Q4 2024 American Homes 4 Rent Earnings Call
The New York Times Coverage The New York Times
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. 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 February 21 2025.
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 are.
Speaker Change: A reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package.
Speaker Change: 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.
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 Dot A&H Dot com.
Speaker Change: With that I will turn the call over to our CEO, Brian Smith.
Brian Smith: Thank you Nick.
Brian Smith: Morning, everyone and thank you for joining us today.
Brian Smith: Before we begin I'd like to take a moment to express our sympathies for those impacted by the recent wildfires in California.
Brian Smith: Not only is U L a community near and Dear to our Hearts, but it is also home to many of our team members and one of our corporate offices.
Brian Smith: We were fortunate that there was no impact to our operations.
Brian Smith: It's been heartbreaking to see the destruction.
Speaker Change: Today marks my first earnings call since taking over as CEO.
Speaker Change: Our consistent outperformance over the past few years within the residential sector is a direct result of our relentless focus.
Speaker Change: This will not change.
Speaker Change: Over the past decade, we have strategically created a portfolio of high quality assets and superior locations.
Speaker Change: On the growth front, we are a vertically integrated development program that allows us to accretively invest at all cycles, while remaining patient and disciplined across our other growth channels.
Speaker Change: And we will lean into innovation across our entire platform introducing industry, leading technology solutions that allow us to continue to efficiently deliver the best resident experience in our industry.
Speaker Change: Our ability to remain focused and execute on this strategy has driven outstanding results.
Speaker Change: And we continue to be well positioned for the future.
Speaker Change: From a macro perspective, the single family residential sector continues to benefit from strong long term fundamentals, including limited supply of quality housing.
Speaker Change: A wide affordability gap.
Speaker Change: Outsized population growth in our markets.
Speaker Change: And with our disciplined and focused approach, we expect to extend our track record of consistent outperformance within the space the.
The future at a M H is bright.
Speaker Change: Di alongside our outstanding leadership team I'm excited to lead this great company through the next chapter of its journey.
Speaker Change: <unk> had a strong finish to 2024 capping off another year of outperformance was six 6% growth in core <unk> per share.
Speaker Change: Consistent with the year end strategy, we outlined on our last call the teams optimize revenue and strength in occupancy during the fourth quarter.
Speaker Change: While we typically do not focus on sequential monthly changes in occupancy and rate.
Speaker Change: Cardiology over the past quarter is important.
Speaker Change: Notably, we picked up occupancy and the final two months of the quarter, which is atypical for the end of the year.
Speaker Change: We also hit an inflection point for rate in November, giving us confidence in our trajectory heading into the new year.
Speaker Change: This translated into 4% same home core revenue growth, which was in line with our expectations for the quarter.
And contributed to our full year core revenue growth of 5%.
Speaker Change: Turning to expenses core operating expense growth was four 8% for the fourth quarter and four 3% for the full year, reflecting excellent execution by the teams who were able to control the controllable throughout the year.
In addition, we received better than expected news or the property tax front, Chris will address in a moment.
Speaker Change: All of this resulted in three 6% and five 3% same home core NOI growth for the fourth quarter and full year respectively.
Speaker Change: Turning to 2025, the leasing momentum from the fourth quarter has continued through January and into February.
Speaker Change: Giving us confidence for the year ahead.
Speaker Change: For the month of January same home average occupied days was 95, 6%.
Speaker Change: New lease spreads accelerated to 7%.
Speaker Change: While renewal growth held steady at four 5%.
Speaker Change: This resulted in blended rate growth of three 3% for the months.
Speaker Change: Looking ahead to the top line in 2025.
Speaker Change: Our same home core revenue growth outlook is three 5% at the midpoint on a full year basis.
Speaker Change: On the occupancy front, we expect the usual seasonal curves to play out over the course of this year with full year average occupancy landing in the low 96% area.
Speaker Change: Which is similar to last year and what we consider the normalized long term run rate for our portfolio.
Speaker Change: On the rate front, we expect average monthly realized rent growth in the high 3% area.
Speaker Change: Which breaks down to approximately a 2% earn in from last year's leasing activity.
Speaker Change: And the partial year contribution from 'twenty to 'twenty five blended spreads expected to be in the high 3% area.
Speaker Change: Lastly, bad dad is forecasted to be in the low 1% area in 2025.
Speaker Change: Which will be a modest offset to the other revenue building blocks.
Chris: Chris will cover the remainder of guidance in a moment.
Chris: On the investment front development continues to be our primary growth channel.
Chris: Since launching our internally managed development program in 2017.
Chris: We have built over 12000 homes in 200 communities, adding.
Chris: Adding much needed supply to the national housing stock.
Chris: We are proud to be part of the solution in addressing the nations shortage of quality housing.
Chris: Similar to 2024.
Chris: We plan to deliver approximately 2300 homes in the current year.
Chris: As rent growth accelerates in the spring leasing season.
Chris: We expect initial yields to gradually improve averaging in the mid 5% area on a full year basis.
Chris: This is similar to the going in yields of our 2024 deliveries.
Chris: <unk> landed a touch below our most recent program expectations.
Chris: Our newly built homes remain the highest and best use of our internally generated and recycled capital.
Chris: A testament to their superior quality location and long term return profiles.
Chris: So either development or expectations do not include any material traditional or national builder acquisitions. This year.
Because of the current pricing and cost of capital environments.
Chris: We will stay true to our buy box and remain patient on the growth side.
Chris: Pursuing incremental opportunities only when they make sense.
Chris: And when they do arise as we demonstrated with our portfolio acquisition of nearly 1700 homes this past quarter.
Chris: We have the experience and infrastructure to quickly integrate a large number of homes onto our platform.
Chris: Finally, we will continue to lean into our disposition program as properties become unencumbered through the refinancing of our remaining securitizations.
Chris: This will allow us to continue to optimize our portfolio, while consistently recycling capital at attractive economics.
Chris: Before I hand, the call off I'd like to highlight some of our recent organizational changes.
Chris: With our CEO transition complete.
Dave: I want to congratulate Dave once again.
Chris: On his retirement as he concludes his advisory period.
Dave: And finishes out his final term on our board of trustees.
Dave: We are grateful for his leadership and wish him all the best.
Dave: Additionally, I am proud to announce the promotions of three key members of our leadership team.
Speaker Change: First Sara bolt law has been elevated to chief administrative officer. In addition to her current role as Chief Legal Officer Andrew.
Speaker Change: It remains a named executive officer, a M H alongside Chris and me.
Speaker Change: Second Zach Johnson has been promoted to EVP Chief investment Officer.
Speaker Change: And third Lincoln.
Speaker Change: Lincoln Palmer, who will be joining us today for the Q&A portion of the call.
Speaker Change: <unk> has been promoted to EVP Chief operating officer.
Speaker Change: All three have been integral members of our team for more than a decade.
Speaker Change: With this leadership team firmly in place and a relentless focus on execution.
Speaker Change: We're well positioned to extend our track record of outperformance.
