Q2 2024 American Homes 4 Rent Earnings Call

Speaker Change: Greetings and welcome to the MAH Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Operator: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nick Fromm, Director of Investor Relations. Thank you, Nick. You may begin.

Speaker Change: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: It is now my pleasure to introduce your host, Nick Fromm, Director, Investor Relations. Thank you, Nick. You may begin.

Nicholas Fromm: Good morning. Thank you for joining us for our second quarter 2024 Earnings Conference. With me today are David Singelyn, Chief Executive Officer, Bryan Smith, Chief Operating Officer, and Chris Lau, Chief Financial Officer. Please be advised that this call may include forward-looking statements. All statements, other than statements of historical fact included in this conference call, are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements.

Nick Fromm: Good morning. Thank you for joining us for our second quarter 2024 Earnings Conference Call.

Speaker Change: With me today are David Singelyn, Chief Executive Officer, Bryan Smith, Chief Operating Officer, and Chris Lau, Chief Financial Officer.

Nicholas Fromm: These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. All forward-looking statements speak only as of today, August 2, 2020. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. A reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package.

Speaker Change: Please be advised that this call may include forward-looking statements.

Speaker Change: All statements, other than statements of historical fact, included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements.

Speaker Change: These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC.

Speaker Change: All forward-looking statements speak only as of today, August 2, 2024.

Speaker Change: We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Speaker Change: A reconciliation of GAAP to non-GAAP financial measures is included in our Earnings Press Release and Supplemental Information Package. As a note, our operating and financial results, including GAAP and non-GAAP measures, are fully detailed in our Earnings Release and Supplemental Information Package.

Nicholas Fromm: As a note, our operating and financial results, including GAAP and non-GAAP measures, are fully detailed in our Earnings Release and Supplemental Information Package. You can find these documents, as well as SEC reports and the audio webcast replay of this conference call, on our website at www.amh.gov. With that, I will turn the call over to our CEO, David Singelyn.

Speaker Change: You can find these documents, as well as SEC reports, and the audio webcast replay of this conference call on our website at www.amh.com.

Speaker Change: With that, I will turn the call over to our CEO , David Singelyn.

David Singelyn: Welcome, everyone, and thank you for joining us today. The power of the AMH platform continues to be on full display. We posted strong second-quarter results with core FFO per share growth of 8.5% year over year. Our teams executed well, and rental fundamentals continue to be strong, leading us to increase our core FFO per share outlook by 3 cents to $1.76 at the midpoint. This represents 6% growth for the full year and was driven by increased same-home core revenue and NOI guidance. In addition, we have de-risked our debt maturities through our recent 10-year unsecured bond issuance. As demonstrated by our results this year, AMH continues to be defined by the following concept: 1.

David Singelyn: Welcome everyone and thank you for joining us today.

David Singelyn: The power of the AMH platform continues to be on full display. We posted strong second quarter results with core FFO per share growth of 8.5% year-over-year.

David Singelyn: Our teams executed well and rental fundamentals continue to be strong, leading us to increase our core FFO per share outlook by 3 cents to $1.76 at the midpoint.

David Singelyn: This represents 6% growth for the full year and was driven by increased same-home core revenue and NOI guidance.

David Singelyn: In addition, we have de-risked our debt maturities through our recent 10-year unsecured bond issuance.

David Singelyn: As demonstrated by our results this year, AMH continues to be defined by the following concepts.

David Singelyn: Consistency and predictability on the operational front. Two, consistent and predictable growth on the AMH development front through our patient and disciplined approach when the investments meet our corporate objectives and goals. And three, consistency and predictability with our prudent capital allocation strategy and balance sheet management. Looking at the big picture.

David Singelyn: One, consistency and predictability on the operational front.

David Singelyn: Two, consistent and predictable growth on the AMH development front through our patient and disciplined approach when the investments meet our corporate objectives and goals.

David Singelyn: And three, consistency and predictability with our prudent capital allocation strategy and balance sheet management.

David Singelyn: Housing Fundamentals continues to support the Single-Family Rental Value Proposition. The national housing shortage and population demographics continue to drive a housing supply and demand imbalance. This dynamic, coupled with elevated home prices and mortgage rates, is resulting in high demand for rental homes from people seeking the benefits of single-family living without the cost or burden of home ownership.

David Singelyn: Looking at the big picture.

David Singelyn: Housing Fundamentals continues to support the single-family rental value proposition.

David Singelyn: The national housing shortage and population demographics continue to drive a housing supply and demand imbalance.

David Singelyn: This dynamic, coupled with elevated home prices and mortgage rates, is resulting in high demand for rental homes from people seeking the benefits of single family living without the cost or burden of home ownership.

David Singelyn: At AMH, we are doing our part to satisfy the growing demand for high-quality single-family rental housing by providing a superior resident experience and contributing new housing stock through our development program. Before I turn it over to Bryan, I want to mention that our CEO transition is going smoothly. The AMH team is talented and experienced, and our future is very bright. You have seen the power of our platform over the past decade. You can see it in this quarter's results, and you will see it moving forward. Now I will turn it over to you for an update on our operations and investment program.

AMH: At AMH, we are doing our part to satisfy the growing demand for high-quality single-family rental housing by providing a superior resident experience and contributing new housing stock through our development program.

Speaker Change: Before I turn it over to Bryan, I want to mention that our CEO transition is going smoothly.

Bryan Smith: The AMH team is talented and experienced, and our future is very bright.

Bryan Smith: You have seen the power of our platform over the past decade.

Bryan Smith: You can see it in this quarter's results, and you will see it moving forward.

Bryan Smith: Now, I will turn it over for an update on our operations and investment programs.

Bryan Smith: Thank you, Dave, and good morning, everyone. Our 2024 spring leasing results were solid, with seasonally strong operating metrics throughout the second quarter. Our teams have done a great job executing across all areas of the business, driving better than expected results in both top line revenue and controllable expenses. During the second quarter, we maintained consistent same-home average occupied days of 96.6%. We accomplish this while accelerating new leaf growth in each month of the quarter.

Bryan Smith: Thank you, Dave, and good morning, everyone.

Dave: Our 2024 spring leasing results were solid, with seasonally strong operating metrics throughout the second quarter.

Speaker Change: Our teams have done a great job executing across all areas of the business, driving better than expected results in both top-line revenue and controllable expenses.

Speaker Change: During the second quarter, we maintained consistent same-home average occupied days of 96.6 percent.

Speaker Change: We accomplish this while accelerating new leaves growth in each month of the quarter.

Bryan Smith: Up to 6.3% in June and 5.7% overall. As we discussed last quarter, we continued our balance for renewal strategy as we entered the move-out season and posted renewal increases of 5.2% for the quarter. This resulted in blended spreads of 5.3%, driving same-home core revenue growth of 5.5% by slightly exceeding our expectations on rental rate spreads and resident collection. On the expense front, tight expense controls across the organization largely drove same-home core operating expense growth of 4.8%, which was better than what we were expecting.

Speaker Change: Up to 6.3% in June and 5.7% overall.

Speaker Change: As we discussed last quarter, we continued our balance for renewal strategy as we entered the move-out season.

Speaker Change: and posted renewal increases of 5.2% for the quarter.

Speaker Change: This resulted in blended spreads of 5.3%, driving same home core revenue growth of 5.5% by slightly exceeding our expectations on rental rate spreads and resident collections.

Speaker Change: On the expense front, tight expense controls across the organization largely drove same-home core operating expense growth of 4.8%.

Bryan Smith: All of this resulted in same home core NOI growth of 5.9% for the quarter, demonstrating the power of the AMH platform and our team's ability to deliver consistent and predictable results through the spring leasing season. Looking forward, we expect to see normal seasonality in the back half of this year. The team has done a great job building momentum through the leasing season and is now shifting focus to managing our turnover inventory. For the month of July, same-home average occupied days remained strong at 96.3%.

Speaker Change: Which was better than what we were expecting?

Speaker Change: All of this resulted in same home core NOI growth of 5.9% for the quarter.

Speaker Change: Demonstrating the power of the AMH platform and our team's ability to deliver consistent and predictable results through the spring leasing season.

Speaker Change: Looking forward, we expect to see normal seasonality in the back half of this year.

Speaker Change: The team has done a great job building momentum through the leasing season and is now shifting focus to managing our turnover inventory.

Speaker Change: For the month of July , Same Home Average Occupied Days remained strong at 96.3%.

Bryan Smith: This was in line with our expectations and reflects the impact of the start of the move up. Leasing spreads continued to hold steady, with new and renewal rate growth of 6.2% and 5%, respectively. Our strong performance in the first half of the year, combined with our outlook for the remainder of the year, has led us to increase our full-year same home core NOI growth guidance by 50 basis points to 4.5% at the midpoint.

Speaker Change: This was in line with our expectations and reflects the impact of the start of move-out season.

Speaker Change: Leasing spreads continued to hold steady, with new and renewal rate growth of 6.2% and 5% respectively.

Speaker Change: Our strong performance in the first half of the year, combined with our outlook for the remainder of the year, has led us to increase our full-year same-home core NOI growth guidance by 50 basis points to 4.5% at the midpoint.

Bryan Smith: This reflects a 25 basis point increase in our full-year core revenue outlook, driven in part by a 50 basis point increase in our rate growth expectations for the back half of the year. In addition, the updated outlook reflects a 25 basis point reduction in our full-year core expense growth.

