Invitation Homes Reports Third Quarter 2019 Results

DALLAS, Oct. 29, 2019 /PRNewswire/ -- Invitation Homes Inc. (NYSE: INVH) ("Invitation Homes" or the "Company"), a leading owner and operator of single-family rental homes in the United States, today announced its third quarter 2019 financial and operating results.

Third Quarter 2019 Highlights

• Year over year, total revenues increased 2.1% to $443 million, total property operating and maintenance expenses increased 3.2% to $175 million, and net income attributable to common stockholders increased to $34 million, or $0.06 per share.
• Core FFO per share was $0.29, flat year over year, and AFFO per share increased 3.1% year over year to $0.23. Included in these numbers is the negative timing impact of $3.5 million of accelerated cost within Other, net, that is expected to be offset by corresponding favorable timing impacts over the next two quarters.
• Same Store NOI grew 4.5% year over year on 4.4% Same Store Core revenue growth and 4.3% Same Store Core operating expense growth.
• Same Store average occupancy was 95.9%, up 40 basis points year over year.
• Same Store renewal rent growth of 4.7% and Same Store new lease rent growth of 4.3% drove Same Store blended rent growth of 4.6%, 30 basis points higher year over year.
• In September 2019, affiliates of Blackstone completed a secondary offering of 44 million shares of Invitation Homes common stock. Invitation Homes did not receive any proceeds from the transaction. After the transaction, Blackstone's ownership decreased to approximately 11% of total common shares and units outstanding at September 30, 2019.

President & Chief Executive Officer Dallas Tanner comments:  "We executed well to achieve another outstanding quarter of resident service and Same Store NOI growth, in line with our expectations.  Favorable fundamentals in Invitation Homes markets helped our teams drive robust revenue growth during peak leasing season, and we executed our playbook to enter the off-season in a strong occupancy position.  Operating efficiency also continues to improve, with controllable expenses, net of resident recoveries, decreasing slightly year-over-year in the third quarter.

"Given our strong year-to-date performance, we are increasing our FY 2019 Same Store NOI growth guidance to 5.2% - 5.6%, up 15 basis points at the midpoint versus previous guidance.  With fundamental tailwinds at our back and a number of opportunities to refine and grow our business, we are ready to run toward a strong finish to 2019 and further value creation in the years ahead."

Financial Results

Net Income (Loss)
Net income in the third quarter of 2019 was $0.06 per share, compared to net income of $0.00 per share in the third quarter of 2018.  Total revenues and total property operating and maintenance expenses in the third quarter of 2019 were $443 million and $175 million, respectively, compared to $434 million and $170 million, respectively, in the third quarter of 2018.

Net income in YTD 2019 was $0.18 per share, compared to a net loss of $0.06 per share in YTD 2018.  Total revenues and total property operating and maintenance expenses in YTD 2019 were $1,320 million and $502 million, respectively, compared to $1,290 million and $496 million, respectively, in YTD 2018.

Core FFO
Year over year, Core FFO in the third quarter of 2019 was flat at $0.29 per share.  Core FFO in the third quarter includes the negative timing impact of $3.5 million of accelerated cost within Other, net.  This is expected to be offset by corresponding favorable timing impacts in the fourth quarter of 2019 and the first quarter of 2020.

Year over year, Core FFO in YTD 2019 increased 6.3% to $0.93 per share, primarily due to an increase in NOI and lower cash interest expense.

AFFO
Year over year, AFFO in the third quarter of 2019 increased 3.1% to $0.23 per share.

Year over year, AFFO in YTD 2019 increased 8.2% to $0.75 per share, primarily driven by the increase in Core FFO described above.

Operating Results

Same Store NOI
For the Same Store portfolio of 72,001 homes, third quarter 2019 Same Store NOI increased 4.5% year over year on Same Store Core revenue growth of 4.4% and Same Store Core operating expense growth of 4.3%.

YTD 2019 Same Store NOI increased 6.1% year over year on Same Store Core revenue growth of 4.5% and Same Store Core operating expense growth of 1.6%.

Same Store Core Revenues
Third quarter 2019 Same Store Core revenue growth of 4.4% year over year was driven primarily by a 4.0% increase in average monthly rent and a 40 basis point increase in average occupancy to 95.9%.