Chris: Now I'll turn it over to Chris.
Chris: Thanks, Brian and good morning, everyone I'll cover three areas in my comments today first a brief review of our year end results.
Chris: An update on our balance sheet and recent capital markets activity and third I'll close with an overview of our 2025 guidance.
Chris: Beginning with our operating results, we closed out 'twenty 'twenty four with another strong performance focused on the core of our business generating net income attributable to common shareholders of $123 $2 million or 33 cents per diluted share and 45 cents of course, I hope of Sharon's unit, representing five seven.
Chris: Percent year over year growth.
Chris: And for the full year, we generated net income attributable to common shareholders of $398.5 million or $1.08 per diluted share and $1 77 of course, I vote per share and unit, representing six 6% year over year growth once again, leading the residential sector.
Chris: From an investment standpoint during the quarter, we delivered 463 total homes from our A&H development program.
Chris: It is comprised of 339 homes and 124 homes delivered to our wholly owned and joint venture portfolios respectively.
Chris: On a full year basis, we delivered a total of 2356 H development properties, which was modestly better than the midpoint of our expectations.
Chris: Outside of development as previously mentioned, we acquired a nearly 1700 home portfolio during the fourth quarter for approximately $480 million.
Chris: Integration of the portfolio was on track as we continue to bring performance at the homes up to image standards over the course of 2025.
Chris: On the dispositions front, we saw another quarter of robust activity selling 587 properties generating roughly $180 million of net proceeds.
Chris: For the full year, we sold 1705 properties for total net proceeds of approximately $530 million at an average disposition cap rate in the mid 3% generating a highly attractive source of recycled capital for reinvestment into our development program, which is a meaningful differentiator in today's cost of capital environment.
Chris: Next I'd like to turn to our balance sheet and recent capital activity.
Chris: At the end of the year, our net debt, including preferred shares to adjusted EBITDA was five four times or one and a quarter billion dollar revolving credit facility was fully undrawn and we had approximately $200 million of cash available on the balance sheet, which included a portion of the proceeds from our well timed unsecured bond offering during the month.
Chris: December <unk>.
Chris: Transaction was meaningfully oversubscribed.
Chris: Secondly, hedged to a 5.08% interest rate and raised total gross proceeds of $500 million that has or will be used to fund a portion of our 'twenty 'twenty four portfolio acquisition in 2025 capital needs. Additionally.
Chris: Additionally, during the fourth quarter. We also took down approximately 3 million Ford E. T. M shares generating net proceeds of approximately $110 million. As a reminder, these shares were previously sold under our ATM program. During the first quarter at an average sales price of $37 and <unk> <unk> per share.
Chris: Next I'd like to share an overview of our initial 2025 guidance.
Chris: For full year 2025, we expect core <unk> per share and unit of $1 80 to $1 86, which at the midpoint represents year over year growth of three 4%.
Brian Smith: For the same home portfolio at the midpoint, our expectations contemplate core revenues growth of three and a half per cent, which Brian discussed a few minutes ago.
Along with core property operating expense growth of 4% driven by property tax growth in the mid 4% area, representing another year of moderation and mid 3% growth on all other expenses driven by modestly negative insurance expense growth based on our successful renewal campaign and another year of tight expense controls.
Brian Smith: Putting together our same home portfolio revenue and expense growth expectations. We expect 2025 same home core NOI growth of 3.25% at the midpoint.
From an investment standpoint, we expect another year of consistent and predictable growth from our development program.
Brian Smith: Similar to last year in 2025, we expect to deploy between 1 billion and $1 $2 billion of total capital, adding between 2200 2400 newly constructed image development properties to our wholly owned and joint venture portfolios.
Brian Smith: Specifically for our wholly owned portfolio at the midpoint of our ranges, we expect to invest approximately $900 million of NH capital consisting of $750 million or 1900 homes added from our development program, along with $150 million of combined investment into our wholly owned development pipeline.
Brian Smith: Pro rata share of JV investments and property enhancing capex programs in.
Brian Smith: Fortunately, our image growth capital requirements for the upcoming year remains strategically sized to require minimal if any newly raised external capital.
Brian Smith: For 2025, we expect to fund our $900 million of image capital primarily through a combination of retained cash flow approximately $200 million of cash on the balance sheet and $4 million to $500 million of recycled capital from dispositions.
Brian Smith: Lastly, in addition to our growth programs, we have our final two securitization loans that we expect to refinance in 2020 five prior to their anticipated repayment dates.
Brian Smith: As a reminder, these securitizations have a combined principal balance of approximately $925 million with an average interest rate of four.
Brian Smith: Four points two 4%.
Brian Smith: In terms of timing is already delivered a notice to pay off the 2015 desk one securitization in April.
Brian Smith: And we'll likely target repayment of the 2015 as of our two securitization during the second half of the year.
Brian Smith: Following repayment of our 2015 Securitizations that we expect to refinance into the unsecured bond market over the course of 'twenty 25, our balance sheet will become 100% unencumbered.
Brian Smith: This represents an important credit rating milestone that has been nearly 10 years in the making.
Brian Smith: And before we open the call to your questions I wanted to close with a few wrap up.
Brian Smith: As Brian highlighted at the start.
Brian Smith: Our track record of a residential sector outperformance is no accident.
Brian Smith: It's the result of a disciplined strategic approach across all aspects of image.
Brian Smith: Our relentless focus on the core of our business continues to set us apart, which was on full display this past year.
Brian Smith: There's a couple of highlights in 'twenty 'twenty four we expanded same home NOI margins and produced best in class residential sector and a wide growth.
Brian Smith: While continuing to Accretively grow our portfolio there are unique in each development program and the value unlocking fourth quarter portfolio acquisition.
Brian Smith: Ultimately translating into full year core <unk> growth per share of six 6% that once again led the residential sector and outperformed our expectations from the start of the year by over 200 basis points.
Brian Smith: And as we head into 2025, I'm confident that our disciplined strategy and relentless focus on the core of our business will continue to set us apart and position us for another year of image value creation and.
Brian Smith: And with that we'll open the call to your questions operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment.
Brian Smith: It may be necessary to pick up your handset before pressing the star keys.
Brian Smith: 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 re queue and time permitting those questions will be addressed one moment. Please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of one <unk> with BMO capital markets. Please proceed.
Speaker Change: Hi, Good morning, I was just hoping you could talk a little bit about your expected development yields in 25, I think you said in the mid fives and what if anything is assumed in that with regards to terrorists, particularly around lumber from Canada, knowing that that's a material input.
Speaker Change: And just kind of your thoughts about how you can navigate that or how are your.
Speaker Change: Trying to hedge that risk if at all.
Brian Smith: Hello, and good morning, it's Brian.
Brian Smith: Yeah regarding our yields in 2025, our expectations as I mentioned in my prepared remarks is that the yields will kind of accelerate as we get into the spring leasing season.
