer.

Speaker 2: John Olson, Chief Financial Officer, and Scott Eisen, Chief Investional.

John Olson Chief Financial Officer.

And Scott Eisen, Chief investment Officer.

Speaker 2: Following our prepared remarks, we'll conduct a question and answer session with our covering cell side amp.

Following our prepared remarks, we will conduct a question and answer session with our covering sell side analysts.

Speaker 2: In the interest of time, we ask that you limit yourselves to one question. And then re-Q, if you'd like to ask a follow-up question.

In the interest of time, we ask that you limit yourselves to one question and then re queue, if you'd like to ask a follow up question.

Speaker 2: During today's call, we may reference our third quarter, 2023, earnings release and supplemental information.

During today's call, we may reference our third quarter 2023 earnings release and supplemental information.

Speaker 2: This document was issued yesterday after the market closed and is available on the Investor Relations section of our website at www.invh.com.

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.

Speaker 2: Certain statements we make during this call may include board looking statements relating to the future performance of our business.

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 identified.

Speaker 2: by the natural results, liquidity and capital resources, and other non-historical states.

Speaker 2: which are subject to risks and uncertainties that could cause actual outcomes or results to different materially from those identified.

Right.

Speaker 2: We describe some of these risks and uncertainties in our 2022 annual report on Form 10K. In other filings, we make with the SEC from time to...

We describe some of these risks and uncertainties in our 2022 annual report on Form 10-K and.

In other filings, we make with the SEC from time to time.

Speaker 2: Invitational homes does not update board looking statements and expressly this claims any obligation to do so.

Invitation homes does not update forward looking statements and expressly disclaims any obligation to do so.

Speaker 2: We may also discuss certain non-GAAP financial measures during this call.

We may also discuss certain non-GAAP financial measures during this call.

Speaker 2: You can find additional information regarding these non- GAAP measures , including reconciliations to the most comparable GAAP measures in yesterday's...

You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures in Yesterdays earnings release.

Speaker 2: I'll now turn the call over to Dallas Tanner, our chief executive of

I'll now turn the call over to Dallas, Tanner, our Chief Executive Officer.

Speaker 3: Good morning and thanks for joining us. At Invitational Homes, we've worked hard to build and enhance our platform over the last dozen.

Good morning, and thanks for joining us at invitation homes, we've worked hard to build and enhance our platform over the last dozen years.

Speaker 3: The foundation of which is our people, our systems, and our unmatched scale. We believe our platform is industry-leading and difficult to replicate. And as a result, offer significant value for our stakeholders, residents, and partners.

Foundation of which is our people our systems and our unmatched scale, we believe our platform is industry, leading and difficult to replicate.

As a result offer significant value for our stakeholders residents and partners.

Speaker 3: It allows us to drive strong performance across diverse geographically dispersed assets while delivering meaningful

It allows us to drive strong performance across diverse geographically dispersed assets, while delivering meaningful returns.

Speaker 3: We've invested heavily in our platform to provide the highest level of professional service, flexibility, and convenience to our residents.

We've invested heavily in our platform to provide the highest level of professional service flexibility and convenience to our residents helping.

Speaker 3: helping them to live in the home neighborhood and school system of their choice. We're proud of what we have- and we're proud of what we have-

Helping them to live in the home neighborhood and school system of their choice.

We're proud of what we've achieved in this regard.

Speaker 3: In addition to the power of our platform, payable fundamentals have continued to drive strong tailwinds for our...

And in addition to the power of our platform favorable fundamentals have continued to drive strong tailwind for our business in.

Speaker 3: In particular, these include the continuing supply and demand imbalance we frequently mentioned.

In particular these include the continuing supply and demand imbalance, we frequently mentioned.

Speaker 3: By most estimates, the United States continues to face a housing shortage of several million units.

By most estimates the United States continues to pace of housing shortage of several million units.

Speaker 3: At the same time, the demand for single family homes for lease continues to remain robust due to favorable demographics, a growing desire for flexibility and convenience, and soaring mortgage rates that make leasing one of our homes much more attractive and affordable than owning a similar home.

At the same time the demand for single family homes for lease continues to remain robust due to favorable demographics, a growing desire for flexibility and convenience and soaring mortgage rates that make leasing one of our homes much more attractive and affordable than owning a similar home.

Speaker 3: According to John Burns, it's now over $1,100 a month cheaper to lease than to own on average in our markets. That's over $13,000 a year in savings that our residents can use to help their families thrive, while at the same time benefiting from the choice and flexibility of leasing a home.

According to John Burns, it's now over $1100, a month cheaper to lease than to own on average in our markets. That's over $13000 a year in savings that our residents can use to help their families thrive.

While at the same time benefiting from the choice and flexibility of leasing a home.

Speaker 3: We believe we remain well positioned to meet this growing demand for single family homes for lease.

We believe we remain well positioned to meet this growing demand for single family homes for lease.

Speaker 3: In addition, we remain committed to bringing new supply to the marketplace through extensive home building relationships.

In addition, we remain committed to bringing new supply to the marketplace through our extensive homebuilding relationships.

Speaker 3: Our multi-channel growth strategy allows us to nimble deploy capital across a variety of acquisition channels, which allows us to be opportunistic depending on the channel that's most attractive in the various real estate cycles.

Our multichannel growth strategy allows us to nimbly deploy capital across a variety of acquisition channels, which allows us to be opportunistic depending on the channel. That's most attractive in the various real estate cycles.

Speaker 3: During the third quarter of 2023, we took advantage of several unique external growth opportunities. This included our previously announced portfolio acquisition of 1,870 wholly owned homes for a contract price of $650 million in July . As we disclosed, we acquired the portfolio at a year one yield in the mid-fives and we anticipate this to grow into the sixes within the next year.

During the third quarter of 2023, we took advantage of several unique external growth opportunities. This included our previously announced portfolio acquisition of 1870 wholly owned homes for a contract price of $650 million in July.

As we disclosed we acquired the portfolio at a year one yield in the mid fives and we anticipate this to grow into the sixes within the next year.

Speaker 3: Progress to date on marking the portfolio's rents to market, increasing occupancy, and selling non-core homes has been right in line with our expectations.

Progress to date on marketing the portfolio's rents to market, increasing occupancy and selling noncore homes has been right in line with our expectations.

Speaker 3: In addition to the large portfolio transaction, we also acquired another 387 wholly owned homes during the third quarter through those various channels at an average cap rate of 6%.

In addition to the large portfolio transaction. We also acquired another 387 wholly owned homes during the third quarter through those various channels at an average cap rate of 6%.

Speaker 3: We effectively funded these acquisitions through the sale of 397 wholly-owned homes at an average disposition cap rate of approximately 4%.

We effectively funded these acquisitions through the sale of 397 wholly owned homes at an average disposition cap rate of approximately 4%.

Speaker 3: The 200 basis point spread between acquisitions and dispositions once again illustrates our unique ability to creatively recycle capital out of older, higher dollar value homes and into newer, higher quality product. We believe our portfolio makeup affords us this opportunity to creatively recycle capital in this way for some time to come.

The 200 basis point spread between acquisitions and dispositions once again illustrates our unique ability to accretively recycle capital out of older higher dollar value homes and into newer higher quality product.

We believe our portfolio makeup affords us this opportunity to Accretively recycle capital in this way for some time to come.

Speaker 3: In closing, I'd like to express my thanks to our dedicated associates. Through their hard work, Invitation Homes has continued to achieve significant milestones and deliver strong financial performance.

In closing I'd like to express my thanks to our dedicated associates through their hard work invitation homes has continued to achieve significant milestones and deliver strong financial performance.

Speaker 4: As we move forward, we remain confident in our ability to navigate these challenges, capitalize on opportunities, and leverage our platform in order to drive sustainable growth and value for our stockholders. Thank you for your continued trust and support. With that, I'll pass the call on to Charles Young, our President and Chief Operating Officer. Thanks, Dallas. To start, I'd like to echo your comments and thank our associates for delivering another great.

As we move forward, we remain confident in our ability to navigate these challenges capitalize on opportunities and leverage our platform in order to drive sustainable growth and value for our stockholders.

Thank you for your continued trust and support.

With that I'll pass the call onto Charles Young, our President and Chief operating officer, Thanks, Dallas to start I'd like to Echo your comments and thank our associates for delivering another great quarter. This includes the hard work by our teams to smoothly onboard to nearly 1900 homes, we acquired in July.

Speaker 4: This includes the hard work by our team to smoothly onboard the nearly 1,900 homes we acquired in July .

Speaker 4: Our premier size and scale help make acquiring large portfolios like this one relatively programmatic, while it is our amazing associates who ensure the transition is seamless and the ongoing resident experience is worry free.

Premier size and scale help make acquiring large portfolios like this one relatively programmatic while it is our amazing associates, who ensure that transition as seamless and the ongoing resident experiences worry free.

I will now walk you through our third quarter operating results.

Speaker 4: Favorable fundamentals and strong execution led to same store NOI growth of 4% year over year in the third quarter of 2023.

Favorable fundamentals and strong execution led to same store NOI growth of 4% year over year in the third quarter of 2023 in line with expectations.

Speaker 4: Same store core revenues in the third quarter grew 6%.

Same store core revenue revenues in the third quarter grew 6% year over year. This increase was driven by average monthly rental rate growth of six 2% as well as a 20 basis point improvement in bad debt.

Speaker 4: This increase was driven by average monthly rental rate growth of 6.2%, as well as a 20 basis point improvement in bad pay.

Speaker 4: We're pleased to see progress here for the second consecutive quarter, including within Southern California, where court times have meaningfully improved since the first part of the.

We're pleased to see progress here for the second consecutive quarter, including within Southern California, where core times have meaningfully improved since the first part of the year.

Speaker 4: In the meantime, we continue to attract high-quality residents with our great homes and professional

In the meantime, we have continued to attract high quality residents with our great homes and professional service for the trailing 12 months, our new residents earned a combined household income of over $142000 a year, representing an average income to rent ratio of five two times.

Speaker 4: For the trailing 12 months, our new residents earned a combined household income of over $142,000.

Speaker 4: Representing an average income to rent ratio of five point

Speaker 4: The financial strength of our customer is also evidenced by our industry-leading partnership with Isuzu that we announced in July .

Our financial strength of our customer is also evidenced by our industry, leading partnership with <unk> that we announced in July.

Speaker 4: In just this short time, we've helped enroll over 160,000 of our residents onto Azusa's free credit reporting program.

And just the short time, we've helped them roll over 160000 of our residents onto his uses free credit reporting program.

Speaker 4: About half of these residents have already seen an improvement in the credit score with an average increase of over 20%.

About half of these residents have already seen an improvement in the credit score with an average increase of over 20 points.

Speaker 4: In addition to attracting high quality residents, they continue to stay longer.

In addition to attracting high quality residents. They continued to stay longer with US length of stay is an indicator of overall resident satisfaction, which we're pleased to see has increased again this past quarter to an average of 36 months.

Speaker 4: Length of stay is an indicator of overall resident satisfaction, which we're pleased to see has increased again this past quarter to an average.

Speaker 4: We believe our Premier ProCare service, along with the many convenient and value-added services we offer, help contribute to

We believe our premiere pro care service, along with the many convenient and value add services, we offer help contribute to this longevity.

Speaker 4: The newest offering that we have just started to roll out is Bondo.

The newest offering that we have just started to rollout as bundled internet. We're excited to partner with one of the nation's largest providers to offer high speed Internet and digital media to over a third of our residents across the country.

Speaker 4: We're excited to partner with one of the nation's largest providers to offer high-speed internet and digital media to over a third of our residents across the country.

Speaker 4: Once again, our scale allows us to provide this essential service at a substantial discount to what our residents might otherwise pay on their own.

Once again, our scale allows us to provide this essential service at a substantial discount to what our residents might otherwise pay on their own.

Speaker 4: Turning back to our same store results, third quarter 2023, core expenses increased 10.2% year-over-year.

Turning back to our same store results third quarter 2023 core expenses increased 10, 2% year over year. This included year over year increases of 11, 7% in fixed expenses, and an 8% and controllable expenses.

Speaker 4: This included year-over-year increases of 11.7% in fixed expenses, and an 8%...

Speaker 4: The latter of which was primarily driven by an increase in turnover compared to the historic lows of last year, along with the costs related to the progress we're making on our lease compliance.

<unk> of which was primarily driven by an increase in turnover compared to the historic lows of last year, along with the costs related to the progress, we're making on our lease compliance backlog.

Speaker 4: Next, I'll cover same-store leasing trends in the third quarter. Demand in our markets remains strong through the end of peak.

Next I'll cover same store leasing trends in the third quarter demand in our markets remained strong through the end of the peak leasing season.

Speaker 4: As we've noted previously, we are seeing a return to more normal

As we've noted previously we are seeing a return to more normal seasonality, which we believe represents a much healthier and sustainable footing. Following the extraordinary market rent growth we saw in the past few years.

Speaker 4: which we believe represents a much healthier and sustainable footing following the extraordinary market rent growth we saw in the past.

Speaker 4: Nevertheless, our third quarter 2023 same store leasing results are still well above pre-pandemic.

Nevertheless, our third quarter 2023 same store leasing results are still well above pre pandemic norms. This includes average occupancy in the third quarter of 96, 9% or 120 basis points higher than our 2018 in 2019 third quarter averages. In addition, blended rent growth in the third quarter of 2002.

Speaker 4: This includes average occupancy in the third quarter of 96.9% or 120 basis points higher than our 2018 and 2019 third quarter average.

Speaker 4: In addition, blended rent growth in the third quarter of 2023 was 6.2%, or 170 basis points higher than our 2018-2019 third quarter average.

93 was six 2% or 170 basis points higher than our 2018 2019 third quarter averages.

Speaker 4: Third quarter 2023 blended rent growth of 6.2% was comprised of renewal rent growth of 6.6% and new lease rent growth of 5%.

Third quarter 2023 blended rent growth of six 2% was comprised of renewal rent growth of six 6% and new lease rent growth of five 2%.

Speaker 4: We are pleased to have seen an acceleration in renewal rent growth each month in the third quarter.

We're pleased to have seen an acceleration in renewal rent growth each month in the third quarter of 2023.

Speaker 4: Renewal Rencroft is further accelerating with October's preliminary.

Renewal rent growth is further accelerating with october's preliminary results.

Speaker 4: This represents a strong performance for the third quarter that is once again attributable to our outstanding

This represents a strong performance for the third quarter that is once again attributable to our outstanding associates as we approach the end of the year. We remain focused on continuing this momentum and finished the year strong.

Speaker 4: As we approach the end of the year, we remain focused on continuing this momentum and finishing years.

Speaker 4: proud of our teams for their tremendous contributions this past quarter and the great effort I know they'll deliver during the remainder of the year.

I am proud of our teams for their tremendous contributions this past quarter and the great effort I know they will deliver during the remainder of the year.

Speaker 4: I now turn the call over to John Olson, our chief.

I'll now turn the call over to Jon Olson, our Chief Financial Officer.

Speaker 4: Thanks, Charles. Today, I'll cover the following topics. First, an update on our investment grade rated balance.

Thanks Charles.

I'll cover the following topics first an update on our investment grade rated balance sheet.

Speaker 5: Second, financial results for the third quarter, and finally, updated 2023 full year guide.

Financial results for the third quarter, and finally updated 2023 full year guidance.

Speaker 5: I'll begin with our balance sheet. At the end of the third quarter, we had $1.8 billion in available liquidity through a combination of unrestricted cash and undrawn capacity on our revolving credit.

I'll begin with our balance sheet at the end of the third quarter, we had $1 $8 billion in available liquidity through a combination of unrestricted cash and undrawn capacity on our revolving credit facility.

Speaker 5: Our net debt to EBITDA ratio was 5.5 times as of the end of the third quarter. At the low end of our targeted 5.5 to 6 times range.

Our net debt to EBITDA ratio was five five times as of the end of the third quarter at the low end of our targeted five five to six times range.

Speaker 5: Our outstanding borrowings carried a weighted average interest rate with 3.8% and we have no debt reaching final maturity until 2026.

Our outstanding borrowings carried a weighted average interest rate of three 8% and we have no debt, reaching final maturity until 2026.

Speaker 5: Over 75% of our total death is unsaccured, and over 99% of our death is fixed rate or swapped to fixed rate.

Over 75% of our total debt is unsecured and over 99% of our debt is fixed rate or swapped to fixed rate and.

