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Edited Transcript of INVH.N earnings conference call or presentation 7-May-19 3:00pm GMT

Q1 2019 Invitation Homes Inc Earnings Call

Dallas May 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Invitation Homes Inc earnings conference call or presentation Tuesday, May 7, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Charles D. Young

Invitation Homes Inc. - Executive VP & COO

* Dallas B. Tanner

Invitation Homes Inc. - Co-Founder, President, CEO & Director

* Ernest M. Freedman

Invitation Homes Inc. - Executive VP & CFO

* Greg Van Winkle

Invitation Homes Inc. - Senior Director of IR

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Conference Call Participants

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* Alexander J. Kubicek

Robert W. Baird & Co. Incorporated, Research Division - Research Analyst

* Buck Horne

Raymond James & Associates, Inc., Research Division - SVP of Equity Research

* Derek Charles Johnston

Deutsche Bank AG, Research Division - Research Analyst

* Haendel Emmanuel St. Juste

Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst

* Hardik Goel

Zelman & Associates LLC - VP of Research

* HyungJun Choe

Crédit Suisse AG, Research Division - Research Analyst

* Jade Joseph Rahmani

Keefe, Bruyette, & Woods, Inc., Research Division - Director

* Jason Daniel Green

Evercore ISI Institutional Equities, Research Division - Analyst

* John Joseph Pawlowski

Green Street Advisors, LLC, Research Division - Analyst

* Michael Bilerman

Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research

* Nicholas Gregory Joseph

Citigroup Inc, Research Division - Director & Senior Analyst

* Richard Hill

Morgan Stanley, Research Division - Head of U.S. REIT Equity & Commercial Real Estate Debt Research and Head of U.S. CMBS

* Shirley Wu

BofA Merrill Lynch, Research Division - Research Analyst

* Wesley Keith Golladay

RBC Capital Markets, LLC, Research Division - Associate

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Presentation

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Operator [1]

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Greetings, and welcome to the Invitation Homes First Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Greg Van Winkle, Vice President of Investor Relations. Please go ahead.

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Greg Van Winkle, Invitation Homes Inc. - Senior Director of IR [2]

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Thank you. Good morning and thank you for joining us for our First Quarter 2019 Earnings Conference Call. On today's call from Invitation Homes are Dallas Tanner, President and Chief Executive Officer; Ernie Freedman, Chief Financial Officer; and Charles Young, Chief Operating Officer.

I'd like to point everyone to our first quarter 2019 earnings press release and supplemental information, which we may reference on today's call. This document can be found on the Investor Relations section of our website at www.invh.com.

I'd also like to inform you that certain statements made during this call may include forward-looking statements relating to the future performance of our business, financial results, liquidity and capital resources and other nonhistorical statements, which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated in any such statements. We describe some of these risks and uncertainties in our 2018 annual report on Form 10-K and other filings we made with the SEC from time to time.

Invitation Homes does not update forward-looking statements and expressly disclaims any obligation to do so. During this call, we may also discuss certain non-GAAP financial measures. You can find additional information regarding these non-GAAP measures, including reconciliations of these measures with the most comparable GAAP measures, in our earnings release and supplemental information, which are available on the Investor Relations section of our website.

I'll now turn the call over to our President and Chief Executive Officer, Dallas Tanner.

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [3]

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Thank you, Greg. Let me start by saying this is a very exciting time for our business right now. With 18% AFFO growth in the first quarter, we're off to a great start to 2019 and are hitting our stride with merger integration in the rearview mirror. We are thrilled to go into peak season with everyone on a singular, unified platform that features better tools than we've ever had before. Cost efficiency initiatives have also been more impactful than expected so far in 2019, enabling us to increase our NOI, core FFO and AFFO guidance, which Ernie will discuss in more detail.

We are continuing to get more efficient, and we're not stopping. In my comments, I'd like to touch on 3 things: First, our strong start to the year. Second, the work our teams have done to wrap up merger integration. And third, an update on our capital recycling efforts.

I hope everyone had a chance to review the results we reported last night. Highlights of our first quarter performance included: 7.3% same-store NOI growth, our best ever first quarter average occupancy of 96.5%, new and renewal rent growth that outpaced prior year and a 9% decrease in net cost to maintain.

Let me add some color on what is driving these results. In short, it comes down to 3 things: Favorable market fundamentals, our unique competitive advantages and strong execution. Fundamentals are fantastic. New single-family supply is not keeping pace with demand, especially in Invitation Homes markets, where household formations in 2019 are expected to grow at almost 2% or 90% greater than the U.S. average.

With the millennial generation aging toward our average resident age of 40 years old, we are convinced more and more people will continue choosing the convenience of a professionally managed single-family leasing lifestyle. The affordability of leasing a home versus buying a home also continues to work in our favor.

What makes Invitation Homes unique is our locations. Residents are able to enjoy the affordable and convenient single-family leasing lifestyle, I just described, while also living in attractive neighborhoods close to their jobs and great schools. Our scale also enables us to deliver a high-quality service to our residents at a more efficient cost and provides us with a large amount of unique data that our best-in-class revenue management system can digest to give us a clear picture of the market.

On that note, we continue to get better and better at execution. Our revenue management team and field teams have worked together to develop and refine the data and process for achieving the right balance between rental rate and occupancy.

On the expense side, the simplification of our organization and systems are driving better results with the integration now behind us. Newly implemented repairs and maintenance initiatives are also making us more efficient, and we see additional opportunity to improve as we roll our ProCare more fully across our portfolio.