Brian Smith: At the end of Q4 than it was 24 and the beginning of a 25, you'll see a little bit of the effect of some of the pricing changes. We made the transition from Q3 to Q4 of last year there'll be a little bit of carryover into Q1, and then as the year progresses, we expect those rents too to really pick back up.
Brian Smith: And accelerate into the back half of the year.
Brian Smith: One small thing to note, it's important that we manage inventory and these development communities well, because we're gonna be delivering new houses and many of these communities and we need to make sure that the timing and strategy of release is optimizing revenue as well.
Brian Smith: And then on the on the tariffs and immigration front.
Brian Smith: We're all following what's happening very closely that there's a lot of different things changing kind of on a daily basis.
Brian Smith: We are recognizing that that labor and material increases could be a headwind there are a lot of different things that play here.
There's some good things that we have as one of the nations top 40, homebuilders and our ability to monitor and respond to this changing environment.
Brian Smith: Notably, though on our development deliveries for 2025 over half of our planned new home deliveries are already baked in in terms of of cost on vertical.
Brian Smith: And contracted labor. So we're we're in a good position entering the first half of the year, but we're paying close attention to to have that kind of evolves as we get through the first quarter.
Brian Smith: Okay.
Brian Smith: Great and then just as a follow up.
Hoping you could talk about kind of the latest views on supply is that changing in terms of markets you're watching and in your your thoughts on but we've obviously seen a pick up in homes for sale that arent necessary clearing that are kind of sitting there and how that's impacting.
Brian Smith:
Brian Smith: Your pricing power and our traditional FSFR market with maybe the shadow supply.
Brian Smith: Yes supply with our asset type is a little bit trickier than maybe it would be on the multifamily side and.
Brian Smith: We track it from a number of different external data sources, and we have some very strong internal data to just some projections of explorations and kind of expectations for how market is going to react.
Apply for our portfolio, that's one of the benefits of having a diversified portfolio of footprint.
Brian Smith: And that we have many many markets some of which haven't really seen much supply pressure over the past few years at all.
Brian Smith: The Midwest comes to mind, Carolinas as well and then the areas that have been impacted our we've been talking about them for many quarters now.
Brian Smith: Thinking about the southwest we haven't seen a major change of late but we are seeing some really nice signs of life in a couple of markets.
Brian Smith: Specifically and in Phoenix.
We're having a really nice occupancy pick up as we get into the new year off of Q4.
Brian Smith: So there may be a little bit of an easing of supply pressures there, but again, it's it's it's hard to tell exactly but we are seeing some favorable signs the same thing's true to some of the pressures that we've talked about in the Tampa area, which I think is one of the markets, where you've seen a lot of for sale product pressure too.
Okay.
Speaker Change: Thank you. Our next question comes from the line of Eric Wolfe with Citibank. Please proceed.
Eric Wolfe: Hey, Thanks, if you look at your occupancy guidance. It suggests that occupancy rises about 50 to 60 bps on average from current levels are you seeing any sort of forward indicators in terms of leasing that this increase should happen over the next couple of months and.
Speaker Change: And should we expect your blended rate growth to be a little bit more muted over this timeframe just as you build that occupancy.
Speaker Change: Yeah, Hi, Eric it's Brian.
Speaker Change: Yeah, we're seeing some really good signs as we entered the year if you remember too.
Speaker Change: Our last call, we were very strategic about our desire to get.
Speaker Change: Really fully occupied to prepare for 2020 fives, it's part of the initiatives that we put out in Q4, where we picked up occupancy in both November and December traditionally kind of slower times of the year for us.
Speaker Change: That success that level of demand in and leasing activity has continued into Q1.
Speaker Change: Our January.
Speaker Change: New lease rates accelerated a little bit as we get into February we're expecting a pick up in occupancy there as well.
Speaker Change: As of January.
Speaker Change: And we're looking for really good momentum as we get through Q1 into Q2, which is kind of the primetime season for us.
Speaker Change: We're going through that if you want to think about our expectations for new lease rate growth in Q1. They are moving in the right direction, we have great trajectory moving off as kind of the inflection point in November and to flat in December positive into January and we're expecting similar gains into February and March. So, it's it's definitely moving in the right direction.
Speaker Change: And we're well positioned for strength in the spring leasing season.
Speaker Change: Got it that's helpful. And then I don't know if you mentioned this in the prepared remarks, sorry, if I missed it but you know you mentioned the high threes blended rent growth expectation could you kind of break that out between new and renewals and if you can sort of what's underpinning the new lease projection is based on you know third party forecasts from John Burns consulting is based on.
Speaker Change: So the buildup from your markets you know what do you what are you basing that that'd be lease projection on thanks.
Speaker Change: Yeah sure so just to break it out for our expectations for 'twenty five we're looking at new leases for the year and the 3% area and renewals in the 4% area.
Speaker Change: Specifically on the new lease side, there are a couple of components there we have.
Speaker Change: Probably a similar loss to lease this quarter as we had last quarter in the low single digits, and then market rent growth across our markets are somewhere in the 3% range for the year.
Speaker Change: And that kind of builds up our expectation.
Speaker Change: Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed.
Jamie Feldman: Great. Thank you I guess, maybe to put a finer point on the rent growth expectations.
Jamie Feldman: Can you talk about like maybe your weakest markets and your best market. You know if you would answer that same question. What you think the delta could be in terms of how strong or how we rank growth could be in and maybe benchmark, yeah, maybe just highlight which which of those markets you're talking about.
Jamie Feldman: Yeah. Thanks, Jamie This is Bryan we have a pretty wide range. If you go back to the inflection point in November.
Jamie Feldman: We had rent growth as high as in excess of 6% in some markets. So there is variability across across the portfolio.
Jamie Feldman: Now as we get into next year.
Jamie Feldman: Looking for continued success in some of the markets that they posted great results last year, notably the Midwest and Carolinas, We've got a really good movement in a.
Jamie Feldman: A couple of other maybe smaller markets you can see positive rent growth in Savannah and Charleston.
Jamie Feldman: So we're expecting that.
Jamie Feldman: <unk> of that.
Jamie Feldman: And then in terms of other kind of building blocks of expectation. So like I said, we're seeing great signs of life in Phoenix and some of the other markets that had a little bit of a pullback as we exited 24.
Speaker Change: Okay. Thank you for that and then I know you didn't include acquisitions in guidance.
Speaker Change: But as you I guess, it's a two parter if you as you unencumbered at that and you have more liquidity to put capital to work do you think that'll be a factor that drives you to do more acquisitions and maybe if you could just cover a little bit more you know why not have more acquisitions in your guidance and are there just not portfolios out there.
Speaker Change: Or do you think they might come to market and you're just not ready to include getting any of those done.
Speaker Change: Yeah, Hey, Jamie its Chris here, you know look like we've talked about all the time, we absolutely keep our finger on the pulse of everything that's going on from an acquisition market perspective, and and you know look I think about it in two different categories.