Speaker 5: In August , we closed on an $800 million dual-trunch public bond offering, comprised of $450 million of seven-year notes at a 5.45% coupon, and $350 million of 10-year notes at a 5.5%.

In August we closed on an $800 million dual tranche public bond offering comprised of $450 million of seven year notes at a 545% coupon and $350 million of 10 year notes at a five 5% coupon.

Speaker 5: We used a portion of the net proceeds to repay the $150 million we drew on our revolver in July . With the remaining net proceeds serving as additional dry powder for growth or future debt repayment, while earning an attractive deposit yield from our banks in the mean-

We used a portion of the net proceeds to repay the $150 million, we drew on our revolver in July with the remaining net proceeds serving as additional dry powder for growth for future debt repayment, while earning an attractive deposit yield from our banks in the meantime.

Speaker 5: In August , as a result of our strong balance sheet and continued access to capital, we were pleased to see Fitch upgrade its ratings outlook for the company from stable to positive and a firm or triple B flat rating. Next, the company from stable to positive and a firm or triple B flat rating.

In August as a result of our strong balance sheet and continued access to capital. We were pleased to see Fitch upgrade its ratings outlook for the company from stable to positive and affirm our triple B flat rating.

Next I'll briefly touch on our financial results.

Speaker 5: Third quarter core FFO per share increased 4.7% year over year to 44 cents, primarily due to an increase in N and Y.

Third quarter core <unk> per share increased four 7% year over year to 44.

Primarily due to an increase in NOI.

Speaker 5: Third quarter AFFO per share increased 3.7% year over year to 36.

Third quarter <unk> per share increased three 7% year over year to 36.

Speaker 5: The last thing I'll cover is our updated 2023 full year guide.

The last thing I'll cover is our updated 2023 full year guidance.

Speaker 5: Our third quarter year-to-date results have generally been in line with our expectations.

Our third quarter year to date results have generally been in line with our expectations with a little over two months remaining in the year last nights release included a tightening of most of our guidance expectations.

Speaker 5: With a little over two months remaining in the year, last night's release included a tightening of most of our guidance expectations.

Speaker 5: This includes a narrowed range for full year 2023 SameStore NOI growth of 4.5% to 5%, which is based on a narrowed range for SameStore core revenue growth of 6.25 to 6.75.

This includes a narrowed range for full year 2023 same store NOI growth of four 5% to 5%, which is based on a narrowed range for same store core revenue growth of six 5% to 675% and revised same store core expense growth of 10 five to $10 75.

Speaker 5: and revised same-store core expense growth of 10.25 to 10.75.

Percent.

Speaker 5: The expected increase in same-store core expense growth guidance is based primarily on higher same-store property tax expense expectations in Florida and Georgia.

Do you.

Did increase in same store core expense growth guidance is based primarily on a higher same store property tax expense expectations in Florida and Georgia.

Speaker 5: While the fundamentals that have favorite housing are well known to us, we originally anticipated property tax milled rates in both Florida and Georgia would decline to at least partially offset some of the unprecedented home price appreciation that's occurred there. Based on the property tax bills we've received or expect to receive during the fourth quarter, that's not been the case. And causes us to now expect full year same-store property tax expense growth of approximately 10 to 10 and a half percent.

While the fundamentals that are favorite housing are well known to US. We originally anticipated property tax millage rates in both Florida, and Georgia would decline to at least partially offset some of the unprecedented home price appreciation. That's occurred there based on the property tax bills, we've received or expect to receive during the fourth quarter, that's not been the case.

And causes us to now expect full year same store property tax expense growth of approximately 10 to 10, 5%.

Speaker 5: Our updated guidance also tightens the ranges of expected core FFO per share and AFFO per

Our updated guidance also tightened the ranges of expected core <unk> per share and <unk> per share. We now expect full year 2023 core <unk> per share in a range of $1 75 to $1 79, or 6% growth year over year at the midpoint and full year 2023.

Speaker 5: We now expect full year 2023 core FFO per share in a range of $1.75 to $1.79 or 6% growth year-over-year at the midpoint. And full year 2023 AFFO per share in a range of $1.46 to $1.00.

<unk> per share in a range of $1 46 to $1 50.

Speaker 5: With that, we have now concluded our prepared remarks. Operator, please open the line for questions.

With that we have now concluded our prepared remarks operator, please open the line for questions.

Speaker 1: We will now begin our question and answer session. To ask a question, please press star then one on your telephone keypad. To withdraw your question, please press star then two.

Yes.

We will now begin our question and answer session to ask a question. Please press Star then one on your telephone keypad to withdraw your.

A question. Please press Star then two.

Speaker 1: If you are using a speaker phone, please pick up your handset before pressing the keys.

You are using a speakerphone please pick up your handset before pressing the keys.

Speaker 1: In the interest of time, we ask that participants submit themselves to one question and then re-cue by pressing star one to ask a follow-up question. One moment please. We'll...

In the interest of time, we ask that participants limit themselves to one question and then re queue by pressing star one to ask a follow up question.

One moment, please while we poll for questions.

Speaker 1: The first question comes from Michael Goldsmith with UBS. Their line is open.

The first question comes from Michael Goldsmith with UBS. Your line is open.

Speaker 6: Good morning, thanks for taking my question. My question seeks to frame the factors that cause the acceleration and occupancy and the slowdown at least. Brent, so how much is attributable to normal seasonality or return to more long-term pre-COVID averages, leaf compliance and moderating underlying demand? I guess the where is the business structurally better now and where is it reverting back to pre-COVID averages? Thank you.

Good morning, Thanks, a lot for taking my question. My question speaks to frame the factors that caused the deceleration in occupancy and the slowdown in lease spreads. So how much is attributable to normal seasonality a return to more long term pre COVID-19 averages leaf compliance and moderating underlying demand I guess.

Whereas the business structurally better now and where is it reverting back to pre COVID-19 averages. Thank you yes. Thanks for the question. This is Charles.

Speaker 4: Thanks for the question. This is Charles here. Now look, I think as you laid out, we're seeing seasonality that we expected. I think we've signal this all year. You know, coming off of the pandemic times, which are kind of heady in terms of rent growth and occupant.

No look I think as you are you laid out we're seeing seasonality that we expected I think we've signaled this all year.

Coming off of the pandemic times, which are kind of heading in terms of rent growth and occupancy.

Speaker 4: We expected that at the end of the year we'd see this more typical seasonality and let's level set a little bit on what that

We expected that at the end of the year, we see this more typical seasonality and let's let's level set a little bit on what that means what that means is new lease cargoes, a bell curve throughout the year with.

Speaker 4: What that means is the new lease kind of goes of bell curves throughout the year with peaks being around June or July . And so historically we've always seen kind of going down that bell curve in August and September as the end of the move in season happens. Because typically in summer is when you're getting the turnover and people are moving in and that's why you get the real pop in the new lease ring.

With peak being around June or July and so historically, we've always seen kind of going down that bell curve in August and September.

As the end of that move in season happens because typically the summer is when youre getting a turnover and people are moving in and Thats why you get the real pop and the new lease rent growth.

Speaker 4: And the peak may vary, but at the end of the day, that downturn, if you will, on the bell curve is August and September . So, if you look back pre-COVID, and I went back to prior to the pandemic times, that new lease range was around one and a half to three and a half. And for our September , we're right around three or just below. So, this is normal. What's not normal is renewals, on the other hand, historically stay steady throughout the

The peak may vary but.

At the end of the day the downturn if you will on the Bell curve is August and September. So if you look back pre COVID-19 and I went back to prior to the pandemic times that new lease range was around one five to three and a half and for our September we're right around three or just below so this is normal.

What's not normal as renewals on the other hand, historically stay steady throughout the year.

Speaker 4: And so we've been there, but we're running a little warmer than we've seen historically. If you look back pre-COVID, renewal rates are around 3 to 5%. Our September run-

And so we've been there.

But we are running a little warmer than we've seen historically, if you look back pre COVID-19, our renewal rates are around 3% to 5%.

Our September renewal rate at six 9%.

Speaker 4: What that tells you is we still are in this really strong fundamental of the business where there's high demand and under supply of homes. We're leasing well. And I would add to it that we have, as we expected, a little higher turnover this year, given our lease compliance backlog work. You put all that together. You know, we're in really normal seasonality that we expect. And Q3 being at 969 occupies.

That tells you is we still are in this really strong fundamentals.

Of the business, where there is high demand and under supply of homes, we are leasing well and I would add to it that we have as we expected a little higher turnover this year, given our lease compliance backlog work.

You put all that together.

And really normal seasonality that we would expect in Q3 being at 96 nine occupancy. If you go back to those years I was talking about we werent as high so we're combining really nice blended overall rent growth for this time of year really high occupancy and kind of a return to normal seasonality with strong funded.

Speaker 4: If you go back to those years I was talking about, we weren't this high. So we're combining really nice blended overall right growth for this time of year, really high occupancy, and kind of a return to normal decenality, which strong fundamentals kind of driving the business. So I feel good where we are and I understand how it may seem like it's different, but at the end of the day we had two years that were just abnormal and we're going back to more typical.

Metals kind of driving the business. So I feel good where we are and I understand how it may seem like it's.

Different but at the end of the day, we had two years that were just abnormal we're going back to more typical season.

Speaker 1: The next question comes from Eric Wolf with City. Your line is open.

The next question comes from Eric Wolfe with Citi. Your line is open.

Speaker 5: Thanks for taking my question. So I appreciate that visibility on 2024 tax is probably really low at this point, but just trying to understand what do you think it's going to be sort of another year of very aggressive tax increases, or if the moderation that you've seen in home prices this year will result in a similar moderation taxes. And just historically, if you look at, you know, in a given year, the degree of change in home prices, is that a good predictor of what next year should look like in terms of tax increases.

Hi, Thanks for taking my question.

So I appreciate that visibility on 2024 to accident is probably really low at this point, but just trying to understand whether you think it's going to be sort of another year of very aggressive tax increases or if the moderation that you've seen in home prices. This year.

Will result in a similar moderation taxes and just historically if you look at <unk>.

Given year the degree of change in home prices is that a good predictor of what next year should look like in terms of tax increases.

Speaker 5: Thanks for the question, it's John . While we're not prepared to talk about 2024 at this time, I think you really hit the nail on the head when you tied together what's been happening with asset appreciation, what's been happening with home values.

Thanks for the question, it's John <unk>.

We're not prepared to talk about 2024 at this time I think you really hit the nail on the head when you tied together whats been happening with asset appreciation, what's been happening with home values and what the outsized year over year.

Speaker 5: and what the outtized year over year property tax expense growth has been.

Property tax expense growth has been for.

Speaker 5: for the last two years. I think it's interesting if you look over a trailing five-year period our annual same store property tax growth averaged around five and a half percent.

For the last two years.

I think it's interesting if you look over a trailing five year period, our annual same store property tax growth averaged around five 5%.

Speaker 5: but within that time period 2021 was sort of an outlier to the low side. So I think we've seen

But within that time period, 2021 was sort of an outlier to the low side. So I think we've seen a bit of a catch up factor.

Speaker 5: bit of a catch-up factor, as we look and think about property tax.

As we look and think about property tax we've always been pretty good at predicting where values were going to command values haven't been the problem for us the challenge for us.

Speaker 5: We've always been pretty good at predicting where values we're going to commit. Values haven't been the problem for us. The challenge for us.

Speaker 5: is that we have assumed that as values increase, and those increases have been substantial, that we would see some degree of relief on millage rates. That was our experience over much of our history. That is what we expected last year. Obviously, it didn't come to pass.

Is that we have assumed that as values increase and those increases have been substantial that we would see some degree of relief on millage rates that was our experience over much of our history that is what we expected last year, obviously it didn't come to pass.

Speaker 5: This year, we did not expect that same pattern to unfold.

This year, we did not expect that same pattern to unfold.

So as it turned out I think the revenue need and municipal budgets was greater than we anticipated probably based on inflation.

Speaker 5: budgets was greater than we anticipated, probably based on inflation. And we saw a little to no relief on milled rates in Georgia and Florida. So as we look to 2024, we're going to be reassessing how we think about property tax. I think we'll be less reliant on what our historical experience has been, at least for the intervening period. But as I said, we're not prepared to give a sense for 2024. We'll talk about 24 in February . The next question.

And we saw little to no relief on millage rates in Georgia, and Florida. So as we look to 2024, we're going to be reassessing, how we think about property tax I think will be less reliant on what our historical experience has been at least for the intervening period, but as I said, we're not prepared to give a sense for 20 excuse me.

2024, we will talk about 24 in February.

Speaker 1: The next question comes from Jeff Specter with Bank of America. Your line is open.

The next question comes from Jeff Spector with Bank of America. Your line is open.

Speaker 7: Great, thank you. I just want to clarify the comments on seasonality and how we should think about that heading into the fourth quarter. What that may mean for new least rate growth and maybe you could talk about historically what you would normally now see, let's say from September to October from three Q into four Q, like what should we be expecting? Thank you.

Great. Thank you just wanted to I guess clarify the comments on seasonality.

And how we should think about that heading into the fourth quarter.

That may mean for new lease rate growth.

And maybe you could talk about historically, what you would normally now seen let's say from September to October from <unk> into <unk> can you like what should we be expecting thank you.

Speaker 4: Yeah, as I as I described, you know, the new lease kind of bell curve.

Yes, as I as I described.

New lease kind of bell curve.

Speaker 4: goes up and down through the year and goes in the Q4 and we'll kind of bottom out and then go in the Q1 and build up later on where we will kind of low point will be as hard to predict. But we're still seeing good demand. We have high occupancy, you know, as you look at that, some of that is we are trying to drive towards what we know are kind of the healthy occupancy giving our turn over at this point.

It is up and down through the year and goes into Q4, and we'll kind of bottom out and then go into Q1 and build up later on where we will.

Kind of low low point will be it's hard to predict.

But we're still seeing good demand we have high occupancy.

You can look at that some of that is we are trying to drive towards.

What we know are kind of the healthy occupancy, giving R. R. Donnelley.

Turnover at this point.

Speaker 4: So that'll be kind of the balance there, but I don't expect we'll go much lower than we are right now, and we'll see where it goes. I think the strength is on our renewals, as I talked about. Again, we're seeing acceleration from September into October , as I mentioned, and keep in mind that, given our low turnover, 75% of our leasing business is renewable.

So that will be kind of a balance there, but I don't expect it will go much lower than we are right now and we'll see where it goes I think the strength is on our renewals as I talked about.

Again, we're seeing acceleration from September into October as I mentioned and keep in mind that given our low turnover, 75% of our newly of our leasing business is renewals and so that really does drive. Our overall result, so seasonality is on the new lease side is up.

Speaker 4: And so that really does drive our overall results. So seasonality is, on the new leaf side, is a part of the business. It actually, we look at and welcome it because it brings us to a more normal period that we're used to and we understand how that works. And when you look at the blend throughout the year, we're really strong and our blend is much higher than we've been historically.

Part of the business it actually.

We look at and welcome it because it brings us to a more normal period that we're used to and we understand how that works and when you look at the blend throughout the year, we're really strong in our blend is much higher than we've been historically pre COVID-19 as well so business isn't good.

Speaker 4: So this isn't a good stand and I expect we'll queue fours where new lease is kind of bottom and then we go into queue one we'll start to bounce out of there and go wow I'm feeling good around our renewals given our lost elise and overall

Stan and I expect will Q4 is where.

New leases kind of bottom and then we go into Q1, we'll start to bounce out of there and go while I'm feeling good around our renewals given our loss to lease in overall low turnover.

Speaker 1: The next question comes from James Feldman with Wells Fargo. Your line is open.

The next question comes from James Feldman with Wells Fargo. Your line is open.

Speaker 2: Great, thanks for taking my question. So, if I could just grab a quick rebound off of Jeff's question, which is.

Great. Thanks for taking my question. So if I could just grab a quick rebound off of Jeff's question, which is.

Speaker 8: Can you talk about new leaf rates in October ? But my question is actually, you know, you had talked about 4%.

Okay.

Can you talk about new lease rates in October.

But my question is actually you had talked about 4%.

Sure.

Speaker 8: 4% yields on your, you're on cap rates on your asset sales versus 6% on acquisitions. I mean, how sustainable is it? We've got the 10-year treasury at 5% or we're doing high. I mean, how sustainable is it to keep that 4% sales yield or cap rate or even your 200 basis point spread given, you know, how much rates have moved in just where the market looks today? Thank you.