All of that came together to drive first quarter results that we were very pleased with, but we still have work to do. The most important part of the year lies ahead as leasing activity and service request pick up in the spring and summer months. We are optimistic, given the momentum we are carrying into peak season, but recognize that it takes even more diligence to maintain operational excellence during this period. Our teams are well prepared and energized for this task ahead.

Next, I want to commend and thank our teams across the country for the superb job they have done with the final piece of merger integration. Our unified operating platform has now been implemented in each of our 17 markets. With 1 team operating on 1 platform, our teams are excited to be equipped with better systems and fewer distractions to do what they do best, focus on the resident and deliver world-class service everyday.

We also continue to innovate and take the opportunity to identify additional areas for platform and process improvements as we start moving on from the integration.

Finally, we continue to refine our portfolio and have made significant strides already in 2019 towards our capital recycling goals for the year. In the first quarter, we sold 654 homes with lower long-term growth prospects for gross proceeds of $155 million. In addition to deleveraging, we used proceeds from these sales to acquire 208 homes with better quality and location for $62 million of investment. In April, we acquired 463 homes in infill submarkets of Atlanta and Las Vegas and a bulk acquisition for $115 million.

99% of these homes are occupied with average in-place rents of $1,554 per month, which we believe is well below current market rates. In addition, we expect to achieve higher operating margins by bringing these homes into our platform with greater economies of scale.

I'll wrap up by reiterating how enthusiastic I am about the future of Invitation Homes. It's exciting to see everything we've worked hard on for the last 18 months of integration fall into place. Our operating teams continue to get more efficient. Our asset management teams continue to enhance the portfolio, and our capital markets teams continue to reduce leverage on our balance sheet. I believe we are better equipped more than ever to drive growth and deliver an outstanding living experience for our residents.

With that, I'll turn it over to Charles Young, our Chief Operating Officer, to provide more detail on our first quarter operating results.

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [4]

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Thank you, Dallas. Our teams carried the momentum from the end of 2018 into another strong quarter to kick off 2019. I'm proud of the results we put on the board and the progress we made on controllable expenses. At the same time, we navigated through platform integration in the field. And most of all, I'm proud that the quality of our resident service continues to achieve new heights, evidenced by further declines in resident turnover.

The occupancy in our portfolio and the enthusiasm of our teams are showing towards resident service put us in a great position for the upcoming peak season and we're excited to tackle it together on one platform. I'll now walk you through the first quarter operating results in more detail.

With outstanding fundamentals in our markets and excellent execution from our teams, same-store NOI increased by 7.3% in the first quarter. Same-store core revenues in the first quarter grew 4.7% year-over-year. This increase was driven by average monthly rental rate growth of 4.1% and an 80 basis point increase in average occupancy to 96.5% for the quarter.

Same-store core expenses in the first quarter were down 0.1% year-over-year. Controllable costs were better than expected down 10.2% year-over-year, net of resident recoveries. A portion of this improvement is attributable to a favorable comparison to the first quarter of 2018 when repairs and maintenance work order volume was higher than normal.

However, the majority of our outperformance versus our expectation for the first quarter was due to great execution from our teams. In particular, I'll point to 3 things our teams accomplished that contributed to the results.

First, we had success continuing to drive system and process improvements for repairs, maintenance and turns. Second, we incurred lower resident turnover. And third, we realized property level merger synergies as a result of our integration efforts. Partially offsetting the significant reduction in our controllable cost was a 4.8% increase in same-store property taxes.

Next, I'd like to expand on one of the main drivers of our strong quarter that I just mentioned. Our efficiency gains were the repair and maintenance or in R&M. On last quarter's call, I talked about the fourth quarter rollout of an important update to our technology platform that enabled all of our internal technicians to perform work on any home in our portfolio, not just the homes associated with their legacy organization. This made a significant difference in the productivity of our maintenance technicians and resulted in an uptick in the percentage of service requests addressed in-house rather than by third parties.

We are pleased with the impact that had on our first quarter results, but we are not celebrating yet. Maintenance volume increased significantly in the spring and summer months, demanding even stronger execution from our teams. In line with normal seasonal trends, we don't expect to see the same level in-house completion percentage in peak season that we saw in the first quarter. That said, I believe we are well positioned for the task ahead now that integration is behind us and with all of the R&M systems and process improvements we've made over the last 9 months.

I'll now provide an update on the integration of our field teams. As Dallas mentioned, we have implemented our unified operating platform in every market. This is an important milestone for our company. It will allow our field teams to operate in a much simpler environment with better tools at their disposal. It also allows our teams to get back to basics and devote all of their attention to providing exceptional resident service and operational execution.

Feedback from our field teams have been extremely positive and they're excited to enter peak season altogether on one system. I'm also happy to report we accomplished this integration in the field ahead of schedule and with more synergies than the midpoint of our guidance. Integration efforts had unlocked $54 million of synergies on an annualized run rate basis as of March 31, 2019. This compares to guidance in the $50 million to $55 million range of synergy achievement by the end of the second quarter 2019. In addition, we'll be better positioned to push for more procurement savings going forward and to take the next step in fully rolling out our ProCare service model across our portfolio. Finally, I'll cover leasing trends in the first quarter and April 2019.

Both renewal and new lease rent growth were higher in the first quarter 2019 than they were in the first quarter 2018. Renewals increased 30 basis points to 5.2% and new leases increased 110 basis points to 3.6%. This drove blended rent growth of 4.7% or 70 basis points higher year-over-year. At the same time, resident turnover continue to decrease, reaching an all-time low of 31% on a trailing 12-month basis.

