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Invitation Homes Reports Third Quarter 2022 Results

DALLAS, October 26, 2022--(BUSINESS WIRE)--Invitation Homes Inc. (NYSE: INVH) ("Invitation Homes" or the "Company"), the nation's premier single-family home leasing company, today announced its Q3 2022 financial and operating results.

Third Quarter 2022 Highlights

  • Year over year, total revenues increased 11.6% to $569 million, property operating and maintenance costs increased 10.5% to $204 million, net income available to common stockholders increased 14.4% to $79 million, and net income per diluted common share increased 8.0% to $0.13.

  • Year over year, Core FFO per share increased 9.5% to $0.42, and AFFO per share increased 8.2% to $0.34.

  • Same Store NOI increased 8.6% year over year on 8.3% Same Store Core Revenues growth and 7.6% Same Store Core Operating Expenses growth.

  • Same Store Average Occupancy was 97.5%, down 60 basis points year over year.

  • Same Store new lease rent growth of 15.6% and Same Store renewal rent growth of 10.2% drove Same Store blended rent growth of 11.6%, up 100 basis points year over year.

  • Acquisitions by the Company and the Company's joint ventures totaled 559 homes for $254 million while dispositions totaled 197 homes for $74 million.

  • The Company's Florida and Carolinas markets experienced limited wind and water damage as a result of Hurricane Ian. Fortunately, no injuries to residents or associates were reported, and the Company responded quickly to provide assistance to residents and impacted communities. The Company has accrued $19.0 million for estimated losses and damages related to the storm.

  • The Company is pleased to announce that it has achieved a 13.3% increase on its Global Real Estate Sustainability Benchmark ("GRESB") score from 2021 to 2022. As a result, the Company's sustainability-linked revolving line of credit and seven year term loan maintain their one basis point improvement in pricing.

President & Chief Executive Officer Dallas Tanner comments:

"This has been another solid quarter for Invitation Homes, with strong lease rate growth, low turnover and high resident satisfaction scores. Aided by favorable supply and demand fundamentals and a team of associates that are the best in this industry, we plan to continue to execute our strategy and be the premier choice for those who prefer to lease a home.

"Included within this release is our updated full year guidance for 2022. While these updates are generally consistent with our previous expectations for our overall business, our expected property taxes have been impacted more quickly than we had anticipated due to rising home price appreciation, and our reserve for bad debt is expected to remain elevated compared to pre-COVID averages, as it continues to take longer to address residents who are not current with their rent.

"We are proud of the results our teams continue to deliver in the current environment, and we believe the long-term attributes of our business remain strong."

Financial Results

Net Income, FFO, Core FFO, and AFFO Per Share — Diluted

Q3 2022

Q3 2021

YTD 2022

YTD 2021

Net income

$ 0.13

$ 0.12

$ 0.46

$ 0.33

FFO

0.35

0.35

1.12

1.00

Core FFO

0.42

0.38

1.24

1.11

AFFO

0.34

0.32

1.05

0.95

Net Income

Net income per share for Q3 2022 was $0.13, compared to net income per share of $0.12 for Q3 2021. Total revenues and total property operating and maintenance expenses for Q3 2022 were $569 million and $204 million, respectively, compared to $510 million and $184 million, respectively, for Q3 2021.

Net income per share for YTD 2022 was $0.46, compared to net income per share of $0.33 for YTD 2021. Total revenues and total property operating and maintenance expenses for YTD 2022 were $1,658 million and $577 million, respectively, compared to $1,476 million and $528 million, respectively, for YTD 2021.

Core FFO

Year over year, Core FFO per share for Q3 2022 increased 9.5% to $0.42, primarily due to NOI growth.

Year over year, Core FFO per share for YTD 2022 increased 12.1% to $1.24, primarily due to NOI growth.

AFFO

Year over year, AFFO per share for Q3 2022 increased 8.2% to $0.34, primarily due to the increase in Core FFO per share described above.

Year over year, AFFO per share for YTD 2022 increased 10.6% to $1.05, primarily due to the increase in Core FFO per share described above.