4% yield on your at your cap rates on your asset sales versus 6% on acquisition.

I mean, how sustainable is that we've got the 10 year treasury at 5% already.

Alrighty drain pie I mean, how sustainable is it to keep that 4% sale yield or cap rate or even your 200 basis points spread given.

How much rates had moved in just the way the market looks today.

Speaker 3: Yeah, hi, this is Dallas. Look, as we look at the overall landscape of the marketplace, there's no doubt that the elevated mortgage rate and mortgage rate environment is certainly shifting behaviors in the home buying and selling arena. Now, our view of that landscape.

Yes, Hi, this is Dallas I'd look as we look at the overall landscape of the marketplace. There is no doubt that the elevated mortgage rate mortgage rate environment.

Certainly shifting behaviors in the home buying and selling arena now our view of that landscape currently.

Operator: Greetings and welcome to the invitation Homes third quarter 2023 earnings conference call. All participants are in listen only mode at this time. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded.

Speaker 3: is as Charles pointed out, it's probably going to impact the positive our renewables business because there is less transaction availability in the marketplace overall.

Is as Charles pointed out, it's probably going to impact to the positive our renewals business because there is less transaction availability in the marketplace overall.

Speaker 3: The lock-in effect in things that we're hearing as we talk with, you know, economists out there and home builders and we obviously have a lot of great relationships there is very real. And I think the resale environment is evidenced by I think any hours number on annualized sales are predicting somewhere around four million, which is off by like 30% in terms of how you think of normal transaction volumes.

The lock in effect and things that we're hearing as we talk with economists out there and homebuilders and we obviously have a lot of great relationships. There is.

Scott Mclaughlin: At this time, I would like to turn the conference over to Scott McLaughlin, Senior Vice President of Investor Relations. Please go ahead. Good morning and welcome.

He is very real and I think the retail environment as evidenced by I think any hours number an annualized sales are predicting somewhere around $4 million, which is up by like 30% in terms of how you think of normal transaction volumes, what does that mean for the rental business and I think by and large if you look at all the data there are less single family homes for rent on the market today.

Scott Mclaughlin: I'm here to the day from invitation homes with Dallas Tanner, Chief Executive Officer, Charles Young, President and Chief Operating Officer, John Olsen, Chief Financial Officer, and Scott Eisen, Chief Investment Officer. Following our prepared remarks, we'll conduct a question and answer session with our covering cell side analysts. In the interest of time, we ask that you limit yourselves to one question, and then req if you'd like to ask a follow up question.

Speaker 3: What does that mean for the rental business? And I think, by and large, if you look at all the data, there are less single family four homes for rent on the market today than there were two or three years ago.

Then there were two or three years ago.

Speaker 3: Many homes get sold back in as MLS inventory.

Many homes get sold back in as MLS inventory and candidly, it's not enough and I think what we've experienced we see it on both sides of the transaction right. We are active in the MLS market as a buyer trying to buy assets.

Speaker 3: And candidly, it's not enough. And I think what we've experienced, we see it on both sides of the transactions.

Speaker 3: We are active in the MLS market as a buyer trying to buy assets.

Scott Mclaughlin: During today's call, we may reference our third quarter 2023 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.invh.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 different materially from those identified.

Speaker 3: at what we think our clearing price of capital is at any given point.

At what we think are clearing price of capital is at any given point, we are not finding a lot of transactions in that environment, because we get outbid and so there is ample demand for homes in the marketplace on a retail basis as evidenced in the data that we have around selling and that's been really consistent so we feel really.

Speaker 3: finding a lot of transactions in that environment because we get out bit. And so there is ample demand for homes in the marketplace on a resale basis as evidenced in the data that we have around selling. And that's been really consistent.

Speaker 3: So we feel really comfortable as John talked about before.

Comfortable as John talked about before our values are up dramatically over the last several years and as we go to sell homes in the market, where having little to no problem selling our home for any particular reason that we deem from an asset management perspective, and we're selling those at really great marks and then being able to accrete.

Speaker 3: Our values are up dramatically over the last several years. And as we go to sell homes in the market, we're having little to no problem selling a home for any particular reason that we deem from an asset management perspective. And we're selling those at really great marks.

Scott Mclaughlin: We describe some of these risks and uncertainties in our 2022 annual report on Form 10K 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-gap financial measures during this call. You can find additional information regarding these non-gap measures, including reconciliation to the most comparable gap measures in yesterday's earnings release.

Speaker 3: And then being able to creatively invest that capital back into homes and much higher cap rates as we talked about in the release, we view as a very good capital allocation strategy for our business going forward. We're selling older homes. Maybe they have some form of cap ex-risk and generally recycling those into newer homes with very little cap ex-long term risk at much better yields on cost. So I don't know the answer as to how long

<unk> invest that capital back into homes at much higher cap rates as we talked about in the release, we view as a a very good capital allocation strategy for our business going forward, we're selling older homes, maybe they have some form of capex risk and generally recycling those into newer homes with very little Capex long.

Term risk at.

At much better yields on cost so I don't know the answer as to how long that can that market can be out there, but it feels like there is a home buyer market.

Speaker 3: that market can be out there, but it feels like there is a home buyer market even at today's mortgage rates albeit it's much more muted however the absolute lack of supply in the marketplace is a very real factor and we don't see that changing anytime

Dallas Tanner: I'll now turn the call over to Dallas Tanner, our chief executive officer. Good morning, and thanks for joining us. At Invitation homes, we've worked hard to build and enhance our platform over the last dozen years, the foundation of which is our people, our systems and our unmatched scale. We believe our platform is industry-leading and difficult to replicate, and as a result offers significant value for our stakeholders, residents, and partners. It allows us to drive strong performance across diverse geographically dispersed assets while delivering meaningful returns.

Even at today's mortgage rates, albeit it's much more muted however, the outer salute lack of supply in the marketplace is a very real factor and we don't see that changing anytime soon.

Speaker 7: The next question comes from Austin Worshmit with Keybank Capital Markets. Your line is open. Great. Thank you. You guys have highlighted some of the unique challenges this year from kind of normal in the last question.

The next question comes from Austin, <unk> with Keybanc capital markets. Your line is open.

Great. Thank you you guys have highlighted some of the unique challenges this year from kind of normalizing.

Normalizing conditions and.

<unk> had tough year over year comps in lease rate growth, you've had the least compliance backlog to work through.

Dallas Tanner: We've invested heavily in our platform to provide the highest level of professional service, flexibility, and convenience to our residents, helping them to live in the home, neighborhood, and school system of their choice. We're proud of what we have achieved in this regard. Invitation to the power of our platform, payable fundamentals have continued to drive strong tailwinds for our business. In particular, these include the continuing supply and demand imbalance we frequently mention.

Speaker 7: and just higher turnover. I guess are those challenges behind us and when you reference occupancy and lease rate growth above the 28

Higher turnover I guess are those challenges behind us and when you referenced occupancy and lease rate growth above the 28 <unk> 18 in 2019 period do.

Do you expect you can sustain.

Speaker 7: you know, occupancy above those periods as well as the least rate growth given some of the tell.

Occupancy above those periods as well as lease rate growth given some of the tailwind to the business.

Speaker 5: I'll let Charles speak to the occupancy piece, but I think as far as your question, if I heard you right, are we through this transitional period? I think the short answer is not yet. Charles and his team have been doing yeomans work on the ground. We're really pleased with the progress we've made working through our delinquency backlog. Quarter over quarter, bad debt, with down 20 years over year, bad debt was down.

Yes, I'll, let Charles speak to the occupancy piece, but I think as far as your question if I heard you right.

Are we through this transitional period I think the short answer is not yet.

Dallas Tanner: By most estimates, the United States continues to pace the housing shortage of several million units. At the same time, the demand for single-family homes for lease continues to remain robust due to favorable demographics, a growing desire for flexibility and convenience, and soaring mortgage rates that make leasing one of our homes much more attractive and affordable than owning a similar home. According to John Burns, it's now over $1,100 a month cheaper to lease than to own on average in our markets.

Charles and his team have been doing yeoman's work on the ground. We're really pleased with the progress we've made working through our delinquency backlog.

Quarter over quarter bad debt was down.

20 basis, sorry year over year bad debt was down 20 basis points, but rental assistance was down 80%. So the health of our customer as we get those homes released.

Speaker 5: 20 basis points, but rental assistance was down 80%.

Speaker 5: So, you know, the health of our customer as we get those homes released.

Is is quite strong if you look at our income to rent ratio. So I think we've still got a little bit of wood to chop.

Speaker 4: So I think we've still got a little bit of what to chop. Certain of our markets have been able to move more quickly than others, but we're certainly heartened by the fact that it seems as though court systems are now moving a little bit more quickly. California in particular is becoming a little bit easier to navigate, but it's going to take us a little bit of time yet before we truly can say we've returned to normal. I think the results that we've posted and what we're seeing in our portfolio in light of that transitional experience we've been going through all year. I think really underscores what a great business we have and how strong the underlying fundamentals are. Yeah, this is Charles. I'll just add a couple of thoughts.

Dallas Tanner: That's over $13,000 a year and savings that our residents can use to help their families thrive while at the same time benefiting from the choice and flexibility of leasing a home. We believe we remain well positioned to meet this growing demand for single-family homes for lease. In addition, we remain committed to bringing new supply to the marketplace through extensive home-building relationships. Our multi-channel growth strategy allows us to nimbly deploy capital across a variety of acquisition channels, which allows us to be opportunistic, depending on the channel that's most attractive in the various real estate cycles.

Certain of our markets that have had been able to move more quickly than others, but we're we're certainly heartened by the fact that it seems as though CT systems are now moving a little bit more quickly, California.

California in particular is is becoming a little bit easier to navigate but it's going to take us a little bit of time, yet before we truly can say we've returned to normal.

But I think the results that we posted and what we're seeing in our portfolio in light of that transitional experience, we've been going through all year.

I think really underscores what a great business, we have and how strong the underlying fundamentals are.

Speaker 4: Yeah, this is Charles. I'll just add a couple of thoughts.

Dallas Tanner: During the third quarter of 2023, we took advantage of several unique external growth opportunities. This included our previously-announced portfolio acquisition of 1,870 wholly-owned homes for a contract price of $650 million in July. As we disclosed, we acquired the portfolio at a year-one yield in the mid-fives, and we anticipate this to grow in the sixes within the next year. Progress to date on marking the portfolio's rents to market, increasing occupancy, and selling non-core homes has been right in line with our expectations.

Yes. This is Charles I'll, just add a couple of thoughts.

Speaker 4: You know, you're asking around, you know, that some of the tailwinds, you know, look, there's more positive that we're seeing. We knew for this year we had the least compliance backlog to go through and it was gonna elevate turnover.

Youre asking around the some.

Some of the tailwind look theres more positive that we're seeing we knew for this year, we had the lease compliance backlog to go through and it was going to elevate.

Turnover temporarily given that backdrop, though we've had tremendous new lease rent growth all year long, we just returning to normal seasonality as I discussed we have been an occupied north of 97% all year long Q3 normal seasonality 96, nine as I look at the portfolio going forward. This is what typically happens Q4 <unk>.

Speaker 4: Given that backdrop though, we've had tremendous new lease current rent growth all year long. We're just returning to normal seasonality as I discuss.

Speaker 4: We've been occupied north of 97% all year long. Q3, normal seasonality, 96.9.

Speaker 4: As I look at the portfolio going forward, this is what typically happens. Q4 will bottom out on occupancy and start to rise back up.

Dallas Tanner: In addition to the large portfolio transaction, we also acquired another 387 wholly-owned homes during the third quarter through those various channels at an average cap rate of 6%. We effectively funded these acquisitions through the sale of 397 wholly-owned homes at an average disposition cap rate of approximately 4%. The 200 basis point spread between acquisitions and dispositions once again illustrates our unique ability to a creatively recycled capital out of older, higher-dollar value homes and into newer, higher-quality product. We believe our portfolio makeup affords us this opportunity to a creatively recycled capital in this way for some time to come.

Bottom out on occupancy and start to rise back up.

Speaker 4: And we are doing this in a backdrop where we've had higher turnover that will ultimately start to, we see it as transitory and start to normalize as we go on to next year. So there's a lot of really good things going on and we're seeing good, still seeing really good demand across the way. Again, it's around the balance of...

And we are doing this in a backdrop, where we've had higher turnover that will ultimately start to we see it as transitory and start to normalize as we go into next year. So there's a lot of really good things going on and we're seeing good.

Still seeing really good demand across the way again.

It's around the balance of <unk>.

Speaker 4: of new lease and renewals and just to highlight the renewals for November we went out at over 9%

New lease and renewals and just to highlight the renewals for November we went out at over 9% for November and December on new lease renewal asks.

Speaker 4: for November and December on new lease renewal.

Speaker 4: So ultimately, I think that leads to the steadiness of the business of demand that we have. And ultimately, I think it puts us in a more kind of stable footing that we know what to expect, especially as we work through this least compliance backlog. And as John said, many of our markets are back to normal. We're still working through it in a few markets like Atlanta and California and a couple of others. And once we do that, then those tail winds will get even better as easier comp.

So ultimately I think that leads to the steadiness of the business that demand that we have and.

Dallas Tanner: In closing, I'd like to express my thanks to our dedicated associates through their hard work, invitation homes has continued to achieve significant milestones and deliver strong financial performance. As we move forward, we remain constant in our ability to navigate these challenges, capitalize on opportunities, and leverage our platform in order to drive sustainable growth and value for our stockholders. Thank you for your continued trust and support.

And ultimately I think it puts us in a more kind of stable footing that we know what to expect especially as we work through this lease compliance backlog and as John said many of our markets are back to normal we are still working through it in a few markets like Atlanta in California, and a couple of others and once we do that then those tailwind or get even better as easier comps for next year.

Sure.

Okay.

Speaker 1: The next question comes from Steve Sokla with Evercore. Your line is open.

The next question comes from Steve <unk> with Evercore. Your line is open.

Charles Young: With that, I'll pass the call on to Charles Young, our President and Chief Operating Officer. Thanks, Dallas. To start, I'd like to echo your comments and thank our associates for delivering another great quarter. This includes the hard work by our teams to smoothly onboard to nearly 1,900 homes we acquired in July. Our premier size and scale help make acquiring large portfolios like this one relatively programmatic, while it is our amazing associates who ensure the transition is seamless and ongoing resident experience, as Worryfree.

Speaker 7: Yeah, thanks. I guess I've got just a follow up because I'm getting hit by a few people on this number.

Yeah. Thanks, I guess I've got a just a follow up because I'm getting hit by a few people on this number and just trying to nail this down you've been very clear about where I guess renewals are coming in and where theyre going out, but it seems like there's a little bit more opaque. This on the on the new leasing so Charles I think you said that historically.

Speaker 7: just trying to uh... nail this down you've been very clear about where i guess renewals are are coming in and where they're going out but it seems like there's a little bit more of pakeness on the on the new leasing so charles i think you said that historically this time a year the range would normally be in kind of the one and a half to maybe three percent range so

This time of year, the range would normally being kind of a one and a half to maybe 3% range. So are you in that range.

Speaker 7: Are you in that range for, say, October , and are you kind of towards the higher end of the range or the lower end of the range, because I think folks are just trying to get their arms around where new leasing is today.

For say October and are you kind of towards the higher end of the range or the lower end of the range. Because I think folks are just trying to get their arms around where new leasing is today alright very good. This is Charles look we are the months not over for October. So it is all preliminary.

Charles Young: I'll now walk you through our third quarter operating results. Favorable fundamentals and strong execution led to Stamestor NOI growth of 4% year-over-year in the third quarter of 2023, in line with expectations. Stamestor core revenue, revenues in the third quarter grew 6% year-over-year. This increase was driven by average monthly rental rate growth of 6.2%, as well as a 20 basis point improvement and bad debt. We're pleased to see progress year for the second consecutive quarter, including within Southern California, where court times have meaningfully improved since the first part of the year.

Speaker 4: Charles look we are the month's not over for October so it's all preliminary on both numbers we are comfortably

Both numbers, we are comfortably in that range and it will be what we expect to be above 2% for October we'll see where it settles out but that again is normal in terms of the seasonality and also given.