As a result, average occupancy in the first quarter of 2019 increased 80 basis points year-over-year to 96.5%. Rent growth and occupancy trends remained very encouraging in April as well. Blended rent growth in April average 5.5%, up 100 basis points year-over-year; and occupancy averaged 96.6%, up 40 basis points year-over-year.

With fundamental tailwinds at our back and occupancy in a strong position, we are confident as we enter peak leasing and maintenance season. I'd like to send a huge thank you to our teams for putting us in this position by focusing on resident service and operational excellence while also working diligently to complete the integration of our platform.

With that, I'll turn the call over to our Chief Financial Officer, Ernie Freedman.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [5]

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Thank you, Charles. Today, I will cover the following topics: Balance sheet and capital markets activity, financial results for the first quarter and updated 2019 guidance. First, I'll cover balance sheet and capital markets activity, where we continue to build on the progress we made in 2018 by deleveraging further.

In the first quarter in April of 2019, we prepaid $250 million of secured debt using cash generated from operations and dispositions. The debt we prepaid carried a weighted average interest rate of LIBOR plus 255 basis points.

Our first quarter activity brings net debt-to-EBITDA to 8.6x, down from 9x at the end of 2018. Pro forma the conversion of our 2019 convertible notes, net debt-to-EBITDA was 8.4x at the end of the first quarter. Outside of $370 million of secured debt maturing in 2021, we have no other secured debt coming due until 2023. As such, we continue to anticipate less refinancing activity in 2019 than in 2018. However, we will remain opportunistic if attractive refinancing opportunities present themselves and we will continue to prioritize debt prepayments as part of our efforts to pursue an investment-grade rating.

Our liquidity at quarter end was over $1.1 billion through a combination of unrestricted cash and undrawn capacity on our credit facility. I'll now cover our first quarter 2019 financial results.

Core FFO per share increased 14.4% year-over-year to $0.33, primarily due to an increase in NOI and lower cash interest expense. AFFO increased 17.6% year-over-year to $0.28.

Last thing I will cover is 2019 guidance. As Dallas and Charles discussed, we had a great first quarter and are positioned well going into peak season. While we are optimistic that we will continue to perform well through peak season, we are not taking it for granted. As such, we are raising our full year 2019 same-store NOI growth guidance by 50 basis points to 4% to 5% driven by a 50 basis point reduction in same-store core expense growth guidance to 3% to 4%. We are maintaining our same-store core revenue growth guidance of 3.8% to 4.4% in 2019. We are also raising our full year 2019 core FFO per share and AFFO per share expectations by $0.01 to $1.21 to $1.29 for core FFO and $0.99 to $1.07 for AFFO. From a timing perspective, I want to remind everyone that occupancy comps were easier at the start of 2019 than they will become as the year progresses.

Regarding expenses, our efforts in the fourth quarter of 2018 and first quarter of 2019 provide a greater impact than was contemplated in our initial guidance. We are hopeful that we could perform better than the expectations that we laid out and are pleased that for the last 2 quarters, we have. At the same time, I want to caution everyone that maintenance and turn volumes are typically lower in the first and fourth quarters, and we would expect these seasonal pickup in the spring and summer.

From a big picture perspective, we believe there is a long runway for growth ahead of us. We are not surprised with our revenue performance to start the year as fundamentals continue to favor single-family rental and our portfolio locations and scale provide us a differentiated advantage. We also look forward to other opportunities to create value in our business. We are excited about the rollout of ProCare across all of our markets, which should drive better resident service and additional expense efficiency. We'll also continue to stay active in recycling capital, investing in value enhancing CapEx projects and beginning to pursue ancillary service offerings to enhance our residents experience. As Dallas mentioned at the start of our call, it's a very exciting time for Invitation Homes.

With that, operator, would you please open up the line for questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Drew Babin with Baird.

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Alexander J. Kubicek, Robert W. Baird & Co. Incorporated, Research Division - Research Analyst [2]

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This is Alex on for Drew. Looking at April leasing spreads, what markets are outperforming or on the other side, underperforming your expectations as you guys kind of get that first sneak peek at your leasing season? And generally, at what rate are you guys sending out renewal notices today?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [3]

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Yes. Alex, this is Charles. Yes. So the West Coast has really been driving our results. If you look from Seattle into California and over to Phoenix, we've had increases in Q1 on occupancy across the board. And our year-over-year renewal and new lease rates, blended rent growth is up. So all positive signs. Where we've been really excited in addition to the West, Tampa and Texas have shown really good results in both occupancy and rate, and Denver has had some really good occupancy pushes as well. We're out in the low 6s in terms of our renewal ask and there's usually a spread from the ask to actually achieve.

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Alexander J. Kubicek, Robert W. Baird & Co. Incorporated, Research Division - Research Analyst [4]

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Understood. And then follow-up for Charles. On the expense front, it looks like HOA fees have trended upward pretty significantly after being stable last year. I'm sure bumps went up 20% across the board. So can you speak a little color on what's going on in that line?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [5]

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Yes. No, good question. Look, as we finalize the integration, we realized that there were some improvement we could do in the HOA management process. And so as a result of that, our accrual was off on HOA expense line. This is really attributable to the merger. It shouldn't be considered recurring. We expect this short-term true-up to be resolved by the end of Q2. And the great news is, today, after being done with the integration and having a right process in place, we have the right personnel and we're confident that we're well positioned to manage the HOA responsibilities smoothly like we did premerger.