Speaker Change: This reflects a 25 basis point increase in our full year core revenue outlook, driven in part by a 50 basis point increase in our rate growth expectations for the back half of the year.

Speaker Change: In addition, the updated outlook reflects a 25 basis point reduction in our full-year core expense growth.

Bryan Smith: Lastly, on the investment front, we remain patient and disciplined as we continue to invest in our vertically integrated in-house development program. We are on track to deliver between 2,200 and 2,400 newly developed homes this year at average economic yields in the high 5% area based on year-on-rent. Stabilized Expenses, and a reserve for CAPEX. As a reminder, we fully control our land pipeline of over 11,000 lots. Not only does this fuel our growth for the next few years,

Speaker Change: Lastly, on the investment front, we remain patient and disciplined as we continue to invest into our vertically integrated in-house development program.

Speaker Change: We are on track to deliver between 2,200 and 2,400 newly developed homes this year at average economic yields in the high 5% area based on year-on-rents,

Speaker Change: Stabilized Expenses, and a reserve for CapEx.

Speaker Change: As a reminder, we fully control our land pipeline of over 11,000 lots.

Bryan Smith: But it also reduces our dependency on the resale market or on other home builders for external growth. This is another example of the consistency and predictability that is at the core of the AMH strategy. In closing, the first half of the year was characterized by great execution across the organization. Our momentum from the spring leasing season and our increased outlook represent the power of the AMH platform and the continued strength of fundamentals in the single-family rental sector. With that, I will turn the call over to Chris for the financial update.

Speaker Change: Not only does this fuel our growth for the next few years,

Speaker Change: But it also reduces our dependency on the resale market or on other home builders for external growth.

Speaker Change: This is another example of the consistency and predictability that is at the core of the AMH strategy.

Speaker Change: In closing, the first half of the year was characterized by great execution across the organization.

Speaker Change: Our momentum from the spring leasing season and our increased outlook represents the power of the AMH platform and the continued strength of fundamentals in the single-family rental sector.

Speaker Change: With that, I will turn the call over to Chris for the financial update.

Christopher Lau: Thanks, Bryan. And good morning, everyone.

Chris Lau: Thanks, Bryan, and good morning, everyone. I'll cover three areas of my comments today. First, a review of our quarterly results. Second, an update on our balance sheet and recent capital activity. And third, I'll close with commentary around our increased 2024 guidance.

Christopher Lau: I'll cover three areas in my comments today. First, a review of our quarterly results. Second, an update on our balance sheet and recent capital activity. And third, I'll close with commentary around our increased 2024 guidance.

Chris Lau: Starting off with our operating results, we delivered another solid quarter of consistent operational execution.

Christopher Lau: Starting off with our operating results, we delivered another solid quarter of consistent operational execution, with net income attributable to common shareholders of $92.1 million, or $0.25 per diluted share. On an FFO share and unit basis, we generated $0.45 of core FFO, representing 8.5% year-over-year growth, and $0.39 of adjusted FFO, representing 9.4% year-over-year growth. From an investment perspective, for the second quarter, our AMH development program delivered a total of 671 homes to our wholly owned and joint venture portfolio.

Chris Lau: With net income attributable to common shareholders of $92.1 million or $0.25 per diluted share.

Chris Lau: On an FFO share and unit basis, we generated 45 cents of core FFO, representing 8.5% year-over-year growth, and 39 cents of adjusted FFO, representing 9.4% year-over-year growth.

Chris Lau: From an investment perspective, for the second quarter, our AMH development program delivered a total of 671 homes to our wholly owned and joint venture portfolios.

Christopher Lau: Specifically, for our wholly owned portfolio, we delivered 580 homes for a total investment cost of approximately $224 million. Outside of development, our acquisition programs continue to remain largely on pause, as we acquired just 10 homes during the quarter.

Chris Lau: Specifically, for our wholly owned portfolio, we delivered 580 homes for a total investment cost of approximately $224 million.

Chris Lau: Outside of development, our acquisition programs continue to remain largely on pause as we acquired just 10 homes during the quarter.

Christopher Lau: Additionally, during the quarter, we sold 391 properties, generating approximately $125 million of net proceeds at an average economic disposition yield in the mid-3% area. Next, I'd like to turn to our balance sheet and recent capital activity. At the end of the quarter, our net debt, including preferred shares to adjusted EBITDA, was down to 5.1 times, and our $1.25 billion revolving credit facility was fully undrawn.

Chris Lau: Additionally, during the quarter, we sold 391 properties, generating approximately $125 million of net proceeds at an average economic disposition yield in the mid-3% area.

Chris Lau: Next, I'd like to turn to our balance sheet and recent capital activity.

Chris Lau: At the end of the quarter, our net debt, including preferred shares to adjusted EBITDA, was down to 5.1 times.

Chris Lau: Our $1.25 billion revolving credit facility was fully undrawn, we had approximately 3 million shares outstanding on a forward share basis for estimated future net proceeds of $109 million, and we had over $700 million of cash available on the balance sheet.

Christopher Lau: We had approximately 3 million shares outstanding on a forward share basis for estimated future net proceeds of $109 million. And we had over $700 million of cash available on the balance sheet, which included the proceeds from another successful and opportunistically timed unsecured bond offering during the month of June. The transaction was meaningfully oversubscribed, priced with an attractive coupon of 5.5%, and raised total gross proceeds of $500 million that will be used to repay our 2014-SFR3 securitization during the third quarter.

Chris Lau: which includes the proceeds from another successful and opportunistically timed unsecured bond offering during the month of June .

Chris Lau: The transaction was meaningfully oversubscribed, priced with an attractive coupon of 5.5%, and raised total gross proceeds of $500 million that will be used to repay our 2014-SFR3 securitization during the third quarter.

Christopher Lau: Following the June bond offering, our 2024 debt maturities are now fully de-risked, which further strengthens our financial flexibility and firepower to take advantage of additional growth opportunities when they present themselves. Additionally, following the end of the quarter, we successfully closed a new $1.25 billion revolving credit facility, which proactively replaced our previous credit facility that was initially scheduled to mature in the first half of 2025. Terms of the new credit facility include a modestly improved cost of borrowing, a fully extended five-year term, and an enhanced sustainability feature that is now linked to the energy efficiency of our newly constructed AMH development home.

Chris Lau: Following the June bond offering, our 2024 debt maturities are now fully de-risked, which further strengthens our financial flexibility and firepower to take advantage of additional growth opportunities when they present themselves.

Chris Lau: Additionally, following the end of the quarter, we successfully closed a new $1.25 billion revolving credit facility, which proactively replaced our previous credit facility that was initially scheduled to mature in the first half of 2025.

Chris Lau: Terms of the new credit facility include a modestly improved cost of borrowing, fully extended five-year term, and enhanced sustainability feature that is now linked to the energy efficiency of our newly constructed EMH development homes.

Christopher Lau: Before we open the call to your questions, I'll cover our updated 2024 earnings guidance, which was positively revised across the board in yesterday evening's earnings press release. Starting with the same home portfolio, recognizing our strong leasing spreads and improved bad debt outlook that we now expect to approximate 100 basis points on a full-year basis, we've increased the midpoint of our full-year core revenue growth expectations by 25 basis points to 5%. And on the expense side, factoring in our team's ongoing solid cost control execution as well as some modestly favorable property tax information, we've also reduced the midpoint of our full-year core expense growth expectations by 25 basis points to 6%, which translates into an overall increase of 50 basis points to the midpoint of our full-year core NOI growth expectations to four and a half percent.

Chris Lau: And before we open the call to your questions, I'll cover our updated 2024 earnings guidance, which was positively revised across the board in yesterday evening's earnings press release.

Chris Lau: Starting with the same home portfolio, recognizing our strong leasing spreads and improved bad debt outlook that we now expect to approximate 100 basis points on a full-year basis, we've increased the midpoint of our full-year core revenues growth expectations by 25 basis points to 5%.

Chris Lau: And on the expense side, factoring in our team's ongoing solid cost control execution as well as some modestly favorable property tax information, we've also reduced the midpoint of our full year core expense growth expectations by 25 basis points to 6%.

Chris Lau: Which translates into an overall increase of 50 basis points to the midpoint of our full year core NOI growth expectations to four and a half percent.

Christopher Lau: And from an FFO perspective, we now expect an additional $0.02 of FFO contribution from our increased core NOI expectations across the entire portfolio, as well as an extra penny of contribution from our modestly improved full-year outlook around interest income in G&A. And in total, we have increased the midpoint of our full-year 2024 core FFO per share expectations by 3 cents. Our new midpoint of $1.76 per share reflects the high end of our previous range and now represents a year-over-year growth expectation of 6%.

Chris Lau: And from an FFO perspective, we now expect an additional $0.02 of FFO contribution from our increased core NOI expectations across the entire portfolio, as well as an extra penny of contribution from our modestly improved full-year outlook around interest income and G&A expense.

Chris Lau: And in total, we have increased the midpoint of our full year 2024 core FFO per share expectations by 3 cents. Our new midpoint of $1.76 per share reflects the high end of our previous range and now represents a year-over-year growth expectation of 6%.

Christopher Lau: And as we open the call to your questions, I'd like to share a quick thank you to our customers. This is a solid quarter for AMH across the board that demonstrates the total power of the AMH platform and our ability to consistently and predictably deliver shareholder value creation again and again and again. And with that, thank you for your time, and we'll open the call to your questions. Operator. Thank you. We will now be conducting a question and answer session.

