American Homes 4 Rent

Greetings and welcome to the American Homes for Rent Second Quarter 2019 Earnings Conference Call. At this time, all participants are in Osanoni mode. A brief question and answer session will follow for more presentation. If anyone should require operator assistance during the conference, please press store zero on your telephone keypad. As a reminder, this conference is being recorded. I'd like to turn the conference over to your host, Stephanie Heim. Thank you. You may begin.

Good morning. Thank you for joining us for our second quarter 2019 earnings conference call. I'm here today with David Singlen, Chief Executive Officer, Jack Corrigan, Chief Operating Officer, and Chris Lau, Chief Financial Officer of American Homes for Rent. At the outset, I need to advise you that this call may include forward-looking statements. All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. 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, July 30, 2019. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For reconciliation, the GAAP of the non-GAAP financial measures we are providing on this call is included in our earnings press release. 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.americanhomesforrent.com. With that, I will turn the call over to our CEO, David Singlin.

Thank you, Stephanie. Good morning, and welcome to our second quarter 2019 earnings conference call. Beginning with operations, I'm extremely pleased with our results in the second quarter. Core FFO was 28 cents per share, up 7% from the second quarter of last year. This increase reflects our strong market fundamentals and a property management platform focused on controlling expenses. while maintaining our assets and providing a quality customer experience. On a macro level, the single-family rental market is as strong as I've seen. Driven by robust population and employment trends in our markets, rental demand for our homes continues to be healthy, which supports our high occupancy rates and continued growth in rents. To highlight this point, let me touch on several metrics that support what we are seeing on the ground. First, our typical resident is a family with children and a head of household in their 30s. Families often desire a single-family home, and in today's environment, with high down payment requirements, a more transient job market, and reduced tax benefits from homeownership, more of today's households are opting to rent. While the national homeownership rate is flat or declining, the U.S. is on pace to add 2.2 million households this year, benefiting the single-family rental demand. Second, we've tailored our portfolio to focus on markets with outsized growth drivers. Employment growth in our markets is 25% higher than the national average, and the population growth in our markets is more than twice the national average. Third, we saw prospective resident showings for available property in our portfolio increase more than 20% year over year in the second quarter of 2019. Fourth, According to recent research from John Burns Real Estate Consulting and Freddie Mac, 50% of older millennial renters prefer to stay as long as possible, and 71% of these renters think it is more affordable to rent than own. Further, over the last four years, the number of renters stating that they intend to purchase a home has trended down from 35% to 24%. This confirms the trend that many current renters do not see value in owning a home even if they can afford to buy a home. Finally, our portfolio is diversified by design, operating in 22 states. Single family rental rate appreciation has been more stable than home price appreciation. Since the mid-1980s, single family rents have never declined on a national basis, while home prices have dropped at least six different years. Additionally, during the Great Recession, single family rents fell in some markets, such as Charlotte and Atlanta. and never declined in other markets like Tampa. Single-family rents proved to be far more stable than most other real estate classes. With regard to our strategic growth, we remain focused on our AMH development program as the best risk-adjusted opportunity to invest our capital for profitable growth. We believe this program is a game changer for our industry, developing homes that are purpose-built for the rental market, designed for durability and lower cost to maintain, and providing near-term and long-term accretion to growth and net asset value. We are now nearly three years into this program, designing and fine-tuning our prototype homes, building our teams, establishing relationships with vendors, testing market acceptance, and piloting the cluster of rental homes within neighborhoods for additional market efficiencies. Further, we are building homes in markets and neighborhoods where we currently operate, adding scale to our existing platform. From an economic perspective, we are building new homes at a lower investment cost than we could acquire a similar home. These new homes are built with our rental program in mind, which, combined with new appliances and systems, will result in future lower cost to maintain than the cost to maintain most existing homes. Our program continues to ramp up, and we have yet to realize its full benefits. In summary, resident acceptance has justified our development product, initial returns are in line or better than originally projected, and we continue to explore ways to expand this program while remaining vigilant on market selection and balancing our capital commitment and risk. Perhaps the best evidence that Building for Rent is changing the housing market landscape is that we are now seeing traditional home builders developing purpose-built rental homes as an alternative channel. and to meet the diversity of market demand in the current environment. Next, as you may have seen, last week we filed an amendment to the resale prospectus we filed in February. The sole purpose of the amendment is to update the prospectus concerning stock sales by the named executives made in connection with the repayment of certain loans previously made by company affiliates. To be clear, this filing is only related to the sales already announced and completed in the first half of 2019. And all affiliate loans have been repaid. Management retains a substantial ownership stake in the company and is committed to alignment of interest with shareholders. In closing, I am very pleased with our results in the first half of 2019. Our portfolio is structurally full, our development growth channels are maturing, and our balance sheet is strong. positioning us to take advantage of opportunities that will arise. As we sit here today, we have huge opportunities in front of us, and I'm confident that we'll sustain our momentum over the long term. We operate within a huge industry that is still in the early stages of transition to an institutional asset class. Professional ownership and management accounts for a tiny fraction of the overall single-family rental market, which gives us a long runway for growth. As previously mentioned, Household formations remain strong, and new housing supply isn't sufficient to meet demand in most markets. Even with the recent decreases in home mortgage interest rates, we are seeing sustained rental demand as families value our well-located homes and the flexibility that renting provides. Finally, our sector is resilient with recession-resistant attributes. Housing is a non-discretionary need, and our platform should produce solid results through all economic cycles. And now I'll turn the call over to Jack.