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Alexander J. Kubicek, Robert W. Baird & Co. Incorporated, Research Division - Research Analyst [6]

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Perfect. And then one last quick one for Ernie. Last quarter, you talked about recurring CapEx being up about 3%. This year after a really strong 1Q and obviously, I know the timing is different, curious if we can just get a little more color on what the cadence of CapEx spend looks like and if that 3% number is still holding true.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [7]

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Sure. Yes, we've talked about the total net cost to maintain, which is both OpEx and CapEx. We thought we'd be up about 3% year-over-year. The great outperformance by the team in the first quarter actually has allowed us to revise those expectations that we'd expect to be more in the flat to 3% increase range. So definitely should be a little bit better than we talked about a little bit earlier this year.

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Operator [8]

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Our next question comes from Nick Joseph with Citi.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [9]

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Ernie, just in terms of full year core FFO guidance. Predictive run rate from the first quarter, if you get to around $1.30 is slightly above the high end. You've walked through the difficult comps in terms of occupancy on same-store revenue and some of the same-store expense side. But are there any other line items that make 1Q not a good run rate for the remainder of the year?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [10]

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Yes. There's a few things, Nick. I appreciate you asking the question. One, we'll see interest expense tick up for the remainder of the year. As we disclosed in our quarterly 10-Qs, a number of the swaps that we inherited in the merger were step-up swaps where instead of having one rate for the entire swap period, it started with a lower rate and progress to a higher rate over the 3, 5, 7-year term in the swap. And so a number of those swaps reset in the first half of the year. And so we do expect on a full year basis, if you were annualized, that $1.30, I would reduce that by about $0.02 just for the step-up swaps, Nick. In addition, we've talked about this and there are some footnotes in our supplemental around it. Currently, the convertible notes that we have that come due July 1, those will convert to shares. At that point, we're treating those though at this point, still as debt, because we're still paying interest expense on those. But that is slightly dilutive when they convert to shares in the second half of the year. That's going to cost us roughly a half penny on the $1.30 that you mentioned. So those 2 items alone bring us down to more like $1.27 $1.28. Then the other 2 things I'd point is that the business is a little seasonal. We just see expenses ramp up and margins decline in the third quarter. That's our peak, certainly, season for work orders mainly around HVACs.

So typically third quarter and you'll see that historically will have a little bit lower margin. So to annualize, the first quarter for NOI will be slightly off from that. And then finally, teams are generally pretty conservative with their G&A spend in the first half of the year to save up some money for the second half of the year. So you'll see G&A ramp up a bit as we go into the second, third and fourth quarter. All those things combined would bring you down from the $1.30 number that you mentioned to something that's more toward the midpoint of our guidance range.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [11]

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That's pretty helpful. And then just on the cap rates for the bulk acquisition. What was that? I think you mentioned it was 99% occupied, but that you saw some upside for putting the homes on the Invitation Homes platform. So kind of what's the stabilized cap rate for that bulk acquisition as well?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [12]

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Yes. Nick, this is Dallas. On the in-place in terms of just pricing Day 1, it's kind of like a 5 7, 5 8, depending on kind of renewals and things that are going on near term. And then I'd say that the way to think about that is we've modeled that will turn about 1/3 of that portfolio every year, and we'd see that, call it, spot cap rate get in the low 6s over the next couple of years.

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Operator [13]

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Our next question comes from Shirley Wu with Bank of America Merrill Lynch.

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Shirley Wu, BofA Merrill Lynch, Research Division - Research Analyst [14]

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So on the transaction side, a little bit more on the bulk acquisition in 2Q. Could you give us a little bit more color in terms of how you sourced that and what your expectations are for the rest of '19, whether you're going to continue to do more bulk acquisitions or maybe like the one-off instead?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [15]

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Well, we're certainly off to really good start in terms of meeting our capital allocation goals for 2019. In terms of bulk, we maintain a pretty steady approach. You'd seen that in the last quarter, fourth quarter of 2018, we're really active on the dispositions side, where we had sold a number of bulk portfolios. And if and when those opportunities present themselves to us, we certainly will take a look, both from a buy or a sell perspective. In this particular circumstance, it was a portfolio we've been familiar with for a number of years as a competitor of ours in the market. We definitely likely the footprints of both Las Vegas and Atlanta in terms of the assets that we bought. And I would expect for us, Shirley, through the remainder of the year, kind of maintain our normal guidance. I think we talked about being in somewhere between $300 million to $500 million of bulk buying and selling this year with kind of a net neutral focus. But we'll definitely pay attention to what comes in front of us during the summer months. There are a few smaller opportunities out there, but nothing of real scale right now that would lead us to change our perspective.

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Shirley Wu, BofA Merrill Lynch, Research Division - Research Analyst [16]

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Got it. And as related to your mortgage rates have come down more recently. Do you expect that the fact you've moved out of the home buying, especially in the spring leasing season, when people start to consider buying a home?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [17]

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No. In fact, it's been pretty consistent. I mean we've seen some smaller rate volatility over the past couple of years. But more or less, homeownership rates has been pretty constant between 64% and 65% for the better part of the best -- last couple of years. Where we see some bigger shifts is in really affordability and that, that option to be able to lease is much more attractive than it is perhaps to own in many of our markets today. Roughly 15 of our 17 markets have pretty good dislocation in terms of the affordability factor pushing maybe customers preferably into a leasing decision versus ownership.