YTD 2019 Same Store Core revenue growth of 4.5% year over year was driven primarily by a 4.1% increase in average monthly rent and a 50 basis point increase in average occupancy to 96.3%.

Same Store Core Operating Expenses
Third quarter 2019 Same Store Core operating expenses increased 4.3% year over year.  Same Store controllable expenses, net of resident recoveries, decreased 0.4% year over year.  Offsetting the improvement in controllable expenses was an 8.0% increase in fixed expenses, net of resident recoveries, driven primarily by a 6.0% increase in property taxes.

YTD 2019 Same Store Core operating expenses increased 1.6% year over year.  Same Store controllable expenses, net of resident recoveries, decreased 5.8% year over year, driven most significantly by lower personnel and turnover costs.  Controllable costs also benefited from a favorable first quarter comparison resulting from higher-than-normal repairs and maintenance work order volume in the first quarter of 2018.  The favorable factors impacting controllable expense growth were partially offset by a negative impact from last year's realignment of utility bill-back timing that resulted in higher than normal resident recoveries in the first quarter of 2018.  Fixed expenses, net of resident recoveries, increased 6.9% year over year, driven primarily by a 5.9% increase in property taxes.

Investment Management Activity
In the third quarter of 2019, Invitation Homes acquired 578 homes for $183 million, including estimated renovation costs, and sold 668 homes for gross proceeds of $168 million, resulting in a total portfolio home count of 80,232 homes as of September 30, 2019.

In YTD 2019, the Company acquired 1,526 homes for $456 million, including estimated renovation costs, and sold 2,101 homes for gross proceeds of $527 million.

Balance Sheet and Capital Markets Activity
As of September 30, 2019, the Company had $1,082 million in available liquidity through a combination of unrestricted cash and undrawn capacity on its revolving credit facility.  The Company's total indebtedness as of September 30, 2019 was $8,717 million, consisting of $6,872 million of secured debt and $1,845 million of unsecured debt.

As previously announced, in July 2019, the Company voluntarily prepaid $50 million of secured borrowings under IH 2017-2, which carried an interest rate of LIBOR + 231 basis points.

As previously announced, in July 2019, the Company completed settling conversions of its 2019 Convertible Notes with common shares.  Conversion of the $230 million of 2019 Convertible Notes resulted in issuance of 12.6 million common shares.

In August 2019, the Company announced that it had entered into agreements ("ATM Equity Program") to sell, from time to time, up to $800 million of common stock in aggregate through at-the-market offerings.  In September 2019, the Company issued 671,020 shares of common stock under its ATM Equity Program, at an average price of $28.02 per share, for gross proceeds of $19 million.  Proceeds were used primarily to acquire homes.  $781 million of capacity remained under the ATM Equity Program as of September 30, 2019.

After the impact of capital markets activity in the third quarter of 2019, net debt / annualized Adjusted EBITDAre declined to 8.5x at September 30, 2019, down from 9.0x at the end of 2018.

Full Year 2019 Guidance Update

Earnings Conference Call Information
Invitation Homes has scheduled a conference call at 11:00 a.m. Eastern Time on Wednesday, October 30, 2019 to discuss results for the third quarter of 2019.  The domestic dial-in number is 1-888-317-6003, and the international dial-in number is 1-412-317-6061.  The passcode is 3199988.  An audio webcast may be accessed at www.invh.com.  A replay of the call will be available through November 30, 2019 and can be accessed by calling 1-877-344-7529 (domestic) or 1-412-317-0088 (international) and using the replay passcode 10135802, 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 in the Glossary and Reconciliations section of this press release and in the Supplemental Information and, as applicable, reconciled to the most comparable GAAP measures.

About Invitation Homes
Invitation Homes is a leading owner and operator of single-family rental homes, offering residents high-quality homes across America. With over 80,000 homes for lease in 17 markets across the country, Invitation Homes is meeting changing lifestyle demands by providing residents access to updated homes with features they value, such as close proximity to jobs and access to good schools.  The Company's mission statement, "Together with you, we make a house a home," reflects its commitment to high-touch service that continuously enhances residents' living experiences and provides homes where individuals and families can thrive.