Speaker Change: And as we open the call to your questions, I'd like to share a quick thank you to our team.

Speaker Change: This was a solid quarter for AMH across the board that demonstrates the total power of the AMH platform and our ability to consistently and predictably deliver shareholder value creation again and again and again.

Speaker Change: And with that, thank you for your time, and we'll open the call to your questions. Operator?

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Thank you. We will now be conducting a question and answer session.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: So that we may address questions from as many participants as possible, we ask that you limit yourself to one question and one follow-up. If you have additional questions, you may requeue, and time permitting, those questions will be addressed. One moment, please, while we pull for questions. Thank you. Our first question comes from Lomai of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Speaker Change: So that we may address questions from as many participants as possible, we ask that you limit yourself to one question and one follow-up. If you have additional questions, you may requeue, and time permitting, those questions will be addressed.

Speaker Change: One moment, please, while we poll for questions.

Speaker Change: Thank you. Our first question comes from Lomai of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Juan Sanabria: Hi, good morning. I'm just curious if you could talk a little bit about the July trends. I believe you gave the new lease rate growth for July, but curious about the renewals for July and where you're sending those out. I think you mentioned you increased your blended lease rate expectations by about a percent for the second half. So if you can give any more details around that, that would also be appreciated.

Speaker Change: Hi, good morning. I'm just curious if you could talk a little bit about the July trends. I believe you gave the new lease rate growth for July , but curious on the renewals for July and where you're sending those out.

Speaker Change: I think you mentioned you increased your blended lease rate expectations by about a percent for the second half. So if you can give any more details around that, that would also be appreciated.

Bryan Smith: Yeah, great. Thank you, Juan. This is Bryan.

Bryan Smith: July was strong. We posted new lease rate growth of 6.2%, as I said in my prepared remarks, and renewals came in at 5%. We're sending out renewals in the low fives; it's really a nice balanced approach to our revenue management process. And in terms of our outlook for the second half, as I mentioned earlier, we increased our outlook by 50 basis points in terms of spread for the back half of the year.

Speaker Change: That's great. Thank you, Juan. This is Bryan.

Bryan Smith: July was strong. We posted new lease rate growth of 6.2%, as I said in prepared remarks, and renewals came in at 5%.

Bryan Smith: We're sending out or mailing renewals in the low fives. It's really a nice balanced approach to our revenue management process.

Bryan Smith: And in terms of our outlook for the second half, as I mentioned earlier, we increased our outlook by 50 basis points in terms of spreads.

Bryan Smith: And that's bolstered by really outstanding demand across our diversified portfolio footprint. A lot of strength in certain regions like the Midwest and the Carolinas. The new lease expectations have been increased significantly. There's a little bit of a benefit, at least in our outlook, to renewal rates in the back half of the year. But we're expecting those to come in, both new and renewals, in the high 4% range.

Bryan Smith: in the back half of the year. And that's bolstered by really outstanding demand across our diversified portfolio footprint.

Bryan Smith: A lot of strength in certain regions like the Midwest and the Carolinas.

Bryan Smith: New lease expectations have been increased significantly. There's a little bit of a benefit, at least in our outlook, to renewal rates in the back half of the year, but we're expecting those to come in, both new and renewals, in the high 4% range.

Bryan Smith: Thanks. And then just curious, one of your peers talked about some impact or negative impacts from new supplies starting to be felt a bit more broadly calling out Florida, as well as through Price Fatigue. So just curious about what your guys' take is on those two points. Are you seeing that in any particular regions in your portfolio?

Speaker Change: Thanks and then just curious you know one of your peers talked about some impact or negative effects from new supplies starting to be felt a bit more broadly calling out

Speaker Change: Florida as well as through Price Fatigue. So just curious on on what your guys take is on those two points. Are you seeing that in any particular regions in your in your portfolio?

Bryan Smith: Yeah, thanks, Juan. In terms of supply, the area that seems to be most effective, it's been talked about on a number of residential calls, is in Phoenix. Phoenix is really kind of the center point for a lot of the new build to rent supply that's coming onto the market. There are a couple of key points, though, that I'd like to make. One, not all built to rent is the same. It's not all created equal.

Speaker Change: Thanks Juan. In terms of supply, the area that seems to be most affected, it's been talked about a number of residential calls, is in Phoenix.

Speaker Change: Phoenix is really kind of the center point for a lot of the new build-to-rent supply that's coming onto the market.

Speaker Change: There's a couple key points, though, that I'd like to make. One, not all built-to-rent is the same. It's not all created equal. When people are referring to built-to-rent supply, they're talking about townhomes and row houses and horizontal apartments.

Bryan Smith: When people are referring to the built-to-rent supply, they're talking about townhomes and row houses and horizontal apartments. In fact, I think John Burns cited that less than 25% of the built-in inventory in Arizona is single-family detached, which is the product that we're building. With the increased built-to-rent supply and the increased multi-family supply, there is some pressure on occupancy in a market that's seen outstanding growth over the past five or six years, still performing well in the 95% area, but there is a little bit of pressure.

Speaker Change: In fact, I think John Burns cited that less than 25% of the built-rin inventory in Arizona is single-family detached, which is the product that we're building.

Speaker Change: with

Speaker Change: The increased built-to-rent supply and the increased multi-family supply, there is some pressure on occupancy in a market that's seen outstanding growth over the past five or six years. It's still performing well in the 95% area, but there is a little bit of pressure.

Bryan Smith: Most notably, though, the built to rent that we're bringing to the market in Phoenix, as I said, a single family detached, very well located, and it's performing extremely well. In fact, our new built to rent product is in excess of 97% occupied in that particular market.

Speaker Change: Most notably though, the Dole Tourette that we're bringing in market in Phoenix.

Speaker Change: As I said, it's single-family detached, very well-located, and it's performing extremely well. In fact, our new built-to-rent product is in excess of 97% occupied in that particular market.

Bryan Smith: There is some supply pressure, but we believe it'll be temporary. It may not necessarily be a like-for-like product to ours, but Phoenix remains a very strong market. We expect that to get absorbed in the near term.

Speaker Change: There is some supply pressure. We believe it'll be temporary. It may not necessarily be like-for-like product to ours, but Phoenix remains a very strong market. We expect that to get absorbed in the near term.

Eric Wolfe: Thank you. Our next question comes from the line of Eric Wolfe with Citibank. Please proceed with your question.

Speaker Change: Bye bye.

Speaker Change: Thank you. Our next question comes from the line of Eric Wolfe with Citibank. Please proceed with your question.

Eric Wolfe: Hey, thanks. I think you mentioned in your remarks that your bad debt, which you're expecting right now, is 1%. And I think it was 1.2% last year. So I guess I would think that would help your same-star revenue by about 20 basis points relative to your original guidance. So I was just curious, like, is the blended spread just adding another five BIPs, just trying to bridge the gap between, you know, your original guidance and your new guidance, and what's contributing to the 25 BIPs increase?

Eric Wolfe: Hey, thanks. I think you mentioned in your remarks that your bad debt that you're expecting right now is 1%, and I think it was 1.2% last year, so I guess I would think that would help your same-star revenue by about 20 basis points relative to your original guidance.

Speaker Change: So I was just curious, like, is the blended spread just adding another five BIPs, just trying to bridge the gap between, you know, your original guidance and your new guidance and what's contributing to the 25 BIPs increase?

Christopher Lau: Good morning, Eric. Chris here.

Chris Lau: Morning, Eric. Chris here. Thanks for the question. In terms of the guide, I would think of the increased 25 basis points as largely coming, call it half-half, half from our increased spread outlook and half from our better-than-expected bad debt experience.

Christopher Lau: Thanks for the question. In terms of the guide, I would think of the increased 25 basis points as largely coming, call it half-half, half from our increased spread outlook and half from our better-than-expected bad debt income. Just on the topic of collections, maybe I can share a little bit more color. You know, the general update is pretty consistent with our discussion last quarter. We're continuing to see strong collection trends into the second quarter.

Chris Lau: [inaudible]

Speaker Change: Just on the topic of collections, maybe I can share a little bit more color.

Speaker Change: You know that the general update

Speaker Change: is pretty consistent to our discussion last quarter. We're continuing to see strong collection trends into the second quarter. And I think what was really encouraging about what we saw is that our collection patterns, what were strong pretty much across

Christopher Lau: And I think what was really encouraging about what we saw is that our collection patterns were strong pretty much across most areas of the portfolio, which we view as a really positive indication with respect to the financial health of the AMH resident base. To your point in terms of tying that into the guide, you know, with that said, you know, as we think about our outlook for the balance of this year, we're very mindful of the fact that bad debt levels typically correlate higher with move out season.

Speaker Change: Most areas of the portfolio, which we view as a really positive indication with respect to the financial health of the AMH resident base.

Speaker Change: To your point in terms of tying that into the guide, with that said, as we think about our outlook for the balance of this year, look, we're very mindful of the fact that bad debt levels typically correlate higher with move-out season.

Christopher Lau: And with that in mind, we've left our bad debt outlook, as contemplated in guidance for the second half of the year, in the low 1% area or so, pretty consistent with the back half of last year, as you point out, bringing our full year bad debt outlook to 1% on average. But you know, look, I'm hopeful that we can do better than that and provide a nice update in the back half of this year. But at this point, I think it's important that we remain prudent, given that the majority of the move out season is still ahead of us.

