American Homes 4 Rent Q4 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 your expected development yields in '25, I think you said in the mid-5s. And what, if anything is assumed in that with regards to tariffs, particularly around lumber from Canada knowing that that's a material input. And just kind of your thoughts about how you can navigate that or how you're trying to hedge that risk, if at all? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 5:00PM, AMH.N - Q4 2024 American Homes 4 Rent Earnings Call

Question: Juan Sanabria - BMO Capital Markets Equity Research - Analyst : Great. And then just as a follow-up, hoping you could talk about kind of the latest views on supply. Is that changing in terms of markets you're watching and your thoughts on -- we've obviously seen a pickup in homes for sale that aren't necessarily clearing that are kind of sitting there and how that's impacting your pricing power in the traditional SFR market with maybe the shadow supply.

Question: Eric Wolf - Citibank, N.A. - Analyst : If you look at your occupancy guidance, it suggests that occupancy rise is about 50 to 60 bps on average from current levels. Are you seeing any sort of forward indicators in terms of leasing that this increase should happen over the next couple of months? And should we expect your blended rate growth to be a little bit more muted over this time frame just as you build that occupancy?

Question: Eric Wolf - Citibank, N.A. - Analyst : Got it. That's helpful. And then I don't know if you mentioned this in the prepared remarks, sorry if I missed it, but you mentioned the high three's blended rent growth expectations. Could you kind of break that out between new and renewals? And if you can, sort of what's underpinning the new lease projection? Is it based on third-party forecasts from John Burns Consulting, is it based on the buildup from your markets? What are you basing that new lease projection on?

Question: Jamie Feldman - Wells Fargo - Analyst : Great. I guess maybe to put a finer point on the rent growth expectations. Can you talk about like maybe your weakest markets in your best market, if you were to answer that same question, what you think the delta could be in terms of how strong or how weak the rent growth could be and maybe benchmark here -- maybe just highlight which of those markets you're talking about? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 5:00PM, AMH.N - Q4 2024 American Homes 4 Rent Earnings Call

Question: Jamie Feldman - Wells Fargo - Analyst : Okay. And then I know you didn't include acquisitions and guidance. But as you I guess a two-parter as you unencumber assets and you have more liquidity to put capital to work, do you think that will be a factor that drives you to do more acquisitions? And maybe if you could just cover a little bit more why not have more acquisitions in your guidance? And are there just not portfolios out there? Or do you think they might come to market and you're just not ready to include getting any of those done?

Question: Steve Sakwa - Evercore ISI Institutional Equities - Analyst : I guess on the bad debt, you guys aren't really looking for much of an improvement. I'm just curious kind of why and are there certain markets that are holding you up from seeing better improvement on that figure.

Question: Steve Sakwa - Evercore ISI Institutional Equities - Analyst : Okay. And then maybe just coming back to some of the questions, Bryan, on development, whether it's the tariffs or just incremental supply from other builders. I guess the 5.5 I guess, maybe seems a little bit like a low return to get, especially where bond yields are today and certainly where your stock is trading. So like how do you think about that overall return? Is it sort of against the marginal cost of capital? Or is it the fact that you can sell assets in the sub-four cap rate that's given you confidence to keep building at 5.5.

Question: Jeffrey Spector - Bank of America Corporation - Analyst : Follow-up to that conversation, I guess, two parts would be, first, Bryan, I don't think you said stabilized yield. And then second, maybe Chris, could you bring in your comments from your opening remarks around expanding your margins? I assume there's some also benefit there on new development.

Question: Jeffrey Spector - Bank of America Corporation - Analyst : And then my second question, my follow-up, I just wanted to confirm in terms of opportunities and acquisitions are you starting to get more incoming from homebuilders? Or it's too early really to see that? And I'm just pointing to the softening home sales.

Question: Haendel St. Juste - Mizuho Securities USA - Analyst : I wanted to follow up a little bit on your renewals guide. I think you said it was 4%. It seems a little conservative given where you've been in recent years, high six's in '23, mid- five's for '24. So I'm curious if you're seeing any signs of perhaps pricing fatigue, uptick in turnover? Just trying to understand how your pricing power could be evolving here.

Question: Richard Hightower - Barclays Bank PLC. - Analyst : And congrats to Dave, if he is on the line with us. So I just want -- I want to dig into property taxes for a minute, and obviously, you're getting some relief kind of relative to years past. And just help us understand the key drivers there? Is some of it based on timing around rivals in certain states? And then, I guess, maybe on the flip side, have you given any thought to the impact given the possible likelihood, I guess, that state budgets and municipal budgets could be affected negatively going forward if federal reimbursements and contributions to those budgets falls kind of along the lines of things we've been reading.

Question: Richard Hightower - Barclays Bank PLC. - Analyst : Okay. Great. Great color. And just maybe a quick follow-up. I don't think we spend a lot of time on the call talking about non-rental revenue, other income opportunities for the year, maybe just run through what you guys are seeing on that front.

Question: John Pawlowski - Green Street Advisors - Analyst : Bryan, I want to go back to the conversation about how yields on the development, basically, shift beyond year one. I know stabilization of the most recent vintages of deliveries is still an unknown. But you've been at it for about eight years build to rent. So you should have, I would think, a decent sample size of earlier vintages of homes. And can you just give us a sense how different like a year three yield is versus initial yield on the earliest vintages of homes?

Question: John Pawlowski - Green Street Advisors - Analyst : Okay. Does that into the six's type trajectory account for a stabilized expense load in these homes that just may have not turned or seen property tax resets?