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Operator [18]

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Our next question comes from Derek Johnston with Deutsche Bank.

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Derek Charles Johnston, Deutsche Bank AG, Research Division - Research Analyst [19]

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Are you planning to push rents even more aggressively in the busy spring and summer leasing season given your high level of occupancy? And as you guys were planning, did you consider raising revenue guidance with the other measures? And why did you decide to keep it unchanged?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [20]

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Yes. So this is Charles. I'm going to answer the first question. The way that we have set our lease expiration curve is the high demand season is Q2, Q3 as families are moving. So we really set our rents based on the market and demand that's out there. Our expirations kind of match to that. So what you'll see is a higher new lease growth in that high demand season, and that renewals will kind of stay steady. And both of them really strong for us, really proud of what the teams have been doing. It's just great performance overall given the integration as well.

So that's kind of how we see the demand come through the summer on the new lease side.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [21]

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And Derek, regarding guidance. First quarter on the revenue line came in where we expect, to me, slightly ahead of expectations. We had signaled that the first quarter is going to be our easiest quarter from an occupancy comp perspective. We're not going to continue to maintain an 80 basis point increase year-over-year in occupancy like we did in the first quarter. So we had mentioned that we thought rental rate would be up around 4% plus or minus, and occupancy will be a little bit better. And that's how you get to our guidance range of 3.8% to 4.4%. And as I said, if Charles and the team keep executing as well as they are on rate as they did in the first quarter, as they did in April in one of the April numbers. Yes, that would certainly give us the opportunity to do that to midpoint or slightly better with revenue. But we started a little bit too early in the year, yet to make an adjustment on that based on where we're at. Currently, but -- we'll keep an eye on it and we'll see how things play out during the second quarter.

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Derek Charles Johnston, Deutsche Bank AG, Research Division - Research Analyst [22]

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That make sense. And just secondly, on turn and churn. So can you discuss how the turn times trended in the first quarter? And then how do you see churn shaking out for the rest of 2019?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [23]

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Yes. This is Charles. So in terms of the actual turning of our homes in terms of construction and rehab. We're in the 15 days in Q1. What you'll see, though, that's a little bit of a seasonal metric as demand gets a little higher in Q2, Q3. It's trending up a little bit in April, but that's typical. But 15 days is where we want to be, and we're always looking for efficiency to bring that down. In terms of churn, I think you're referring to the days to re-residents. So from move out to move in, we're about where we were last year in Q1, but we're seeing good trends down in April that's very positive.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [24]

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And Derek, it's really hard for us to make a bold prediction on whether turnover will continue to be down year-over-year like it's been overall. And as we mentioned in the prepared remarks, it's a 31% on a trailing 12-month basis. That's the lowest we've seen. So they're certainly hard to predict that it'd go lower still, but certainly, there's that opportunity. But we're not in a position to make a prediction on where that may go over the next few quarters. So we feel really good where it's at right now and the way that we're delivering service. We certainly see the opportunity to keep turnover on the low end of the scale.

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Operator [25]

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Our next question comes from Jason Green with Evercore.

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Jason Daniel Green, Evercore ISI Institutional Equities, Research Division - Analyst [26]

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Just wanted to touch on turnover a little bit more. Turnover came in very low this quarter. I was wondering if there's anything unique about the homes that were turning over this quarter or anything that you're seeing out there that would suggest that turnover will continue to reduce as we head into the peak leasing season.

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [27]

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Thanks for the question. This is Charles. Nothing special about the homes that turned. I think, as we said, the tailwinds that are back is helpful for the industry in general. But we think turnover is low because of the quality of our resident service and the quality of our homes. Teams, as I said, are really executing well. Now that we're on one platform, it's working in our favor. And Dallas mentioned earlier, affordability is also a factor. So we're really focused on what we can control, and that's putting out great service and quality homes.

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Jason Daniel Green, Evercore ISI Institutional Equities, Research Division - Analyst [28]

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And I guess in same-store expenses coming in flat. Can you quantify how much of that is really due to the fact that 1,000 less homes turned this quarter versus the comparable quarter and how much of it is really due to increased efficiency and operations?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [29]

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Yes. Just off the top of my head, Jason, 1,000 less turns, our turns typically run about $1,000 of operating expense, seemed about $1,500 of operating expense. So I'd say that certainly about 1 point, 1.5 points may have come from that. Most of it has come from the fact that the teams are just performing better. And these -- the things that Charles talked about came through for us in space with regards to what we're trying to do on R&M. So a little turnover certainly was a portion of it, but not the majority of it.

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Operator [30]

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Our next question comes from Rich Hill with Morgan Stanley.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity & Commercial Real Estate Debt Research and Head of U.S. CMBS [31]

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Wanted to just follow up with you on property taxes. Late last year, there was obviously a lot of discussion about property taxes and how those would be controllable going forward as the 2018 increases were onetime driven by M&A. So I'm wondering if you could put the 4.8% increase that we saw in 1Q in context and really what drove that.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [32]

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Sure. So we had signaled, Rich, which that we expected taxes to be up in the 5s for the year because we've had good home price appreciation. And we also mentioned that we thought the fourth quarter would be the best quarter because we'd had the tough comp. So we actually came in a little bit better than our expectations at the 4.8%. And what drove that was the State of Washington actually put out some legislation that limited military rate increases and we weren't anticipating that. So State of Washington, we have -- where we're unique, where we have a portfolio of about 3,500 homes in Seattle was a bigger good guy than we would've anticipated, and that will carry through for the rest of the year. That helped us. But I'll caution everyone that Washington is one of the few states that comes out early. Texas does as well. The majority of what we'll find out about real estate taxes will start hitting in September and October, especially our bigger states like Florida, Georgia. And so we've got ways to go. But at least the first quarter put us on a path to be about where we expected with regards to real estate taxes.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity & Commercial Real Estate Debt Research and Head of U.S. CMBS [33]