Speaker Change: And with that in mind, we've left our bad debt outlook, as contemplated in guidance for the second half of the year, in the low 1% area or so, you know, pretty consistent with the back half of last year, as you point out, bringing our full year bad debt outlook to 1% on average.

Speaker Change: I'm hopeful that we can do better than that and provide a nice update in the back half of this year, but at this point, I think it's important that we remain prudent, given that the majority of move-out season is still ahead of us.

Christopher Lau: Got it. And I guess where is that debt trending today? So I mean, maybe just the last couple months in terms of where it's been.

Speaker Change: Got it. And I guess, where is Bad Debt trending today? So, I mean, maybe just the last couple months in terms of where it's been.

Christopher Lau: Yeah, the second quarter ran at 90 basis points.

Speaker Change: Yeah, second quarter ran at 90 basis points.

Christopher Lau: Thank you.

Speaker Change: Thank you.

Jamie Feldman: Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Eric Wolfe: Thanks, Eric.

Eric Wolfe: Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Jamie Feldman: Great, thanks for taking the question. So given some of the positive updates on expenses and property taxes in states where you have more visibility, we're wondering what your current guidance assumptions are for Florida and Georgia and if those assumptions have changed at all. What's the right way to think about taxes in those states? You'll get your millage rates closer to November.

Jamie Feldman: Great. Thanks for taking the question. So given some of the positive updates on expenses and property taxes in states where you have more visibility, we're wondering what your current guidance assumptions are for Florida and Georgia.

Speaker Change: And if those assumptions did change at all, what's the right way to think about taxes in those states? You'll get your millage rates closer to November .

Christopher Lau: Sure. Morning, Jamie. Chris here.

Speaker Change: Morning, Jamie. Chris here. Yeah, I can give kind of a little bit more of the broader property tax update and tie in Florida and Georgia as well.

Christopher Lau: Yeah, I can give kind of a little bit more of the broader property tax update and tie it in with Florida and Georgia as well. You know, look, the general update at this point is to keep in mind that we're really only about halfway through the property tax calendar event year. At this point, you know, we've received initial assessed values for a little over half of the portfolio overall, as we've talked about plenty of times. That then really starts the beginning of the appeals process that runs over the course of summer and into early fall, with the remainder of our values being received in the third quarter.

Speaker Change: The general update at this point is, keep in mind, we're really only about halfway through the property tax calendar event year. At this point, we've received initial assessed values for a little over half of the portfolio overall.

Speaker Change: As we've talked about plenty of times, that then really starts the beginning of the appeals process.

Speaker Change: that runs over the course of summer and into early fall with the remainder of our values being received in the third quarter. And then as you point out, you know, with the majority of our tax rates across the board for the most part being received in the fourth quarter. So you know, we're still early in the year, as I mentioned in prepared remarks, you know, we have seen and received some positive news out of Indiana.

Christopher Lau: And then, as you point out, the majority of our tax rates across the board, for the most part, being received in the fourth quarter. So, you know, look, we're still early in the year. As I mentioned in my prepared remarks, you know, we have seen and received some positive news. Of course, Indiana runs on an earlier schedule than most other states. And that is what, at this point, is driving the 25 basis point reduction in our guidance.

Speaker Change: Indiana runs on an earlier schedule than most other states and that is what at this point is driving the 25 basis point reduction in our guidance.

Christopher Lau: Outside of Indiana, you know, based on the rest of the information we've received to date, we're feeling pretty good about the new midpoint of 7% growth for this year on a full year basis. You know, just the color on Georgia, in Florida, and Georgia at this point. We've received a good portion of our initial assessed values. And that then, you know, as I mentioned, kicks off appeals season. A little bit hard to say on Georgia.

Speaker Change: Outside of Indiana, you know, based on the rest of the information we've received to date, we're feeling pretty good about the new midpoint of 7% growth for this year on a full year basis.

Speaker Change: You know, just the color on Georgia, in Florida, in Georgia at this point, you know, we've received a good portion of our initial assessed values, and that then, you know, as I mentioned, kicks off appeals season. A little bit hard to say on Georgia, you know, we've seen some values coming slightly below initial expectations, but like I said, it's still early and we really don't have any visibility into rates on Georgia at this point. Too difficult to say one way or the other, and then Florida, as we know, is really kind of a third and fourth quarter event type of state.

Christopher Lau: You know, we've seen some values coming slightly below initial expectations. But, like I said, we're still early, and we really don't have any visibility into rates on Georgia at this point. So it's too difficult to say one way or the other. And then Florida, as we know, is really kind of a third and fourth quarter event type of thing.

Jamie Feldman: Okay, it's very helpful. Thank you for all the color.

Jamie Feldman: And then I guess just shifting gears to talk about the markets, your Midwest markets have been particularly strong, as you mentioned, and I was hoping to get your thoughts on why you think that is. I know there's an article in the journal today talking about Milwaukee specifically, and the challenge and buying homes there, but just maybe thoughts on the Midwest. And then, you know, clearly the markets are pricing in lower rates ahead. Which of your markets would you be concerned about most if mortgage rates do come down, about being more challenged on the occupancy front or higher turnover?

Speaker Change: Okay, it's very helpful. Thank you for all the color.

Speaker Change: And then I guess just shifting just to talk about the markets, your Midwest markets have been particularly strong, as you mentioned.

Speaker Change: I was hoping to get your thoughts on on why you think why I know there's an article in the journal today talking about Milwaukee specifically And the challenge and buying homes there, but just maybe thoughts on the Midwest and then you know clearly the markets pricing in

Speaker Change: Lower rates ahead, which of your markets would you be concerned about most if mortgage rates do come down about being more challenged on the occupancy front or higher turnover?

Bryan Smith: Thanks, Jamie. This is Bryan.

Speaker Change: Thanks, Jamie. This is Bryan. We're really pleased with the performance of the Midwest markets this year.

Bryan Smith: We're really pleased with the performance of the Midwest markets this year. Our homes there are really high quality and characterized by being in really good locations. And we're seeing some strong in-migration. It goes back to what we've talked about for the past couple of years, just the real appreciation of the value proposition of single-family homes. And in the Midwest, that's characterized by good neighborhoods, large yards, and quality of life moves, I think. But we're really pleased with that performance. There's talk of moderation. I read the same articles as well.

Speaker Change: Our homes there are really high quality and characterized by being in really good locations.

Speaker Change: And we're seeing some strong in-migration. It goes back to what we've talked about for the past.

Speaker Change: A couple of years, just the real appreciation of the value proposition of single-family homes. And in the Midwest, that's characterized by, you know, good neighborhoods.

Speaker Change: large yards and really quality of life moves I think but we're really pleased with that performance that there's there's talk of moderation I read the same articles as well but our portfolio specifically is well positioned for continued success there

Bryan Smith: But our portfolio specifically is well positioned for continued success there. And then, in the event of a change in mortgage rates, it really depends on the supply of new housing. And our markets are characterized by pretty heavy supply constraints, especially on for sale product. Again, it's the number one reason for people to move out, but we did well when the value proposition or the delta between the cost of owning and the cost of renting was a lot tighter. So we seem to be pretty durable in all cycles.

Speaker Change: And then in the event of a change in mortgage rates, it really depends on supply of new housing and our markets are characterized by pretty heavy supply constraints, especially on for sale product.

Speaker Change: Again, it's the number one reason for move out, but we've done well when the value proposition or the delta between cost of owning and cost of renting was a lot tighter. So we seem to be pretty durable in all cycles.

Jeff Spector: Our next question comes from the line of Jeff Sceptor with Bank of America. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jeff Sceptor with Bank of America. Please proceed with your question.

Jeff Spector: ...

Bryan Smith: Great, thank you. One follow-up to that, Bryan. Can you quantify that last comment? Because, you know, that is still one of the big concerns, right? Investors have on lower mortgage rates mean you'll see a flock of renters leave to go buy homes. So you commented that, you know, when things were tighter and the cost to own was higher than rent, you had you were resilient. I guess, can you quantify that verse today?

Jeff Scepter: Great, thank you.

Jeff Scepter: One follow-up to that, Bryan, can you quantify that last comment because, you know, that is still one of the big concerns, right, investors have on lower mortgage rates means, you know, you'll see a flock of renters leave to go buy homes, so you commented that, you know, when things were tighter on cost to own, to rent,

Bryan Smith: You had, you were resilient, I guess, can you quantify that verse today?

Bryan Smith: Yeah, again, as I mentioned in the last question, it's still the top reason for people to move out. We do have residents that are going to transition into ownership, but the business held up very well during periods of time with low mortgage rates and a lot of supply on new builds.

Bryan Smith: Yeah, again, as I mentioned in the last question, it's still the top reason for move out. We do have residents that are going to transition into ownership.

Speaker Change: But the business held up very well during periods of time with low mortgage rates and a lot of supply on new builds. We're obviously not immune to the effect of a major change there, but I think the effect won't be as dramatic as some might be thinking.

David Singelyn: We're obviously not immune to the effect of a major change there, but I think the effect won't be as dramatic as some might be thinking. Again, you have got to get back to the basis, though, that we are supply constrained for high-quality housing across the board in our markets. And I think that'll provide a lot of support for our occupancy and rates.

Speaker Change: Again, you've got to get back to the basis, though, that we are supply-constrained for high-quality housing across the board in our markets, and I think that will provide a lot of support for our occupancy and rate.