Speaker 4: for October . We'll see where it settles out, but that that again is is normal in terms of the seasonality and also given a little bit of elevated turnover given the seasonality and what we're doing the lease compliance backlog. So I like where we are and I think if you're looking ahead it's the renewals that should give a lot more optimism given that the new lease is only 25% of what we do on our leases. The renewals is what's going to drive the blend as we go forward and keep our occupancy.

A little bit of elevated turnover, given the seasonality and what we're doing the lease compliance backlog. So I like where we are and I think if youre looking ahead at the renewals that should give a lot more optimism given that the new lease is only 25% of what we do on our leases. The renewals that are what's going to drive the blend as we go forward and keep our occupancy steady <unk>.

Charles Young: In the meantime, we continue to attract high-quality residents with our great homes and professional service. For the trailing 12 months, our new residents earned a combined household income of over $142,000 a year, representing an average income to rent ratio of 5.2 times. The financial strength of our customers also evidenced by our industry-leading partnership with Azuzu that we announced in July. In just a short time, we've helped enroll over 160,000 of our residents onto Azuzu's free credit reporting program.

Hi.

Speaker 1: The next question comes from Juan Sanabria with BMO Capital Markets. Your line is open.

The next question comes from Juan Sanabria with BMO capital markets. Your line is open.

Speaker 9: Good morning. Just on the least compliance or COVID era issues, when do you think we'll work through that and do you have a sense of what the expense profile would be if those items, if those homes that turn over was kind of stripped out just to think about what the costs were, would normalize to once that that deck is cleared out.

Hi, good morning.

Just on the the lease compliance or Covid era issues. When do you think will work through that.

Do you have a sense of what the expense profile would be if those items if those homes that turnover.

Charles Young: About half of these residents have already seen an improvement in the credit score with an average increase of over 20 points. In addition to attracting high-quality residents, they continue to stay longer with us. Length to stay is an indicator of overall resident satisfaction, which we're pleased to see has increased again this past quarter to an average of 36 months. We believe our premier ProCare service along with the many convenient and value ad services we offer help contribute to this longevity.

Stripped out just to think about what the costs would normalize to one step.

Dec has cleared out.

Speaker 5: Hey, Juan, it's John . That's a good question. I think a couple things to bear in mind. Historically, bad debt for us has run give or take 50 basis points if you go back to the pre-COVID period.

Hey, Juan it's John.

That's a good question I think a couple of things to bear in mind historically bad debt for US is run give or take 50 basis points. If you go back to the pre Covid period.

Speaker 5: You know, for the third quarter, we came in at 133 basis points.

For the third quarter, we came in at 133 basis points.

Charles Young: The newest offering that we have just started to roll out is bundled internet. We're excited to partner with one of the nation's largest providers to offer high-speed internet and digital media to over a third of our residents across the country. Once again, our scale allows us to provide this essential service at a substantial discount to what our residents might otherwise pay on their own.

Speaker 5: which was down materially from what our experience has been over the last several quarters. So we're absolutely heartened by that. We do believe that over time and distance, we can get back to those pre-pandemic levels. That said, it's hard to predict the timing.

Which was down materially from what our experience has been over the last several quarters. So we're absolutely heartened by that we do believe that over time and distance we can get back to those pre pandemic levels that said, it's hard to predict the timing.

Speaker 5: You know, there are a lot of factors that come into play, certain of those factors are out of our control in terms of how quickly courts can work through their backlogs.

There are a lot of factors that come into play.

Certain of those factors are out of our control in terms of how quickly courts can work through their backlogs.

Charles Young: Turning back to our same-store third quarter 2023 core expenses increased 10.2 percent year-over-year. This included year-over-year increases of 11.7 percent in fixed expenses and an 8 percent in controlable expenses. The latter of which was primarily driven by an increase in turnover compared to the historic lows of last year, along with the costs related to the progress we're making on our lease compliance backlog.

Speaker 5: you know, the various steps in the process of resolving those delinquency issues can sometimes take longer than we would hope. That said, I think we do see a path to a return to normalcy. I think the other thing I would note is

The various steps in the process of resolving those delinquency issues can can sometimes take longer than we would hope that said I think we do see a path to a return to normalcy I think the other thing I would note is.

Speaker 5: you know turnover has been elevated for all the reasons Charles talked about. You know, I think...

Turnover has been elevated for all the reasons Charles talked about.

I think.

Speaker 5: roughly 19% of our moveouts in the third quarter were related to skips or eviction moveouts. That's up I think 400 basis points year over year and those skipping evict turns can cost 50% more than a regular way turn. So if you adjust for sort of that both the elevated turnover the higher cost of a larger subset of those turns.

Roughly 19% of our move outs in the third quarter were related to skips or eviction move outs, that's up I think 400 basis points year over year.

Charles Young: Next, I'll cover same-store leasing trends in the third quarter. Demandered on markets remain strong through the end of peak leasing season. As we've noted previously, we are seeing a return to more normal seasonality, which we believe represents a much healthier and sustainable footing following an extraordinary market rent growth we saw in the past few years. Nevertheless, our third quarter 2023 same-store leasing results are still well above pre-pandemic norms. This includes average occupancy in the third quarter of 96.9 percent or 120 basis points higher than our 2018 and 2019 third quarter averages.

And those those skipping evict turns can cost 50% more than a regular way turn so if you if you adjust for sort of debt, but the elevated turnover.

The higher cost of a larger subset of those turns the fact that those those skipping a vic turns on average are going to take a few days longer which has an additional impact on occupancy beyond the impact of turnover already I think when you put it all together we feel really good that as we continue this march towards.

Speaker 5: The fact that those those skip and evict turns on average are going to take a few days longer, which has an additional impact on occupancy beyond the impact of turnover already.

Speaker 5: I think when you put it all together, we feel really good that as we continue this march towards a return to normal, if you will, that we see a path to getting back to a portfolio that operates.

Charles Young: In addition, blended rent growth in the third quarter of 2023 with 6.2 percent or 170 basis points higher than our 2018 and 2019 third quarter F. 3rd quarter of 2023, Blenda Rencroft, a 6.2% was comprised of Renuel Rencroft, a 6.6% and Newly's Rencroft, a 5.2% were pleased to have seen an acceleration in Renuel Rencroft each month in the 3rd quarter of 2023. Renuel Rencroft is further accelerating with October's preliminary results. This represents a strong performance for the 3rd quarter that is once again attributable to our outstanding associates.

A return to normal if you will that we see a path to getting back to a portfolio that operates.

Speaker 5: in a manner very similar to what we experienced before the sort of anomalous last few years of COVID.

In a manner very similar to what we experienced before the sort of anomalous last few years of Covid.

Speaker 1: The next question comes from Adam Kramer with Morgan Stanley . Your line is open.

The next question comes from Adam Kramer with Morgan Stanley. Your line is open.

Speaker 10: Hey guys, just wanted to talk about the cash on the balance sheet. I know you did the debt offering in the quarter. I think cash is sitting higher than it has historically as a result. You took up the acquisition guidance by a little bit. I think it only implies

Hey, guys just wanted to kind of talk about the.

Turning to cash on the balance sheet I know you did the debt offering in the quarter.

Cash is kind of sitting higher than it has historically as a result.

You took up the.

The acquisition guidance by a little bit I think the only kind of implies.

Speaker 10: You know, maybe I think it's $100 million or so of acquisitions from here on the wholly-owned side. So maybe just walk us through kind of what's the opportunity set like in terms of acquisitions now, and, you know, just in terms of the capital deployment, anything else that we're maybe not thinking about, you know, that some of that cash can be used for.

Charles Young: As we approach the end of the year, we remain focused on continuing this momentum and finishing year strong. I'm proud of our teams for their tremendous contributions this past quarter and the great effort I know they'll deliver during the remainder of the year.

And then maybe I think it is.

$100 million or so.

Acquisitions from here on the wholly owned side, maybe just walk us through kind of what's the opportunity set like in terms of acquisitions now.

Just in terms of the capital deployment anything else or maybe not thinking about that.

John Olsen: I'll now turn the call over to John Olsen, our Chief Financial Officer. Thanks, Charles.

Some of that cash can be used for.

Speaker 3: Hey, this is Dallas. You know, great question on the environment. I think, you know, we're, we're, and I'll let John speak a little bit around how we're thinking about cash. As I finish, I think we want to stay in a position.

Hey, This is Dallas great question on the environment I think we're we're and I'll, let John speak to a little bit around how we're thinking about cash as I finished I think we want to stay in a position of.

John Olsen: Today, I'll cover the following topics. First, an update on our investment-grade rated balance sheet. Second, financial results for the 3rd quarter and finally, updated 2023 full-year guidance.

Speaker 3: of strength and the goal here would be to make sure that we have as much flexibility between cash our JV businesses

The strength and the goal here would be to make sure that we have as much flexibility between cash or JV businesses our.

John Olsen: I'll begin with our balance sheet. At the end of the 3rd quarter, we have $1.8 billion in available liquidity through a combination of unrestricted cash and undrawn capacity on our revolving credit facility. Our net debt to EBITDA ratio was 5.5 times as of the end of the 3rd quarter at the low end of our targeted 5.5 to 6 times range. Our outstanding borrowings carried a weighted average interest rate with 3.8 percent and we have no debt reaching final maturity until 2026.

Speaker 3: Our pipeline with new construction, which continues to be an interesting area for us as we continue to evaluate better opportunities. And then ultimately also being ready for some additional hopeful M&A over the next couple of years as smaller portfolios sort of get in a position where they have a decision tree moment and have to make a decision based on the capital markets.

Our pipeline with new construction, which continues to be an interesting area for us as we continue to evaluate better opportunities and then ultimately also being ready for some additional hopeful M&A over the next couple of years as smaller portfolios sort of get in a position where they have a decision tree moment and have to make a decision based on the capital markets.

Speaker 3: uh... maybe in availability that's out there and so what what we don't have anything uh... pressing or current and we just digested

In availability that's out there and so look while we don't have anything pressing or current and we just digested.

Speaker 3: 1800 homes that we did last quarter, we're certainly wanna be ready if or when the opportunities come in front of us. We are still seeing opportunities out there.

John Olsen: Over 75 percent of our total debt is unsecured and over 99 percent of our debt is fixed rate or swapped to fixed rate. In August, we closed on an $800 million dual-trunch public bond offering comprised of $450 million of 7-year notes at a 5.45 percent coupon and $350 million of 10-year notes at a 5.5 percent coupon. We used a portion of the net proceeds to repay the $150 million we drew on our revolver in July with the remaining net proceeds serving as additional dry powder for growth or future debt repayment while earning an attractive deposit yield from our banks in the meantime.

The 1800 homes that we did last quarter, we're certainly want to be ready if or when the opportunities come in front of US we are still seeing opportunities out there with significant embedded loss to lease from some of the other smaller portfolios, we're having sort of the inbounds that I've talked about at NAREIT in June and.

Speaker 3: with significant embedded loss to lease from some of the other smaller portfolios we're having sort of the end bounds that I've talked about it in a week in June uh... and we still continue to see sort of what if type of moments i think people are still trying to get their heads around where those opportunities are if you're a seller

And we still continue to see sort of what if type of moments I think people are still trying to get their heads around where those opportunities are if you're a seller as I mentioned earlier on the call. We do not see the MLS as a big source of of opportunistic external growth for our business. We prefer to continue to stack a bunch of this newer product at <unk>.

Speaker 3: As I mentioned earlier on the call, we do not see the MLS as a big source of opportunistic external growth for our business.

Speaker 3: We'd prefer to continue to stack a bunch of this newer product at pretty meaningful discounts to where kind of they're selling a neighborhood.

Pretty meaningful discounts.

John Olsen: In August, as a result of our strong balance sheet and continued access to capital, we were pleased to see Fitch upgrade its ratings outlook for the company from stable to positive and a firm or triple B flat rating.

To where kind of they are selling in neighborhoods and being able to sort of insulate our balance sheet, so to speak with newer product less capex Rick.

Speaker 3: and being able to sort of insulate our balance, she said to speak, with newer product, less cap X-Rick, less cap X-Risk, sorry for that.

Less capex risk sorry for that while we sell older assets at really updated March so I think from an external growth perspective, just keeping our options open and making sure that we have plenty of cash available John can talk more about what we're doing with that cash and then also just making sure that we're keeping.

Speaker 3: while we sell older assets at, you know, really updated marks. So I think from an external growth perspective, just keeping our options open.

John Olsen: Next, I'll briefly touch on our financial results. Third quarter core FFO per share increased 4.7 percent year over year to 44 cents, primarily due to an increase in NOI. Third quarter AFFO per share increased 3.7 percent year over year to 36 cents.

Speaker 3: Making sure that we have plenty of cash available. John can talk more about what we're doing with that cash. And then also just making sure that we're keeping you know, our eyes out on just any and all kind of balance sheet activity that could be available to us.

Our eyes out on just any and all kind of balance sheet activity that could be available to us.

Speaker 5: Yeah, Adam, with respect to cash, I mean, you know, the thing that that feels really good at the moment is the fact that we can sell assets at a four cap, put the cash in the bank and earn five point three.

John Olsen: The last thing I'll cover is our updated 2023 full-year guidance. Our third quarter year-to-date results have generally been in line with our expectations. With a little over two months remaining in the year, last night's release included a tightening of most of our guidance expectations. This includes a narrowed range for full-year 2023 same-store NOI growth of 4.5 to 5 percent, which is based on a narrowed range for same-store core revenue growth of 6.25 to 6.75.

Yes, Adam with respect to cash.

Thing that that feels really good at the moment is the fact that we can sell assets at a four cap put the cash in the bank and earn five three.

Speaker 5: 5.35% right so we don't need to have an immediate sort of capital redeployment opportunity we can we can

535% right. So we don't need to have an immediate sort of capital redeployment opportunity. We can we can.

Speaker 5: basically park the cash and it is still accretive up until such a point that we find something that is interesting to go after on the acquisition side.

Basically park, the cash and it is still accretive up until such a point that we find something that.

That is interesting to go after on the acquisition side so.

John Olsen: 1% and revised same-store core expense growth of 10.25 to 10.75%. The expected increase in same-store core expense growth guidance is based primarily on higher same-store property tax expense expectations in Florida and Georgia. While the fundamentals that have favorite housing are well known to us, we originally anticipated property tax milled rates in both Florida and Georgia would decline to at least partially offset some of the unprecedented home price appreciation that's occurred there.

Speaker 5: in this moment in time, being liquid, having a lot of capital, just makes sense to us, right? So a portion of that cash on the balance sheet is, if not directly earmarked, is certainly in our minds circled to take care of one of our 2026 maturities, which is the $615 million 2018-4 securitization. But

This moment in time.

Being liquid having a lot of capital just makes sense to us right. So a portion of that cash on the balance sheet.

As if not directly earmarked is certainly in our mind circle to take care of one of our 2026 maturities, which is the $615 million 2018 for securitization.

<unk>.

Speaker 5: I think all things considered right now, we want to maximize flexibility, we want to maximize optionality, and that means sort of having as much dry powder on hand, particularly if holding that cash is a creative. It just makes...

I think all things considered right now we want to maximize flexibility, we want to maximize optionality and that means sort of having as much dry powder on hand, particularly of holding that cash is accretive.

John Olsen: Based on the property tax bills we've received or expect to receive during the fourth quarter, that's not been the case. And causes us to now expect full-year same-store property tax expense growth of approximately 10 to 10.5%.

It just makes sense.

Speaker 1: The next question comes from Keegan Carl with Wolf Research. Your line is open.

The next question comes from Keegan Karl with Wolfe Research Your line is open.

John Olsen: Our updated guidance also tightens the ranges of expected core FFO per share and AFFO per share. We now expect full-year 2023 core FFO per share in a range of $1.75 to $1.79 or 6% growth year over year at the midpoint and full-year 2023 AFFO per share in a range of $1.46 to $1.50.

Speaker 11: Yeah, thanks for the time, guys. Just wondering if you could provide any color on recent news that you're entering property management, given the articles that came out.

Yes. Thanks for the time guys. Just wondering if you could provide any color on recent news so youre entering property management given the articles that came out.

Speaker 3: Hey, we appreciate the question. We have nothing to report. By nature, we don't comment on speculation. We've said in the past that with the strength of our platform, we're gonna continue to look for opportunities, find ways to grow that can both be capital-like and accretive, and also look for areas where we can actually leverage the platform to enhance our own operating margins. But as of today, we have nothing to report.

Hey, we appreciate the question.

We have nothing to report.

By nature, we don't.