Speaker Change: So we can think about in terms of one off acquisitions or portfolios in terms of one offs I'm again, we keep our finger on the pulse there you know.
I would say, we're kind of a ways off in terms of where we would find that market attractive to be transacting at but again, we watch it closely just to give you a little bit of color in terms of what we're seeing.
Speaker Change: This past quarter through our network of National builder relationships, we screened upwards of 15000 newly constructed national builder properties and as we looked at those you know we found that something like over 80% of them fell outside of our disciplined anh buy box in terms of location.
Speaker Change: Quality, and then importantly single family detached product type and for even those that did hit our buy box you know the average yield on those was somewhere in the mid fours, which I think really underscores the importance of the development program and its ability to consistently and predictably provide pathway to growth.
Speaker Change: And then in terms of the second piece portfolios again, no different than what we've talked about in the past we are optimistic on the number of assembled portfolio opportunities that we know are out there.
Speaker Change: And what we especially like about those types of opportunities is our potential to unlock value in them, bringing them up to our standards on the image platform just like we're doing currently with the portfolio, we acquired in the fourth quarter, but.
Speaker Change: But at the same time, we recognize that there's a variety of quality levels in many of those portfolios out there and again, we are unwavering on our commitments to the A&H buy box.
Speaker Change: Thank you. Our next question comes from the line of Steve <unk> with Evercore ISI. Please proceed.
Speaker Change: Yeah. Thanks, I guess on the bad debt you guys arent really looking for much of an improvement I'm just.
Speaker Change: That's kind of why and and you know are there certain markets that are holding you up.
Speaker Change: From seeing better improvement on that figure.
Chris: Yeah sure morning, Steve Chris here.
Speaker Change: I can start and then you know maybe Lincoln can fill in some some color at the at the market level.
Speaker Change: But you know look I would say over all the collections narrative is is largely unchanged right you heard it in prepared remarks and in the release our expectation is that that that continues to run slightly elevated.
Speaker Change: In the low ones over the course of 'twenty five kind of similar to how we are exiting 'twenty for which is largely being driven still by a few remaining municipalities and in court systems that like we talked about last year continue to process at slower than typical timelines.
Speaker Change: And so you know look I would say taking a step back we would love to see this be an area of upside against our guide, but recognizing that some of the processing timelines are out of our control.
Speaker Change: You know I think we're going to hold our view kind of similar to where we're running currently until we start to see some of that timing actually move in terms of some color on the ground I'm sure Lincoln can can share a few additional details yes, Steve from a market perspective, the vast majority of our markets are operating from a bad debt perspective, I'm very close to our <unk>.
Speaker Change: Long term expectations for a sub 1% run rate.
Speaker Change: Most of it that we're seeing is from a few select markets Atlanta is kind of the Prime example, and even in Atlanta, It's really it really boils down to a few counties them. So as we get those those counties moving we're working with the local jurisdictions. The best we can to get those timeframe shortened and as we have success in doing that we'll see some of them.
Speaker Change: <unk> and the bad debt, but what you're seeing in <unk> and the guide is us reflecting what we can see in the marketplace.
Brian Smith: Okay. Thanks, and then maybe just coming back to some of the questions Brian on development.
Brian Smith: You know, whether it's the terrorists or just incremental supply from other builders I guess.
Brian Smith: And a half I guess, maybe seems a little bit like a low return to get you know, especially where bond yields are today and certainly where your stock is trading so like how do you think about that overall return is it sort of against the marginal cost of capital or or is it. The fact that you can sell assets you know when a sub four cap rate that's given.
Brian Smith: Your confidence to keep building at five and a half.
Brian Smith: Yeah. Thanks, Steve there's a lot of different things that we want to address on that on that question, but I want to start with the the five 5% yield and make sure.
Brian Smith: Everybody recognizes that the going in yield.
Brian Smith: And that's the going in yield that doesn't include a special incentives leasing incentives and so forth. It's it's it's what we're getting on houses as they're being delivered into active construction projects. In many cases. These are not stabilized yields we've seen really nice movement as a community you start to stabilize and hopes for gas.
Brian Smith: And age and in the communities mature a little bit the $5 five is it going in from a long term perspective.
Brian Smith: We really like what we're seeing from the development. The aim H development homes and it's it's a great a.
Brian Smith: Return, it's a great long term program.
Brian Smith: And in the numbers that we cite today are where we're holding ourselves to a very high standard is going at a level.
Speaker Change: And then Steve Chris Here, you know I think implied in your question is bringing up a really good reminder, around the importance of how we have strategically sized the development program I know we've talked about this a lot, but we've intentionally sized our pipeline such that any year's development deliveries.
Speaker Change: And spend is fundable without the need for built in equity right. This year is a perfect example, or any of the past years right, where the primary funding building blocks.
Speaker Change: The development program is retained cash from the portfolio from the business.
Speaker Change: Some level of recycled capital from the disposition program, which today, we know screening very attractively and then modest levels of incremental debt as that capacity grows on the balance sheet. So again.
Speaker Change: Sized strategically to consume minimal amounts of external capital and then importantly, no equity needs.
Speaker Change: Thank you. Our next question comes from the line of Jeff receptor with Bank of America. Please proceed.
Speaker Change: Great. Thank you a follow up to that conversation I guess two parts would be first Brian I don't think you said stabilized yield and then second maybe Chris could you bring in your comments from your opening remarks around you know expanding your margins.
Assume theres some also benefit there.
Speaker Change: On new development. Thank you.
Speaker Change: Yeah, Thanks, Jeff I didn't.
Speaker Change: Give a comment on an exact stabilized yields are where we're still I'm looking forward to getting a little bit more homes under the same home pool. As an example, before we start to cite those separately, but what I can tell you is that they're moving in the right direction. The expense controls are at least as good as what we thought they would be.
Speaker Change: The leasing and uptake has been has been fantastic I wanted to kind of remind everyone. Too. These are extremely high quality homes purpose built for rentals that are durable, they're highly upgrade it off of a normal starter home.
Speaker Change: They're in great locations. This is exactly the type of home that we want to be owning and managing and you cannot buy these houses at these prices anywhere in the market. So we're really really happy with the long term prospects.
Chris: Yeah, Jeff Chris here.
Speaker Change: On the NOI margin expansion and it's an important point.
And in a really important part of our view going forward that we talk a lot about in and our view of the opportunity for margin expansion over time, and we see it coming from a couple of different areas.
Speaker Change: The development program absolutely comes to mind in terms of the more efficient and higher NOI margins coming out of that product and in that we'll have more and more benefit over time as we deliver more those properties stabilize and they can ultimately age of their way into the same home pool.
Speaker Change: That's category number one category number two are really comes back to a lot of the really smart and strategic decisions, we're making from an asset management perspective, and ultimately translating into what is fueling our disposition program one of the great parts of our asset class is its granularity in our ability to fine tune the unit.
Speaker Change: Level, which is very powerful over time and in that we see being beneficial to margins over time as well and then finally you know the last piece to come back to and we saw this very clearly in 2024 is the opportunity to continue to move margins higher over time at the core of the business out of the core of the portfolio in the <unk>.