David Singelyn: Hey Jeff, it's Dave. I think that last point is the key point. We're undersupplied with housing throughout this country, but more importantly, we're very undersupplied where migration is moving too, and that's the market that we're in. If rates come down, and some people can buy houses, all the better, but it's not going to solve the housing problem, because demand is going to remain very strong. Two other points to add to it:

Speaker Change: Hey Jeff, it's Dave. I think that last point is the key point. We're undersupplied in housing throughout this country.

Jeff Scepter: But more importantly, we're very undersupplied where migration is moving to, and that's the markets that we're in.

Speaker Change: We need more housing. If rates come down and some people can buy houses, all the better. But it's not going to solve the housing problem.

David Singelyn: One is that there still remains a very, very large delta between the cost of ownership and renting, and the last point is if you go back before interest rates moved up, demand was getting stronger each and every period without the delta. Very, very strong demand in all economic sectors.

Speaker Change: And demand is going to remain very strong. Two other points to it. One is there still remains a very, very large delta between cost of ownership and renting.

Speaker Change: And the last point is, if you go back before the interest rates moved up, demand was getting stronger each and every period without the Delta. That was due to the lack of housing, especially in migration markets. So we're going to continue to see.

Speaker Change: Very, very strong demand in all economic cycles.

Jeff Spector: Thanks. And then the follow-up question I have on development and development, the development yield you're earning, which you talked about in your opening remarks. I think you did say that construction costs are trending down. Is that helping the yield that you think you can earn in year one or year two? Yeah, no, I don't think so.

Speaker Change: Thanks and then the follow-up question I have on development and development the development yield you're earning you talked about in your opening remarks

Speaker Change: I think you did say that construction costs are trending down. Is that helping the yield that you think you can earn in year one or year two?

Bryan Smith: Yeah, no, I don't know that development costs are trending down, but the growth in the, um... The speed at which they were going up is definitely declining.

Speaker Change: No, I don't know that development costs are trending down.

Bryan Smith: It used to be a very, very red-hot market. It's still competitive, whether you're talking about land or per-capita traits. What we are going to be delivering for the balance of this year, I think I've had in prepared remarks, it'll continue to be in the high fives. We are buying. We are seeing some land opportunities, so that's a new ability for us to start buying a little bit of land. And I used the word little and underlined it.

Speaker Change: The speed at which they were going up is definitely declining. It used to be a very, very red-hot market.

Speaker Change: It's still competitive whether you're talking about land or per trait.

Speaker Change: For the balance of this year, I think I've had in prepared remarks, it'll continue to be in the high fives, we are buying, we are seeing some land opportunities, that's a new

Speaker Change: Ability for us to start buying a little bit of land and I use the word little and Underline it, but we're seeing some sharpshooting opportunities in really all of our markets

Bryan Smith: But we're seeing some opportunities in really all of our markets, and we're going to probably have about $50 million in new land this year. We'll have a little bit more that we are putting under contract right now for next year. Some of this land will take a little longer to close because the sellers we require to get it fully encumbered for us as we move forward. Our next question comes from the line of Linda Tsai.

Speaker Change: We're going to probably have about $50 million of new land this year.

Speaker Change: We'll have a little bit more that we are putting under contract right now for next year.

Speaker Change: As we move forward.

Linda Tsai: Our next question comes from the line of Linda Tsai with Jeffrey's. Please proceed with your question. Yes, hi. The 391 homes.

Speaker Change: Thank you. Our next question comes from the line of Linda Tsai with Jeffries. Please proceed with your question.

Linda Tsai: Yes, hi. The 391 homes, 125 million in net proceeds and a yield of mid-3%, would you expect the mid-3% yield to stay stable and how much visibility do you have on dispositions?

Linda Tsai: Sure. Good morning, Linda.

Christopher Lau: Chris here. You know, look, I think that the mid threes is pretty representative of what we're seeing in the marketplace right now, mid to high threes or so. And we've been pretty consistent in that area for the last several quarters, at least overall. I would say we're continuing to see really solid traction through the disposition program. In the first half of this year, the team did a great job capturing the spring and summer selling seasons, as you point out, selling 391 homes in the quarter, bringing our year-to-date disposition activity to a total of 862 properties, which is slightly better than about half of our full-year expectations. So, tying that into the full-year outlook, recognizing that home sales and activity typically slow down in the back half of the year Would you continue to expect to lean into dispositions more as you head into next year? We would definitely do it.

Linda Tsai: Sure. Morning, Linda. Chris here.

Chris Lau: You know, look, I think that mid threes is pretty representative of what we're seeing in the marketplace right now, mid to high threes or so, and we've been pretty consistent in that area for the last several quarters at least.

Linda Tsai: You know overall I would say we're continuing to see really solid traction through the disposition program

Linda Tsai: See you next time.

Linda Tsai: You know first half of this year that the team did a great job capturing that the spring and the summer selling season

Speaker Change: As you point out, selling 391 homes in the quarter, bringing our year-to-date disposition activity to a total of 862 properties, which is slightly better than about half of our full-year expectations.

Speaker Change: Which is great from a capital recycling perspective, helping to contribute to interest income in the meantime, while really

Speaker Change: Getting attractively redeployed into our growth programs. So, you know, tying that into the full-year outlook, you know, recognizing that home sales

Speaker Change: and activity typically slows down in the back half of the year. It feels like we're still right on track for our full year expectations of around 1,500 dispositions and something in the threes from a disposition cap rate perspective feels right.

Speaker Change: Would you continue to expect to lean into dispositions more as you head into next year?

Christopher Lau: And, you know, like we've talked about many times before, one of the great aspects of our asset class is its granularity and our ability to really make smart asset management decisions down to the unit level, refining the portfolio, and finding attractive opportunities to really attractively recycle that capital into our growth programs. You know, the other catalyst, I would say, for disposition opportunities is the collateral that is currently being freed up from our remaining securitizations that are coming off the balance sheet.

Speaker Change: We would. And, you know, like we've talked about many times before,

Speaker Change: One of the great aspects of our asset class is its granularity and our ability to really make

Speaker Change: Smart Asset Management Decisions down to the unit level, refining the portfolio, and finding attractive opportunities to really attractively recycle that capital into our growth programs.

Speaker Change: The other catalyst, I would say, to disposition opportunities is the collateral that is currently being freed up from our remaining securitizations that are coming off of the balance sheet.

Christopher Lau: We have two securitizations that we're maturing this year, the first of which was already paid off in the first quarter. The second of which, I mentioned this in prepared remarks, after the successful June bond offering, will be paid off in the third quarter. The two of those securitizations will release about 9,000 homes or so. And then we have two more securitizations that become repayable in 2025. The game plan, as we've talked about, is to refinance those on an unsecured basis, moving the balance sheets to a 100% unencumbered balance sheet, also freeing up probably 8,000 to 9,000 homes that will be essentially the next leg of opportunity from a disposition and asset management perspective.

Speaker Change: We have two securitizations.

Speaker Change: that were maturing this year, the first of which was already paid off in the first quarter.

Speaker Change: The second of which we mentioned this, I mentioned this in prepared remarks, after the successful June bond offering will be paid off in the third quarter. The two of those securitizations will release about 9,000 homes or so.

Speaker Change: And then we have two more securitizations that become repayable in 2025.

Speaker Change: Game plan, as we've talked about, is to refinance those on an unsecured basis, moving the balance sheet to a 100% unencumbered balance sheet, also freeing up probably 8,000 to 9,000 homes that will be essentially the next leg of opportunity from a disposition and asset management perspective.

John Pawlowski: Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

John Pawlowski: Good morning, Chris. Just a few quick questions on expenses. I know it's too early to talk specific numbers, but just in terms of directional moves, do you expect any expense line items to reaccelerate next year?

John Pawlowski: Thanks. Good morning. Chris, just a few quick questions on expenses. I know it's too early to talk specific numbers, but just in terms of directional moves, do you expect any expense line items to re-accelerate next year?

Christopher Lau: Morning, John. Um, next year? Well, you know, look, um, I would say this year, in particular, as we're thinking about momentum and execution from the team, we're feeling really good about things across the board. We talked about property taxes coming down 25 basis points at the midpoint on a full-year basis. And then, importantly, outside of property taxes, look, the teams are doing a really good job doing what we call controlling the controllables and executing really well across the portfolio, driving the revised outlook on non-property tax expenses down by 25 basis points to 5% at the midpoint.

Chris Lau: Morning, John . Next year, well, you know, look,

Speaker Change: I would say this year, in particular, as we're thinking about momentum and execution from the team, we're feeling really good about things across the board. We talked about property taxes.

Speaker Change: Coming down 25 basis points at the midpoint on a full year basis.

Speaker Change: And then importantly, outside of property taxes.

Speaker Change: The teams are doing a really good job doing what we call controlling the controllables and executing really well across the portfolio, driving the revised outlook on non-property tax expenses down by 25 basis points to 5% at the moment.

Christopher Lau: It's probably a little bit early to be talking about numbers for next year, but from a controllables perspective, like I said, the team is doing a great job. We're really seeing the benefits from many of our investments, like Resident 360, and I would expect all of those programs and the team's execution to continue into next year as well. On a lag basis, our expectation is that property taxes should be coming off of the peak and moderating over time.

Speaker Change: point. So...

Speaker Change: I agree with your statement. It's probably a little bit early to be talking about numbers for next year, but from a controllables perspective,

Speaker Change: Like I said, the team is doing a great job. We're really seeing the benefits from many of our investments, like Resident 360. And I would expect all of those programs and the team's execution to continue into next year as well. And then from property, from a property tax perspective,

Speaker Change: Again, can't talk to numbers, no crystal ball here, but like we've also talked about many a times.