Question: Adam Kramer - Morgan Stanley & Co LLC. - Analyst : I just wanted to ask about the Midwest exposure. I think this has kind of been the source of strength for the market, and I think it's expected to be going forward as well. So if you think about some of the Midwest markets, if you could maybe attribute the strength. And I don't know if it's kind of on the existing home sale side, on the lack of new homes available, maybe it's kind of still COVID catch-up play in some ways. Maybe just talk about the Midwest and kind of what are some of the drivers of strength in these markets?

Question: Adam Kramer - Morgan Stanley & Co LLC. - Analyst : Great. And maybe just kind of a more general one looking ahead to 2025. I'm wondering if you could maybe kind of frame the year, right? I think you kind of gave the blended rent growth numbers, the new and renewal, the occupancy expectations. But if you were to just kind of, take a step back, think about this year relative to maybe pre-COVID years, and I know there's kind of limited history in the public markets there. But would you kind of categorize this year as a normal year normal seasonality? And what can kind of drive this year to progress differently than maybe a normal year?

Question: Julian Blouin - The Goldman Sachs Group, Inc - Analyst : I guess on the demand front, can you sort of walk us through what you're seeing in your internal metrics? I guess, how is engagement trending versus maybe a year ago or two years ago? How our sort of household incomes of new incoming tenants looking? Anything you can help sort of frame on the demand side?

Question: Julian Blouin - The Goldman Sachs Group, Inc - Analyst : Awesome. That's very helpful. And when we think about the new lease rate growth assumption for the year at 3%, it does seem to bake in quite a meaningful sequential improvement in new lease spreads versus where we are in January. I guess what's sort of giving you that confidence that we're going to see that strong ramp. I guess it does sort of seem a little bit more similar to pre-COVID seasonality. Is there anything you're seeing so far in February that's sort of encouraging you? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 5:00PM, AMH.N - Q4 2024 American Homes 4 Rent Earnings Call

Question: Daniel Tricarico - Scotiabank Global Banking and Markets - Analyst : Question on interest expense for Chris. First, kudos on the bond timing. Can you just talk to what's in the current plans on paying down the securitizations. Do you expect to issue unsecured concurrently or maybe say a bit more flexible utilizing the line balance and how that all rolls into interest expense expectations for the year and the math behind the $0.09 dilution from financing costs in the FFO bridge.

Question: Daniel Tricarico - Scotiabank Global Banking and Markets - Analyst : And just a high-level follow-up for Bryan. I know you've been formally prepping to take the reins for maybe a year now, but any early insights you can share on the business, steps you've taken or plan to take that's different or incremental to the company.

Question: Linda Yu Tsai - Jefferies LLC - Analyst : You said over half of your costs are baked in for development at this point in the year. Is this typical? Or does it vary? And then what costs aren't baked in?

Question: Linda Yu Tsai - Jefferies LLC - Analyst : And then you also earlier highlighted outperforming 2024 core FFO growth by over 200 bps, do you view the 200 bps as an achievable benchmark for this year? And then what would be some of the risks to potentially achieving this outperformance? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 5:00PM, AMH.N - Q4 2024 American Homes 4 Rent Earnings Call

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc - Analyst : Just going back to development for a minute. If you were to see construction costs increase faster than rents from here and kind of all else equal around cost of capital, I guess, what yield does development become less attractive where you consider flexing the size of the development platform down and how easily and quickly can you dial that back?

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc - Analyst : That's helpful. And then if we started to see a pickup in the for-sale market, I mean how confident are you that you can sustain kind of the higher occupancy you've achieved following -- coming out of the pandemic. And are you concerned at all that you start to get a pickup and move out for home purchases and the impact that could have on total revenue and even expense growth?

Question: Michael Goldsmith - UBS Investment Bank - Analyst : First question is on renewals. Are you seeing any tenant pushback on renewals, just kind of within the context of the 4% renewal rate.

Question: Michael Goldsmith - UBS Investment Bank - Analyst : That was helpful. And then just as a follow-up. Have you seen any changes on the regulatory front?

Question: Brad Heffern - RBC Capital Markets - Analyst : I just have one given we're past the top of the hour. I guess on [days to re-resident], are there any stats that you can give on that and how it's trended, the turnover number continues to move lower, but then occupancy also came down in the fall. So it just seems like the homes have to be sitting on the market for longer for that to make sense. Just trying to get a sense of the scale of that and if it's abnormally long versus maybe pre-COVID levels. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 5:00PM, AMH.N - Q4 2024 American Homes 4 Rent Earnings Call

Question: John Pawlowski - Green Street Advisors - Analyst : Bryan, one question for you on corporate governance. I think the Board -- the size of the Board is now 13. What's the right long-term number of directors for AMH and how long will it take to get there?

Question: Omotayo Okusanya - Deutsche Bank AG - Analyst : Yes. Bryan, again, congrats on the CEO role. Again, while you and Dave have been long-term partners in the business, just curious if you're thinking about things any differently from the way Dave thought about it now that your kind of in the driver seat. I'm also very curious what kind of feedback you are getting from the Board now that you are officially a Board member as well.

Question: Jesse Lederman - Zelman & Associates. - Analyst : So you mentioned earlier that there has been a number of different changes across the industry and in the AMH platform, specifically that makes you confident the new norm for occupancy is more in the 96% range than 95%. Could you just talk a little bit more about what those changes have been both in the industry and specifically at AMH.