Comment on speculation.

We said in the past that with the strength of our platform. We're going to continue to look for opportunities find ways to grow that can both be capital light and accretive.

Scott Mclaughlin: With that, we have now concluded our prepared remarks.

Operator: Operator, please open the line for questions. We will now begin our question and answer session. To ask a question, please press star then one on your telephone keypad. To withdraw your question, please press star then two. If you are using a speaker phone, please pick up your handset before pressing the keys. In the interest of time, we ask that participants submit themselves to one question and then recue by pressing star one to ask a follow-up question.

Also look for areas, where we can actually leverage the platform to enhance our own operating margins, but as of today, we have nothing to report.

Speaker 1: The next question comes from Buck Horn with Raymond James. Your line is open.

The next question comes from Buck Horne with Raymond James Your line is open.

Speaker 5: Hey, thanks guys and following up on that. I was just wondering if you could maybe comment on your thoughts on expanding joint venture relationships or any partnerships there and. Also, your thoughts on on working with home builders, if there's any interest, or you're finding any availability with builders to do more build for rent communities.

Hey, Thanks, guys and following up on that I was just wondering if you could maybe comment on your thoughts on expanding joint venture relationships or any partnerships there.

Also your thoughts on on working with homebuilders, if there's any interest or are you finding any availability with builders to do more build to rent communities.

Operator: One moment, please, while we pull for questions.

Hi, Budd thanks for the question.

Michael Goldsmith: The first question comes from Michael Goldsmith with UBS. Your line is open. Good morning. Thanks for taking my question. My question seeks to frame the factors that caused the acceleration and occupancy and the slowdown and least spread. So how much is attributable to normal seasonality, a return to more long-term pre-COVID averages, least compliance and moderating underlying demand. I guess where is the business structurally better now and where is it reverting back to pre-COVID averages? Thank you. Thanks for the question. This is Charles here. Now, look, I think as you laid out, we're seeing seasonality that we expected. I think we've signal this all year.

Speaker 3: On the on the second one around builders, yes, I mean we are definitely we have existing relationships already with some of the bigger builders in the country that that I think everybody on this call is aware of.

On the second one around builders, yes, I mean, we are definitely we have existing relationships already with some of the bigger builders in the country that I think everybody on this call is aware of those relationships have been excellent for us they've been equally is excellent for them. We are all looking to expand that.

Speaker 3: Those relationships have been excellent for us. I hope they've been equally as excellent for them. We are all looking to expand those pipelines and create additional what we would call deal flow through the channel of.

Pipelines and create additional what we would call deal flow through the channel of partnering with our homebuilder partners and just by sort of a way of kind of reminding everyone. One of the things we love about that let's call. It <unk> plus type relationship as we get meaningful discounts, we can put sort of limited deposits out there.

Speaker 3: partnering with our home builder partners. And just by sort of a way of kind of reminding everyone, one of the things we love about that.

Speaker 3: call it CFO , CFO plus type relationship, is we get meaningful discounts, we can put sort of limited deposits out there, and we can manage that business and that pipeline which today sits at roughly a billion dollars or more in a way that is very effective and efficient.

And we can manage that business in that pipeline, which today sits at roughly $1 billion or more in a way that is very.

Charles Young: Coming off of the pandemic times, which are kind of heavy in terms of rent growth and occupancy, we expected that at the end of the year, we'd see this more typical seasonality and let's level set a little bit on what that means. What that means is the new lease kind of goes a bell curve throughout the year with peaks being around June or July. And so historically we've always seen kind of going down that bell curve in August and September.

Effective and efficient for us as we look for other opportunities I think one of the areas that we've been pretty vocal on especially in light of where the capital markets are treating equity prices for reeds is doing more in and around ventures with partners that are sophisticated and also have.

Speaker 3: As we look for other opportunities, I think one of the areas that we've been pretty vocal on, especially in light of where the capital markets are treating equity prices for REITs,

Speaker 3: is doing more in and around ventures with partners that are sophisticated and also have sort of the same ambition around the single family space that we do.

The same ambition around the single family space that we do and so we don't want while we don't have anything sort of new to announce on that front. We are always having inbounds in active dialogues with potential partners one of the areas of which that seems to be the most appealing is around our new construction business and that to me feels like a natural.

Speaker 3: We don't have anything sort of new to announce on that front. We are always having in-bounds and active dialogues with potential partners.

Charles Young: As the end of the move in season happens, because typically this summer is when you're getting the turnover and people are moving in and that's why you get the real pop in the new lease rent growth. And the peak may vary, but at the end of the day that downturn, if you will, on the bell curve is August and September. So if you look back pre-COVID, and I went back to prior to the pandemic times, that new lease range was around one and a half to three and a half. And for our September, we're right around three or just below. So this is normal.

Speaker 3: One of the areas of which that seems to be the most appealing is around our new construction business and that to me feels like a natural fit for us as we continue to build out our JV businesses over time that we could bring on strategic capital and still be a partner with them with our balance sheet capital at John's point and put meaningful opportunities to work over time. I think that business will continue to develop and evolve for us and we'll obviously keep everybody posted if or when there's anything to talk about there as well.

Fit for us as we continue to build out our JV businesses over time that we could bring a strategic capital and still be a partner with them with our balance sheet capital as John's point.

And put meaningful opportunities to work overtime, and I think that business will continue to develop and evolve for us and we'll obviously keep everybody posted if the if or when there is anything to talk about there as well.

Charles Young: What's not normal is renewals on the other hand historically space studies throughout the year. And so we've been there, but we're running a little warmer than we've seen historically. If you look back pre-COVID, renewal rates are around three to five percent. Our September renewal rate is 6.9%. What that tells you is we still are in this really strong fundamentals of the business where there's high demand and under supply of homes, we're leasing well.

Speaker 12: The next question comes from Daniel Tricharico with Scotiabank. Your line is open. Thank you. Question on the JV acquisition guidance coming down. Dallas, can you talk to what you're hearing from your partners and, you know, how their outlooks or expectations have changed over the last 90 days? Thanks.

The next question comes from Danielle <unk> with Scotiabank. Your line is open.

Thank you question on the JV acquisition guidance coming down Dallas can you talk to what Youre hearing from your partners and how their outlooks are expectations have changed over the last 90 days.

Speaker 3: I just think there's been honest conversations around where the clearing price of capital is, and I think that has more to do with where the debt capital markets are or aren't as they've shifted. It feels like it's sort of a new conversation every 30 or 40 days in terms around where debt facilities are. I mean, if you look at

Yes, I don't think theres been honest conversations around where the clearing price of capital is and I think that has more to do with where the debt capital markets are.

Charles Young: And I would add to it that we have, as we expected, a little higher turnover this year, given our lease compliance backlog work. You put all that together, you know, we're in really normal seasonality that we expect in Q3 being at 96.9. Occupancy, if you go back to those years, I was talking about we weren't this high. So we're combining really nice blended overall right growth for this time of year, really high occupancy and kind of a return to normal seasonality, which strong fundamentals, kind of driving the business.

Or aren't as they've shifted it feels like it's sort of a new conversation every 30 or 40 days in terms around where debt facilities are I mean, if you look at the deal John and the team did in August in the bond market.

Speaker 3: the deal John and the team did in August in the bond market.

Speaker 3: We had basically a blended cost on that $800 million of around five and a half percent. And I think that market's far different today, you know, being 60 days later. And so as we think about, you know, where we would need to be as a

We had basically a blended cost on that $800 million of around five 5% and I think that market is far different today being 60 days later.

And so as we think about.

Where we would need to be as a.

Speaker 3: partnership either with our own capital being partnered with theirs or if we were to just do things on balance sheet like where is sort of our strike price and it definitely feels like it's it's in today's world in the sixes we've talked about that in the last earning calls we're looking for you know creative opportunities that are sort of in the sixes on a yield on cost for us today and out being outside of that I think you know capital is willing and able I think capital markets less so willing at times and that's what we're trying to sort of navigate through right

Partnerships, either with our own capital.

Charles Young: So I feel good where we are and I understand how it may seem like it's different. But at the end of the day, we had two years that were just abnormal. And we're going back to more typical season.

Being partnered with theirs.

Or if we were to just do things on balance sheet, like where is sort of our strike price and it definitely feels like it's it's in today's world and the fixes we've talked about that in the last earning calls we're looking for accretive opportunities that are sort of in the sixes on a yield on cost for us today and out being outside of that.

Eric Wolfe: The next question comes from Eric Wolf with city. Your line is open. Thanks for taking my question.

John Olsen: So I appreciate that visibility on 2024 tax is probably really low at this point, but just trying to understand what do you think it's going to be sort of another year, very aggressive tax increases, or if the moderation that you've seen in home prices this year will result in a similar moderation taxes. And just historically, if you look at, you know, in a given year, the degree of change in home prices, is that a good predictor of what next year should look like in terms of tax increases?

Thank <unk>.

Capital is willing enable I think capital markets less so willing at times and that's what we're trying to sort of navigate through right now.

Speaker 1: The next question comes from Alan Peterson with Green Street. Your line is open.

The next question comes from Alan Peterson with Green Street. Your line is open.

Speaker 13: Hey guys, thanks for the time. Charles, I was just wondering, what markets are you seeing the most concession usage across the portfolio today, and what's the average concession being offered? As you kind of stare out to the end of the year, are you anticipating needing to dial up concessions to build back occupancy into year-end?

Hey, guys. Thanks for the time Charles I was just wondering what markets are you seeing the most concessionary concession usage across the portfolio today and what's the average concession being offered as you've kind of stare out that'd be ended the year are you anticipating needing to dialup concessions to build back occupancy into year end.

John Olsen: Thanks for the question. It's John. While we're not prepared to talk about 2024 at this time, I think you, you really hit the nail on the head when you tied together, you know, what's been happening with asset appreciation, what's been happening with home values. And what the outside year over your property tax expense growth has been for the last two years. You know, I think it's interesting. If you look over a trailing five year period, our annual same store property tax growth averaged around five and a half percent.

Speaker 5: Yeah, so we ran no concessions through Q3, but as we're looking at the landscape now, and to your point, thinking about occupancy and trying to go into 2024 on solid footing, we're looking to go selectively while the market is still, you know, kind of pumping. We feel the demand is here, but, you know, things slow down typically on the holidays. And so I would expect that we'll run some select

Yes, So we ran no concessions to Q3, but as we're looking at the landscape now.

And to your point thinking about occupancy and trying to go into 2024 on solid footing.

We're looking to to go selectively while the market is still.

Kind of pumping we feel the demand is here, but things slowdown typically on the holidays and so I would expect that.

John Olsen: But within that time period, 2021 was sort of an outlier to the low side. So I think we've seen a bit of a catch up factor. You know, as we look and think about property tax, we've always been pretty good at predicting where values were going to come in. The values haven't been the problem for us. The challenge for us is that we have assumed that as values increase and those increases have been substantial, that we would see some degree of relief on militaries.

Speaker 4: Concessions in markets that have been a little softer as I look around Vegas. I've talked about this before Softened a little bit. We're seeing a little bit of softness in Phoenix lately those two markets sometimes run similar

We'll run some select.

Sessions in markets that have been a little softer as I look around Vegas I've talked about this before softened a little bit we're seeing a little bit of softness in Phoenix lately, those two market sometimes run.

Similarly.

Speaker 4: A lot of it will be around thinking about homes that may be on the market a little longer, and so we'll try to move that product. So it's a balance, and it's really just to your point around trying to make sure that we are in good footing going into the start of the year. At 96-9 occupancy, I expect October to kind of be at that same level plus minus, and then we'll rise from here. That's what typically happens in this seasonality. We want to push to get that back over 97 as fast as we can, and that's how we'll use concessions as need be.

But a lot of it will be around thinking about homes that may be on the market a little longer and so we'll try to move that product. So.

John Olsen: That was our experience over much of our history. That is what we expected last year. Obviously, it didn't come to pass this year. We did not expect that same pattern to unfold. So as it turned out, I think the revenue need in municipal budgets was greater than we anticipated, probably based on inflation. And we saw little to no relief on militaries in Georgia and Florida. So as we looked at 2024, we're going to be reassessing how we think about property tax. I think we'll be less reliant on what our historical experience has been, at least for the intervening period. But as I said, we're not prepared to give a sense for 2024.

So it's a balance and it's really just to your point around trying to make sure that we are in good footing going into the start of the year.

96, nine occupancy I expect October to kind of be at that same level plus minus and then will rise from here. That's what typically happens in the seasonality and we want to push to get that back over 97% as fast as we can and thats, how we will use concessions as need be.

Speaker 1: The next question comes from Tyler Baturi with Oppenheimer. Your line is open.

The next question comes from Tyler <unk> with Oppenheimer. Your line is open.

Speaker 5: Good morning. Thank you. Follow-up question on your builder relationships. Can you remind us what you're underwriting for cap rates in that channel? And then when you look at some of the homes that you've taken down already, especially from Pulte with that relationship, can you talk a little bit about lease-up trends where you're getting better union economics on those assets than comparable homes?

Good morning. Thank you a follow up question on your builder relationships can you remind us what your underwriting for cap rates in that channel and then when you look at some of the homes that you've taken down already especially from pulte without relationship.

John Olsen: We'll talk about 24 in February.

Jeff Spector: The next question comes from Jeff Specter with Bank of America. Your line is open. Great, thank you.

Can you talk a little bit about sub trends, where youre getting better unit economics on those assets than comparable homes.

Charles Young: I just want to clarify the comments on seasonality and how we should think about that heading into the fourth quarter, what that may mean for new least rate growth, and maybe you could talk about historically what you would normally now see, let's say from September to October from 3Q into 4Q, what should we be expecting? Thank you. Yeah, as I described, you know, the new least kind of bell curve goes up and down through the year and goes in the Q4 and we'll kind of bottom out and then go in the Q1 and build up later on, where we will kind of low, low point will be, it's hard to predict, but we're still seeing good demand.

Speaker 3: Yeah, on your latter point, and while we don't have any specifics for releasing, I just tell you that we are we generally really outperformed underwritten rents on the communities as we've taken them in. I think Scott shared that on some of our investor days and things that he's held out as some of the different communities that they've as they've onboarded. And I just mentioned before, it sort of feels like the market today needs to be somewhere in the sixes to have it really want to make sense as you sort of start to measure, you know, absorption risk and new construction pricing and the like. But to be fair, that shift mix can vary. And we're total return investors at the end of the day.

Yes on your latter point and while we don't have any specifics or releasing I'd. Just tell you that we are generally really outperformed underwritten rents on the communities as we've taken the man I think Scott shared that on some of our investor days and things that he has held out as some of the different communities as they are on boarded and I just mentioned before it sort of feels like the market today needs to be somewhere in the <unk>.

<unk> data it really want to make sense as you start to measure absorption risk in new construction pricing and the like but to be fair that shift mix can vary by market to market and we're total return investors at the end of the day. So we're looking for one park asset appreciation going in basis on cost or how we think about.

Speaker 3: So we're looking for one part, asset appreciation, going in basis on cost or how we think about replacement costs in a way that feels like measured risk. And then we need to have convictions around where we see demographic trends going, because we believe that's ultimately a proxy for where rents go. And I think as you look at our business, the one thing that we have fundamentally more and more conviction around, the customer today with us this quarter is staying almost 36 years, as you average that across the portfolio.

Replacement costs in a way that feels like measured risk and then we need to have convictions around where we see demographic trends going because we believe that's ultimately a proxy for where rents go and I think as you look at our business. The one thing that we have fundamentally more and more conviction around the customer every day with us this quarter staying almost 36 years as you average that across the portfolio.

Charles Young: We have high occupancy, you know, as you look at that, some of that is we are trying to drive towards what we know are kind of the healthy occupancy giving us. We are going to turn over at this point, and so that will be kind of the balance there, but I don't expect we'll go much lower than we are right now, and we'll see where it goes. I think the strength is on our renewals, as I talked about.

Speaker 3: That is a much stronger, they say 36 years. 36 months, excuse me. I wish it was 36 years. But 36 months is meaningful. As John talked about turnover and the cost that are associated with it, and as you look at our business in that demographic window, the average customer between 38 and 39 years old, we have a massive pipeline of customers potentially coming into our business. And many of them want to live in a new community with brand new schools. And that to us is a winning value proposition for our business.

That is a much stronger they say 36 years 36 months excuse me I wish it was 36 years.

