Invitation Homes Inc.

Good morning 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'll conduct a question and answer session with our covering sell-side analysts. In the interest of time, we ask that you limit yourselves to one question. and then re-queue if you'd like to ask a follow-up question. During today's call, we may reference our third quarter 2023 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 identified. We describe some of these risks and uncertainties in our 2022 Annual Report on Form 10-K and other filings we make with the SEC from time to time. 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 this call. You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures, in yesterday's earnings release. I'll now turn the call over to Dallas Tanner, our Chief Executive Officer.

Good morning and thanks for joining us. At Invitation Homes, we've worked hard to build and enhance our platform over the last dozen years, the foundation of which is our people, our systems, and our unmatched scale. We believe our platform is industry-leading and difficult to replicate, and as a result, offers significant value for our stakeholders, residents, and partners. It allows us to drive strong performance across diverse, geographically dispersed assets while delivering meaningful returns. We've invested heavily in our platform to provide the highest level of professional service, flexibility, and convenience to our residents, helping them to live in the home, neighborhood, and school system of their choice. We're proud of what we have achieved in this regard. And in addition to the power of our platform, favorable fundamentals have continued to drive strong tailwinds for our business. In particular, these include the continuing supply and demand imbalance we frequently mention. By most estimates, the United States continues to face a housing shortage of several million units. At the same time, the demand for single-family homes for lease continues to remain robust due to favorable demographics, a growing desire for flexibility and convenience, and soaring mortgage rates that make leasing one of our homes much more attractive and affordable than owning a similar home. According to John Burns, it's now over $1,100 a month cheaper to lease than to own on average in our markets. That's over $13,000 a year in savings that our residents can use to help their families thrive, while at the same time benefiting from the choice and flexibility of leasing a home. We believe we remain well-positioned to meet this growing demand for single-family homes for lease. In addition, we remain committed to bringing new supply to the marketplace, through our extensive home building relationships. Our multi-channel growth strategy allows us to nimbly deploy capital across a variety of acquisition channels, which allows us to be opportunistic depending on the channel that's most attractive in the various real estate cycles. During the third quarter of 2023, we took advantage of several unique external growth opportunities. This included our previously announced portfolio acquisition of 1,870 wholly owned homes for a contract price of $650 million in July. As we disclosed, we acquired the portfolio at a year one yield in the mid fives, and we anticipate this to grow into the sixes within the next year. Progress to date on marking the portfolio's rents to market, increasing occupancy, and selling non-core homes has been right in line with our expectations. In addition to the large portfolio transaction, We also acquired another 387 wholly owned homes during the third quarter through those various channels at an average cap rate of 6%. We effectively funded these acquisitions through the sale of 397 wholly owned homes at an average disposition cap rate of approximately 4%. The 200 basis point spread between acquisitions and dispositions once again illustrates our unique ability to accretively recycle capital out of older, higher dollar value homes and into newer, higher quality product. We believe our portfolio makeup affords us this opportunity to creatively recycle capital in this way for some time to come. In closing, I'd like to express my thanks to our dedicated associates. Through their hard work, Invitation Homes has continued to achieve significant milestones and deliver strong financial performance. As we move forward, we remain confident in our ability to navigate these challenges, capitalize on opportunities, and leverage our platform in order to drive sustainable growth and value for our stockholders. Thank you for your continued trust and support. With that, I'll pass the call on to Charles Young, our President and Chief Operating Officer.

Thanks, Dallas. To start, I'd like to echo your comments and thank our associates for delivering another great quarter. This includes the hard work by our teams to smoothly onboard the nearly 1,900 homes we acquired in July. Our premier size and scale help make acquiring large portfolios like this one relatively programmatic, while it is our amazing associates who ensure the transition is seamless and the ongoing resident experience is worry-free. I'll now walk you through our third quarter operating results. Favorable fundamentals and strong execution led to same-store NOI growth of 4% year-over-year in the third quarter of 2023, in line with expectations. Same-store core revenues in the third quarter grew 6% year-over-year. This increase was driven by average monthly rental rate growth of 6.2%, as well as a 20 basis point improvement in bad debt. We're pleased to see progress here for the second consecutive quarter, including within Southern California, where court times have meaningfully improved since the first part of the year. In the meantime, we continue to attract high-quality residents with our great homes and professional service. For the trailing 12 months, our new residents earned a combined household income of over $142,000 a year, representing an average income-to-rent ratio of 5.2 times. The financial strength of our customers is also evidenced by our industry-leading partnership with Isuzu that we announced in July. In just this short time, we've helped enroll over 160,000 of our residents onto Isuzu's free credit reporting program. About half of these residents have already seen an improvement in the credit score with an average increase of over 20 points. In addition to attracting high quality residents, they continue to stay longer with us. Length of stay is an indicator of overall resident satisfaction, which we're pleased to see has increased again this past quarter to an average of 36 months. We believe our premier ProCare service, along with the many convenient and value-add services we offer, help contribute to this longevity. The newest offering that we have just started to roll out is Bundled Internet. We're excited to partner with one of the nation's largest providers to offer high-speed internet and digital media to over a third of our residents across the country. Once again, our scale allows us to provide this essential service at a substantial discount to what our residents might otherwise pay on their own. Turning back to our same-store results, third quarter 2023 core expenses increased 10.2% year-over-year. This included year-over-year increases of 11.7% in fixed expenses and 8% in controllable expenses, the latter of which was primarily driven by an increase in turnover compared to the historic lows of last year, along with the costs related to the progress we're making on our lease compliance backlog. Next, I'll cover same-store leasing trends in the third quarter. Demand in our markets remained strong through the end-of-peak leasing season. As we've noted previously, we are seeing a return to more normal seasonality, which we believe represents a much healthier and sustainable footing following the extraordinary market rent growth we saw in the past two years. Nevertheless, our third quarter 2023 same-store leasing results are still well above pre-pandemic norms. This includes average occupancy in the third quarter of 96.9% or 120 basis points higher than our 2018 and 2019 third quarter averages. In addition, blended rent growth in the third quarter of 2023 was 6.2%, or 170 basis points higher than our 2018-2019 third quarter averages. Third quarter 2023 blended rent growth at 6.2% was comprised of renewal rent growth at 6.6% and new lease rent growth at 5.2%. We're pleased to have seen an acceleration in renewal rent growth each month in the third quarter of 2023. Renewal rent growth is further accelerating with October's preliminary results. This represents a strong performance for the third quarter that is once again attributable to our outstanding associates. As we approach the end of the year, we remain focused on continuing this momentum and finish the year strong. I'm proud of our teams for their tremendous contributions this past quarter and the great effort I know they'll deliver during the remainder of the year. And I'll turn the call over to John Olson, our Chief Financial Officer. Thanks, Charles.