Speaker Change: Property taxes, in part, are a function of property values, and our expectation for some time now has been

Speaker Change: Now that rate of home price appreciation hit the high-water mark in, call it, 22 or so,

Christopher Lau: I think that we're seeing that this year. Again, I can't crystal ball it yet, but it wouldn't surprise me if, hopefully, property taxes continue their rate of moderation into next year. I can't quantify it, but we feel good from a directional perspective.

Speaker Change: On a lag basis, our expectation is that property taxes should be coming off the peak and moderating over time. I think that we're seeing that this year.

Speaker Change: Again, I can't crystal ball it yet, but it wouldn't surprise me if hopefully property taxes continue its rate of moderation into next year. Can't quantify it, but we feel good from a directional perspective.

John Pawlowski: Okay, one last follow-up on repair and maintenance and turnover costs. Just given the increasing length of stay, you turn some of these homes that really haven't turned into post COVID environments, and kind of evictions and bad debt fully normalized. Do you think we'll see a temporary period of above average R&M and turnover costs because of deferred spend?

Speaker Change: Okay, one last follow-up on repair, maintenance, and turnover costs. Just given the increasing length of stay, you turn some of these homes that really haven't turned into post-COVID environments.

Speaker Change: and kind of evictions and bad debt fully normalize. Do you think we'll see a temporary period of above, you know, above average R&M and turnover costs because of deferred spend?

David Singelyn: Hey, John, it's Dave. Um, I would keep Reiterating a couple of things that Chris said and I'll then tie them into the question, and that is, we invested in our teams, our field teams, two years ago in this resident 360, and we have a lot more visibility and a lot more discipline in the field around our repair and maintenance. The second thing is that the... The seasonality of this business, and it is a seasonal business, has largely returned, and so the comparisons on a period-to-period basis, on a year-to-over-year basis are going to be much better than they have been.

Dave: Hey John, it's Dave.

Dave: I'll just reiterate a couple of things that Chris said and I'll then tie it into the question.

Dave: And that is, we invested in our teams, our field teams, two years ago in this Resident 360 and we have a lot more visibility and a lot more discipline in the field around our repair and maintenance.

Dave: The second thing is that the...

Speaker Change: The seasonality of this business, and it is a seasonal business.

Speaker Change: It has largely returned, and so the comparisons on a period-to-period basis, on a year-to-over-year basis, are going to be much better than they have been.

Speaker Change: In the last couple of years, as we were going from pandemic patterns back to regular seasonality patterns. And the third area that I would...

David Singelyn: The other thing I want to talk about that gives us confidence in our repairs and maintenance is the fact that we continue to add a lot of new homes to our portfolio that are purpose-built for rental by us with materials and in a manner that has long-term maintenance in mind. So the average age of our homes is remaining consistent, and the portfolio as a whole is not aging significantly. But more importantly, the age of the home is in one piece.

Speaker Change: talk about that gives us confidence in our repairs and maintenance.

Speaker Change: in a manner that has long-term maintenance in mind.

Speaker Change: So, the average age of our homes is remaining consistent and the portfolio as a whole is not aging significantly, but more importantly, the age of the home is one piece.

David Singelyn: The quality of the home, the higher-end plumbing fixtures, the way the flooring is built, and the decking is built, is keeping our maintenance costs much more under control than if we didn't do that.

Speaker Change: The quality of the home, the higher-end plumbing fixtures, the way the flooring is built, the decking is built, is keeping...

Speaker Change: Keeping today and will keep in the future our maintenance costs much more under control than if we didn't do that.

Daniel Tricarico: Thank you. Our next question comes from the line of Daniel Tricarico with Scotiabank. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Daniel Tricarico with Scotiabank. Please proceed with your question.

Daniel Tricarico: Hey, good morning, team. Chris, you noted the collateral from the securitization. Could you give us a sense of the magnitude of those disposition opportunities from those assets? And, you know, could it be a large enough source of funds that would lead you to ramp up the development pipeline a little more? Thanks.

Daniel Tricarico: Hey, good morning, team. Chris, you noted the collateral from the securitization. Could you give us a sense on the magnitude of those disposition opportunities from those assets? And, you know, could it be large enough of a source of funds that would lead you to ramp up the development pipeline a little more? Thanks.

Christopher Lau: Sure. Good morning, Daniel.

Chris Lau: Morning, Daniel. In terms of framing the collateral magnitude,

Christopher Lau: Yeah, in terms of framing the collateral magnitude, each one of our securitizations, these are average numbers; each one of our securitizations is collateralized by, call it, 4,500 properties or so. So the two securitizations, either paid off or being paid off this year, will free up about 9,000 homes. And then as we refinance, as I mentioned, our two opportunities next year on an unsecured basis, that will free up another 9,000 homes, which really, as I mentioned, creates a great opportunity to fine-tune the existing portfolio and really attractively recycle that capital.

Chris Lau: Each one of our securitizations, these are average numbers. Each one of our securitizations is collateralized by, call it, 4,500 properties or so.

Speaker Change: So the two securitizations, either paid off or being paid off this year, will free up about 9,000 homes.

Speaker Change: And then as we refinance, as I mentioned, our two opportunities next year on an unsecured basis that will free up another 9,000 homes, which really, as I mentioned, creates a great opportunity to fine-tune the existing portfolio and really attractively recycle that capital.

Christopher Lau: The one thing that I would point out, though, just in terms of timeline to recycle that capital, I wouldn't think of it as a flipping of the switch overnight on the recycling of that capital, in large part because of the channel through which we are selling those homes, right? Pretty much all of our dispositions these days are being sold through the MLS to end-user homebuyers, which means we need to have vacant units to be able to put them on the MLS.

Speaker Change: The one thing that I would point out, though, just in terms of timeline to recycle that capital,

Speaker Change: I wouldn't think of it as a flipping of the switch overnight on the recycling of that capital in large part because of the channel through which we are selling those homes, right? Pretty much all of our dispositions these days are being sold through the MLS to end-user homeowner buyers.

Speaker Change: Which means we need to have vacant units to be able to put onto the MLS.

Christopher Lau: And as we think about, you know, having vacant units to sell, it's a good problem to have, but, you know, 96% plus of our homes are not vacant. And so, you know, we need to let leases roll. After leases roll, residents move out, and when homes are identified for disposition, we'll spend a short amount of time prepping those homes for sale and then putting them on the market after that. So, we have a big opportunity ahead of us, and I would think of it more of a kind of gradual runway of opportunity to refine, fine-tune the portfolio, and attractively recycle capital for years to come, especially as this collateral is being recycled.

Speaker Change: And as we think about, you know, having vacant units to sell, it's a good problem to have, but, you know, 96% plus of our homes are not vacant.

Speaker Change: And so, you know, we need to let leases roll.

Speaker Change: After Lisa's role, residents move out when homes are identified for disposition. We'll spend a short amount of time prepping those homes for sale and then putting them onto the market after that. So, big opportunity ahead of us, and I would think of it more of a kind of a gradual runway of opportunity to refine, fine-tune the portfolio, and attractively recycle capital for years to come.

Speaker Change: especially as this collateral is being released.

Daniel Tricarico: Thanks for that color, Chris. I guess I'll keep it here with you.

Speaker Change: Thanks for that color, Chris. I guess I'll keep it here with you. You gave the guidance change breakdown, nothing specific on occupancy. So, you know, the low 96% expectation you had initially unchanged. And I guess just with the strength and demand you're seeing, is that keeping you more towards a rate-focused strategy at this time of year?

Daniel Tricarico: You gave the guidance change breakdown, but nothing specific on occupancy. So, you know, the low 96% expectation you had initially unchanged. And I guess just with the strength and demand you're seeing, is that keeping you more towards a rate-focused strategy at this time of year?

Speaker Change: Thanks, Jesse. This is Bryan. We're not focused on any one component of revenue. Our objective is really just to consistently maximize revenue and revenue growth over time.

Bryan Smith: So the 96% that you're seeing, it is consistent with our expectations at the beginning of the year, and our increased rate outlook is us being able to capitalize on that increased demand, but we're not focused on any one metric in isolation.

Bryan Smith: Thanks, Jesse. This is Bryan.

Speaker Change: Thank you. Our next question comes from the line of Jesse Lederman with Zellman & Associates. Please proceed with your question.

Bryan Smith: We're not focused on any one component of revenue. Our objective is really just to consistently maximize revenue and revenue growth over time. So the 96% that you're seeing is consistent with our expectations at the beginning of the year, and our increased rate outlook is us being able to capitalize on that increased demand, but we're not focused on any one metric in isolation.

Jesse Lederman: Good morning and thanks for taking my questions. Looks like you reached a single-digit rate of inflation on insurance expense for the first time since late 2020. Can you give us an update on what you're seeing on the insurance side of the business, please?

Jesse Lederman: Our next question comes from the line of Jesse Lederman with Zellman & Associates. Please proceed with your question.

Jesse Lederman: Sure. Morning, Jesse. Chris here. Yeah, I would say from an insurance standpoint,

Jesse Lederman: Good morning, and thanks for taking my questions. Looks like you reached a single-digit rate of inflation on insurance expense for the first time since late 2020. Can you give us an update on what you're seeing on the insurance side of the business, please?

