American Homes 4 Rent Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Juan Sanabria - BMO Capital Markets Equity Research - Analyst : Just hoping you could talk a little bit about the pricing dynamic for new customers. It seems like renewals are pretty steady, but you kind of talked about focusing on maintaining occupancy and setting yourself up for '25. So just curious, your expectations for new leasing in the balance of the year into '25. And what the impact of supply is that you're facing any kind of early discounting that you're doing or you're seeing across your various markets?

Question: Juan Sanabria - BMO Capital Markets Equity Research - Analyst : Great. And just as a follow-up, could you give a little color on bad debt, they ticked up as a percentage of revenue sequentially. So just curious on where we stand on cleaning up the remaining kind of post-COVID [bad] issues, et cetera.

Question: James Feldman - Wells Fargo Securities - Analyst : Congratulations, Dave, on the transition. So thinking about what you just said about October and into the year-end. I mean thinking about the 1% new lease rate growth, I think you said 2% in October. I mean how much of that would you attribute to the storms clean up from the storms all that versus just seasonality? And then I guess just thinking beyond 4Q, I mean, how do you think that accelerates into the beginning of the year?

Question: James Feldman - Wells Fargo Securities - Analyst : Okay. That's helpful. And then I guess thinking about the acquisition, you mentioned nominal yield of 6% cash after CapEx highs. Can you just talk about the going in yield on the portfolio and where you think the areas are where you can get that number up? Whether it's revenue optimization, economies of scale and R&M adding it to your blanket insurance is kind of what are the big levers here to hit your numbers?

Question: Haendel St. Juste - Mizuho Securities USA - Analyst : Congrats to you, Dave, and also Bryan again. I wanted to follow up on the reduction in the OpEx guide, specifically the tax of that, you mentioned better-than-expected property tax assessment outcomes from Florida, Georgia, Texas. I guess I'm curious as to our performance was from millage rates or property sense value flat lining. And any kind of early read for 2025, Curious if this is a tailwind that we can see continue into next year?

Question: Haendel St. Juste - Mizuho Securities USA - Analyst : Appreciate the color, Chris. One follow-up just on the portfolio purchase. I don't know if I missed it, but did you guys mention the time line to which you expect to get to that 6% stabilized yield at that end of next year? And then I guess I'm more curious broadly on the motivation, maybe who the seller is, if you could share, but also their motivation here? Was it just perhaps an opportunity given maybe lower rates and perhaps an ability to get maybe a better price? And just also the tone of conversations that you're having more broadly with other potential sellers? Are you sensing that maybe there's a greater chance of likelihood, more similar type of activity, not just for you, but more broadly in the space into the next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 4:00PM, AMH.N - Q3 2024 American Homes 4 Rent Earnings Call

Question: Steve Sakwa - Evercore ISI Institutional Equities - Analyst : I guess just going back to some of the comments, Bryan, you made about the occupancy in the October trends. The 95.2% puts you about 100 basis points below kind of the fourth quarter last year. I guess with 1% pricing on new and let's call it, low-5s on renewals, how confident are you that 95.2% comes up materially? And I guess, would you expect the year-over-year decline in occupancy, say, 4Q to 4Q to kind of match the decline you saw in 3Q to 3Q? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 4:00PM, AMH.N - Q3 2024 American Homes 4 Rent Earnings Call

Question: Steve Sakwa - Evercore ISI Institutional Equities - Analyst : Okay. And then just going back on the transaction. I sort of recall comments, Dave saying, hey, we're pushing into the development program because we can build the homes that we really want, customize them the way we want them, whether it's bigger doorways, better stairs, materials, and you could get stabilized yields on new projects around six, and you're buying this portfolio in the low-5s with ultimately the stabilization going to a six. So just trying to understand the rationale of why not put that money just into more development assets versus buying older assets that will get you the same yield as new development.

Question: Joshua Dennerlein - BofA Securities - Analyst : Bryan, you mentioned there were some other portfolios that you looked at in the past few months, but passed on. Were there any kind of common boxes that think get checked across the portfolios you passed on?

Question: Joshua Dennerlein - BofA Securities - Analyst : And I guess when you think about like the other opportunities set out there, are there -- most portfolios that you're going to -- like that are coming to market? Do they have more townhomes, attached homes that were like developed? Or are there a lot of portfolios out there that have been kind of disaggregated one-off?

Question: Julien Blouin - Goldman Sachs Group, Inc. - Analyst : All the best, Dave. Bryan, you talked about demand continuing to be strong, which sort of sets you up well going into next year. I guess what specific sort of metrics or data points are you looking at that give you that confidence? And relatedly, one of the data points I think you've given in the past is sort of the stated incomes of incoming residents continuing to improve. How much of an indicator of demand is that? Is that showing you that sort of higher income households are coming into the portfolio and seeing better value in renting versus owning.

Question: Julien Blouin - Goldman Sachs Group, Inc. - Analyst : Great. And maybe as a follow-up, it looked like turnover continued to trend lower year-over-year, and that obviously had some benefit on the controllable expense side, do you expect that to sort of continue for the coming quarters, given mortgage rates sort of continuing to be stubbornly high here?