Investor Relations Contact

Greg Van Winkle
Phone: 844.456.INVH (4684)
Email: IR@InvitationHomes.com

Media Relations Contact

Kristi DesJarlais
Phone: 972.421.3587
Email: Media@InvitationHomes.com

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, which include, but are not limited to, statements related to the Company's expectations regarding the anticipated benefits of the merger with Starwood Waypoint Homes, 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," "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 associated with achieving expected revenue synergies or cost savings from the merger, risks inherent to the single-family rental industry sector and the Company's business model, macroeconomic factors beyond the Company's control, competition in identifying and acquiring the Company's properties, competition in the leasing market for quality residents, increasing property taxes, homeowners' association fees and insurance costs, the Company's dependence on third parties for key services, risks related to evaluation of properties, poor resident selection and defaults and non-renewals by the Company's residents, performance of the Company's information technology systems, and risks related to the Company's indebtedness. 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 the section entitled "Part I. Item 1A. Risk Factors," of the Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission (the "SEC"), as such factors may be updated from time to time in the Company's periodic filings with the SEC, which are accessible on the SEC's website at http://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 and in the Company's filings with the SEC. The forward-looking statements speak only as of the date of this press release, and we expressly disclaim 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.

Glossary and Reconciliations

Glossary:

Average Monthly Rent
Average monthly rent represents average monthly rental income per home for occupied properties in an identified population of homes over the measurement period, and reflects the impact of non-service rental concessions and contractual rent increases amortized over the life of the lease.

Average Occupancy
Average occupancy for an identified population of homes represents (i) the total number of days that the homes in such population were occupied during the measurement period, divided by (ii) the total number of days that the homes in such population were owned during the measurement period.

Core Operating Expenses
Core operating expenses for an identified population of homes reflect property operating and maintenance expenses, excluding any expenses recovered from residents.

Core Revenues
Core revenues for an identified population of homes reflects total revenues, net of any resident recoveries.

EBITDA, EBITDAre, and Adjusted EBITDAre
EBITDA, EBITDAre and Adjusted EBITDAre are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. We define EBITDA as net income or loss computed in accordance with accounting principles generally accepted in the United States ("GAAP") before the following items: interest expense; income tax expense; and depreciation and amortization. National Association of Real Estate Investment Trusts ("Nareit") recommends as a best practice that REITs operating as real estate companies which report an EBITDA performance measure also report EBITDAre in all financial reports for periods beginning after December 31, 2017.  We define EBITDAre, consistent with the Nareit definition, as EBITDA, further adjusted for gain/loss on sale of property, net of tax and impairment on depreciated real estate investments.  Adjusted EBITDAre is defined as EBITDAre before the following items: share-based compensation expense; IPO related expenses; merger and transaction-related expenses; severance; casualty losses, net; acquisition costs; and interest income and other miscellaneous income and expenses. EBITDA, EBITDAre and Adjusted EBITDAre are used as supplemental financial performance measures by management and by external users of our financial statements, such as investors and commercial banks. Set forth below is additional detail on how management uses EBITDA, EBITDAre and Adjusted EBITDAre as measures of performance.

The GAAP measure most directly comparable to EBITDA, EBITDAre and Adjusted EBITDAre is net income or loss. EBITDA, EBITDAre and Adjusted EBITDAre are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our EBITDA, EBITDAre and Adjusted EBITDAre may not be comparable to the EBITDA, EBITDAre and Adjusted EBITDAre of other companies due to the fact that not all companies use the same definitions of EBITDA, EBITDAre and Adjusted EBITDAre. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies.  See "Reconciliation of Non-GAAP Measures" below for a reconciliation of GAAP net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre.

Funds from Operations (FFO), Core Funds from Operations (Core FFO), and Adjusted Funds from Operations (AFFO)
FFO, Core FFO, and Adjusted FFO are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. FFO is defined by Nareit as net income or loss (computed in accordance with GAAP) excluding gains or losses from sales of previously depreciated real estate assets, plus depreciation, amortization and impairment of real estate assets, and adjustments for unconsolidated partnerships and joint ventures.  In calculating per share amounts, Core FFO and AFFO reflect convertible debt securities in the form in which they were outstanding during the period.