Operating Results

Same Store Operating Results Snapshot

Number of homes in Same Store Portfolio:

74,881

Q3 2022

Q3 2021

YTD 2022

YTD 2021

Core Revenues growth (year over year)

8.3

%

9.4

%

Core Operating Expenses growth (year over year)

7.6

%

6.1

%

NOI growth (year over year)

8.6

%

11.0

%

Average Occupancy

97.5

%

98.1

%

97.9

%

98.3

%

Bad debt % of gross rental revenues (1)

1.7

%

0.9

%

1.3

%

1.6

%

Turnover Rate

6.2

%

6.3

%

16.6

%

18.4

%

Rental Rate Growth (lease-over-lease):

Renewals

10.2

%

7.7

%

10.0

%

6.1

%

New Leases

15.6

%

18.3

%

15.7

%

13.7

%

Blended

11.6

%

10.6

%

11.4

%

8.2

%

(1)

Invitation Homes reserves residents' accounts receivables balances that are aged greater than 30 days as bad debt, under the rationale that a resident's security deposit should cover approximately the first 30 days of receivables. For all resident receivables balances aged greater than 30 days, the amount reserved as bad debt is 100% of outstanding receivables from the resident, less the amount of the resident's security deposit on hand. For the purpose of determining age of receivables, charges are considered to be due based on the terms of the original lease, not based on a payment plan if one is in place. All rental revenues and other property income, in both Total Portfolio and Same Store Portfolio presentations, are reflected net of bad debt.

Revenue Collections Update

Q3 2022

Q2 2022

Q1 2022

Q4 2021

Pre-COVID

Average (2)

Revenues collected % of revenues due: (1)

Revenues collected in same month billed

91

%

92

%

91

%

92

%

96

%

Late collections of prior month billings

6

%

7

%

6

%

6

%

3

%

Total collections

97

%

99

%

97

%

98

%

99

%

(1)

Includes both rental revenues and other property income. Rent is considered to be due based on the terms of the original lease, not based on a payment plan if one is in place. Security deposits retained to offset rents due are not included as revenue collected. See "Same Store Operating Results Snapshot," footnote (1), for detail on the Company's bad debt policy.

(2)

Represents the period from October 2019 to March 2020.

Same Store NOI

For the Same Store Portfolio of 74,881 homes, Same Store NOI for Q3 2022 increased 8.6% year over year on Same Store Core Revenues growth of 8.3% and Same Store Core Operating Expenses growth of 7.6%.

YTD 2022 Same Store NOI increased 11.0% year over year on Same Store Core Revenues growth of 9.4% and Same Store Core Operating Expenses growth of 6.1%.

Same Store Core Revenues

Same Store Core Revenues growth for Q3 2022 of 8.3% year over year was primarily driven by a 9.7% increase in Average Monthly Rent, and a 15.5% increase in other income, net of resident recoveries, offset by a 60 basis points year over year decline in Average Occupancy and an 80 basis points year over year increase in bad debt as a percentage of gross rental revenue.

YTD 2022 Same Store Core Revenue growth of 9.4% year over year was primarily driven by an 9.1% increase in average monthly rent, a 30 basis points year over year improvement in bad debt as a percentage of gross rental revenues, and a 25.5% increase in other income, net of resident recoveries, offset by a 40 basis points year over year decline in Average Occupancy.

Same Store Core Operating Expenses

Same Store Core Operating Expenses for Q3 2022 increased 7.6% year over year, primarily driven by a 3.8% increase in Same Store fixed expenses, a 15.4% increase in repairs and maintenance expense, net of resident recoveries, and a 15.2% increase in turnover expenses, net of resident recoveries, mainly driven by inflationary pressures.

YTD 2022 Same Store Core operating expenses increased 6.1% year over year, primarily driven by a 4.1% increase in Same Store fixed expenses, and a 16.3% increase in repairs and maintenance expense, net of resident recoveries, mainly driven by inflationary pressures.

Investment Management Activity

Acquisitions for Q3 2022 totaled 559 homes for $254 million through diversified acquisition channels. This included 244 wholly owned homes for $98 million in addition to 315 homes for $156 million in the Company's joint ventures. Dispositions for Q3 2022 included 189 wholly owned homes for gross proceeds of $70 million and eight homes for gross proceeds of $4 million in the Company's joint ventures.

Year to date through September 30, 2022, the Company acquired 2,336 homes for $1,021 million, including 1,273 wholly owned homes for $543 million and 1,063 homes for $478 million in the Company's joint ventures. The Company also sold 527 homes for $202 million, including 506 wholly owned homes for $192 million and 21 homes for $10 million in the Company's joint ventures.

Update on Hurricane Ian Impact

In Q3 2022, the Company's Florida and Carolinas markets experienced limited wind and water damage as a result of Hurricane Ian. Fortunately, no injuries to residents or associates were reported, and the Company responded quickly to provide assistance to residents and impacted communities.