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Got it. That's helpful. And then maybe just going back to the expenses. Obviously, the guide implies, I think, 4.75% for the rest of the year. Is this -- are you just trying to take a little bit of conservative approach, as you had mentioned, 2Q starts to be in that higher cost portion of the year? How should we be thinking about that?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [34]

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Yes. I think that's probably the right way to think about it, Rich. We were happy with how things have happened. But will be our first time going through a peak work order season on the new systems. And we want to be cautious and appropriately so when setting our guidance. Your math -- the correct math, it certainly implies that the number is going to go up. And as we -- let's be perfectly clear with everyone, we do not expect flat growth for the rest of the year. If we did, we would revise guidance even further still, but we still want to make sure we're being smart about how we're looking at it. And things happen. And so we'll make sure we're trying to leave some room for that as well. So we feel good about the numbers. We're certainly pleased with how the first quarter came in, and we're hopeful we can set ourselves up to have a successful remainder of the year with regards to expense control.

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Operator [35]

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Our next question comes from Hardik Goel with Zelman & Associates.

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Hardik Goel, Zelman & Associates LLC - VP of Research [36]

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Great quarter, congratulations. Maybe this one is for Charles, I guess. The turnover decline year-over-year was pretty significant. And I'm just wondering how much of that was intentional from you guys moving leases over the last year into the peak leasing season to give you better pricing? And how much was just organic decline?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [37]

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Yes. I think a little bit of both. As we put the portfolios together, we're being thoughtful around that lease expiration curve. So that had some help. But look, demand is healthy. We're executing well. We got to the single platform ahead of schedule, and it's paying dividends. We'll continue to provide high-quality service. And we think over the long haul, it'll help us. You put all that together and then the teams are really doing the -- what the best they can do out there. I can't thank them enough, really best-in-class. So it's a lot of execution in the field.

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Hardik Goel, Zelman & Associates LLC - VP of Research [38]

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And just one quick follow-up on personnel costs. There were some really good expense leverage there. What are the drivers of that? Is that as seasonal as other costs? How would you think about that because it hasn't been in the past.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [39]

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Yes. Hardik, this is Ernie. That's almost entirely due to the merger and the integration, where last year we had staffing this time of the year which was full with regards to the platform. We started seeing savings with regards to personnel and other as we rolled it further into 2018. As we gotten to 2019, we just got with the integration being completed, we're just about at our final staffing levels. So it's really the staffing levels that drove that from the integration.

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Operator [40]

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Our next question comes from Haendel St. Juste with Mizuho.

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Haendel Emmanuel St. Juste, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst [41]

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So I guess first, kudos on the great expense results in the first quarter. Charles, I guess maybe for you. I'm curious just thinking more broadly longer term beyond some of the recent benefits from the improved systems and efficiencies and the merger synergies, what do you think now the long-term expense run rate for your platform is after the merger synergies run out, after you get the systems kind of on to where you want them?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [42]

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Yes. So thanks, Haendel. I -- we're really focused in on the execution that we did in Q4 and Q1. Teams put up great cost controls with a lot of the systems that we discuss that we implemented late last year. It's added real benefit. I think what's left for us to do is the implementation of ProCare, to roll that out as we finish the integration and train everybody on it and get that kind of internal system and partnership with the resident going. We also have in the future fleet management that's coming out, that's going to have some benefit. So it's hard to quantify exactly what that's going to be. We've put up good numbers. We're going to continue to execute. As Ernie said, peak season is the litmus test and that's upcoming here. So hard to predict, but we're doing what we're supposed to and what we said we were going to do and we're executing well, and we're going to continue to focus.

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Haendel Emmanuel St. Juste, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst [43]

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Got it. Got it. And not to press too much on it, certainly a difficult question to answer. But I guess a few years back, we used to think about the expense growth side of this business is more or less being inflationary, some operational hiccups last year, forced the rethink of that. And so there was fears of a higher expense projection coming into this year. And certainly, the guidance is reflecting some of the incremental costs. But is it still the view that this is inflationary and that there are factors between the clustering of your portfolio and the systems that can support that? Or should we be thinking about this as an inflation plus maybe a 3%, 4% expense growth business over the long term?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [44]

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Yes. Haendel, I'll take a swing at it. This is Ernie. I think 2 components. We've talked about it before. I think we're not going to be much different broadly than general residential. So if people have the view that residential's will be inflationary plus, we probably saw than that. I think it's going to be inflationary. We're probably there if things go inflationary minus. I think there's 2 though important differentiators for us, where we are as an industry and as a company versus the broader residential community, which I think I talk about the multiple family. One is real estate taxes are a bigger component of our expenses than they are in residential because we're not a commercial product. We're a residential product. Close to 50% of our expenses come from real estate taxes. And we're in the best markets when it comes to home price appreciation. So that may lend you to think that we will be maybe a little more inflationary plus because of that. Offsetting that, I think at least for the near term is that we're still in the early stages of running as an industry and as a business. So there's opportunities for efficiencies. And then Charles mentioned a couple of those around fleet management, around ProCare and things like that. So at least for the near term, you'd hope to have some things there that will help offset that. But I think overall, this business has been around for hundreds and hundreds of years. It's only been institutionalized for the last few years. And it's worked for folks for the last hundreds and hundreds of years to be able to operate a single-family homes, and I'd like to think we can do a little bit better with the scale that we have and the expertise that we have and the technology capabilities that we have that others don't. So hopefully, that all washes out to be a very similar profile that you would see in the broader residential world.