Charles Young: Again, we're seeing acceleration from September into October, as I mentioned, and keep in mind that given our low turn over 75% of our leasing business is renewals. And so that really does drive our overall result. So seasonality is on the new least kind is a part of the business. Actually, we look at and welcome it because it brings us to a more normal period that we're used to, and we understand how that works.

But 36 months is meaningful as John talked about turnover and the costs that are associated with it as you look at our business in that demographic window. The average customer between 38, and 39 years old we have a massive pipeline of customers potentially coming into our business and many of them want to live in a new community with brand new schools and that to US is a winning value proposition for our business.

Speaker 1: The next question comes from Jesse Letterman with Zellman & Associates. Your line is open.

The next question comes from Jesse Letterman with Zelman and Associates. Your line is open.

Yes.

Speaker 14: Good morning, thanks for taking my question. Are you hearing or seeing any impacts from rising apartment availability across any of your markets? That might be keeping renters in the multi-family asset class for longer than the otherwise would be, recognizing that the new multi-family supply is largely catered toward luxury product and any concessions offered by apartment operators might make the value proposition for apartments versus single-family rentals more attractive. Thank you.

Good morning, Thanks for taking my question.

Charles Young: And when you look at the blend throughout the year, we're really strong and our blend is much higher than we've been historically pre-COVID as well. So business isn't good stand and I expect will Q4 is where new leases kind of bottom and then we go into Q1. We'll start to bounce out of there and go while I'm feeling good around our renewals given our loss to lease and overall low turnover.

Are you hearing or seeing any impacts from rising apartment availability across any of your markets that might be keeping renters in the multifamily asset class for longer than they otherwise would be recognizing.

Recognizing that the new multifamily supply is largely catered toward towards luxury product in any concessions offered by apartment operators might make the value proposition for apartments versus single family rental is more attractive. Thank you.

James Feldman: The next question comes from James Feldman with Wells Fargo. Your line is open. Great. Thanks for taking my question. So if I could just grab a quick rebound off a Jeff's question, which is, can you talk about new lease rates in October? But my question is actually, you know, you had talked about 4% yield on your, you're a cap race on your assets sales versus 6% on acquisitions. I mean, how sustainable is it?

Speaker 4: Yeah, it's a good question. I think I start with the majority of our renters come from single fans. So there's not a lot of overlap. It's somewhere around.

Yes, it's a good question I think.

Start with the majority of our renters come from single family.

Theres not a lot of overlap it's somewhere around.

Speaker 4: You know, the number that are coming from, historically, that have been coming from multifamily is 10% or less. And so, it will vary market by market in terms of the size of the market, but generally we'll not see that have a direct impact on us. But we'll pay attention to it. I think, you know...

<unk>.

The number that are coming from historically that have been coming from multifamily is 10% or less and so.

It will vary market by market in terms of the size of the market, but generally we will not see that have a direct impact on us and but we'll pay attention to it I think.

James Feldman: We've got the 10-year treasury at 5% already drains high. I mean, how sustainable is it to keep that 4% sales yield or cap rate or even your 200 basis points spread given, you know, how much rates have moved in just where the market looks today. Thank you.

Speaker 4: A couple years ago, we felt it a bit in South Florida when there was a bunch of condo products out there. And so, I think, again, each market will have its own nuances, but given that most of our folks are families.

Couple of years ago, we felt that a bit in south Florida. When there was a bunch of condo product out there.

And so I think again each market will have its own nuances, but given that most of our folks our families pads.

Dallas Tanner: Yeah, hi, this is Dallas. I'd look as we look at the overall landscape of the marketplace. There's no doubt that the elevated mortgage rate and mortgage rate environment is certainly shifting behaviors in the home buying and selling arena. Now, our view of that landscape currently is, as Charles pointed out, it's probably going to impact the positive our renewables business because there is less transaction availability in the marketplace overall. The lock-in effect and things that we're hearing as we talk with, you know, economists out there and home builders and we obviously have a lot of great relationships there is very real.

Speaker 4: you know looking for school districts uh... having a backyard having extra space for zoom call all of these things drive people that are looking for single family homes as dialysis uh... moving their kids for the good

Looking for school districts.

Having a backyard having that extra space for zoom call. All of these things drive people that are looking for single family homes as Dallas said.

Moving their kids for the good schools.

Speaker 4: That's the driver and so the multifamily isn't a direct competitor most of the time and that's not in all the cases but generally we're looking at kind of the mom and pops that are out there that are offering homes and

That's the driver and so the multifamily isn't a direct competitor most of the time and Thats not in all the cases, but generally we're looking at kind of the mom and pops that are out there that are offering homes in.

Speaker 4: And that's been our main competitor throughout. And, you know, what we know is given our marketing kind of platform and universe, we do well against that given our professional pro care service and all that.

That's been our main competitor of drought and what we know is given our marketing kind of platform in our universe, we do well against that given our professional <unk> service in all that we provide.

Dallas Tanner: And I think the resale environment is evidenced by I think any hours number on annualized sales are predicting somewhere around 4 million, which is off by like 30% in terms of how you think of normal transaction volumes.

Speaker 1: The next question comes from Brad Hefern with RBC Capital Markets. Your line is open.

The next question comes from Brad Heffern with RBC capital markets. Your line is open.

Dallas Tanner: What does that mean for the rental business? And I think, you know, by and large, if you look at all the data, there are less single family four homes for rent on the market today than there were two or three years ago. Many homes get sold back in as MLS inventory, and candidly it's not enough. And I think what we've experienced, we see it on both sides of the transaction, right? We are active in the MLS market as a buyer trying to buy assets at what we think our clearing price of capital is at any given point.

Speaker 13: Hey, good morning, everybody. John , I was wondering if you could give the size of the true up for the under-recruited property taxes that fell into the fourth quarter. I think the implied growth guidance for the fourth quarter is roughly six and a half percent for OPEX. Just wondering what that figure would have been without the out-of-period taxes.

Hey, good morning, everybody John I was wondering if you could give the size of the true up to the under accrued property taxes that fell into the fourth quarter.

Implied growth guidance for the fourth quarter, it's roughly six 5% for Opex, just wondering what that figure would have been without the out of period taxes.

Well I think.

Speaker 5: For the fourth quarter, I think the reasonable expectation is that year-over-year Q4 property taxes will be up between 6.5% and maybe 7.25%. I think that's the right way to do it.

For the fourth quarter I think the reasonable expectation is that.

Year over year, Q4 property taxes will be up between six five and maybe 700 a quarter percent I think that's the right way to think about it.

Dallas Tanner: We are not finding a lot of transactions in that environment because we get out bid. And so there is ample demand for homes in the market. We have a place on a resale basis as evidenced in the data that we have around selling and that's been really consistent. So we feel really comfortable as John talked about before, our values are up dramatically over the last several years. And as we go to sell homes in the market, we're having little to no problem selling a home for any particular reason that we deem from an asset management perspective.

Speaker 1: The next question comes from Anthony Paolone with JP Morgan. Your line is open.

The next question comes from Anthony Powell loan with Jpmorgan. Your line is open.

Speaker 14: Yeah. Thanks. I guess along the same lines, given what's happened on the property tax side and just insurance this year, if we're thinking about the full year impact and starting to think about 24, can you maybe just help us with any brackets? Are there enough levers to even bring expenses down into a more normalized growth range next year or does the full year impact really just keep these up such that your OPEX is going to run high again for another year?

Yes, Thanks, I guess, along the same lines, if given what what's happened on the property tax side and just insurance. This year. If we're thinking about the full year impact in starting to think about 24 can you maybe just help us with with any brackets are there enough levers Stephen bring expenses down into a more normalized growth range next year.

Dallas Tanner: And we're selling those at really great marks. And then being able to creatively invest that capital back into homes. And much higher cap rates as we talked about in the release, we view as a very good capital allocation strategy for our business going forward. We're selling older homes. Maybe they have some form of cap ex risk. And generally recycling those into newer homes with very little cap ex long term risk at much better yields on cost.

Does the full year impact really just.

Keep these up such that your Opex is going to run high again for another year.

Speaker 5: Thanks for the question, Tony. You know, as I said, we're not in a position where we're gonna start talking about 24 yet. I think we are going to evaluate everything in totality. I think when we're prepared to talk about 2024 in February , we will give you a sense for what our expectations are around both of those line items because look, we certainly understand that we have seen outsized growth in both of those over the last few years. And I think...

Thanks for the question Tony.

I said, we're not we're not in a position where we're going to start talking about 24 yet.

I think we are going to evaluate everything in totality I think when we're prepared to talk about 2024 in February we will give you a sense for what our expectations are around both of those line items because look we certainly understand that we have seen outsized growth in both of those over the last few years and I think as we take a step.

Dallas Tanner: So I don't know the answer is to how long that can that market can be out there. But it feels like there is a home buyer market. Even at today's mortgage rates, albeit it's much more muted. However, the absolute lack of supply in the marketplace is a very real factor and we don't see that changing anytime soon.

Speaker 5: As we take a step back and think about where we are, you know, we are in the midst of a return to quote unquote normalcy. I think there have been a lot of factors in our business and other businesses that have had.

Back and think about where we are.

We are in the midst of a return to quote unquote normalcy I think there've been a lot of factors in our business and other businesses that have had.

Austin Wurschmidt: The next question comes from Austin Worshmit with Keybank Capital Markets. Your line is open. Great. Thank you. You guys have highlighted some of the unique challenges this year from kind of normalizing conditions. And you've had tough year over your comps and lease rate growth. You've had the lease compliance backlog to work through and just higher turnover.

Speaker 5: some temporary structural impact that are gonna take some time to resolve. How long that is I think remains to be seen, and we'll be happy to chat about that a little bit more when we release our talk.

Some temporary structural impacts that are going to take some time to resolve how long that is I think remains to be seen.

And we'll be happy to chat about that a little bit more when we released our 2000 and for guidance.

Speaker 1: The next question comes from Jade Romani with KBW. Your line is open.

The next question comes from Jade Rahmani with <unk>. Your line is open.

Charles Young: I guess are those challenges behind us? And when you referenced occupancy and lease rate growth above the 2018 and 2019 period, do you expect you can sustain occupancy above those periods as well as lease rate growth given some of the tailwinds to the business? I'll let Charles speak to the occupancy piece. But I think as far as your question, if I heard you right, are we through this transitional period? I think the short answer is not yet.

Speaker 15: Hi, this is actually Jason Sashon on for Jades. So current cap rates, what do you think the IRR is on single family rental acquisitions over five to seven year hold? And do you view that as attractive? And separately, what's your outlook for home prices over the next year? Thanks.

Hi, This is actually Jason on for Jade current cap rates, what do you think the IRR is on.

Single family rental acquisitions over five to seven year hold and you view that as attractive and separately, what's your outlook for home prices over the next year.

Thanks.

Speaker 3: I think as you look at going in cap rates, you know, reasonable assumptions around home price appreciation, you know, in our markets, it feels like on an unlevered basis, you could certainly, you know, be in the high single digits, low double digits, based on sort of the returns that we're seeing out there. I think, you know, that obviously, that equation sort of, it depends on your inputs around, you know, leverage over.

I think as you look at going in cap rates reasonable assumptions around home price appreciation.

In our markets it feels like on an Unlevered basis, you could you could certainly.

Charles Young: Charles and his team have been doing yeomans work on the ground. We're really pleased with the progress we've made working through our delinquency backlog. You know, quarter over quarter, bad debt was down 20, sorry, year over year, bad debt was down 20 basis points, but rental assistance was down 80%. So, you know, the health of our customer as we get those homes released is quite strong if you look at our income to rent ratio.

It will be in the high single digits low double digits based on sort of the returns that we're seeing out there I think that obviously that equation sort of it depends on your inputs around leverage over time.

Speaker 1: The next question comes from Handel St. Jusk with Mizzouho. Your line is open.

The next question comes from Handelsbank, Jeff with Mizuho. Your line is open.

Speaker 16: Hey there, thanks for the time. Dallas, you mentioned earlier portfolio still has, I guess, more of an opportunity to generate a creation from asset recycling, selling, older assets, to buy new ones. Could you maybe put some broad brackets around that opportunity? Do you see that as perhaps 10, 20, 30 from the portfolio? And how much larger of a role should we expect for disposition to play in funding your business near term?

Hey, there thanks for the time.

You mentioned earlier the portfolio still has I guess more of an opportunity to generate accretion from asset recycling selling older assets to buy new ones.

Charles Young: So, I think, you know, we've still got a little bit of what to chop. You know, certain of our markets have been able to move more quickly than others, but we're certainly heartened by the fact that it seems as though court systems are now moving a little bit more quickly. California in particular is becoming a little bit easier to navigate, but, you know, it's going to take us a little bit of time yet before we truly can say we've returned to normal. But I think the results that we've posted and what we're seeing in our portfolio in light of that transitional experience we've been going through all year.

Could you maybe put some broad brackets around that opportunity do you see that as perhaps 10 20, 30% of the portfolio and how much larger role should we expect for disposition to play in funding your business near term.

Speaker 3: Hi, Andale. Good question. You know, one of the things, and John mentioned it, is

Hi.

Good question.

One of the things and John mentioned it is.

Speaker 3: We have sort of a high class problem right now. And it's that we have assets that have really good valuations to them, a market that is starved for product if you're selling a home.

We have sort of a high class problem right now and that we have assets that have really good valuations to them a market that is star for product. If you are selling a home.

Dallas Tanner: I think really underscores what a great business we have and how strong the underlying fundamentals. Yeah, this is Charles. I'll just add a couple of thoughts. You know, you're asking around, you know, that some of the tailwinds, you know, look, there's more positive that we're seeing. We knew for this year, we had the least compliance backlog to go through and it was going to elevate turnover temporarily. Given that backdrop though, we've had tremendous new lease current rent growth all year long.

Speaker 3: But we also have a business that's got really amazing growth fundamentals behind it. And so, anytime homes come up for a renewal where we reprice, we call it a rebuy analysis, and we look at the portfolio as a whole. And there's a lot of different reasons for holding an asset, and there can be several different factors to why you may consider selling an asset. I think...

But we also have a business that's got some really amazing growth fundamentals behind it and so hey, John Holmes come up for.

Our renewal, where we reprice, we call it a rebuy analysis when we look at the portfolio as a whole and there is a lot of different reasons for holding an asset and theres a lot. There can be several different factors as to why you may consider selling an asset I think.

Speaker 3: In today's environment, with equity being so precious, I think if there are opportunities to recycle capital, expect us to be probably a little bit more aggressive there. And we've certainly shown that the last couple of years. I think the company itself.

In today's environment with equity being so precious I think if there are opportunities to recycle capital expect us to be probably a little bit more aggressive there and we've certainly shown that the last couple of years I think the company itself.

Dallas Tanner: We're just returning to normal seasonality as I discussed. We've been occupied north of 97% all year long. Q3, normal seasonality, 96.9. As I look at the portfolio going forward, this is what typically happens. Q4 will bottom out on occupancy and start to rise back up. And we are doing this in a backdrop where we've had higher turnover. That will ultimately start to, we see it as transitory and start to normalize as you go into next year.

Speaker 3: generally has gotten really good high marks for being good capital allocators. We've sold probably 13, 14,000 homes back into the market over the last decade.

Generally has gotten really good high marks for being good capital Allocators, we sold probably 13 14000 homes back into the market over the last decade.

Speaker 3: And we look at the US single family housing market as the most liquid asset class in the world.

And we look at the U S single family housing market is the most liquid asset class in the world and there are homes are generally located in areas, where if we want to sell that home. There are a lot of buyers as well as they would normally be a lot of renters for that home and so that's a high class problem I think we will evaluate our capital opportunity.

Speaker 3: And our homes are generally located in areas where if we want to sell that home, there are a lot of buyers as well as there would normally be a lot of renters for that home.

Dallas Tanner: So there's a lot of really good things going on and we're seeing good, still seeing really good demand across the way. Again, it's, it's around the back. There's a balance of new lease and renewals. And just to highlight the renewals for November, we went out at over 9% for November and December on new lease renewal asks. So ultimately, I think that leads to the steadiness of the business of demand that we have.

Speaker 3: And so that's a high class problem. I think we'll evaluate our capital opportunities over time.

Over time, if we think that it makes sense to keep recycling because of sort of the spreads between where values are and where we can reinvest accretively expect as I mentioned before to be a little bit more aggressive there, but in terms of issuing like a guidance on that we'll update our thinking in February again, we did that at the beginning of this year, we've been a little bit more of a seller relative to what we laid out at the beginning of the year and.