Speaker Change: Up there as we think about it like we've talked about many times before is the opportunity to drive inflationary plus growth from a top line perspective, given fundamental tailwind of the asset class and our operating platform and then ultimately holding the line on expenses as tight as we can I think we did a fantastic job on that in 2024.
Speaker Change: Sure.
Speaker Change: Translating into 20 basis points of margin expansion in 'twenty four.
Speaker Change: Yeah.
Speaker Change: Thank you and then my second question My follow up I, just wanted to confirm in terms of opportunities and.
Speaker Change: And acquisitions are you starting to get more incoming from homebuilders or it's too early really to see that I am just pointing to the softening a home sales. Thank you.
Speaker Change: Yeah. Thanks, Thanks, Jeff Chris Here again, I would say a little bit too early but at the same time you know I mentioned this a couple of minutes ago on one of the other questions.
Speaker Change: We are very well established robust relationships with all of the large builders out there and you know this quarter you know I know I just mentioned this but you know this quarter as an example, we looked at and screened over 15000 newly constructed properties. So you know I think it's a little bit early we're watching it close.
Speaker Change: Lee, but again I would underscore the fact that we have very mature relationships with all the builders who have been very active with them in the past and we will continue to watch it really really closely.
Speaker Change: Thank you. Our next question comes from Haynesville. Thank used with Mizuho Securities. Please proceed.
Speaker Change: Thank you good morning out there.
Speaker Change: Wanted to follow up a little bit on your renewables Guide I think he said it was 4%.
Speaker Change: It seems a little conservative given where you've been in recent years high sixes in 'twenty three mid fives for 24, So I'm curious if you're seeing any signs of perhaps pricing fatigue uptick in turnover.
Speaker Change: I'm trying to understand how your pricing power could be evolving here. Thanks.
Brian Smith: I had all its Brian.
Brian Smith: Yeah, we're really pleased with the results that we've had over the past couple of years as you cited and our retention is very strong all of this all the signs that we're seeing coming into the year a positive if you looked at our pick up and retention last year. The programs are working our resident 360 investment which included a <unk>.
Brian Smith: Significant investment in the communication platform.
Brian Smith: Around renewals and kind of police administration piece I think is paying some dividends.
Brian Smith: We're having a fantastic customer review scores that are contributing to kind of sustained high levels of retention.
Brian Smith: And when you look at the results that we posted and you mentioned on my prepared remarks.
Brian Smith: Four 5% renewal rate growth in January we're expecting that to continue through Q1, and then typically see a slight moderation into Q2 for renewals is that's a really high activity period.
Brian Smith: But we felt that our we feel that 4% area is a good investment for this year, all things considered with market rent growth to loss to lease.
Brian Smith: Got it fair enough.
Brian Smith: That's it for me Thank you guys.
Speaker Change: Thank you Sundar.
Speaker Change: Thank you. Our next question comes from the line of Rich Hightower with Barclays. Please proceed.
Hey, good morning out there guys and congrats to Dave if he is on the line with us.
Speaker Change: So I just wanted to I wanted to dig into property taxes for a minute and obviously you're getting some relief you know kind of relative to years past and just help US understand you know the key drivers there is some of it based on timing around rebound in certain states.
Speaker Change: And then I guess, maybe on the flip side have you given any thought to to the impact.
Speaker Change: Given the the possible likelihood I guess that state budgets and municipal budgets could be affected negatively going forward. If you know federal.
Speaker Change: Reimbursements and contributions to those budgets.
Speaker Change: <unk> falls kind of along the lines of things we've been reading.
Speaker Change: Yes.
Chris: Yeah sure Thanks, Rich Chris here.
Speaker Change: You know lots of property taxes. Overall, you know I think we were really pleased with with how things trended over the course of the year you know largely in the direction that that we were expecting and we received some nice final year end information towards the end of the year you know just to put it.
Speaker Change: Finer point on that you know some of that information they've received towards the end of the year was notably out a few out of a few of our larger states, including Texas, Florida, and Georgia, where final values and then a little bit on the rate side as well landed a touch better than our previous expectations.
Which is really what drove the full year down into the 5% area or so.
Speaker Change: That like I said, we are you know Sheridan in prepared remarks, we expect that to moderate a touch further into 'twenty five and that's largely coming from the value side of the equation, which.
Speaker Change: Which is landing back into what is our long term run rate.
Speaker Change: Of 4% to 5% for property tax growth right. So we're kind of back to long term run rate at this point.
And then you know to your point in terms of our budgetary pressures.
Speaker Change: Something that we're watching very closely.
Speaker Change: With that said you know, we see that the larger driver here being on the value side, but nonetheless, it's something that we watch closely.
Speaker Change: In particular, we're watching it in in Texas.
Speaker Change: Like we've talked about plenty of times the.
Speaker Change: The Texas property tax reform back in 2022.
Speaker Change: Has now expired and we know that a new property tax relief will need to be re past four for 25, and 26, which is an update is completely supported by both Governor Abbott and then state Congress and it really is a top priority for a portion of the state's budget surplus, which I think latest estimates are like.
Speaker Change: <unk> $24 billion.
Speaker Change: And so it's things like that that we're watching very closely.
Speaker Change: But you know all things considered we feel good about you know the setup going into 'twenty five and in the fact that we're expecting to see additional moderation back into the 4% to 5% area.
Speaker Change: Okay, great great color and just maybe a quick follow up I don't think we've spent a lot of time on the call talking about non rental revenue you know other income opportunities for the year, maybe just run through what you guys are seeing on that front. Thanks.
Speaker Change: Sure Yeah, you know contemplated in the guide and even taking a step back to 224.
Speaker Change: Modest contribution from our same home perspective, I think in 24 contributed 10 basis points of same store revenue contribution something like that.
Speaker Change: We would expect a modest growth in that line item into 'twenty five as well you know maybe a touch below 24, or so think of it think of it kind of growing in line, but the broader rent growth.
Speaker Change: Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed.
John Pawlowski: Hey morning, Brian I wanted to go back to the conversation about how yields on the development.
Speaker Change: Basically shift beyond year, one I know stabilization on the most recent vintages of deliveries is still an unknown, but you've been at about eight years build to rent. So you should have a I would think a decent sample size of.
Speaker Change: Earlier vintages at homes and can you just give us a sense how different like a year three yield is versus initial yield on the earliest vintages of homes.
Speaker Change: Yeah. Thanks, John just in terms of just getting everything calibrated right. The early years, where we're kind of small test phases. So we've been running for a full speed for a lesson that that entire time period, but.
Speaker Change: I talked earlier on the call what the yields look like going in.
Speaker Change: And then as these these communities stabilize construction traffic accidents.
Speaker Change: They're fully leased.
Speaker Change: They turn.