We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization. Because real estate values have historically risen or fallen with market conditions, management considers FFO an appropriate supplemental performance measure as it excludes historical cost depreciation and amortization, impairment on depreciated real estate investments, gains or losses related to sales of previously depreciated homes, as well non-controlling interests, from GAAP net income or loss.

The GAAP measure most directly comparable to Core FFO and Adjusted FFO is net income or loss. Core FFO and Adjusted FFO are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our Core FFO and Adjusted FFO may not be comparable to the Core FFO and Adjusted FFO of other companies due to the fact that not all companies use the same definition of Core FFO and Adjusted FFO. Accordingly, there can be no assurance that our basis for computing this non-GAAP measures is comparable with that of other companies.  See "Reconciliation of Non-GAAP measures" below for a reconciliation of GAAP net income (loss) to FFO, Core FFO, and Adjusted FFO.

Net Operating Income (NOI)
NOI is a non-GAAP measure often used to evaluate the performance of real estate companies. We define NOI for an identified population of homes as rental revenues and other property income less property operating and maintenance expense (which consists primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel expenses, repairs and maintenance, leasing costs and marketing). NOI excludes: interest expense; depreciation and amortization; general and administrative expense; property management expense; impairment and other; acquisition costs; (gain) loss on sale of property, net of tax; and interest income and other miscellaneous income and expenses.

The GAAP measure most directly comparable to NOI is net income or loss. NOI is not used as a measure of liquidity and should not be considered as an alternative to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our NOI may not be comparable to the NOI of other companies due to the fact that not all companies use the same definition of NOI. Accordingly, there can be no assurance that our basis for computing this non-GAAP measure is comparable with that of other companies.

We believe that Same Store NOI is also a meaningful supplemental measure of our operating performance for the same reasons as NOI and is further helpful to investors as it provides a more consistent measurement of our performance across reporting periods by reflecting NOI for homes in our Same Store portfolio.  See "Reconciliation of Non-GAAP Measures" below for a reconciliation of GAAP net income (loss) to NOI for our total portfolio and NOI for our Same Store portfolio.

Recurring Capital Expenditures or Recurring CapEx
Recurring Capital Expenditures or Recurring CapEx represents general replacements and expenditures required to preserve and maintain the value and functionality of a home and its systems as a single-family rental.

Rental Rate Growth
Rental rate growth for any home represents the percentage difference between the monthly rent from an expiring lease and the monthly rent from the next lease, and, in each case, reflects the impact of any amortized non-service rent concessions and contractual rent increases. Leases are either renewal leases, where our current resident chooses to stay for a subsequent lease term, or a new lease, where our previous resident moves out and a new resident signs a lease to occupy the same home.

Same Store / Same Store Portfolio
Same Store or Same Store portfolio includes, for a given reporting period, homes that have been stabilized and seasoned (whether under Invitation Homes ownership or Starwood Waypoint Homes ownership), excluding homes that have been sold, homes that have been identified for sale to an owner occupant and have become vacant, homes that have been deemed inoperable or significantly impaired by casualty loss events or force majeure, and homes acquired in portfolio transactions that are deemed not to have undergone renovations of sufficiently similar quality and characteristics as the existing Invitation Homes Same Store portfolio.

Homes are considered stabilized if they have (i) completed an initial renovation and (ii) entered into at least one post-initial renovation lease.  An acquired portfolio that is both leased and deemed to be of sufficiently similar quality and characteristics as the existing Invitation Homes Same Store portfolio may be considered stabilized at the time of acquisition.

Homes are considered to be seasoned once they have been stabilized for at least 15 months prior to January 1^st of the year in which the Same Store portfolio was established.

We believe presenting information about the portion of our portfolio that has been fully operational for the entirety of a given reporting period and its prior year comparison period provides investors with meaningful information about the performance of our comparable homes across periods and about trends in our organic business.

Total Homes / Total Portfolio
Total homes or total portfolio refers to the total number of homes owned, whether or not stabilized, and excludes any properties previously acquired in purchases that have been subsequently rescinded or vacated.

Turnover Rate
Turnover rate represents the number of instances that homes in an identified population become unoccupied in a given period, divided by the number of homes in such population.

Reconciliation of Non-GAAP Measures: