Q4 2024 Earnings Call Transcript

Please signal a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Scott McLaughlin, Senior Vice President of Investor Relations. Please go ahead.

Greetings, and welcome. I'm here today from Invitation Homes with Dallas Tanner, Chief Executive Officer, Charles Young, President and Chief Operating Officer, John Olson, Chief Financial Officer, and Scott Eisen, Chief Investment Officer. Following our prepared remarks, we will conduct a question and answer session with our covering sell-side analysts. During today's call, we may reference our fourth quarter 2024 earnings release and supplemental information.

This document was issued yesterday after the market closed and is available on the investor relations section of our website at www.invh.com. Certain statements we make during this call may include forward-looking statements relating to the future performance of our business, financial results, liquidity and capital resources, and other non-historical statements, which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated. We describe some of these risks and uncertainties in our 2023 annual report on Form 10-K and other filings we make with the SEC from time to time.

Except to the extent otherwise required by law, Invitation Homes does not update forward-looking statements and expressly disclaims any obligation to do so. We may also discuss certain non-GAAP financial measures during the call. You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures, in yesterday's earnings release. With that, I now turn the call over to Dallas Tanner, our Chief Executive Officer.

Good morning, everyone, and thank you for joining us today. I'm pleased to report that Invitation Homes delivered another strong quarter of operational and financial results to close out 2024. Our full-year results demonstrated solid execution across our platform, including core FFO per share growth of 6.4% and AFFO per share growth of 6.7%. I extend my thanks to our dedicated teams and for the continued loyalty of our residents. On the latter point, we're proud that our residents continue to choose Invitation Homes for the long term.

During the fourth quarter, the average length of stay was approximately 38 months. We also achieved a renewal rate of 80% with same-store rental rate growth on renewals of 4.2% year over year. We believe this underscores the value proposition that our industry and our platform offer and the strong relationships we're able to maintain with our residents over time. It's also a testament to the continued demand for our high-quality homes in desirable neighborhoods located in some of the fastest-growing areas of the country and delivered with our trademark genuine care.

During 2024, we emerged as the professional manager of choice for partners seeking premium service and performance. We grew our JV and third-party managed home count by more than six and a half times last year to over 25,000 homes. We expect this business to continue to have opportunities to grow in the future. At the same time, we further optimized our wholly-owned portfolio, recycling capital from older assets into newly constructed, growth-enhancing investments.

This was possible in part through our innovative builder partnerships, helping us welcome over 1,800 individuals and families into newly built homes during 2024. In the meantime, our pipeline remains robust, with more than 2,000 homes under development by our home builder partners at the start of this year. Since we launched our home builder partnerships nearly four years ago, we have continued to broaden and refine the traditional build-to-rent model. In doing so, we've moved beyond the binary view of either on-balance sheet development or completed home purchases. Rather, our unique broad-spectrum approach considers everything from early-stage builder partnerships to the acquisition of stabilized communities.

As the market has further evolved and our approach has become more sophisticated, we're continuing to evaluate new opportunities and structures to strengthen our growth profile by thinking out of the traditional SFR box. Combined, our strategic growth initiatives allow us to enhance our scale and density within our core markets and potentially expand our existing footprint by evaluating new markets with attractive growth profiles. As we've learned, improved scale and density support better OpEx and CapEx management across the entire portfolio, setting the stage for overall margin expansion. In that regard, our same-store NOI margin returned to over 68% last year, and we believe we can continue to see improvement as we further execute on our growth and efficiency objectives.

Turning now to current market conditions. Last summer, we were among the first to call out the moderating impact that new home deliveries were having in some of our markets. We continue to work through this and are seeing some early signs of improvement. At the same time, we are taking a measured approach with our initial expectations for 2025 and remaining vigilant as we seek better clarity throughout the year, including with regard to new supply for the year ahead, the impact of potential tariffs, and the chance for prolonged higher mortgage rates, and the effect that builder spec inventory and buyer incentives may have on the market.

Nevertheless, we believe the tailwinds for our business remain supported by the demographics. As a reminder, there are 46 million American households who lease their primary residence, and among those, nearly one in three choose to lease a single-family home. With our average resident age of 38 years old, this includes many millennials and young families who desire the flexibility and convenience of leasing a single-family home. It also includes those who appreciate the compelling value of leasing, with the average cost of leasing a single-family home nearly $1,100 a month cheaper than owning in our markets according to John Byrne's research.

As we look ahead, we remain confident in our ability to capitalize on opportunities while maintaining a disciplined approach to capital allocation. With our dedicated teams, strategic approach to external growth, and operational excellence, we believe we are well-positioned to create value for our stakeholders while delivering on our mission to provide high-quality homes and superior service to our residents. Charles, over to you.

Thank you, Dallas. I'm proud to begin by highlighting our team's outstanding response to the recent wildfires in Los Angeles. Our local team showcased the very best of Invitation Homes, demonstrating extraordinary dedication in caring for our residents. We lost only two homes to the fires, which was thanks in part to the scattered nature of our portfolio that provides a built-in risk mitigate.

Yet the more important victory was ensuring all of our residents and associates remain safe. And I extend my deepest gratitude to our LA-based team, first responders, and all those who worked tirelessly during this challenging time. Moving on now to same-store results. I'm happy to report strong fourth-quarter performance with NOI growth of 4.7% year over year.

This result was driven by core revenue growth of 2.7% and a 1.5% reduction in core operating expenses, demonstrating our continued focus on operational efficiency. For the full year 2024, we delivered NOI growth of 4.6%, based on core revenue growth of 4.3% and core operating expense growth of 3.7%. Notably, our property tax expense growth of 5.8% year over year was in line with our latest expectations and brought a welcome return to a more normal growth rate following two years of larger increases. Overall, our results underscore our differentiated performance within the residential REIT sector that we believe our resident-focused approach helps to provide.

During 2024, that included annual turnover of just 22.6%, average length of stay of approximately 38 months, same-store average occupancy above 97%, and a full-year blended rent growth of 3.9%. Turning now to our leasing performance. For the fourth quarter, we achieved same-store blended rent growth of 2.3% year over year, based on a 4.2% renewal rate growth and a negative 2.2% new lease rate growth. As Dallas mentioned earlier, we've seen a healthy improvement in same-store leasing as we moved into 2025 and more recently kicked off our spring leasing.

As we would expect this time of year, new lease rent growth has reaccelerated and was positive here in February. While renewal rent growth has remained strong in the mid-fives for the past couple of quarters to date, including January and preliminary February results, average occupancy rose to 97% and blended lease rate growth climbed to 3.5%. While John will discuss more details of our 2025 guidance with you in a moment, I'd like to share some color around our leasing expectations for the year. We anticipate our same-store new lease rate growth will continue to accelerate through April or May with renewals and average occupancy moderating somewhat as we enter the summer months before improving again towards the last few months of the year.

Overall, we expect full-year same-store blended rent growth in the mid-threes and average occupancy of 96.5% at the midpoint, effectively finalizing our return to more normal pre-pandemic levels. Before I close, I'd like to take a moment to congratulate Tim Loadner on his promotion to Chief Operating Officer. Tim joined Invitation Homes shortly after it was founded in 2012, most recently serving as Executive Vice President and Head of Field Operations. Many of you have met Tim at recent investor conferences and know he's a seasoned leader with unmatched talent for customer care, operations management, and efficiency.

Following Tim's promotion to COO next week, I'll remain in my role as President, allowing me to focus even more on our strategic plans for growth. Together with Tim and the entire leadership team, we're excited for the year ahead, with great appreciation for our outstanding associates in the field who remain focused on leasing execution, disciplined cost management, and providing the exceptional service that our residents expect. This is truly fundamental to our success and the achievement of our goals. Thank you for bringing your best every day.

With that, I'll turn it over to John to discuss our financial results in more detail.

Thanks, Charles. Today, I'll cover the following three topics. First, an update on our balance sheet and liquidity. Second, our fourth quarter and full-year 2024 financial results.

And third, the introduction of our 2025 guidance and assumptions. I'll start with our balance sheet. At year-end 2024, we had a robust liquidity position of nearly $1.4 billion comprised of unrestricted cash on the balance sheet and undrawn revolver capacity. Our year-end net debt to adjusted EBITDA ratio was 5.3 times, just below our targeted range of 5.5 to 6 times.

Over the last several years, we've made substantial progress in optimizing our debt structure. Today, over 83% of our total debt is unsecured, nearly 90% of our wholly-owned homes are unencumbered, and over 91% of our total debt is either fixed rate or swapped to fixed rate. I'm also pleased to note enhanced transparency regarding our swap book through a new addition to our supplemental, which is posted to the Investor Relations section of our website. Our new Schedule 2D provides detail around our active swaps as of year-end as well as forward-starting swaps through 2026, along with our swaps' weighted average strike rates.

We believe our swap book positions us well for the foreseeable future, with the vast majority of our floating rate debt locked in at attractive fixed rates for the next several years. Next, I'll cover our fourth-quarter results. Total revenues grew 5.6% to $659 million in the fourth quarter, and property operating expenses were well-controlled, a testament to our team's cost controls. This translated into strong year-over-year growth in our fourth-quarter results, with core FFO per share up 5.9% and AFFO per share up 8.9%.

For the full year 2024, we delivered 6.4% core FFO growth per share and 6.7% AFFO growth per share. Looking ahead now to 2025, we've introduced our full-year guidance ranges, with core FFO in a range of $1.88 to $1.94 per share, AFFO between $1.58 and $1.64 per share, and same-store NOI growth in a range of 1% to 3%. Our guidance also anticipates $600 million in wholly-owned acquisitions at the midpoint, primarily funded through dispositions of $500 million at the midpoint. The complete details of our 2025 guidance and core FFO bridge from 2024 to our 2025 guidance midpoint are available in last night's release.

In summary, we entered 2025 in a very healthy financial position, with a strong balance sheet, compelling operating metrics, and a clear strategic vision focused on growth. Our strong liquidity position and largely unencumbered asset base provide us with tremendous flexibility to pursue compelling growth opportunities while maintaining our disciplined approach to capital allocation. More than ever, we're focused on providing genuine care to our residents and delivering superior value for our shareholders. Operator, we're now ready to open the line for questions.

We will now begin our question and answer session. To ask a question, please press star, then one on your telephone keypad. To withdraw your question, please press star then two. If you are using a speakerphone, please pick up your handset before pressing the keys.

In the interest of time, we ask the participants to limit themselves to one question and then requeue by pressing star one to ask a follow-up question. One moment, please, while we poll for questions. The first question comes from Eric Wolf with Citibank. Please go ahead.

Hey. Thanks. I think you said that your blended spreads were already in the mid-threes in February. So I was just curious why you're not expecting that to accelerate a bit further since I think your guidance is based on a similar level throughout the year.

I think Dallas also mentioned that you're taking sort of a cautious approach to guidance, so I don't know if that's sort of what you meant by that or is referring to something else. Thanks.

Yep. Thanks, Eric. We are anticipating blended rent growth for 2025 in the mid-threes. So, as you recall, the typical seasonal curve is we see acceleration in new lease rate growth here in the first part of the year, as turnover picks up in the summer months, we see a little bit of a step back.

And then, you know, sort of in the back part of the year, some moderation, potentially some reacceleration. We do feel good that, you know, we've seen acceleration each month since December. And I think, you know, overall, we're just trying to take a very measured approach to 2025. The reality is, you know, there are some supply pressures. There is some supply out there that needs to be absorbed.

We anticipate that the absorption of that supply will have a flow-through impact on occupancy. So as you saw, the midpoint of our range is 96.5%. That assumes that turnover for 2025 is generally similar to 2024, maybe a skosh higher, but that the biggest impact comes from slightly longer days on market as we go out and try to achieve the best rate growth we can.

Your next question comes from the line of Michael Goldsmith with UBS. Please go ahead.

Good morning. Thanks a lot for taking my question. Dallas, in your opening remarks, you talked about how new home deliveries were impacting last year, but you're starting to see some early signs of improvement. So can you walk us through what you're seeing right now and then also what you're expecting from the new home deliveries through 2025? Thank you.

Yeah. Hey. Great question. You know, to double-click on something that John said, we're certainly seeing some reacceleration as we head into the spring leasing season.

We've seen, you know, supply start to moderate coming off sort of peaks last summer as we called out when we started to see some of these real supply pressures coming into the market. Now there is some variability amongst markets, you know, we'd expect that there's still some pressures in Florida and Phoenix and some of those markets that had sort of easier barriers to entry, in terms of new development with a lot of the starts in 2020 and 2021 sort of feeding into the system. We're optimistic as we pay attention to both deliveries and starts that this number probably, most likely, continues to get better for us.

You know, we've even listened to some of our counterparts, with the public homebuilders, and some of their calls, as well as our discussion with regionals that we would just expect that there may be a bit more of spec inventory as mortgage rates stay elevated. And all this is, you know, slight headwinds for new lease, but it's terrific for our renewals business. So we'll continue to anchor on the renewal side of the house, which has been close to 80% of our leasing volume for last year and be as aggressive as we can on rates on the new lease side. Sort of have to take what the market's giving us, but the skies are a little bit more clear now than they were, say, last summer.

Your next question comes from the line of Daniel Tricarico with Scotiabank. Please go ahead.

Hey. Good morning. Fryder Stosser Scott. Wanted to ask about your coast markets.

You know, first, have you seen any increase in activity in SoCal since the fires earlier in the year? And, you know, is there any incremental impact from that on your guidance that you can quantify? You know, and second, with the West Coast being your, you know, seeing stronger growth today, you know, there seems to be an increasing confidence in the demand recovery out there as well. You know, potentially better business backdrop too.

So have you, you know, reevaluated being a net seller? Thanks.

So this is Charles. I'll take it. In terms of your initial question around the impact on guidance SoCal, really no material impact. If you look at our NorCal and SoCal markets, we run really high occupancy.

The fires, very unfortunate. But for us, we only had two homes that were lost. You gotta remember, our book is a little further away from where the fires were located. And at the time, when we were running high 97% occupancy in SoCal, there were only 50 homes that were available on the market at the time.

And so while, yeah, there was a little bit more demand, it didn't really have a huge impact on how we're running. That book generally runs at a high occupancy because there's a lack of supply in that market. And we're also doing really well on rate there, on both the new lease and the renewal side. So it's been really solid.

If you want to discuss Dallas going into the dispositions.

Look, it's a really great question on how to think about accretively recycling capital. Scott and I spend a lot of time looking at ways to create, you know, call it highest and best use cost of capital for the company. And we've certainly had a successful year in 2024 selling roughly, call it, 1,500 homes on balance sheet, for proceeds of around $600 million, and those are typically, you know, sort of priced around a forecast in today's market. And then Scott's done a nice job of, you know, accretively reinvesting that capital closer to a six.

And so I think as you think about Southern California specifically to your question, there will likely always be opportunities for us to continue to refine that portfolio. It's really at our discretion based on a total return model as we look at the higher expected rents that Charles just talked about. And in a business that's pretty automatic in terms of our expectations around renewals and new lease. And weighing that out with where we see sort of appetite on a risk-adjusted basis.

And so for us, we're a total return investor. Important to remember that we don't look at things in just a binary bubble all the time. Either on yield or on total value, but we're looking to accretively kind of grab both over time and distance.

Your next question comes from the line of Yana Gallon with Bank of America. Please go ahead.

Thank you. Good morning. I was hoping if we could, Dallas, following up on that, talk a little bit more about the capital allocation and the transaction market. Know what you're seeing right now. Is it primarily portfolios or BTR communities? Or is there a little bit more of an opportunity in kind of like one-off MLS sales?

I'll take it. This is Dallas. Let me take the first part of this and ask Scott to provide some color. From a high level, we're absolutely focused on bringing more and more new product into the portfolio through these builder partnerships and structures that we're seeing, you know, candidly evolve and get better and even create ways for us on a risk-adjusted basis to have less capital out the door early, but to lock ourselves into some really good opportunities over time.

You'll see that even in the fourth quarter, we backed off of a few opportunities because we felt some market dynamic shifting, and that was at basically little to no risk to the company. We love the fact that we're kind of asset-light in this model, but driving towards called untrended sixes. I'll ask Scott to provide more color on what he's seeing on the ground right now between sort of stabilized transactions bulk and what really is a nothing market in terms of one-off acquisitions.

Yeah. And, obviously, in terms of where we are sourcing deal flow right now, as Dallas said, we're not really seeing very much on the single asset MLS market. We absolutely are evaluating bulk portfolios. We have obviously institutional sellers with whom we've engaged.

Obviously, in terms of where we see that market, we've seen some opportunities on a small scale to buy small pieces of bulk portfolios, but we absolutely are seeing deal flow there. We've actually seen a very nice deal flow of kind of end-of-month or end-of-quarter tapes from the builders in terms of opportunities. I think we see some yield there that we like, albeit the hit rate is obviously very low on a percentage win basis. But in selective areas, in selective communities, we've seen opportunity.

We're absolutely seeing deal flow in terms of stabilized BTR communities. We're being very selective in terms of locations and yields that we're targeting. But we're definitely seeing institutional sellers and financial sponsors to build product in the 2021 time frame that want to get liquidity. And then we continue to engage in strategic dialogue with our national builder partners in terms of targeting and executing forward purchase, you know, build projects.

As Dallas said, we've got about 2,000 in the pipeline on a forward basis, and we'd like to add more. So we continue to look at all of these channels, and we're trying to, you know, pick the right channels where we think there's the best risk-adjusted return for us as a publicly traded company.

Your next question comes from the line of Jamie Feldman with Wells Fargo. Please go ahead.

Great. Thanks for taking my question. So, you know, Dallas, at the outset, you talked about looking for new and innovative structures for growth. Entering possibly new markets.

You know, you guys added Tim to the C-suite, I think Charles commented that he's gonna be focused on growth, Scott, obviously, focused on growth too. Can you just help us better understand, you know, the management changes exactly the different roles of everyone on the team now? And then also, you know, do you expect to see more changes ahead for the team?

Oh, yeah. Happy to answer those questions. Thanks for asking. First of all, it's gonna be a luxury of riches for me to have Charles freed up to work on a few more strategic things and areas of the business that we see are gonna continue to grow for the company over time.

Scott's doing a really nice job in building out sort of our new product pipelines and everything that centers around call it traditional SFR growth, Charles and I have our eye on a number of opportunities, including ones we're already doing, like 3PM and sort of our strategies around how to make the platform more efficient over time. That both Charles and I will get the opportunity to work on together. Secondly, you know, Tim's been in the weeds on the business for a long time on the cost side of our house. Really rehab, turn of maintenance for basically a decade.

Last year, Charles made the decision in concert, you know, with me and the rest of management to give Tim a little bit more flexibility to get more involved on the property management and leasing side of the house. And it just makes more sense because so much of our business is sort of a sweet combination between being centralized and the boots-on-the-ground part of our organization that is high touch in the field. And that transition went really seamless, I would say, through most of last year. I think for Charles and I, the goal is how do we widen the breadth of the organization without having to reinvent the wheel.

And you saw what we did last year in adding 20,000 plus new units to our 3PM business. We're excited about what that business is, not only because it adds itself to extra efficiencies for our partners, but it creates a better margin-enhancing profile for our own business. We see some opportunities there. We're looking at some things around AI and technology that we'd like to implement with a little bit more pace and scale and focus.

And candidly, I think having Charles as a partner to work on some of these things with me will allow us to go quicker, create more innovation, and lend another set of, you know, senior strategic thinking around the things that we're working on. I have no plans of going anywhere, nor does Charles, and so the goal is to just keep our heads down and keep trying to find ways to create alpha for both our shareholders and better opportunities for our residents.

Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

Great. Thanks. Just expanding, I guess, a little bit on the last question. I mean, I guess, how meaningful and growth-enhancing do you think some of these projects that you're pursuing and kind of, you know, adding outside the SFR box?

And then separately, you hit on, I think, for the first time in your prepared remarks, about, you know, evaluating some new markets. And so just curious, you know, if you can share any additional detail about, you know, your ability to, you know, gain immediate scale if you were to enter a new market similar to, you know, what we saw you do at Nashville last year.

Yeah. This is John. I'll start off by just framing up how substantial some of these opportunities have already been for us. So in 2024, our third-party management businesses contributed about nine cents per share to core FFO and AFFO.

And for 2025, we anticipate that, you know, between our JVs and our third-party management business, that'll contribute an incremental two cents a share. So, you know, I think very clearly that the third-party management business has been a really solid contributor to, you know, capital-light earnings growth, enhanced scale, better efficiencies, which I think you'll continue to see in terms of, you know, the cost related to managing our book. So we think that that has been absolutely a needle mover, and we're eager to try to find new opportunities that will continue to move the needle. I'll jump in on the second part of your question.

This is Dallas. And I don't want to put Scott on the hot seat on a quarterly call, but we're definitely doing work on how to expand our current markets. How to think about new markets. You've heard us talk about markets in the past that we love, that we aren't in today, like Salt Lake City.

We've talked about San Antonio in the past, Nashville getting a little bit more scale, and we've done the latter too. I think we would like to find ways to both widen and extend our advantage of scale in the markets that we're currently in, I would say, generally, almost all of them. And then there's probably a market or two over the next, you know, year to five that we could see ourselves make a strategic investment. And we don't take it lightly if we go into a market because we want to offer the same services.

And I think some of the things that we talked about a second ago around AI automation, we've already seen that in some of our new leasing business where implementing some of that in our renewals business today is allowing us to leverage our leadership team, an example, Charles, to be able to start to think about some different things, ways that we can grow our company over time. So all the benefits of technology and the move to, you know, digital automation, to John's point, being able to flex and extend the infrastructure of the platform are gonna allow Invitation Homes over a long run rate to create more efficient returns on our own capital and those of our partners.

Your next question comes from the line of Haendel St. Juste with Mizuho. Please go ahead.

Hey, guys. Good morning. I guess I'm curious how you're thinking about the sustainable long-term same-store revenue run rate for this business. Seems to me that we could be nearing a low point for new lease pricing this year, especially if supply pressures could be abating.

If renewal pricing can stay stickier around 4% this year, could potentially be a trough year for same-store revenue in your blend. So don't think you're already thinking about this year's same-store revenue outlook in context of the longer-term core growth opportunity for the portfolio. Thanks.

Great question, Haendel. And I'll emphasize something John said earlier on. Which is we are, you know, we're taking a measured approach as we go into the year. Just knowing that there are some supply, I would say, some soft kind of headwinds around supply that we flagged six months ago.

But to your point, we're seeing good velocity. And we also know that it's probably unrealistic to stay in the 97% plus occupancy rate forever. So we have rational expectations that sort of comes in and moderates a bit. You see that in our guide as well.

Think as you go back, Haendel, if you think about the business since we went public in 2017, you know, renewals have generally been outside of the COVID years. Pretty sticky around 4% to 5%. You think about it on a blend. You know, we've had an unbelievable run in terms of rate in this country, which is driven by a lot of different things as you know.

And new lease is always gonna be sort of a story around supply and expectations around future deliveries. And how you optimize your lease expiration curve. We've done some really great work over the last six months on our lease expiration curve feel like we're in a pretty defendable position going into the year. This summer, so we'd expect it, but we gotta see what the market's willing to get.

It's a different environment than it was pre-pandemic. It was a lot more predictable in terms of deliveries. And I do think as the deliveries come down and all the data that we follow and suggest that, you know, deliveries are gonna be somewhere between 50% and, say, 70% down this year versus last, that doesn't take into consideration starts. And while there's still a relatively low cost of capital and the environment, there certainly are developers and operators to the point that Scott made earlier that are bringing product to the market, that are fighting to get full and are creating some tougher operating environments particularly in the Sunbelt right now.

But I would just take a step back as much as we're impressed with our, you know, rate of growth in the Midwest right now, we're still very long. Our fundamental beliefs around the Sunbelt in the southeast. The demographic information suggests that we're gonna see prolonged tenure of demand. We know that there's something like 12,000 to 13,000 people a day turning age 35. Our average customer today is right around 38 years old.

All the profile of that customer has been pretty resilient over the last five to seven years. So there's nothing in our business today that suggests that we need to change course, rethink a strategy, or invest in different parts of the country. In fact, maybe the opposite. While things are a little bit soft, we may actually look to extend our lead scale density in some of these markets while pricing softens that we can be in a position to really capture a bull run as the supply side sort of works through itself.

Your next question comes from Rich Hightower with Barclays. Please go ahead.

Hey. Good morning, guys. Obviously, covered a lot of ground today, but maybe just to pick up on a point that you just made, Dallas, you know, in terms of the core renter demographic and maybe drawing a contrast between multifamily and single-family. I think, you know, there's kind of this emerging thesis that the core multifamily comfort is expanding, you know, for all sorts of socioeconomic reasons.

And so, you know, one, do you agree with that thesis? And second, do you think that it makes it, you know, a little more of a zero-sum proposition between multi and single than maybe we, you know, had earlier appreciated. Do you think it's, you know, the pie is big enough for everybody kinda to enjoy it, you know, for the next several years? In that sense.

Yeah. This is Charles. Thanks for the question. If I'm understanding the question, look, we think we're serving a unique part of the market that, you know, we have this opportunity.

It's $1,000 more affordable to rent a home than it is to buy in today's market. You know, we are three, four, five bedrooms, so we're serving families. The majority of our families, 60%, have kids, have pets, and, you know, our portfolio, whether it's our scattered portfolio or build-to-rent, is around safe neighborhoods and good school districts. And so we have an opportunity to continue to serve that group, that demographic.

We're seeing really good demand there. People are staying for 38 months and rising each quarter. You know, the demand is healthy. We talked a little bit about the book, but, you know, we built back occupancy in Q4 and looking at where we are in January, February, we're seeing good absorption and good demand.

And I think it really comes down to that, you know, we have some markets that are working through absorption, but our turnover is low, our renewal is high, and I think that's the differentiation of our product relative to multifamily, and we like where we are, and we're serving an ecosystem that's part of the business. And when you really look at it and compare it to multifamily, on a price per square foot, given that you're getting more space, bigger houses, you know, in and around school districts and job growth, and demographics, with the yard that the family goes in, there really is value that we are offering and it's showing up given our occupancy.

Yes. We're working through a little bit on the new lease rate, but when you think about renewals, and where how we're renewing right now, even in a period that is typically slower in Q4, we're seeing really good demand to go in. So we're working through it, and we like our product. And where we stand long term relative to multi.

Your next question comes from the line of Adam Kramer with Morgan Stanley. Please go ahead.

Hi. Good morning. This is Derek Maxwell on for Adam. Thanks for the time.

If we could just double-click on the same-store revenue growth assumptions a little bit. I don't know if you gave new and renewal lease expectations in that blended rate in the mid-3% range. And then it looks like your bad debt has been trending around 1% in Q3 and Q4. So just curious about the confidence in the improvement to 60, 90 basis points in 2025. Thanks.

Hey. It's John. Thanks for the question. I think I'll start with bad debt.

You know, our bad debt range reflects our expectation that we'll continue to see improvement in bad debt expense but a degree of cautiousness about the rate at which that improvement will continue. As you correctly noted, you know, 2024 was sort of a tale of two halves. We saw a real material improvement in the first half of last year, then a little bit of a backup in the second half. You know, I think the first half improvement was down to, you know, a number of markets where timelines in the court system started to shrink.

And then I think what we're seeing today is we still have, you know, a couple three markets where the timelines remain elongated. You know, markets like Atlanta, the Carolinas, specifically Mecklenburg County, Chicago, you know, it still takes quite a while to get some of these situations worked through the system. And so we just want to be cautious. So we do believe we'll continue to see improvement.

We're really focused on collections. We're really focused on being as efficient as we can be. But want to be mindful of kind of what that second half experience was last year. We did not give a guide around new versus renewal rate growth for 2025. We're not gonna do that, but, you know, feel very comfortable that the mid-three blended guide incorporates sort of our expectation for renewal rate growth that continues to remain sticky sort of in that 4% to 5% range that Dallas talked about, high renewal rate.

And then, you know, a typical seasonality curve that, you know, maybe looks a little bit different than it did pre-pandemic. But I think the pattern in terms of the quarterly trends really remains the same. I would also note that, you know, as you look at 2025, would expect that, you know, core revenue growth and NOI growth will be a little bit higher in the second half of the year than the first half of the year, primarily due to how our quarterly comp shake out. You know, as we said at the outset, we think that this our guidance and our sort of outlook on 2025 is appropriately measured given the supply backdrop, you know, we feel good about the trends we're seeing on the ground here in the very early part of 2025, but, you know, it's really early in the year.

A lot of things can happen, so we just want to be mindful of that.

Your next question comes from Jesse Lederman with Zelman and Associates. Please go ahead.

Hi. Thanks for taking the question. Sounds like you're expecting a pretty nice contribution from third-party management in 2025. Just looking under the hood in the fourth quarter, it looks like revenue and expenses for 3PM increased sequentially and units under management actually inch lower sequentially. So can you talk about the moving pieces there?

And embedded within the two cents of incremental, for 2025, do you expect that to come mostly from units or expanding margin? Thanks.

Hey, Jesse. It's John. Yeah. I'll just say this.

I mean, I think the third-party managed portfolio is going to ebb and flow a little bit. Hopefully, you know, we'll be looking to find new accounts to add. But, you know, our customers do periodically want to prune their own portfolio. That's an important part of our role as asset manager is sort of sharing with them our perspective on, you know, which assets make sense from a risk-adjusted total return perspective, with which assets would allow them to improve the overall growth and margin profile of their own book by sort of shedding those assets.

So look, we feel very good. The contribution, as I noted at the outset, to 2025 earnings will be about two cents incremental from our third-party management business and our JV business. You know, that reflects sort of a full-year earn-in this year as well as the various structures in terms of how we receive fee income over time. But, look, as I said, I think it's a great business.

You know, we have and I think you sort of implicitly suggested we have, you know, higher PME expenses. We've had to scale to absorb that new line of business. I think as you look at 2025, our run rate in terms of PME and G&A will probably be a skosh lower than it was here in the fourth quarter as we continue to extract efficiencies. You know, when we first introduced this new line of business, we noted that we were gonna need to scale up, make some investments in the platform, make some investments in people, and that over time and distance, we would understand kind of what was the appropriate structure to efficiently manage that business together with our wholly-owned business.

I think we have much greater insight into what that looks like now. And so as Dallas said, we're really focused on getting as efficient as we can be in terms of how we manage the totality of the properties, whether we own them, manage them, or whatever the case may be.

Your next question comes from the line of John Pawlowski with Green Street. Please go ahead.

Thanks. And it's a two-part question around your comments on external growth. One, are you actively considering expanding into international markets? Into Dallas when I hear we're exploring avenues outside of traditional SFR. My mind goes to new property sectors, so more detail around the nontraditional avenues of growth would be appreciated.

Alright. Thanks, John. On the first question, no. We're not currently contemplating office in Rio de Janeiro or anything like that.

All jokes aside, we see a great opportunity here in the US to continue to look for ways to meaningfully add scale, as I mentioned earlier. Well, you know, as we mentioned in our prepared remarks, our NOI margin continues to enhance scale, and we get better at offering our services in a more cost-effective way over time. But we, I guess you could never say never, but that's not in the cards right now. Secondly, as we think about, you know, stuff that's outside of traditional SFR, there's sort of two ways to think about that.

One is, you know, Scott and I are looking at a number of opportunities where we can, you know, lend strength to regional operators or builders in a way that might help, you know, sort of lower their cost of capital, but create meaningful opportunities for us to close on those assets at the end of maybe a construction or delivery cycle. So those are things that we're looking at. We've done more townhome projects candidly in the last year. Looked at more opportunities of, you know, where candidly single-family rental units, but maybe they share a common wall but they have all the aspects and characteristics of our business.

Typically, on the townhome product, we're looking at stuff that's much more intel. So higher gross economic pricing, higher gross economic rents, and the ability to sort of compress costs across that scale. And, you know, I think lastly, we're gonna pay attention. Is there a convergence at some point where you see more multifamily and SFR?

In operating structures? We certainly see that with smaller companies today. It's not something we're, you know, we're currently thinking about, but we are keeping our eyes open to look for opportunities to add meaningful scale in parts of markets that we're already in and or maybe new markets as I mentioned before.

Your next question comes from Juan Sanabria with BMO Capital Markets. Please go ahead.

Hi. Good morning. Thanks for the time. Just hoping you could talk a little bit about G&A and kind of what we should be modeling for 2025. You noted some step-ups with regards to 3PM and the joint venture business. And also, just give us some color on the applications around CapEx for homes and has been pretty flat and how that may or may not be impacted by tariffs that are out there.

Sure. Thanks, Juan. It's John. I think in the fourth quarter, PME and G&A on a combined basis was around $54 million, $56 million, I think.

And as I noted a couple of questions ago, we think that the run rate on that is gonna be a Scotia lower. So, you know, kind of $51, $52 million quarterly. As we have sort of rationalized some of our costs and figured out how to maximize the efficiency with which we, you know, operate our business. Our hope is that we'll continue to extract additional efficiency gains over time, but that is not baked into our guide.

Juan, can you remind me of the second part of your question? I'm sorry.

Spending for home?

Oh, thanks. Yeah. Look. I think part of the reason that you've seen a flattening there, honestly, is we have been investing the majority of our external growth opportunities into new product.

Additionally, as we've talked about in the past, we have a unique ability in, you know, the real estate landscape to asset manage on a unit-by-unit basis. So to the extent that, you know, certain homes within the portfolio start to exhibit patterns of materially higher sort of capital reinvestment need, we can go ahead and dispose of those assets and recycle the capital into newer homes and locations that we feel good about. That are gonna have a lower long-term cost to maintain.

Your next question comes from the line of Julien Blouin with Goldman Sachs. Please go ahead.

Yeah. Thank you for taking my question. Dallas, you gave some really helpful color on the supply dynamics. And you mentioned that you expect a bit more spec inventory maybe based on comments from Publix and regional builders.

Can you help frame sort of how large that spec supply impact could be? And, also, what's your sense of how the quality, maybe the features, and the locations of those in that spec inventory compares to your own portfolio?

Great question. I'll add a little bit of commentary on top of what Scott said earlier. I mean, we are seeing with some of our partners and people that we do a lot of business with, you know, every month, every quarter just sort of getting to see opportunities on spec that sort of fit the profile of our traditional product. We love it, candidly.

We love the product quality that both the public and the private builders generally have in place. We're not seeing anything that alarms us in terms of builders both at a big scale or maybe a regional scale that are putting so much product out in the pipeline that it causes us to be fearful. I think we're just recognizing the fact that there is a bid-ask spread in the market right now between where mortgage rates are and maybe where deliveries are coming in. And so with that, I would expect that Scott and the team will be a little bit more aggressive in buying both scattered in those opportunities and also in our strategic thinking around when we do a development, remember, we're pretty agnostic.

We're fine taking development bets on large sections of master plans. We're also fine sprinkling within a community over scale and density. It looks and feels like 80,000 of our current home business. So I don't see anything on the horizon that suggests that there's such a major tilt that it's a problem.

Just recognizing that we're seeing a little bit more deal flow and this stuff tends to change quarter to quarter. Based on the market dynamics. Right now, those dynamics, as you guys know, is mortgage rates are elevated, people still want access to good quality product. It's about $1,100 a month cheaper to lease a home from us than it would be to buy that similar home in that market.

So we're taking advantage of that dislocation.

Your next question comes from Linda Tsai with Jefferies. Please go ahead.

Yes. Hi. You are over 97% in occupancy for most of last year and are guiding to 96.5%. Which markets are you expecting a bigger shift to blend to the slower rate?

Yeah. This is Charles. Good question. Look, this time of year, we've set ourselves up well to capitalize on spring leasing season and building occupancy kind of across the board.

But as we mentioned last year, we're starting to see some supply challenges in Central Florida, Texas, Phoenix. Those are the markets that we're just being thoughtful about that may not build back occupancy as high as we have in California or Seattle. Or, you know, maybe the Carolinas. So, you know, as we look at, you know, our ability to lease those homes when they turn over, we're having to need a bit more on price in a number of those markets.

And we just want to be thoughtful to try to capture as much of that rate as possible and understand that it may have an impact on occupancy. I think the other thing to think about is turnover is remaining really low. So that's really great, and I think on the renewal side, we're seeing really healthy numbers. And overall, you know, turnover is staying where we think it's healthy.

So it's really about the numbers coming in based on how long we're having to stay on market. And certain markets have more supply than others. Across the board, we're seeing a little bit of an uptick on supply, which is normal coming off of COVID. But that's not material in most markets.

It's in the market that we're talking about that I think we'll see a little less occupancy.

Your next question comes from Jade Rahman with KBW. Please go ahead.

Hi. This is Jason Sabshon on for Jade. Are you guys seeing any increased interest in third parties and partnering or taking interest in the portfolio? Because SFR certainly remains a high-interest sector for institutional investors. Thanks.

You know, Scott and I get inbounds all the time with people that are curious, like, what's our program? How do we think about 3PM? Could we help operating margins be more efficient? You know, prospective partners.

I want to emphasize sort of two broad points, and then, Scott, feel free to add any color. One is that we're only really interested in partners that have scale and that have pretty similar market overlap. That's the first point. And two, that want to operate their portfolios in a manner that's very in line with how we run our own business.

So leaning in on the areas that scale and efficiency give you. Scott, there's nothing really color to note, but just generally, we're definitely on people's radar out of the things.

Yeah. I mean, we get inbounds frequently. And I think for us, it's really, as Dallas said, about finding, you know, LPs or prospective partners that we think are sophisticated, institutional, and like-minded. And also for people, we also want to look at portfolios that sort of are in our five-box in terms of the types of homes that we manage today.

There are people that come to us with markets where we don't operate. There are people that come to us with a different business segment not necessarily where we're trying to pay. And so we try to be focused on that. But, clearly, this is, you know, in terms of, you know, obviously, when we look at our potential partnerships, you know, these partners are obviously holders of assets, but we'll explore selling or pruning some or all of those portfolios over time.

And clearly, when our partners decide if they want to prune a little bit or a lot, we get a first look at those assets. And every single time a partner would like to sell assets out of the portfolio, we evaluate the acquisition, and we have an early look in a discussion with them on whether it's an opportunity for us to wholly own it within our portfolio. And this is part of our regular dialogue. And we view all of our third-party and joint venture partners as being opportunities for future growth for us.

Your final follow-up question comes from Jamie Feldman with Wells Fargo. Please go ahead.

Great. Thanks. I think you covered a bit of it in the last question. But, you know, we've now seen Welltower raise their fund.

Obviously, ProLogistix is a pretty robust fund business. Just what is your appetite for whether they're finite infinite life funds or even larger single investor JVs. And if, you know, I'll ask a follow-up question now since I can't do it regularly. So and if that's the case, how would you think about what would go on balance sheet versus into third-party structures?

And if we could see down the road you're adding a promote to your either business model or your comp structure.

Thanks for the questions, plural. I'll try to make sure that I tackle basically, just broad strokes around how we think about our JVs and what we're focused on. As we mentioned and as we reconfirmed in the earnings transcript, we were successful in raising another joint venture with what we think is a very high-quality partner here in the US that gives us added flexibility as we come across opportunities. Primarily, probably in the new construction space, but it'll lend itself to lots of creative thinking together as we look to maximize returns both for our shareholders and for theirs.

Right now, our focus has been, and this is our third joint venture that we've announced in the history of the business and really probably the third in the last four to five years. It gives us an extra layer of creative capital to go after opportunities that may warrant different structures, different leverage structures as well. And so we're finishing deploying one other venture right now while looking at opportunities to invest in this new venture. And we have a very, matter of fact, clear and transparent structure on how we rotate those opportunities.

They don't all fit into the same buckets, which makes it easy for us as well. And we certainly are looking for ways to protect the reach that we can grow on balance sheet as much as possible. And what's nice about these joint venture partners, and I would argue that they are partners, is that we can work, you know, collectively to be smart around how we think about, you know, deploying the capital, what their structures are, relationship to your question around promotes, we don't get any detail of that publicly unless we get to a point that we think that we need to. And so at this point in time, I think what I would just say is we have excellent partners.

They give us added flexibility. It's making us more opportunistic and allowing us to look at more opportunities for growth knowing that we've got that added layer of flexibility.

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

We want to thank everyone again for joining us today. These are really exciting times for our company, Invitation Homes, and we feel privileged to work alongside such a talented team. Also want to extend gratitude and appreciation to Charles and join him in congratulating Tim. Both are exceptional leaders.

They both play pivotal roles in driving Invitation Homes forward in the future and helping us achieve our long-term goals. We look forward to seeing everybody at the Citi Conference. Thanks.

That concludes today's call. Thank you all for joining. You may now disconnect.