Speaker Change: Like I said before we're having fantastic experience on the expense side, a little bit better than we even thought in terms of cost of turn and speed to turn occupancy and rates have held consistent with expectations. We've talked about some of the increases we've seen in time. So as these as these projects stabilize those yields are.
Grading out of the fives and into the fixes.
Speaker Change: And performing very well from a long term perspective.
Speaker Change: Okay does that into the sixes type trajectory account for stabilized expense load on these homes that just may have not turned or same property tax resets.
Speaker Change: Yeah. It does it does I'm talking about ones that have matured enough to experience both of those things yeah, John by year, three or so property taxes will will have.
Speaker Change: Settled in and stabilized up and you do have turn activity going on by year three.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed.
Speaker Change: Great. Thanks for the time guys.
Speaker Change: Just wanted to ask about your you know the Midwest exposure I think this is kind of been a source of strength for the market.
Speaker Change: And I think if you expect it to be going forward as well. So if you think about someone who's Midwest markets. You know if you could maybe attribute the strength.
Speaker Change:
Speaker Change: No if it's kind of on the existing home sales volume on the lack of new homes available, maybe it's kind of still a COVID-19 catch up play and in some ways, maybe just talk about the Midwest and kind of what are what are some of the drivers of the strength in these markets.
Speaker Change: Yeah. Thanks, Adam this is Brian.
Speaker Change: Probably the easiest way to look at the performance of our Midwest portfolio is to talk about really the quality of assets and the type of new single family detached.
Speaker Change: West is characterized by large yards and we were really particular about what locations we wanted to invest there.
Speaker Change: We've seen a really nice pick up over the past few years migration into these markets for high quality of life moves.
Speaker Change: And the reality is there's just not a lot of supply of equal level quality product there maybe supply on the outskirts of lower levels of apartments, and so forth, but in terms of the type of home the quality of home that we have.
Speaker Change: We're unique in that aspect.
Speaker Change: One other thing to note too with a portfolio transaction that we closed at the end of last year. We were really pleased that we were able to add some some homes to those high quality Midwest markets.
Speaker Change: Really it's been kind of difficult to grow.
Speaker Change: Great. Thanks for that Brian and maybe just.
Speaker Change: You kind of a more general one looking ahead into 2025 and I'm wondering if you could maybe kind of frame. The euro I think you kind of gave the.
Speaker Change: Blended rent growth numbers of new and renewal of the occupancy expectations, but if you were to just kind of take a step back and think about this year.
Speaker Change: Relative to maybe pre Covid years, and I know, there's kind of limited history in the public markets, there, but where did you kind of categorize this year as a normal year normal seasonality and what can you kind of drive this year due to progress differently than maybe a normal year.
Speaker Change: Yeah. Thanks out of it in terms of normal probably the easiest way to look at it our rent growth expectations.
Speaker Change: Aren't that dissimilar to what we saw pre COVID-19 and that's really a snapshot of just this year, that's not really a long term perspective necessarily but what is different is our expectation for occupancy. If you remember kind of pre COVID-19 levels, we're always talking about the 95% area.
Speaker Change: And there's just been a number of different changes in our industry and with our platform that are giving us confidence that 90, 695% expectation has been moved to 96, that's really the main difference.
Speaker Change: In terms of how the rate trajectory plays out for the year, we're going to do the best we can we're well positioned on the new lease side.
Speaker Change: But the estimates that we have right now are a good fit for expectations of market rent growth and loss to lease as I mentioned earlier.
Speaker Change: Yeah, and then Adam Chris Here I would just add since you kind of asked the question also in terms of kind of the broader context of outlook overall.
Speaker Change: Overall.
Speaker Change: Again, like Brian just said and we've been saying since the start here, we were in a great spot and in a position of strength and because of that you know we feel really good about our outlook in the guide for the year ahead, especially relative to the broader residential landscape.
Speaker Change: And look at the end of the day. It is our objective and we'd love to be able to deliver some nice updates it against the guide over the course of the year and as I think about the shape of those opportunities.
Speaker Change: I would say those opportunities are very similar to the focus areas from from 2020 for you know we've talked about this a minute ago, but bad debt comes to mind, we'd love to be able to see some improvement there.
Speaker Change: That would represent area or opportunity for upside and then our objective no different than any other year, but very similar to 24 in particular is to capture as much upswing as possible on the front end of the leasing curve and then deliver the tightest expense controls that we can.
Speaker Change: Again, all of which the team did a fantastic job in 'twenty, four and and that's our objective again in 'twenty five.
Speaker Change: Thank you. Our next question comes from the line of Julien fallen with Goldman Sachs. Please proceed.
Julien Fallen: Hi, Thank you for taking my question.
I guess on the demand front can you sort of walk us through what Youre seeing in your internal metrics I guess, how is engagement trending versus maybe a year ago or two years ago, our sort of household incomes.
Julien Fallen: The new incoming tenants looking anything you should you can help sort of frame on the demand side.
Lincoln Palmer: Alright, Thanks, Julian this is Lincoln.
Lincoln Palmer: We continue to see really strong incoming residents from a financial perspective.
Lincoln Palmer: Stated income is running north of 150000 still in.
Lincoln Palmer: Income to rent ratios and a five and a half time, so we're really really happy with our resident base.
Speaker Change: The encouraging thing coming off of what Chris and Brian have already talked about out of our kind of strategic.
Speaker Change: Stabilization of occupancy in the fourth quarter is that we're seeing great trajectory into January and February.
Speaker Change: Nearly all of our markets are trending.
Speaker Change: Trending very well from both the occupancy and rate perspective, but even more encouraging is to seek some of the leading indicators. One of those is a foot traffic in our homes. So we saw kind of a 30% pick up from the end of fourth quarter end of January when people visiting our homes and that has to do with a return of activity that we've already talked about.
Speaker Change: And then year over year that activity is about 15% higher than it was last year. So it gives us a lot of confidence going into the remainder of the other I'm going to see a very strong leasing season.
Speaker Change: Awesome. Thank you that's very helpful.
Speaker Change: And when we think about the new lease rate growth assumption for the year of 3%. It does seem to know bacon quite a meaningful sequential improvement in new lease spreads versus where we are in January.
Speaker Change: I guess, what would sort of giving you that confidence that we're going to see that.
Speaker Change: That strong ramp I guess, it does sort of theme a little bit more similar to pre COVID-19 seasonality.
Speaker Change: Is there anything you're seeing so far in February that sort of encouraging you.
Bryan: Yeah. Thanks, John This is Bryan it really comes back to the demand.
Speaker Change: Momentum that Lincoln is talking about the fact that our portfolio is well positioned from an occupancy perspective.
Bryan: And also a testament to the quality.
Bryan: Type of asset and the location of our homes. So we're in a really good place to be optimistic about our continued rate growth and even occupancy pick up.
Bryan: As we as we migrate into the spring leasing season.
Speaker Change: Thank you. Our next question comes from the line of Brad Heffern with RBC capital markets. Please proceed.
Speaker Change: Brad I'm glad you are you on mute.