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Haendel Emmanuel St. Juste, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst [45]

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And Ernie, a quick one while I have you. Can you talk a bit about some of the ancillary service initiatives you're pursuing here, potential impact and potential timing on revenue?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [46]

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I'm going to pass that over to Dallas because he's certainly, it's been one his big focuses where he's sitting now.

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [47]

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Thanks, Ernie. Hi, Haendel. A couple of things we're working on. As you know, we've done a really good job with our Smart Home implementation and adoption rates. Those adoption rates today are somewhere between 75% plus or minus, and we're looking to enhance some of those offerings. In fact, working on the some of the stuff. I wouldn't expect a lot of it to be 2019, but more 2020 type of events as you start to think about the way that we could see other income grow within our business. And there's certainly a number of other areas that would fall into kind of 2 buckets. One would be things that we're currently doing, like Smart Home, that we can do better. And we see an opportunity in our structure around pets and some of the things that we're doing there for our residents currently. We know that roughly 50% to 60% of our residents have pets and we think there's other offerings and things that fit with those that we're now trying to work through and to see what kind of experience we can provide that centers around some of that. We believe that that's also an emotional factor for the leasing lifestyle in terms of keeping our customers longer and providing an experience that feel stickier.

And so then there are other things that we're working on. Outside of that, they're maybe newer from an ancillary perspective. Are there other ways that we can perhaps make the experience as we onboard a new resident better by using things like deposit insurance versus deposits and there's revenue streams that are associated with those types of things. Those are a few of the examples of things that we're working on, and they are near and dear to us kind of post-merger integration so that we can start to roll these out on a unified system. And the delivery mechanisms for that, how we do that is really important. So we are focused on it.

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Haendel Emmanuel St. Juste, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst [48]

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Got it. Got it. Appreciate that. And certainly we're looking intently on the rollout.

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Operator [49]

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Our next question comes from Buck Horne with Raymond James.

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Buck Horne, Raymond James & Associates, Inc., Research Division - SVP of Equity Research [50]

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Just kind of bigger picture here. With the share price starting to afford you a little bit more reasonable cost of capital here. So how do you think or has your thought process around deleveraging or accelerating deleveraging changed at all with a better cost of capital here? Or are you also potentially thinking of accelerating your external growth activities? Is that a possibility as well? What -- how do you think about kind of using your cost of capital more efficiently?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [51]

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Yes. Thanks, Buck. We've always talked about we'd be opportunistic when it comes to -- if we have opportunities to delever or opportunities to externally grow and certainly, the share price behaving better that may give us some more opportunities, but word is the share price had stay still significantly under consensus NAV and where we think NAV is as well. And so to use the shares or equity to delever when we're at that level is a difficult decision to make and probably one wouldn't want to make. We do want to see some better performance there. But we'll always leave all options on the table. With regards to external growth, we've been successful and we're able to fund that through capital recycling. But certainly, again, as share price behaves, it opens up some more avenues to us and then it's just a question of finding the right opportunities. So we're very cognizant with that. We talked to the Board often about that, and we're pleased in where things have headed and we'll just have to see where things play out as we go forward.

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Buck Horne, Raymond James & Associates, Inc., Research Division - SVP of Equity Research [52]

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Okay. That's great. And going back to the acquisition here in the second quarter. Just -- so as you're dropping in these new houses into the existing Atlanta and Vegas footprint, so this is kind of conceptually. But so obviously, you're going to expect to improve the margin performance of that portfolio over time. But does it also leverage your costs for the existing homes in the portfolio? Can you improve the existing performance of the portfolio by adding these new homes and making the markets denser?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [53]

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Yes. Great question. And fundamentally, you nailed it in terms of the things that we think about in terms of growing our footprint and trying to find the right size. In scale, you hear us say this over and over when we see you guys at conferences and other things, but scale really matters in this business. And so the Las Vegas example is one that we can talk about here briefly for a moment. As you think about our footprint there, with that acquisition, it took our Las Vegas footprint about 2,700 homes. And prior to the merger, Invitation Homes was plus or minus, I want to say, 1,100, 1,200 homes in the Las Vegas market. And we think about the growth and the margin expansion with Las Vegas, similar to what we saw in other markets like Phoenix. When we started these businesses, Phoenix was a market for us that was in the kind of low- to mid-60s. In our world today, Phoenix is a low 70s type market. And that comes through a couple of things. One is scaling footprint because we get more efficient. Charles and his team do a fabulous job in terms of creating efficiencies around those pods, those groups that manage a portfolio for us. But 2,700, 2,800 homes is about the perfect size for us right now for a pod. So that makes us extremely efficient. There shouldn't be additional G&A additions with an acquisition like that. And then furthermore, your question around how does that leverage the other parts of your portfolio. Well, as Charles and the team look at efficiencies around route optimization for our maintenance techs or the way that we stock our vans with the certain types of supplies and things like that. Certainly, our work order and our maintenance efficiencies get much more enhanced. And then to add to that on the revenue side, anytime we have another mark in the portfolio, or in the book in a market, it makes us that much more competitive to understand what our rates are doing relative to our peers.