Question: John Pawlowski - Green Street Advisors - Analyst : Chris, with respect to the financing of the portfolio acquisition, I'm curious how you weighed issuing equity versus just selling more assets into what is still an extremely aggressive bid that owner occupants are willing to pay for your homes?

Question: John Pawlowski - Green Street Advisors - Analyst : And then last one for me is a two-part question. Just so I understand the build-to-rent impact on same-store numbers. And so could you help quantify the NOI growth lift that the rolling in of build-to-rent properties has had on 2024, same-store NOI growth this year? And then I have a follow-up.

Question: John Pawlowski - Green Street Advisors - Analyst : Okay. Is there any effect given certain quarters have smaller sample size or lease signings? Has there been any basically lift to new

Question: Adam Kramer - Morgan Stanley - Analyst : I just want to ask, I guess similar question around kind of the infill properties versus build to rent. So maybe if you could quantify the difference in kind of how each property type is behaving relative to some of the new supply. I think we've heard a lot about kind of new supply. I think a lot of it is maybe more build to rent, more periphery of markets. So maybe just walk us through kind of how your BTR is performing relative to infill kind of with regards to the new supply impacts. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 4:00PM, AMH.N - Q3 2024 American Homes 4 Rent Earnings Call

Question: Adam Kramer - Morgan Stanley - Analyst : Great. That's really helpful. And then just on bad debt. I was wondering if you could just remind us the kind of pre-COVID bad debt kind of level or a rule of thumb for what bad debt was pre-COVID and then obviously, I would imagine still elevated today relative to that number. So maybe just on kind of the path to getting back there. Is that something that can happen next year? Is it a multiple years? Is that something where, hey, maybe we stay elevated relative to history, over the long run even. Just maybe kind of the levels of bad debt.

Question: Daniel Tricarico - Scotiabank Global Banking and Markets - Analyst : For your markets that haven't seen as much HPA since COVID, some of your Midwest markets. They're now seeing stronger new lease rate growth, outperforming the broader portfolio. Is this a dynamic that you'd expect to continue next year?

Question: Daniel Tricarico - Scotiabank Global Banking and Markets - Analyst : Bryan, I think I'll stick with you. Backing into the development yields for the new deliveries in Q3, it seems to reflect a decrease versus the first half of the year deliveries. I think you had mentioned nearing 6% NOI yields on those, but any thoughts on what's driving this decrease if that is, in fact, true? And is the 6% figure a fair number for target yields on deliveries next year?

Question: Linda Yu Tsai - Jefferies LLC - Analyst : Regarding the portfolio of 1,700 properties you purchased, what's the average age? And how does that compare to AMH's overall portfolio? And then are there any homes that are located in new markets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 4:00PM, AMH.N - Q3 2024 American Homes 4 Rent Earnings Call

Question: Linda Yu Tsai - Jefferies LLC - Analyst : And then just in terms of John Burn's comment of 3% to 4% rent growth next year, are there certain markets you'd highlight as exceeding this and conversely being below?

Question: Brad Heffern - RBC Capital Markets - Analyst : Chris, a stat that you didn't give. Can you say what you underwrote for the loss to lease on the acquired portfolio?

Question: Brad Heffern - RBC Capital Markets - Analyst : Okay. Got it. And then on the revised expense guidance, expenses were obviously low in the third quarter. The guidance implies a reacceleration to the highest figure of the year plus or minus, is there like a comps or timing issue driving that? Or is there something else?

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc. - Analyst : You've referenced the 3% to 4% market rent growth projected for next year. I guess, given your operating platform, quality of portfolio and just kind of the fragmentation of the business, I guess how has your portfolio grown relative to market rent growth forecast over the years? And just curious if there's any outperformance that's worth flagging?

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc. - Analyst : Helpful. And then just second one for me. You've discussed about how more portfolio opportunities you'd expect to come to market. But can you just give us a sense how competitive the process has been and kind of what you expect in terms of number of bidders and really then what gave you the upper hand to get this deal across the finish line. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 4:00PM, AMH.N - Q3 2024 American Homes 4 Rent Earnings Call

Question: Michael Goldsmith - UBS Investment Bank - Analyst : You talked about uncertainties in the market. Has there been any signs of increased price sensitivity for customers? Or does that uncertainty that you talked about, like help keep your tenant base in place and renew?

Question: Michael Goldsmith - UBS Investment Bank - Analyst : Got it. And you brought up the temporary disruptions. Do you tend to see stronger demand following the larger weather events like what we've kind of experienced recently?

Question: Omotayo Okusanya - Deutsche Bank AG - Analyst : Dave, congrats from us as well. In terms of -- just in terms of the stock performance out of the call has been going on has just been deteriorating. Again, it's clear that investors feel somewhat disappointed about some of the fourth quarter operating trends that are being discussed. So I'm just trying to understand a little bit again as it pertains to the new leasing trends and even some of the October occupancy if one was to really kind of think about supply versus weather versus kind of classic seasonality, really how much can one really kind of attribute each of these three factors to some of those forecasts? And then also specifically, are there any kind of regional biases where it's impacting some markets a little bit more than others.

Question: Jason Sabshon - Keefe, Bruyette, & Woods, Inc. - Analyst : This is Jason Sabschon on for Jade. It would be helpful to hear what you're seeing in the Florida property insurance markets and whether there are any spillover effects into adjacent markets?