American Homes 4 Rent (NYSE:AMH) Q1 2024 Earnings Call Transcript

American Homes 4 Rent (NYSE:AMH) Q1 2024 Earnings Call Transcript May 3, 2024

American Homes 4 Rent isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the American Homes 4 Rent First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nicholas Fromm, Director of Investor Relations. Thank you, you may begin.

Nicholas Fromm: Good morning, thank you for joining us for our first quarter 2024 earnings conference call. 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 facts 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.

All forward-looking statements speak only as of today, May 03, 2024. 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. 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.com. With that, I will turn the call over to our CEO, David Singelyn.

David Singelyn: Welcome everyone and thank you for joining us today. 2024 is off to a good start. Demand for single-family rentals and more specifically AMH homes remains healthy. In the first quarter, we delivered $0.43 of core FFO per share, representing 5.8% year-over-year growth. As expected, the SFR normal seasonal curve is back and our property management team is doing a great job capturing accelerating demand heading into our spring leasing season. More broadly, the ongoing macro drivers, including the national housing shortage, aging millennial demographics and challenging home affordability dynamics, suggests steady demand into the foreseeable future for single-family rental homes. Additionally, the higher for longer interest rate scenario seems to be playing out, which may continue to pressure new housing supply.

With that in mind, our focus remains on the development program, where we continue to do our part in solving the housing shortage by providing new premium housing options in desirable family-friendly locations across the country. Turning to an update on sustainability, we published our 6th annual Sustainability Report last week, which includes updates on our progress and impact on environmental and social initiatives, such as the expansion of our solar pilot program to residents. As a reminder, whether solar enabled or not, our newly constructed homes are designed with sustainability in mind. In fact, our 2023 deliveries on average are 54% more energy efficient than the typical American home. Additionally, our corporate headquarters in Las Vegas was recently awarded LEED Gold certification for the building green design, construction and use practices.

This represents another milestone in the company’s sustainability journey, affirming AMH’s continued commitment to responsible environmental practices. In closing, AMH is in a great position starting out the new year. Long-term business fundamentals are strong, leasing momentum continues to build into the second quarter and our development program continues to deliver new, high quality homes into the portfolio. Now I’ll turn the call over to Bryan for an update on our operations and investment programs.

Bryan Smith: Thank you and good morning everyone. As Dave mentioned, 2024 is off to a great start with demand accelerating into the spring leasing season. Website activity is up double digits year-over-year and inbound inquiries saw strong sequential pickup to support the occupancy levels and leasing spreads that remain well above long-term historical averages. Further, the kickoff of our seasonal curve is evident in our sequential occupancy metrics with March occupancy increasing over that of January and February. Turning to first quarter Same-Home results, rate growth was healthy with new, renewal and blended rental rate spreads of 4.8%, 5.9% and 5.6%, respectively and with Same-Home average occupied days of 96.2%, this drove Same-Home core revenue growth of 5.3%.

Core operating expense growth was 5.9%, also in line with our expectations. All of this resulted in Same-Home core NOI growth of 4.9% for the quarter. First quarter operating momentum has continued into April, demonstrating the strength of the spring leasing season with Same-Home average occupied days of 96.6% and new, renewal, and blended spreads of 5.1%, 5.2% and 5.2%, respectively. While strong, these results are within our range of expectations and our guide remains unchanged with the bulk of the prime leasing season still ahead. Lastly, expanding more on our investment programs, our strategy, driven by prudent decision-making and consistent execution, remains unchanged. Internally developed homes continue to be our primary method of growth.

For the year, we expect the AMH Development Program to deliver between 2,200 and 2,400 homes at average economic yields in the high 5% area after a reserve for CapEx. In closing, operations are off to a strong start as we enter our busiest period of the year, and our investment programs remain in great shape. As I travel to our field offices across the country, I continue to be impressed with the hard work and dedication of our team members and providing the best resident experience in our space. Thank you for setting us up for another strong year. With that, I will turn the call over to Chris for the financial update.

Chris Lau: Thanks, Bryan. And good morning, everyone. I will cover three areas in my comments today: first, a review of our solid quarterly results; second, an update on our balance sheet through recent capital activity; and third, I will close with a brief update around our unchanged 2024 guidance. Starting off with our operating results, we delivered another consistent and solid quarter with net income attributable to common shareholders of $109.3 million or $0.30 per diluted share. On an FFO share and unit basis, we generated $0.43 of core FFO, representing 5.8% year-over-year growth and $0.40 of adjusted FFO, representing 6.5% year-over-year growth. From an investment standpoint, our development program continues to perform right on track and delivered a total of 469 homes to our wholly-owned and joint-venture portfolios during the quarter.

Specifically, for our wholly-owned portfolio, we delivered 441 homes for a total investment cost of approximately $171 million. Additionally, during the quarter, we sold 471 properties, generating approximately $145 million of net proceeds at an average economic disposition yield in the high 3% to 4% area. Next, I would 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 5.3 time. We had $125 million of cash available on the balance sheet and our $1.25 billion revolving credit facility was fully undrawn. Additionally, following the successful green bond offering that we discussed on our last call, we fully repaid our 2014-SFR2 securitization during the quarter.

As a reminder, the 2014-SFR2 securitization had an outstanding principal balance of $461 million with an expiring interest rate of 4.4% and was collateralized by approximately 4,500 properties that can now be freely reviewed by our asset management and disposition programs. And finally, I am happy to share that AMH was added to the S&P 400 Index on March 1. This created an opportunistic window to sell approximately three million Class A common shares under our ATM program at an average sales price of $37.03. Given the opportunistic nature, these shares were sold on a 100% forward basis and represent future gross proceeds of $110.6 million that will be used to expand our future growth capacity. Lastly, before we open the call to your questions, I wanted to briefly touch on our 2024 guidance.

As expected, the year is off to a strong start with robust demand and leasing activity. However, given that the bulk of the spring leasing season is still ahead of us, we are currently maintaining our previously provided full year 2021 earnings guidance and look forward to providing another update on this front next quarter. And with that, thank you again for your time, and we’ll open the call to your questions. Operator?

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