Speaker Change: Yeah.
Speaker Change: Alright, I, we may have lost Brad.
Speaker Change: Please enter the queue, if you're still there.
Speaker Change: Our next question comes from the line of Daniel Tycho with Scotiabank. Please proceed.
Okay. Thanks. Good afternoon question on interest expense for crest first kudos on a bond timing can you just talk to what's in the on the current plans on paying down. The Securitizations. You know do you expect to issue unsecured concurrently or maybe say a bit more flexible utilizing our line balance and how that all rolls into interest expense expectations for the year and you know the math behind the nine cents.
Speaker Change: Dilution from financing costs and yet the footbridge.
Daniel Tycho: Yeah Fantastic question. Thanks, Daniel.
Daniel Tycho: So in terms of timing on the Securitizations are as I mentioned in prepared remarks, our expectation is that the the first of the two will be paid off in April.
Daniel Tycho: And then expectation is that the second will be paid off in the second half of the year anticipated repayment date falls in October so I'd expect probably a little bit before that.
Daniel Tycho: Base case plan.
Is to refinance those into the unsecured bond market, which is what we have contemplated in guidance right. It is that refinancing on an unsecured basis that we'll be bringing the balance sheet to 100% unencumbered doesn't mentioned very important milestone.
Daniel Tycho: And contemplated in the guide is two unsecured bond executions.
Daniel Tycho: Timing is a little bit difficult to peg it will be dependent on market conditions.
Daniel Tycho: I guess, we can assume one of the first half of the year one in the second half of the year, but again it'll depend on market conditions.
Daniel Tycho: You know two day, new issue cost of tenure unsecured.
Daniel Tycho: Depending on where treasuries are today, probably a touch over.
Daniel Tycho: Mid fives or so we've contemplated something in that area actually a touch higher in the guide.
But to your point you know look we've got great flexibility and you know the credit facility is fully undrawn with total capacity of of one and a quarter billion dollars, which would provide additional flexibility for runway if.
Daniel Tycho: If we weren't liking what we're seeing in the bond market, but base case assumption would be to bond market execution over the course of the year.
Daniel Tycho: And then to your point on what's contemplated in the bridge in guidance. Another great question, Let me break it down into a couple of different pieces for you are the right building blocks is call it about two pennies.
Daniel Tycho: Just in terms of growth financing, that's the annualized <unk> of some of the E. T. M shares that we sold on a forward basis earlier in 24 that we just took down and then a little bit of modest incremental debt over the course of 'twenty four annualizing into this year. So that's two out of the nine pennies.
Daniel Tycho: And then you can think of about four of the nine pennies being financing cost on the bulk portfolio. We acquired in the fourth quarter and then that leaves three cents of refinancing.
Daniel Tycho: Headwind in in the in the nine pennies and you know as Youre thinking about the math on those three pennies don't forget that includes both kind of be the annulus Asian of 24 refinancing activities and then partial year consideration for this year's refinancing activities.
Speaker Change: No that's great. Thanks, thanks for the detail Chris.
Speaker Change: And just a high level final one for Brian I know you've been formally prepping to take the reins for maybe a year now, but any early insight you can share on the business step.
Speaker Change: The steps you've taken or plan to take that's that's different or.
Speaker Change: Incremental to the company.
Daniel Tycho: Yeah. Thanks Daniel.
Speaker Change: The transition went very well.
Speaker Change: A lot of gratitude to Dave for making that really smooth.
Speaker Change: We have a great strategy, we have a great business. There are a number of really strong things in our favor I talked about some of them in my prepared remarks.
Speaker Change: Just the industry itself has a lot of Blue Sky ahead.
Speaker Change: So I'm very energized and excited about going forward in terms of major changes.
Speaker Change: We've got excellent strategy is focused on executing and we're going to continue to focus on our core business the resident.
Speaker Change: And continued innovation and optimization so no major changes I'm, just just very excited and optimistic about the future.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Linda Tsai with Jefferies.
Speaker Change: Please proceed.
Linda Tsai: Hi, Thanks for taking my question you said over half of your costs are baked in for development at this point in the year is this typical or does it vary and what costs aren't baked in.
Speaker Change: I, let it yet.
Speaker Change: Baked in I mean contracted we have active construction occurring on half of our expected deliveries for 2025, which means we've already locked in pricing for some of the materials and labor and so forth.
Speaker Change: I think that that timeframe is typical we start these communities. We we contract with a subcontractor, we began managing off of off of those beds.
Speaker Change: So when you think about kind of the timing and the effect of any event that there are.
Speaker Change: Some constraints on the tariff side or the or the.
Speaker Change: Employment side, probably the show up more in the second half of the year.
Speaker Change: Thanks, and then you also earlier highlighted outperforming 2024 core <unk> growth by over 200 bps do you view, the 200 bps and achievable.
Mark for this year and then what would be some of the risks to potentially achieving this outperformance.
Linda Tsai: [laughter], Linda or Chris here, I kind of chuckle.
Linda Tsai: You know look I I would encourage you to look at the range.
Linda Tsai: We've contemplated in the guide.
Linda Tsai: Our range of expectations, our upper end at $1 86 is into the fives or so so.
Linda Tsai: So you know I would frame it that way and then as I mentioned, a couple of minutes ago in terms of how we think about you know sheet, but the guide over the course of the year our objective no different than any year is to be able to.
Linda Tsai: Two to do our best to outperform and be able to deliver nice updates against the guide again over the course of the year and I think 24 was a good example of great execution and great execution against our expectations as at the start of the year.
Linda Tsai: Thank you. Our next question comes from the line of Austin, where Smith with Keybanc capital markets. Please proceed.
Austin Smith: Great Thanks, and good morning.
Austin Smith: Going back to development for a minute. If you were to see construction costs increased faster than rents from here and kind of all else equal around cost of capital I guess at what yield does development become less attractive where you'd consider flexing the size of the development platform down and how easily and quickly can you dial.
Austin Smith: Add back.
Austin Smith: Hey, Austin this is Brian.
Speaker Change: Yeah, I want to start by just reminding everyone I've talked about it earlier, but the yields that we've been signing or the going in and our development product our deliveries in the program itself.
Speaker Change: This fantastic over the long term from a long term perspective.
Speaker Change: If there was a case, where there was the effect of the tariffs and some of the labor issues that people have been talking about we're talking about you know based on estimates from the National Association of Homebuilders and other experts within the field.
Speaker Change: We're talking about something in the neighborhood of two.
Speaker Change: 2% range on total home cost for us this year. So we're not talking about a huge needle mover and there are a bunch of other factors at play it's difficult to predict maybe those changes and cost effect activity, maybe we're able to to shift some of our purchasing.
Patterns in some of the materials, we put in to mitigate a little bit of that increase but but again, we're not expecting a massive massive change there.
Speaker Change: And then from the perspective of whether the returns are attractive I can say unequivocally that they are from a long term perspective.
Speaker Change: Okay. That's helpful. And then if we started to see a pickup in the for sale market.