Speaker Change: That's an actual renewal number at this point. If you recall, our renewal

Chris Lau: falls during the first quarter and so our renewal was done. We knew the actual number and contemplated it in guidance this year.

Chris Lau: What we saw in the second quarter I think is a little bit of a function of where some of the prior year quarterly comps fell on a full year basis as we talked about at the start of the year and as contemplated in guidance.

Chris Lau: We would expect insurance to land in the high single digits from a full year perspective.

Chris Lau: And I think it really reflects two things.

Chris Lau: That's one. As I'm sure you've heard from elsewhere.

Chris Lau: The insurance landscape overall has been improving this year, which is great from an insurance and broader industry perspective. And I think it's also a reflection of the, you know, the favorable risk profile associated with insurance.

Chris Lau: you know, dispersed single-family assets. And then in particular, the AMH risk profile, especially in and around weather events,

Chris Lau: In large part, thanks to our team's really mature disaster preparedness and response programs, which has differentiated the AMH risk profile, which you can see reflected into our insurance renewal.

Speaker Change: Great, thanks for that call. That's helpful.

Speaker Change: Shifting gear to the development pipeline, looks like you'll have a high exposure going forward to markets that are already burdened by increased supply. So if I look at, you know, Phoenix and Vegas in particular, it looks like 30% of your future lots

Speaker Change: will come from those two markets.

Speaker Change: And of course, this reflects investments made a couple of years ago when fundamentals in those markets were particularly strong, but is there any concern that such a large percentage of development conceivably will come from areas where more supply is and will be coming online?

Speaker Change: This is Dave. The answer is no, I don't have a concern. Let me give you, I think Bryan mentioned some of this.

Speaker Change: Our bill to rent is not the same as the bill to rent that is coming in, and we're seeing very, very high demand for our bill to rent.

Speaker Change: You know, we talked about location is important and where our homes that we are delivering are in those infill locations.

Speaker Change: And that's right next to where the home builders are building for retail sale. It's not where they're building, they're built to rent.

Speaker Change: When you look at the type of home or residence that we're building, Bryan mentioned this already, we're building detached homes, again, closer to the employment areas of the city because of their location.

Bryan Smith: And we're not building the attached homes.

Speaker Change: If you look at what is going on today in the build-to-rent deliveries, the build-to-rent deliveries, 21%, 22% of them are, and this is nationwide, are detached.

Speaker Change: The attached homes are on market much longer and they are having concessions being offered in order to rent them.

Speaker Change: Our homes with no concessions, all of our build-to-rent product that we have

Speaker Change: that we are delivering is 97% occupied today.

Speaker Change: High, high demand for our build-to-rent products.

Speaker Change: I see it as being a higher quality product in higher demand than other Build-to-Rent and I don't have concerns about the occupancy of our Build-to-Rent deliveries in the future.

Speaker Change: Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley . Please proceed with your question.

Adam Kramer: Hey guys, congrats on a really strong quarter and a guide raise.

Adam Kramer: I wanted to ask about how you view your cost of capital today, and I guess specifically your equity cost of capital. Looks like, you know, active on the ATM a little bit last year and a little bit earlier this year, but not in the second quarter. Looks like the stock price today is a little bit higher.

Speaker Change: and where you were issuing in the first quarter. So just, you know, again, maybe specifically with your equity cost of capital, but even just generically across all the different forms of capital, how you think about a kind of cost of capital today.

Christopher Lau: Sure. Morning, Jesse. Chris here.

Christopher Lau: Yeah, I would say from an insurance standpoint, That's an actual renewal number at this point. If you recall, our renewal falls during the first quarter. And so our renewal was done.

Speaker Change: Sure. Morning, Adam. Chris here.

Chris Lau: You know, look, I think things are moving up and down, moving in the right direction. You know, clearly, we'd still like to see more from from an equity cost of capital perspective. You know, what I would remind you of in terms of where we were active earlier this year, you know,

Christopher Lau: We knew the actual number and contemplated it in guidance this year. You know, what we saw in the second quarter, I think, is a little bit of a function of where some of the prior year quarterly comps fell on a full year basis, as we talked about at the start of the year. And, as contemplated in guidance, we would expect insurance to land in the high single digits from a full year perspective.

Christopher Lau: And I think it really reflects two things. One, as I'm sure you've heard from elsewhere, the insurance landscape overall has been improving this year, which is great from an insurance and broader industry perspective. And I think it's also a reflection of the, you know, favorable risk profile associated with, you know, dispersed single family assets. And then, in particular, the AMH risk profile, especially in and around weather events, thanks in large part to our team's really mature disaster preparedness and response programs, which have differentiated the AMH risk profile, which you can see reflected in our insurance.

Jesse Lederman: Great, thanks for that color. That's helpful.

Chris Lau: Small opportunity, small equity raise earlier this year, fully on a forward basis. And if you recall, that was actually event-driven.

Chris Lau: On the back of our S&P index inclusion, where we had an opportunity to top up the tank in a small way, north of $37 totally on a forward that we will use opportunistically going forward.

Chris Lau: But I think that that's the key word as we think about cost of and use of capital, opportunistic, right, it's all relative to the opportunity set and finding the right places and opportunities to use a

Chris Lau: [inaudible]

Chris Lau: We've been very thoughtful.

Chris Lau: about sizing the development program so that in any given year, our land pipeline and our development program can be constructed and built without the need for equity.

Chris Lau: In any one given year, right? The development program on a calendar basis is fundable through a combination of retained cash flow from the business

Chris Lau: Some level of recycled capital from dispositions, and then leveraged capacity off of the balance sheet.

Chris Lau: Unknown Attendee. Which then means equity can become an opportunistic weapon to look for incremental opportunities. Maybe it's a little bit more development. Maybe it is, you know, MLS or national builder opportunities in the future when they start to make sense.

Speaker Change: Or, you know, portfolio opportunities as we look for those types of opportunities down the road that we've talked a lot about, right? We're really optimistic on the portfolio front down the road.

Speaker Change: As we know, there are a lot of assembled portfolios out there that have been on the IRR clock now for a number of years that are going to need to find liquidity.

Speaker Change: especially in today's cost-of-debt environment. And those are fantastic opportunities for us, especially as you think about the value that we can create and unlock in those smaller and medium-sized portfolios by bringing on to our platform and bringing up to our operating standards.

Speaker Change: And, you know, something like that on a relative basis could make a ton of sense relative to cost of capital. But, like I said, they need to be the right opportunities, and because of the built-in growth from our development program, we don't need to stretch ourselves, and like you always hear from us, we're unwavering on our commitment to the buy box around location, quality, and price.

Speaker Change: Thanks Chris, that was really helpful.

Speaker Change: Just on a little bit of a different note, just wondering on some of the comments around kind of the renewal rate and where you're going out with renewals today. Maybe just quantifying kind of what the take rate is on renewals.

Speaker Change: either today or maybe your expectations for the second half of the year kind of take rate on renewals and then how does that compare to history you know just kind of rule of thumb in terms of kind of take rate on renewals

Jesse Lederman: Shifting gears to the development pipeline, it looks like you'll have a high exposure going forward to markets that are already burdened by increased supply. So if I look at, you know, Phoenix and Vegas, in particular, it looks like 30% of your future lots will come from those two markets. And, of course, this reflects investments made a couple years ago when fundamentals in those markets were particularly strong. But is there any concern that such a large percentage of development conceivably will come from areas where more supply is and will be coming online? Yeah, this is really good.

David Singelyn: Yeah, this is Dave. The answer is no, I don't actually have a concern. Let me give you. I think Brian mentioned some of this.

Speaker Change: Yeah, thank you, Adam. This is Bryan. As I talked about a little bit earlier, the 70% retention rate is kind of the expectation going forward.

Speaker Change: If you look at that in a historical context, a pre-COVID context, it's a pretty significant improvement over to what our run rate was.

Speaker Change: Back then, for a couple of reasons. One, we've talked about the supply dynamics, but...

Speaker Change: We've also really improved the offering and I think the residents are appreciating it.

Speaker Change: Thank you. Our next question comes from the line of Brad Heffner with RBC Capital Markets. Please proceed with your question.

Brad Heffner: Yeah, thank you. For sale housing supplies picked up in a lot of your markets, and I think pricing is looking a little weaker in a few places. Obviously, rent has continued to go up as well. So I'm curious if you're closer to a place where you might want to acquire in a more active way, or if the economics are still quite far from what development gives you.

David Singelyn: Our bill to rent is not the same as the bill to rent that is coming in, and we're seeing very, very high demand for our bill to rent. We talked about location being important, and where our homes that we are delivering are in those infill locations. And that's right next to where the homebuilders are building for retail sale. It's not where they're building; they're building to rent. When you look at the type of home that, or residence that we're building, Bryan mentioned this already, we're building detached homes, again, closer to the employment areas of the city because of their location. And we're not building the attack.

David Singelyn: If you look at what is going on today in the build-to-rent deliveries, the build-to-rent deliveries, 21%, 22% of them, and this is nationwide, are detached. The attached homes are on the market for much longer, and they are having concessions being offered in order to rent them. Our homes, with no concessions, all of our build-to-rent product that we are delivering is 97 percent occupied today. High, high demand for our build-to-rent product. I see it as being a higher quality product in higher demand than other build-to-rent products, and I don't have concerns about the occupancy of our build-to-rent deliveries.

Adam Kramer: Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question.

Brad Heffner: Yeah, thanks Brad. This is Bryan.