The Company has accrued $19.0 million for estimated losses and damages related to the storm. Based on previous experience, it is possible that additional damage, and thus costs, may be identified and incurred over the coming months. Estimates will therefore be adjusted if needed and as new information becomes available. Additionally, a portion of the losses may be recoverable through insurance policies that provide coverage for wind, flood, and business interruption, subject to deductibles and limits.

Balance Sheet and Capital Markets Activity

As of September 30, 2022, the Company had $1,875 million in available liquidity through a combination of unrestricted cash and undrawn capacity on its revolving credit facility and term loan. The Company's total indebtedness as of September 30, 2022 was $7,821 million, consisting of $5,200 million of unsecured debt and $2,621 million of secured debt. Net debt / TTM adjusted EBITDAre was 5.7x at September 30, 2022, down from 6.2x as of December 31, 2021.

Dividend

As previously announced on October 21, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.22 per share of common stock. The dividend will be paid on or before November 23, 2022, to stockholders of record as of the close of business on November 8, 2022.

FY 2022 Guidance Update

The Company's updated 2022 guidance is presented in the table below. The majority of the change in its updated guidance for Same Store Core Operating Expenses Growth is due to higher expectations for property taxes, which are approximately three percent higher than previous expectations. This increase is primarily due to an anticipated increase in tax bills on the Company's homes in Florida and Georgia based on recent assessments that are up nearly 30 percent over prior year in these states. The Company plans to appeal a much higher proportion of these assessments compared to prior years, noting that there will be a timing difference between the date of appeal and when any rebates are received. In addition, the Company's updated guidance for Same Store Core Revenues growth reflects its revised expectation that bad debt will remain somewhat elevated compared to pre-COVID averages, as it continues to take longer to address residents who are not current with their rent.

The Company has also revised its assumptions for annual 2022 acquisitions of $1.1 billion and dispositions of $250 million.

The updated guidance also reflects two additional non-recurring items for the quarter and year to date period ending September 30, 2022, as noted on Supplemental Schedule 1 and the Company's reconciliation of reported FFO to Core FFO. The first relates to an approximate $7.4 million global settlement of a multistate putative class action regarding resident late fees. The settlement covers claims initially asserted in May of 2018, and involves allegations similar to what others in the residential sector have experienced. The Company strongly believes that the allegations were without merit, and does not admit to any liability in the settlement, which remains subject to court approval. The second non-recurring item relates to an accrual of $19.0 million for estimated losses and damages relating to Hurricane Ian.

FY 2022 Guidance

Current

Previous

FY 2022

FY 2022

Guidance

Guidance

Core FFO per share — diluted

$1.63 - $1.67

$1.66 - $1.72

AFFO per share — diluted

$1.38 - $1.42

$1.41 - $1.47

Same Store Core Revenues growth

8.75% - 9.25%

9.0% - 10.0%

Same Store Core Operating Expenses growth

8.75% - 9.25%

6.0% - 7.0%

Same Store NOI growth

8.75% - 9.25%

10.0% - 11.5%

Note: The Company does not provide guidance for the most comparable GAAP financial measures of net income (loss), total revenues, and property operating and maintenance expense, or a reconciliation of the forward-looking non-GAAP financial measures of Core FFO per share, AFFO per share, Same Store Core Revenues growth, Same Store Core Operating Expenses growth, and Same Store NOI growth to the comparable GAAP financial measures because it is unable to reasonably predict certain items contained in the GAAP measures, including non-recurring and infrequent items that are not indicative of the Company's ongoing operations. Such items include, but are not limited to, impairment on depreciated real estate assets, net (gain)/loss on sale of previously depreciated real estate assets, share-based compensation, casualty loss, non-Same Store revenues, and non-Same Store operating expenses. These items are uncertain, depend on various factors, and could have a material impact on the Company's GAAP results for the guidance period.

Earnings Conference Call Information

Invitation Homes has scheduled a conference call at 11:00 a.m. Eastern Time on October 27, 2022, to discuss results for the third quarter of 2022. The domestic dial-in number is 1-844-200-6205, and the international dial-in number is 1-929-526-1599. The access code is 535191. An audio webcast may be accessed at www.invh.com. A replay of the call will be available through November 24, 2022, and can be accessed by calling 1-866-813-9403 (domestic) or 1-929-458-6194 (international) and using the replay access code 147088, or by using the link at www.invh.com.

Supplemental Information

The full text of the Earnings Release and Supplemental Information referenced in this release are available on Invitation Homes' Investor Relations website at www.invh.com.