Speaker Change: Confident are you that you can sustain kind of the the higher occupancy achieved following you know coming out of the pandemic.
Speaker Change: Are you concerned at all that you start to get a pickup in and move outs for home purchases and that the impact that that could have on total revenue and even expense growth.
Speaker Change: Yeah, the the move out to buy as has always been and remains our largest reason from our residents who are moving out.
Speaker Change: The changes in the for sale market.
Speaker Change: I have some effect the effect, though it might not be as dramatic as people think.
Speaker Change: The cost of owning a home was the same as the cost to rent.
Speaker Change: We still fared very well from a retention perspective.
That gap is an enormous enormous right now, especially in the markets that are starting to have a lot of activity a slight drop in asking rates on houses doesn't do much to bridge the 28% affordability gap.
Speaker Change: We're in a good shape going into this year in the meantime, we're bolstering.
Speaker Change: Our offering and making sure that we're really focused on the resident experience so that they they see renting from us as being Super convenient and you know it's difficult to replace that that level of service on the home the healing yourself.
Speaker Change: Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed.
Michael Goldsmith: Good afternoon, and thanks, a lot for taking my question first question is on the on renewals are you seeing any tenant pushback on renewals is just kind of within the context of the AR.
Michael Goldsmith: The 4% renewal rate.
Michael Goldsmith: Yeah.
Speaker Change: Yeah. Thanks, Michael we Havent seen any any change if you notice we had really nice pickup in retention as we exited last year.
Michael Goldsmith: We don't have a huge band.
Negotiations with our pricing and the way that we offer renewals.
Michael Goldsmith: Very supportable and the improvements in the communication that made that that process a lot easier for both us and the resident we're not seeing a lot of pushback and we're not seeing any excess negotiation as we get into 2025.
Michael Goldsmith: Yeah.
Michael Goldsmith: Thanks for that though those how about then just as a follow up.
Michael Goldsmith: Have you seen any changes on the regulatory front.
Michael Goldsmith: We haven't I mean.
Michael Goldsmith: Our our performance historically, it really hasnt varied much with changes in the regulatory environment, we have a very high quality operations, where we're focused on being proactive and transparent with our residents and other stakeholders. So.
Michael Goldsmith: So we haven't seen anything, but there's a lot of different things going on but.
Michael Goldsmith: Nothing that is effective as of yet.
Michael Goldsmith: Thank you.
Speaker Change: Our next question comes from the line of Brad <unk> with RBC capital markets. Please proceed.
Speaker Change: Everybody can hear me now.
Speaker Change: If we can morning Brad.
Speaker Change: Sorry about that.
Speaker Change: I just have one given we're past the top of the hour I guess on days to re resident are there any stats that you can give on that and how it has trended now that turnover number continues to move lower but then occupancy also came down in the fall. So it just seems like the home has to be sitting on the market for longer for that to make sense.
Speaker Change: Trying to get a sense of the scale of that and if it's abnormally long versus maybe pre COVID-19 levels.
Speaker Change: Yeah, Yeah, Thanks, Brad you're you're identifying really exactly what we talked about with the slowdown in activity that we saw exiting the third quarter.
Speaker Change: And the difference and re tenant and the expansion in Q4. It was really just the catch up of that as we as you picked up occupancy in November and December, but we expect it to return to kind of consistent numbers and compressed down as we get into the spring leasing season.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Brett.
Speaker Change: Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed.
Speaker Change: Hey, Thanks for taking the follow up Brian One question for you on corporate governance I think the board the size of the board is now 13, what's the right long term number of directors for A&H and how long will it take to get there.
Speaker Change: Yeah, Hi, John.
Speaker Change: I think these are decisions that are to be considered by our board in its entirety and that is a focal point in terms of the right number and the right composition.
Speaker Change: But those are the types of things that <unk> been discussing at length.
Speaker Change: And the Energy Committee as an example.
Speaker Change: Well I'll, let them decide exactly where that where that comes out but it is something that we're that we're focused on are watching.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Tayo, let Sinama with Deutsche Bank. Please proceed.
Speaker Change: Yeah.
Speaker Change: Hi, Yes, good afternoon, Brian again, congrats on the CEO role.
Speaker Change: Again, while you and Dave have been long term partner in the business just curious.
Speaker Change: You know if you're thinking about any differently from the way D. What about it.
Speaker Change: Now that you're kind of in the driver seat.
Speaker Change: I'm also very curious what kind of feedback you are getting from the board.
Speaker Change: It should be a board member as well.
Speaker Change: Yeah. Thanks, Teo in terms of any changes in strategy.
Speaker Change: We were very fortunate at <unk> to have a leadership team that's been together through the formative years of the company in excess of a decade.
Speaker Change: We've been working in lockstep from from the very beginning our strategy is sound.
Speaker Change: We've done some really good things that we're continuing to lean into.
Speaker Change: The core of the business on the development program.
Speaker Change: So in terms of major changes, we don't anticipate anything just really continuing to do what we do very well.
Speaker Change: I would expect to see continued focus on innovation and optimization.
Speaker Change: The resident in the resident experience the center of everything that we do.
Speaker Change: And focus on our core businesses allowed us to tab excellent performance.
Speaker Change: Of late and expectations for that to continue.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Jesse Letterman with Zelman and Associates. Please proceed.
Jesse Letterman: Hey, Thanks for taking the question.
Jesse Letterman: You mentioned earlier that theres been a number of different changes across the industry and in the A&H platform, specifically that makes you confident the new norm for occupancy is more in the 96% range than 95% could you just talk a little bit more about what those changes have been both in the industry and specifically.
Speaker Change: With an H.
Speaker Change: Yeah, Thanks, Josh starting with the industry I think that's as far as a whole are people are starting to appreciate the value proposition of a home and a yard.
Speaker Change: And.
Speaker Change: In a garage and extra space.
Speaker Change: As opposed to historically.
Speaker Change: My family was really the main choice for families that we're going into their thirties and starting to expand so I think there's a general improvement in appreciation of that people are looking for when they move to new areas as an example.
Speaker Change: And then all of the institutional operators have been very focused on the resident experience, which wasn't a focus in a specific industry. Prior to these changes over the past past few years.
We're very excited about the product that we have we think that.
Speaker Change: The additions that we've made not only through the platform, but specifically on technology allowed us to be faster and more efficient.
Speaker Change: Just as an example, but it's very easy and frictionless to lease a house from us today.
Speaker Change: Theres going to bolster occupancy.
Speaker Change: We've done a very good job of communicating with our residents and providing an excellent services platform, which is going to improve retention and I could go down the list of each of the line items to show areas that we've improved over time all of these lead to our improved expectations of a new kind of 96% level of occupancy.
Speaker Change: Thank you there are no further questions at this time I'd like to pass the call back over to Brian for closing remarks.
Brian Smith: Yeah. Thank you for your time today I look forward to talking to you again soon on our next.
Speaker Change: First quarter's call have a great day.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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