Speaker Change: In terms of National Builder activity, we continue to review tens of thousands of homes.

Adam Kramer: Hey, guys, congrats on a really strong quarter and guide raise. I want to ask you about how you view your cost of capital today, specifically your equity cost of capital. Looks like, you know, active on the ATM a little bit last year and a little bit earlier this year, but not in the second quarter. Looks like the stock price today is a little bit higher than where you were issuing in the first quarter. So just, you know, again, maybe specifically with your equity cost of capital, but even just generically across all the different forms of capital, what do you think about that kind of cost of capital today?

Speaker Change: We're active in reviewing really across the portfolio.

Speaker Change: If you look at our specific buy box and the bid-ask spread, it's consistent with what we talked about last quarter.

Speaker Change: somewhere in the 15 to 20 percent range before they start to make a lot of sense for us in today's current environment. So we aren't seeing any significant movement, but when it happens we'll be ready to take advantage of it.

Speaker Change: Okay, got it. And then Chris, I think in the second quarter, there was a bigger sequential jump in FFO than what you would typically have. I'm just curious, is that just shifting timing? Was there maybe anything one time in the quarter? Any color, that would be great.

Christopher Lau: Sure. Morning, Adam. Chris here.

Christopher Lau: You know, look, I think things are moving up and down, moving in the right direction. But, you know, clearly, we'd still like to see more from an equity cost of capital perspective. You know, what I would remind you of in terms of where we were active earlier this year, small opportunities, a small equity raise earlier this year, fully on a forward basis. And if you recall, that was actually event-driven on the back of our S&P index inclusion, where we had an opportunity to top up the tank in a small way north of $37, totally on a forward that we will use opportunistically going forward

Chris Lau: Sure. No, definitely nothing one-timey.

Chris Lau: You know, I think it's largely a function of timing of prior year quarterly pumps as well.

Speaker Change: And you can see it in the same store pool a little bit, you know, if you look at property taxes, for example, that ran, you know, sub-5% relative to the full year expectation.

Speaker Change: At seven percent, you know, that really has to do with timing of where some of some of the things fell on a quarterly basis last year.

Speaker Change: Okay, thank you.

Christopher Lau: But I think that that's the key word as we think about the cost and use of capital, opportunistic, right? It's all relative to the opportunity set and finding the right places and opportunities to use our cost of capital attractively relative to the opportunity set. And the important thing to keep in mind is how we have sized the capital plan and, in particular, the development program, right? We've talked about it a lot of times, but we've been very thoughtful about sizing the development program so that in any given year, our land pipeline and our development program can be constructed and built without the need for equity in any one given year, correct?

Speaker Change: Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

Christopher Lau: The development program on a calendar basis is fundable through a combination of retained cash flow from the business, some level of recycled capital from dispositions, and then leverage capacity off of the balance sheet, which then means equity can become an opportunistic weapon to look for incremental opportunities. Maybe it's a little bit more development.

John Pawlowski: Thanks for taking the follow-up. Bryan, I have a kind of a broader question about how you think through your geographic footprint today.

John Pawlowski: Call it 35 markets, and there's plenty of diversification within sub-markets within every one of those markets. So I'm curious how you think through potential merits of concentrating your capital in a shorter list of markets to drive better density and perhaps better efficiency at the corporate level or at the property level, rather.

Christopher Lau: Maybe it will be MLS or national builder opportunities in the future when they start to make sense, or portfolio opportunities as we look for those types of opportunities down the road that we've talked a lot about. We're really optimistic on the portfolio front. As we know, there are a lot of assembled portfolios out there that have been on the IRR clock now for a number of years and are going to need to find liquidity, especially in today's cost of debt environment.

John Pawlowski: Yeah, thanks, John . This is Bryan.

Christopher Lau: Those are fantastic opportunities for us, especially as you think about the value that we can create and unlock in those smaller and medium-sized portfolios by bringing them on to our platform and bringing them up to our operating standards. Something like that, on a relative basis, could make a ton of sense relative to the cost of capital. But like I said, they need to be the right opportunities, and because of the built-in growth from our development program, we don't need to stretch ourselves. And, like you always hear from us, we're unwavering in our commitment to the buy box around location, quality, and price.

Bryan Smith: We're very pleased with our diversified footprint. We've proven, we've built an operating model that allows us to be very efficient in some of the satellite markets where we may not have.

Speaker Change: A huge presence, but the efficiencies are still there.

Speaker Change: I've talked about it in the past, but we manage a lot of these markets through kind of a hub-and-spoke system.

Speaker Change: and it's proven to be to be a really good way to to allow us to have that expansive footprint. In terms of concentration on select markets, I think you can see it in where we're targeting our development program and the growth there. We're not we're not developing in every market across the United States.

Speaker Change: Although we're very pleased with our portfolio footprint.

Speaker Change: More excited about growth in the development market, so I think what I'm...

Speaker Change: 16 markets or so right now. And that's the area that we're concentrating on growth.

Speaker Change #100: And it ties right into your question, too, because remember, in most cases, we're delivering communities which have a lot more density, obviously, and potential for increased efficiencies on the repairs and maintenance and operating side.

Speaker Change #101: Okay, thank you for your time.

John Pawlowski: Thanks, John.

Speaker Change #101: Thank you. There are no further questions at this time. I'd like to turn the call back over to management for closing comments.

Adam Kramer: Thanks, Chris. That was really helpful.

Adam Kramer: Just on a little bit of a different note, just wondering about some of the comments around kind of the renewal rate and where you're going out with renewals today, maybe just quantifying kind of what the take rate is on renewals, either today or maybe your expectations for the second half of the year kind of take rate on renewals. And then how does that compare to history? You know, just a kind of rule of thumb in terms of the kind of take rate on renewals. Yeah, thank you, Adam. This is a good example

Bryan Smith: Yeah, thank you, Adam. This is Bryan.

Bryan Smith: As I talked about a little bit earlier, this 70% retention rate is kind of the expectation going forward. And if you look at that in a historical context, a pre-COVID context, it's a pretty significant improvement over what our run rate was back then for a couple of reasons. One, we've talked about the supply dynamics, but we've also really improved the offering. And I think the residents are appreciating the power of the maintenance platform and the services platform. So, 70% is right where we're targeting and again, a really nice improvement over the past five or six years.

Speaker Change #103: Thank you, Operator, and thank you to all of you for your time today. Have a great weekend, and we will speak with you next quarter.

Brad Heffern: Thank you. Our next question comes from the line of Brad Heffner with RBC Capital Markets. Please proceed with your question.

Brad Heffern: Yeah, thank you. For sale housing supply picked up in a lot of your markets, and I think pricing is looking a little weaker in a few places. Obviously, rent has continued to go up as well. So I'm curious if you're closer to a place where you might want to acquire in a more active way, or if the economics are still quite far from what development gives you.

Bryan Smith: Yeah, thanks, Brad. This is Bryan.

Brad Heffern: In terms of National Builder activity, we continue to review tens of thousands of homes. We're active in reviewing really across the portfolio. If you look at our specific buy box and the bid-ask spread, it's consistent with what we talked about last quarter, somewhere in the 15% to 20% range before they start to make a lot of sense for us in today's current environment. We aren't seeing any significant movement, but when it happens, we'll be ready to take advantage of it.

Brad Heffern: Okay, got it. And then Chris, I think in the second quarter there was a bigger sequential jump in FFO than you would typically have. I'm just curious, is that just shifting timing? Was there maybe anything one time in the quarter, any color that would be great? Sure.

Brad Heffern: Sure. No, nothing, definitely nothing, one tiny thing.

Christopher Lau: You know, I think it's largely a function of the timing of the prior year quarterly pumps as well, and you can see it in the same store pool a little bit. You know, if you look at property taxes, for example, that ran, you know, sub-5% relative to the full year expectation at 7%, you know, that really has to do with the timing of where some of some of the things fell on a quarterly basis.

John Pawlowski: Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

John Pawlowski: Thanks for taking the follow-up. Bryan, I have a kind of broader question about how you think through your geographic footprint today. So you're in, call it, 35 markets, and there's plenty of diversification within sub markets within every one of those markets. So curious how you think through the potential merits of concentrating your capital in a shorter list of markets to drive better density and perhaps better efficiency at the corporate level or the property level rather.

John Pawlowski: Yeah, thanks, John. This is Brian.

Bryan Smith: We're very pleased with our diversified footprint. We've proven, and we've built an operating model that allows us to be very efficient in some of the satellite markets where we may not have a huge presence, but the efficiencies are still there. I've talked about it in the past; we manage a lot of these markets through kind of a hub and spoke system. And it's proven to be a really good way to allow us to have that expansive footprint.

Bryan Smith: In terms of concentration on select markets, I think you can see it in where we're targeting our development program and the growth there. We're not developing in every market across the United States. Although we're very pleased with our portfolio footprint, we're more excited about growth in the development markets. I think we're in 16 markets or so right now, and that's the area that we're concentrating on growth in and really leaning into. And it ties right into your question too, because remember, in most cases, we're delivering communities which have a lot more density, obviously, and potential for increased efficiencies on the repairs and maintenance and operating side.

John Pawlowski: Okay, thank you for your time.

Management: Thank you. There are no further questions at this time. I'd like to turn the call back over to management for closing comments.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Management: Well, thank you, operator, and thank you to all of you for your time today. Have a great weekend, and we will speak with you next quarter.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change #105: ?? ?? ??