Speaker 3: If we think that it makes sense to keep recycling because of sort of the spreads between where values are and where we can reinvest accretively, expect this, as I mentioned before, to be a little bit more aggressive there. But in terms of issuing like a guidance on that, we'll update our thinking in February again. We did that at the beginning of this year. We've been a little bit more of a seller relative to what we laid out at the beginning of the year and that's been based on the market upper.

Dallas Tanner: And ultimately, I think it puts us in a more kind of stable footing that we know what to expect, especially as we work through this lease compliance backlog. And as John said, many of our markets are back to normal. We're still working through it in a few markets like Atlanta and California and a couple others.

It's been based on the market opportunity.

Speaker 1: The next question comes from Anthony Powell with Barclays. Your line is open.

Charles Young: And once we do that, then those tailwinds are getting even better as easier comps for next year.

The next question comes from Anthony Powell with Barclays. Your line is open.

Speaker 14: Hi, thank you. Could you update us on your views on this risk of shadow supply and workers rate lock in? I think this comes up from time to time questions to us with

Hi, Thank you could you update us on your views on the risk of Shadow supply and mortgage rate lock and I think this comes up from time to time questions to us with <unk>.

Speaker 14: Workers at 8%, people may want to hold on to their current works for longer. Do you expect to see more more supply from, I guess accidental landlords going forward? And that's something that you underwrite when you buy properties or when you look for development.

Steve Sokwa: The next question comes from Steve Sokwa with Evercore. Your line is open. Yeah, thanks. I guess I've got a just a follow up because I'm getting hit by a few people on this number and just trying to nail this down. You've been very clear about where I guess renewals are coming in and where they're going out. But it seems like there's a little bit more opaqueness on the new leasing. So Charles, I think you said that historically this time of year, the range would normally be in kind of the one and a half to maybe 3% range.

We're just under 8% people may want to hold on to their current marks for longer do you expect to see more and more supply from I guess accidental landlord is going forward and that's something that you underwrite when you buy properties or when you for development.

Speaker 3: My own view is that just based on conversations we're having with

My own view is that just based on conversations we're having with both economists and homebuilders. It certainly feels like mortgage rate sensitivity has been more of a factor for people.

Speaker 3: both economists and home builders. It certainly feels like mortgage rate sensitivity has been more of a factor for people. Builders have had obviously tremendous success in buying down mortgage rate and they've been able to do that for the better part of the last year, year and a half.

<unk> have had obviously tremendous success in buying down mortgage rate and they've been able to do that for the better part of the last year year and a half as these rates get more and more elevated based on where the tenure and sort of treasuries are I would expect that that probably increases people's willingness to stay locked in at home that they currently own I was looking at this the other day.

Steve Sokwa: So are you in that range, you know, for say October. And you know, are you kind of towards the higher end of the range or the lower end of the range? Because I think, you know, folks are just trying to get their arms around where new leasing is today. All right, very good.

Speaker 3: As these rates get more and more elevated based on where the tenure and sort of treasuries are, I would expect that that probably increases people's willingness to stay locked in in a home that they currently own.

Speaker 3: I was looking at this the other day and I think it's still somewhere around 80% of the country is still at a sub 5%.

Charles Young: This is Charles. Look, look, we are the months not over for October. So it's all preliminary on both numbers. We are comfortably in that range. And it will be what we expect to be above 2% for October. We'll see where it settles out. But that again is normal in terms of the seasonality and also given a little bit of elevated turnover, given the seasonality and what we're doing the least compliance backlogs.

And I think it's still somewhere around 80% of the country is still at a sub 5% mortgage rate and we talked about this in our earnings release, its about $13000 a year cheaper to run at home right now an invitation home than it is to go out and buy and I don't see that changing in the near term if anything I think with the.

Speaker 3: mortgage rate. And we talked about this in our earnings release. It's about $13,000 a year cheaper to run a home right now, an invitation home than it is to go out and buy.

Speaker 3: And I don't see that changing in the near term. If anything, I think with this higher for longer period that people keep referring to...

Higher for longer period that people keep referring to sort of seems like the new reality right now and I think it's probably a really good thing for those in our business in terms of the inherent demand that Charles talked about and I think we're probably seeing some of that in the elevated renewal rates that are still sticking around through Q3 and likely into Q4.

Speaker 3: sort of seems like the new reality right now and i think it's probably a really good thing for those in our business in terms of uh... the inherent demand that Charles talked about and i think we're probably seeing some of that in the elevator brunel rates that are still sticking around uh... through q3 and likely in the q4

Charles Young: I like where we are. And I think if you're looking ahead, it's the renewals that should give a lot more optimism given that the new leases is only 25% of what we do on our leases. The renewals are what's going to drive the blend as we go forward and keep our occupancy steady and high.

Speaker 1: Our final question comes from James Feldman with Wells Fargo. Your line is open.

Our final question comes from James Feldman with Wells Fargo. Your line is open.

Juan Sanabria: The next question comes from Juan Sonabria with BMO capital markets. Your line is open. Good morning.

Speaker 8: Great, thank you for taking the follow up. I just wanted to go back to your comments on JV opportunities and fee opportunities.

Great. Thank you for taking the follow up I just wanted to go back to your comment then on JV opportunities that see opportunity.

John Olsen: Just on the least compliance or COVID era issues, when do you think we'll work through that and do you have a sense of what the expense profile would be if those items, if those homes that turn over with kind of stripped out just to think about what the cost growth would normalize to one step that that is cleared out? Hey Juan, it's John. That's a good question. I think a couple of things to bear in mind.

Speaker 8: So if you were to expand the JV platform meaningfully, uh, is, would you think about entering new markets, maybe new home types, or do you think you kind of stick with the exact same strategy you have and types of markets you have? And then similarly, if you think about the, uh, if you do more kind of fee management, is that purely just a fee collection business, or do you take equity stakes in those types of portfolios as well?

So if you were to expand the JV platform meaningfully would.

Would you think about entering new market, maybe new home types or do you think you'd kind of stick with the exact same.

Strategy you have in types of markets you have and then similarly, if you think about the if you do more kind of fee management is that purely just a fee collection business or do you take equity stakes in those types of portfolios as well.

Speaker 3: Your question on markets, this is Dallas. To your question on markets, we love the markets we're in. I think one of the reasons that we've had the sort of performance that we've had historically, and we've been, you know, one of the top five, we've had probably the best numbers in the residential space the last five years running, is in large part because we've been very delivered about where we invest capital and why. And if you look at our concentrations, we've been in some of the highest growth parts of the country and I wouldn't expect us to change that philosophy.

To your question on markets versus Dallas to your question on markets.

John Olsen: Historically, bad debt for us has run, give or take 50 basis points, if you go back to the pre-COVID period. For the third quarter we came in at 133 basis points, which was down materially from what our experience has been over the last several quarters. So we're absolutely heartened by that. We do believe that over time and distance we can get back to those pre-pandemic levels that said it's hard to predict the timing.

We love the markets were in I think one of the reasons that we've had the sort of performance that we've had historically and we've been one of the top five we've had probably the best numbers in the residential space the last five years running.

In large part because we've been very deliberate about where we invest capital and why and if you look at our concentrations we've been in some of the highest growth parts of the country and I wouldn't expect us to change that philosophy.

Speaker 3: In addition, I think one of the reasons we get the operating margins that we do, and right now we're in the high 60s and we have markets that are well into the 70s, is because of our focus on scale, density, and being able to lay out services that people are going to want for longer periods of time.

In addition, I think one of the reasons, we get the operating margins that we do and right now we're in the high <unk> and we have markets that are well into the seventies is because of our focus on scale density and being able to lay out services that people are going to want for longer periods of time and so as we continue to focus on being in not just the right states, but the right market.

John Olsen: There are a lot of factors that come into play. Certain of those factors are out of our control in terms of how quickly courts can work through their backlogs, the various steps in the process of resolving those delinquency issues can sometimes take longer than we would hope. That said, I think we do see a path to a return to normalcy. I think the other thing I would note is turnover has been elevated for all the reasons Charles talked about.

Speaker 3: And so as we continue to focus on being in not just the right states, but the right markets within those states.

Within those states and then building out scale and product density that allows you to meaningfully impact your service model that is a winning proposition for invitation homes over the long term and don't expect us to change from that now to your question around product type, we've certainly experimented a little bit as we've gotten more and more infill with some townhome type product in <unk>.

Speaker 3: and then building out scale and product density that allows you to meaningfully impact your service model. That is a winning proposition for invitation homes over the long term. Don't expect us to change from that. Now to your question around product type, we've certainly experimented a little bit as we've gone more and more in fill with some town home type product and some product that was a little bit higher density.

John Olsen: Roughly 19% of our moveouts in the third quarter were related to skips or eviction moveouts. That's up I think 400 basis points year over year. Those skipping evict turns can cost 50% more than a regular way turn. So if you adjust for sort of debt, both the elevated turnover, the higher cost of a larger subset of those turns, the fact that those skipping evict turns on average are going to take a few days longer which has an additional impact on occupancy beyond the impact of turnover already.

And some product that was a little bit higher density.

Speaker 3: One of the purchases we made in Q3 was a community like that in Arizona. It was a little bit higher density product, really good location, right off a meaningful transportation quarter on the west side of Phoenix. I think you could see us continue to try to experiment a little bit on town-home type product, but remember, square footage matters and amenities matter in those situations. We certainly aren't an apartment investor today doing 800 to 1000 square foot units. That's not our business.

One of the purchases we made in Q3 was a community like that in Arizona, There was a little bit higher density product really good location right off of meaningful <unk>.

<unk> quarter in the West side of Phoenix, I think you could see us continue to try to experiment a little bit on townhome type product, but remember square footage matters and amenities matter in those situations, we certainly arent on apartment investment.

John Olsen: I think when you put it all together, we feel really good that as we continue this march towards a return to normal if you will, that we see a path to getting back to a portfolio that operates in a manner very similar to what we experienced before the sort of anomalous last few years of COVID.

Partner Investor Today doing 800 to 1000 square foot units, that's not our business, we want to be $15, $16 1700 square feet minimum and preferably a little bit bigger than that that lends to the demographic that we think we cater to the best in terms of your question around fee management look I think you've seen us as a company over the first decade.

Speaker 3: We want to be 15, 16, 17, 100 square feet minimum and preferably a little bit bigger than that. That lends to the demographic that we think we cater to the best.

Speaker 3: In terms of your question around fee management, look, I think you've seen us as a company over the first decade prove out a couple of things. One, we have an ability to take on scale in a meaningful way time and time again and integrate that into our platform and see margin expansion in our numbers. We've done that last quarter with the 2,000 units we added with that trade meaningfully. It will add to additional scale and density and what we believe will be margin expansion over time. I think as we start to consider things.

Prove out a couple of things one we.

Adam Kramer: The next question comes from Adam Kramer with Morgan Stanley. Your line is open. Just wanted to talk about the cash on the balance sheet and he did the debt offering in the quarter. I think cash is kind of sitting higher than it has historically as a result. When you took up the acquisition guidance by a little bit, I think it only applies. I think it's 100 million or so of acquisitions from here on the wholly owned sides.

We have an ability to take on scale in a meaningful way time and time again and integrated that into our platform and see margin expansion in our numbers, we've done that last quarter with the 2000 units we added.

With that trade meaningfully it will add two additional scale and density and what we believe will be margin expansion over time, I think as we start to consider things.

Speaker 3: around, we get the question around property management and as we've expanded our JV businesses, we wanna look for things that are creative, that are gonna give a scale, but that won't take away from the discipline approach we already have to our business. And so if it has scale, if it's meaningful, and if it can actually lend to our own operating margins in a way that we think that our business becomes more profitable.

Around.

We get the question around property management and as we've expanded our JV businesses. We want to look for things that are accretive that are going to give us scale, but it wont take away from the disciplined approach, we already have to our business and so if it has scale if it's meaningful and if it can actually lend to our own operating margins in a way that we think that our business becomes more profitable.

Dallas Tanner: Maybe just walk us through what the opportunity set like in terms of acquisitions now. In terms of the capital deployment, anything else or maybe not thinking about the kind of that cash can be used for.

John Olsen: Hey, this is Dallas. You know, great question on the environment. I think, you know, we're and I'll let John speak a little bit around how we're thinking about cash as I finish. I think we want to stay in a position of strength. And the goal here would be to make sure that we have as much flexibility between cash, our JV businesses, our pipeline with new construction, which continues to be an interesting area for us as we continue to evaluate better opportunities.

Speaker 3: especially in a capital light way, those are things we're gonna look at in the future and continue to evaluate. So focused on controlling the controllables right now within our business, I feel like Charles talked about this.

Especially in a capital light way those are things, we're going to look at in the future and continue to evaluate so focused on controlling the controllable right now within our business I feel like Charles talked about this our business from a controllable perspective is running really really well I think as we get through some of this near term noise in what we call kind of the pandemic transitory when's, a property tax and bad debt.

Speaker 3: Our business from a controllable perspective is running really, really well. I think as we get through some of this near-term noise and what we call kind of the pandemic transitory winds of property tax and bad debt, our business is set up for success for the future and we feel really good about where we are.

Our business is set up for success for the future we feel really good about where we are.

John Olsen: And then ultimately also being ready for some additional hopeful M&A over the next couple of years as smaller portfolios sort of getting a position where they have a decision tree moment and have to make a decision based on the capital markets. Maybe unavailability that's out there. And so look, well, we don't have anything pressing or current and we just digested the 1800 homes that we did last quarter. We're certainly want to be ready if or when the opportunities come in front of us.

Okay.

Speaker 1: This completes our question and answer session. I would now like to turn the conference back over to Dallas Paner for any closing remarks.

This completes our question and answer session I would now like to turn the conference back over to Dallas Tanner for any closing remarks.

Speaker 3: Hey, we want to thank everyone again for joining us today, and we're going to look forward to seeing many of you again in a couple of weeks at NARE. Thanks again. The conference has now come.

Hey, we want to thank everyone again for joining us today, and we're going to look forward to seeing many of you again in a couple of weeks at NAREIT. Thanks again.

The conference has now concluded you may now disconnect.

Speaker 17: Please wait, the conference will begin shortly. Please wait, the conference will begin shortly. Please wait, the conference will begin shortly.

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John Olsen: We are still seeing opportunities out there with significant embedded loss to lease from some of the other smaller portfolios. We're having, you know, sort of the end bounds that I've talked about at Nayri in June. And we still continue to see sort of what if type of moments. I think people are still trying to get their heads around where those opportunities are if you're a seller. As I mentioned earlier on the call, we do not see the MLS as a big source of opportunistic external growth for our business.

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John Olsen: We'd prefer to continue to stack a bunch of this newer product at pretty meaningful discounts to where kind of they're selling in neighborhoods. And being able to sort of insulate our balance, she so to speak, with newer product less cap ex-risk, less cap ex-risk, sorry for that while we sell older assets at, you know, really updated markets. So I think from an external growth perspective, just keeping our options open, making sure that we have plenty of cash available.

John Olsen: John can talk more about what we're doing with that cash. And then also just making sure that we're keeping, you know, our eyes out on just any and all kind of balance sheet activity that could be available to us. Yeah, Adam, with respect to cash, I mean, you know, the thing that feels really good at the moment is the fact that we can sell assets at a forecast cap, put the cash in the bank and earn 5.35%, right?

John Olsen: So we don't need to have an immediate sort of capital redeployment opportunity. We can, we can basically park the cash and it is still a creative up until such a point that we find something that that is interesting to go after on the acquisition side. So in this moment in time, being liquid, having a lot of capital just makes sense to us, right? So a portion of that cash on the balance sheet, you know, is, is if not directly earmarked is certainly in our minds circled to take care of one of our 2026 maturities, which is the $615 million or 2018 for securitization.

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John Olsen: But, you know, I think all things considered right now, we want to maximize flexibility, we want to maximize optionality, and that means sort of having as much dry powder on hand, particularly if holding that cash is a creative, it just makes sense.

Keegan Carl: The next question comes from Keegan Carl with Wolf Research. Your line is open. Yeah, thanks for the time, guys.