Glossary & Reconciliations of Non-GAAP Financial and Other Operating Measures

Financial and operating measures found in the Earnings Release and Supplemental Information include certain measures used by Invitation Homes management that are measures not defined under accounting principles generally accepted in the United States ("GAAP"). These measures are defined herein and, as applicable, reconciled to the most comparable GAAP measures.

About Invitation Homes

Invitation Homes, an S&P 500 company, is the nation's premier single-family home leasing company, meeting changing lifestyle demands by providing access to high-quality, updated homes with valued features such as close proximity to jobs and access to good schools. The company's mission, "Together with you, we make a house a home," reflects its commitment to providing homes where individuals and families can thrive and high-touch service that continuously enhances residents' living experiences.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which include, but are not limited to, statements related to the Company's expectations regarding the performance of the Company's business, its financial results, its liquidity and capital resources, and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "guidance," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the single-family rental industry and the Company's business model, macroeconomic factors beyond the Company's control, competition in identifying and acquiring properties, competition in the leasing market for quality residents, increasing property taxes, homeowners’ association and insurance costs, the Company's dependence on third parties for key services, risks related to the evaluation of properties, poor resident selection and defaults and non-renewals by the Company's residents, performance of the Company's information technology systems, risks related to the Company's indebtedness, and risks related to the potential negative impact of unfavorable global and United States economic conditions (including inflation and interest rates), uncertainty in financial markets, geopolitical tensions, natural disasters, climate change, and public health crises, including the ongoing COVID-19 pandemic, on the Company’s financial condition, results of operations, cash flows, business, associates, and residents. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. The Company believes these factors include, but are not limited to, those described under Part I. Item 1A. "Risk Factors" of the Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), as such factors may be updated from time to time in the Company's periodic filings with the Securities and Exchange Commission (the "SEC"), which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release, in the Annual Report, and in the Company's other periodic filings. The forward-looking statements speak only as of the date of this press release, and the Company expressly disclaims any obligation or undertaking to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except to the extent otherwise required by law.

Consolidated Balance Sheets

($ in thousands, except shares and per share data)

September 30,

2022

December 31,

2021

(unaudited)

Assets:

Investments in single-family residential properties, net

$

17,108,963

$

16,935,322

Cash and cash equivalents

300,312

610,166

Restricted cash

215,584

208,692

Goodwill

258,207

258,207

Investments in unconsolidated joint ventures

286,897

130,395

Other assets, net

508,451

395,064

Total assets

$

18,678,414

$

18,537,846

Liabilities:

Mortgage loans, net

$

2,207,792

$

3,055,853

Secured term loan, net

401,476

401,313

Unsecured notes, net

2,517,272

1,921,974

Term loan facilities, net

2,626,491

2,478,122

Revolving facility

Convertible senior notes, net

141,397

Accounts payable and accrued expenses

325,967

193,633

Resident security deposits

173,280

165,167

Other liabilities

79,787

341,583

Total liabilities

8,332,065

8,699,042

Equity:

Stockholders' equity

Preferred stock, $0.01 par value per share, 900,000,000 shares authorized, none outstanding as of September 30, 2022 and December 31, 2021

Common stock, $0.01 par value per share, 9,000,000,000 shares authorized, 611,409,909 and 601,045,438 outstanding as of September 30, 2022 and December 31, 2021, respectively

6,114

6,010

Additional paid-in capital

11,133,258

10,873,539

Accumulated deficit

(916,138

)

(794,869

)

Accumulated other comprehensive income (loss)

91,892

(286,938

)

Total stockholders' equity

10,315,126

9,797,742

Non-controlling interests

31,223

41,062

Total equity

10,346,349

9,838,804

Total liabilities and equity

$

18,678,414

$

18,537,846

Consolidated Statements of Operations

($ in thousands, except shares and per share amounts) (unaudited)

Q3 2022

Q3 2021

YTD 2022

YTD 2021

Revenues:

Rental revenues

$

514,670

$

464,086

$

1,504,601

$

1,351,332

Other property income

50,721

44,092

145,530

121,918

Management fee revenues

3,284

1,354

8,154

3,140

Total revenues

568,675

509,532

1,658,285

1,476,390

Expenses:

Property operating and maintenance

203,787

184,484

576,736

528,279

Property management expense

22,385

17,886

65,166

51,424

General and administrative

20,123

19,369

57,104

56,147

Interest expense

76,454

79,370

225,683

243,540

Depreciation and amortization

160,428