Dallas Tanner: Just wondering if you could provide any color on recent news that you're entering property management, given the articles that came out. Hey, we appreciate the question. We have nothing to report. You know, by nature, we don't comment on speculation. We've said in the past that, you know, with the strength of our platform, we're going to continue to look for opportunities. Find ways to grow that can both be capital light and creative and also look for, you know, areas where we can actually leverage the platform to enhance our own operating margins. But as of today, we have nothing to report.

Buck Horne: The next question comes from Buck Horn with Raymond James. Your line is open. Hey, thanks, guys.

Dallas Tanner: And following up on that, I was just wondering if you could maybe comment on your thoughts on expanding joint venture relationships or any partnerships there. And also your thoughts on working with home builders, if there's any interest or you're finding any availability with builders to do more build for rent communities. Hi, Buck. Thanks for the question. On the second one around builders, yes. I mean, we are definitely, we have existing relationships already with some of the bigger builders in the country that I think everybody on this call is aware of.

Dallas Tanner: Those relationships have been excellent for us. I hope they've been equally as excellent for them. We are all looking to expand those pipelines and create additional, what we would call, you know, deal flow through the channel of partnering with our home builder partners. And just by sort of a way of kind of reminding everyone, one of the things we love about that call it CFO, CFO plus type relationship is we get meaningful discounts.

Dallas Tanner: We can put sort of limited deposits out there. And we can manage that business and that pipeline, which today sits at roughly $1 billion or more in a way that is very effective and efficient for us. As we look for other opportunities, I think, you know, one of the areas that we've been pretty vocal on, especially in light of where the capital markets are treating equity prices for reeds is doing more in and around ventures with partners that are sophisticated and also have sort of the same ambition around the single family space that we do.

Dallas Tanner: And so we don't have, while we don't have anything sort of new to announce on that front, we are always having in bounds and active dialogues with potential partners. One of the areas of which that seems to be the most appealing is around our new construction business. And that to me feels like a natural fit for us as we continue to build out our JB businesses over time that we can bring on strategic capital and still be a partner with them with our balance sheet capital, John's point. And put meaningful opportunities to work over time. I think that business will continue to develop and evolve for us.

Dallas Tanner: And we'll obviously keep everybody posted if or when there's anything to talk about there as well.

Daniel Tricarico: The next question comes from Daniel Tricarico with Scotiabank. Your line is open. Thank you.

Dallas Tanner: Question on the JV acquisition guidance coming down, Dallas, can you talk to what you're hearing from your partners and you know how their outlooks or expectations have changed over the last 90 days. Thanks. I just think there's been honest conversations around where the clearing price of capital is and I think that has more to do with where the debt capital markets are or aren't as they've shifted. It feels like it's sort of a new conversation every 30 or 40 days in terms around where debt facilities are.

Dallas Tanner: I mean, if you look at the deal, John and the team did in August in the bond market. We had basically a blended cost on that 800 million of around five and a half percent and I think that markets are far different today, you know, being 60 days later. And so as we think about, you know, where we would need to be as a partnership either with our own capital being partnered with theirs or if we were to just do things on balance sheet like where is sort of our strike price and it definitely feels like it's it's in today's world in the sixes.

Dallas Tanner: We've talked about that in the last learning calls. We're looking for, you know, creative opportunities that are sort of in the sixes on a yield on cost for us today. And being outside of that, I think, you know, capital is willing and able. I think capital markets less so willing at times. And that's what we're trying to sort of navigate through right now.

Charles Young: The next question comes from Alan Peterson with Green Street. Your line is open. Hey guys, thanks for the time. Charles, I was just wondering, what market is using the most consistent concession usage across the portfolio today? And what's the average concession being offered? Is you kind of stare out to the end of the year? Are you anticipating needing to dial up concessions to build back occupancy into year end? Yeah, so we ran no concessions through Q3.

Charles Young: But as we're looking at the landscape now into your point, thinking about occupancy and trying to go into 2024 on stylish footing, we're looking to go selectively while the market is still, you know, kind of pumping. We feel the demand is here, but, you know, things slow down typically on the holidays. And so I would expect that we'll run some select concessions in markets that have been a little softer. As I look around Vegas, I've talked about this before.

Charles Young: It's often a little bit. We're seeing a little bit of softness in Phoenix lately. Those two markets sometimes run similarly. But, you know, a lot of it will be around thinking about homes that may be on the market a little longer. And so we'll try to move that product. So it's a balance. And it's really just to your point around trying to make sure that we are in good footing going into the start of the year.

Charles Young: At 96-9 occupancy, I expect October to kind of be at that same level plus minus, and then we'll rise from here. That's what typically happens in this seasonality. And we want to push to get that back over 97 as fast as we can. And that's how we'll use concessions as need be.

Dallas Tanner: The next question comes from Tyler Baturi with Oppenheimer. Your line is open. Good morning. Thank you. Follow a question on your builder relationships. Can you remind us what you're underwriting for cap rates in that channel? And then when you look at some of the homes that you've taken down already, especially from Poltie with that relationship. If you talk a little bit about lease up trends, when you're getting better, you need economics on those assets and comparable homes.

Dallas Tanner: Yeah, on your latter point, and while we don't have any specifics we're releasing, I just tell you that we are generally really outperformed underwritten rents on the communities as we've taken them in. I think Scott shared that on some of our investor days and things that he's held out as some of the different communities as they've onboarded. And I just mentioned before, it sort of feels like the market today needs to be somewhere in the sixes to have it really want to make sense as you start to measure absorption risk and new construction pricing and the like.

Dallas Tanner: But to be fair, that shift mix can vary by market to market and we're total return investors at the end of the day. So we're looking for one part, you know, asset appreciation going in basis on on cost or how we think about, you know, replacement costs in a way that that feels like measured risk. And then we need to have convictions around where we see demographic trends going because we believe that's ultimately a proxy for where rents go.

Dallas Tanner: And I think as you look at our business, the one thing that we have fun on only more and more conviction around, you know, the customer today with us this quarter staying almost 36 years is you average that across the portfolio. That is a much stronger. They say 36 years, 36 months. Excuse me. I wish it was 36 years. But 36 months is meaningful. As John talked about turnover and the cost that are associated with it.

Dallas Tanner: And as you look at our business and that demographic window, the average customer between 38 and 39 years old, we have a massive pipeline of customers potentially coming into our business. And many of them want to live in a new community with brand new schools.

Dallas Tanner: And that tells us is a winning value proposition for our business.

Jesse Lederman: The next question comes from Jesse Letterman with Zelman and associates. Your line is open. Good morning. Thanks for taking my question. Are you hearing or seeing any impacts from rising apartment availability across any of your markets. That might be keeping renters in the multifamily asset class for longer than the otherwise would be, you know, recognizing that the new multifamily supply is largely catered to or toward luxury product and any confessions offered by apartment operators might make the value proposition for apartments versus single family rentals more attractive. Thank you.

Charles Young: Yeah, that's good question. I think I start with the majority of our renters come from single family. So there's not a lot of overlap. It's somewhere around. You know, the number that are coming from historically that have been coming from multifamily is 10% or less. And so it will vary market by market in terms of the size of the market. But generally we will not see that have a direct impact on us.

Charles Young: But we'll pay attention to it. I think, you know, a couple of years ago, we felt it a bit in South Florida when there was a bunch of condo product out there. And so I think again each market will have its own nuances, but given that most of our folks are families, pets, you know, looking for school districts, having a backyard, having an extra space for Zoom call. All of these things drive people that are looking for single family homes.

Charles Young: As Dallas said, moving their kids for the good schools, that's the driver. And so the multifamily isn't a direct competitor most of the time. And that's not in all the cases, but generally we're looking at kind of the mom and hops that are out there offering homes and that's been our main competitor throughout.

Dallas Tanner: And, you know, what we know is given our marketing kind of platform and universe, we do well against that, given our professional pro care service and all that.

Brad Heffern: The next question comes from Brad Heffern with RBC Capital Markets. Your line is open. Hey, good morning, everybody.

John Olsen: John, I was wondering if you could give the size of the true up for the under-approved property taxes that fell into the fourth quarter. I think the implied gross guidance for the fourth quarter is roughly 6.5% for Op-X. Just wondering what that figure would have been without the out of period taxes. Well, I think for the fourth quarter, I think the reasonable expectation is that your over-year Q4 property taxes will be up between 6.5% and maybe 7.5%. I think that's the right way to think about it.

John Olsen: The next question comes from Anthony Powell with JP Morgan. Your line is open. Thanks. I guess along the same lines. If given what happened on the property tax side and just insurance this year, if we're thinking about the full-year impact and starting to think about 24, can maybe just help us with any bracket. Are there enough levers to even bring expenses down into a more normalized growth range next year or does the full-year impact really just keep these up such that your Op-X is going to run high again for another year?

John Olsen: Thanks for the question, Tony. As I said, we're not in a position where we're going to start talking about 24 yet. I think we are going to evaluate everything in totality. I think when we're prepared to talk about 2024 in February, we will give you a sense for what our expectations are around both of those line items. We certainly understand that we have seen outsized growth in both of those over the last few years.

John Olsen: I think as we take a step back and think about where we are, we are in the midst of a return to quote-unquote normalcy. I think there have been a lot of factors in our business and other businesses that have had some temporary structural impact that are going to take some time to resolve.

John Olsen: How long that is I think remains to be seen, and we'll be happy to chat about that a little bit more when we release our 24 guidance.

Dave Romani: The next question comes from Dave Romani with KBW. Your line is open.

Jason Fashron: Hi, this is Jason Fashron on for James. Current cap rates. What do you think the IRR is on single-family rental acquisitions over five to seven year hold and do you view that as attractive and separately what's your outlook for home prices over the next year? Thanks. I think as you look at going in cap rates, reasonable assumptions around home price appreciation, in our markets it feels like on an unlevered basis you could certainly be in the high single digits, low double digits based on the returns that we are seeing out there. I think that obviously that equation depends on your inputs around leverage over time.

Haendel St. Just: The next question comes from Handel St. Just with Mizzouho.

Dallas Tanner: Your line is open. Hey there. Thanks for the time. Dallas, you mentioned earlier portfolio still has, I guess, more of an opportunity to generate a creation from asset recycling, selling older assets to buy new ones. Could you maybe put some broad brackets around that opportunity? Do you see that as perhaps 10, 20, 30 from the portfolio and how much larger role should we expect for disposition to play in funding your business near term?

Dallas Tanner: Haendel, good question. You know, one of the things John mentioned is we have sort of a high-class problem right now. And it's that we have assets that have, you know, really good valuations to them, a market that is star for product if you're selling a home. But we also have a business that's got really amazing growth fundamentals behind it. And so, anytime Homes come up for a renewal where, you know, we reprice, we call it a rebuy analysis.

Dallas Tanner: And we look at it the portfolio as a whole. And there's a lot of different reasons for holding an asset. And there's a lot, there can be several different factors to why you may consider selling an asset. I think in today's environment with equity being so precious. I think if there are opportunities to recycle capital, expect us to be probably a little bit more aggressive there. And we've certainly shown that the last couple of years.

Dallas Tanner: I think the company itself generally has gotten really good high marks for being good capital allocators. We've sold probably 13, 14,000 homes back in to the market over the last decade. And we look at the US single family housing market as the most liquid asset class in the world. And there are homes are generally located in areas where if we want to sell that home, there are a lot of buyers as well as there would normally be a lot of renters for that home.

Dallas Tanner: And so that's a high-class problem. I think we'll evaluate our capital opportunities over time. If we think that it makes sense to keep recycling because of sort of the spreads between where values are and where we can reinvest to creatively, expect this as I mentioned before to be a little bit more aggressive there.

Dallas Tanner: But in terms of issuing like a guidance on that, we'll update our thinking in February again. We did that at the beginning of this year. We've been a little bit more of a seller relative to what we laid out at the beginning of the year. And that's been based on the market opportunity.

Anthony Powell: The next question comes from Anthony Powell with Barclays. Your line is open. Hi. Thank you. Could you update us on your views on this risk of shadow supply and workers rate lock-in? I think this comes up from time to time. With workers at 8 percent, people may want to hold on to their current works for a longer. Do you expect to see more supply from, I guess, accidental landlords going forward? And that's something that you underwrite when you buy properties or when you look for developments?

Anthony Powell: My own view is that just based on conversations we're having with both economists and home builders, it certainly feels like mortgage rate sensitivity has been more of a factor for people. Builders have had obviously tremendous success in buying down mortgage rate. And they've been able to do that for the better part of the last year, year and a half. As these rates get more and more elevated based on where the tenure and sort of treasuries are, I would expect that that probably increases people's willingness to stay locked.

Anthony Powell: Again, in a home that they currently own. I was looking at this the other day and I think it's still somewhere around 80 percent of the country is still at a sub 5 percent mortgage rate. And we talked about this in our earnings release. It's about $13,000 a year cheaper to run at home right now, an invitation home than it is to go out and buy. And I don't see that changing in the near term.

Anthony Powell: If anything, I think with this higher for longer period, the people keep referring to sort of seems like the new reality right now. I think it's probably a really good thing for those in our business in terms of the inherent demand that Charles talked about. And I think we're probably seeing some of that in the elevated renewal rates that are still sticking around through Q3 and likely into Q4.

James Feldman: Our final question comes from James Feldman with Wells Fargo. Your line is open. Great, thank you for taking the follow up. I just wanted to go back to your comments on JV opportunities and see opportunities.

Dallas Tanner: So, if you were to expand the JV platform, meaningfully, would you think about entering new markets, maybe new home types, or do you think you kind of stick with the exact same strategy you have in types of markets you have. And then similarly, if you think about the, if you do more kind of key management, is that purely just a fee collection business, or do you take equity stakes in those types of portfolios as well?

Dallas Tanner: To your question on markets, this is Dallas. To your question on markets, we love the markets we're in. I think one of the reasons that we've had the sort of performance that we've had historically, and we've been, you know, one of the top five we've had probably the best numbers in the residential space the last five years running. Is a large part because we've been very delivered about where we invest capital and why.

Dallas Tanner: And if you look at our concentrations, we've been in some of the highest growth parts of the country, and I wouldn't expect us to change that philosophy. In addition, I think one of the reasons we get the operating margins that we do, and right now we're in the high 60s, and we have markets that are well into the 70s, is because of our focus on scale, density, and being able to lay out services that people are going to want for longer periods of time.

Dallas Tanner: And so as we continue to focus on being in not just the right states, but the right markets within those states, and then building out scale and product density that allows you to meaningfully impact your service model.

Dallas Tanner: That is a winning proposition for invitation homes over the long term, and don't expect us to change from that. Now to your question around product type, we've certainly experimented a little bit as we've gone more and more in fill with some town home type product and some product that was a little bit higher density. One of the purchases we made in Q3 was a community like that in Arizona. It was a little bit higher density product, really good location, right off a meaningful transportation quarter on the west side of Phoenix.

Dallas Tanner: I think you could see us continue to try to experiment a little bit on town home type product, but remember square footage matters and amenities matter in those situations. We certainly aren't an apartment investment, an apartment investor today doing 800 to 1000 square foot units. That's not our business. We want to be 15, 16, 1700 square feet minimum, and preferably a little bit bigger than that. That lends to the demographic that we think we cater to the best.

Dallas Tanner: In terms of your question around fee management, look, I think you've seen us as a company over the first decade, prove out a couple of things. One, we have an ability to take on scale in a meaningful way, time and time again, and integrated that into our platform and see margin expansion in our numbers. We've done that last quarter with the 2000 units we added with that trade, meaningfully. It will add to additional scale and density, and what we believe will be margin expansion over time.

Dallas Tanner: I think as we start to consider things around, we get the question around property management, and as we've expanded our JV businesses, we want to look for things that are creative, that are going to give us scale, but that won't take away from the discipline approach we already have to our business. If it has scale, if it's meaningful, and if it can actually lend to our own operating margins in a way that we think that our business becomes more profitable, especially in a capital lightweight, those are things we're going to look at in the future and continue to evaluate.

Dallas Tanner: So focused on controlling the controllables right now within our business, I feel like Charles talked about this. Our business from a controllable perspective is running really, really well. I think as we get through some of this near term noise and what we call kind of the pandemic transitory winds of property tax and that debt, our business is set up for success for the future, which is really good about where we are.

Scott Mclaughlin: This completes our question and answer session.

Dallas Tanner: I would now like to turn the conference back over to Dallas Tanner for any closing remarks. Hey, we want to thank everyone again for joining us today and we're going to look forward to seeing many of you again in a couple of weeks at Navy. Thanks again.

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