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Operator [54]

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Our next question comes from Douglas Harter with Credit Suisse.

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HyungJun Choe, Crédit Suisse AG, Research Division - Research Analyst [55]

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This is actually Sam Choe filling in for Doug. So I mean we talked a lot about turns. And I know that turns will pick up during peak season. But if the turnover rates stays at the current lows, could you see occupancy pushing past 97% for the portfolio on the whole?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [56]

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I think longer term, Sam, the math would tell you that would be the case that if you could bring your days to re-resident down further. And we've done that in April. It's about 2 or 3 days better this year than last year and turnover stays low, you can do a quick math exercise and say that absolutely than on a stabilized basis, low 97% type occupancy over the course of the year is achievable. In April, we ended up at 96.6%. So that -- I would agree with that.

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Operator [57]

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Our next question is a follow-up from Nick Joseph with Citi.

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Michael Bilerman, Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research [58]

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It's Michael Bilerman. Ernie, the $1.5 million of offering related expenses on Page 10 in the supplemental that you're adding back for core FFO, what are those -- I guess, why is Invitation paying that when Blackstone sold $1 billion? What does that -- what's that in regards to?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [59]

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Yes. I know that's exactly what it is, is we had to file 3 shelves, 1 for Blackstone selling its shares, 1 for Starwood Waypoint. Of course, you mean, Starwood Capital in case they want to do some shares and then the company has a shelf as well. And really, there's cost spread across all 3 of those. Now we aren't using our shelf today. But it is out there if we do want to issue common equity. And that's just normal course with regards to how the shareholder agreements and things are written. And so it's about 1/3 of $0.01 in terms of cost. It's a onetime cost associated with this. So as Blackstone does further transactions, the only cost that would be associated with those, Mike, would be comfort letters and things like that in a much more smaller amount of legal costs associated with future offerings. But it's standard course for the first time when you get it set up for the company to pick that up.

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Michael Bilerman, Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research [60]

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And you didn't want to put that in the G&A since normal course of business is always tough as a public company that you have and you might back it out of core FFO? I know it's a small number, but just from a methodology perspective, it just seems that we're -- we go down this road of having alternative definitions of earnings.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [61]

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Yes. I can understand that comment. Yes. You kind of say what it was, you said it was a small amount, and want to call it out so people could see it very specifically it's onetime, and a little more expensive than usual because 3 shelves had to be filed versus 1 that company would do in the future and, I think, shelves you do every few years. But it's a fair feedback, Michael, but we want to give more disclosure and let people do with it what they thought.

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Michael Bilerman, Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research [62]

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And then the perspective on Pages 9 had $1.4 million. Is that just a different amount? Or is it relating to something else?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [63]

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No. They should be pretty consistent, Michael, so I'd have to check to see why we might end up with an extra tens and thousands of dollars that might have rolled in separate from that, that were also in that line. But I don't have an accounting for that off the top of my head.

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Michael Bilerman, Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research [64]

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And then your comment on NAV. You made the comment that Street consensus NAVs are, I think, you said significantly are much, but it was indicating that there was a lot higher than where the stock is trading. SNL has got your NAV at 24 34 and FactSet has got it to 25 64, stocks at 25 20. So it's not -- I mean I guess it's in the range of where the Street sort of think it's worth. So I just wanted you guys to sort of follow up a little bit on the comment about using your equity to accelerate a deleveraging program or to fund external growth.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [65]

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Yes. And so I'm pleased to hear that's doing so well this morning. We've been preparing for the call. So I haven't been paying attention to the fact that it's gone up some this morning. So that's good to see. What I'd say, Michael, is we actually pulled the analyst models and I don't think everyone reports into those numbers. We can get to a number that's closer to 26.5% for what the analysts set out there, so I'm calling that consensus, understanding other people to different consensus numbers. Regardless, we have a different view on where NAV is and we haven't disclosed NAV since our IPO. But yes, it's just like any other public company. We will use that as a source for capital for us. On the deleveraging side, we have a very safe balance sheet today. We would like to get to investment-grade faster if we could, but we weren't going to do that by diluting current shareholders. We don't have that need, that requirement. We certainly -- it's a like. It's a preference to get to investment-grade as fast as we can. And we keep that option open for us if the stock price continues to perform and do better. And then regardless, Dallas and Charles come from very acquisitive backgrounds. They both worked in the private world and you've seen what they were able to build in their predecessor companies than we've done here. So certainly look very carefully at what our best cost of capital for us is if we found the right external growth opportunities, Michael. So we're -- I'd like to think management and everyone we're -- and our Board is aligned with all of our shareholders on what we want to get accomplished there.

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Michael Bilerman, Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research [66]

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And just remind me in terms of processes. Blackstone came and wanted to do another secondary offering of their shares, and you could tag along with that in terms of issuing primary. Do you have the ability to knock the amount down? Or so just like a peer negotiation with them about what the rightsizing is the total offering is, right? So I'm saying, let's say they came to that, we want to do $1 billion. You don't think you can put $1 billion into the market, you want to do $500 million. What's the -- is it preset in terms of methodology? Or it has to be negotiated?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [67]

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Well, I'd say it's different things. So -- and when anytime that the company is thinking about issuing equity, Michael, it's the decision of our Board. So management will go to the Board of Directors and say whatever reason, whether Blackstone is potentially selling at that point, Starwood selling at that point or anyone else. We think there's an opportunity for us to issue equity then or at other times we'd have -- and engage in discussion with our Board for what we thought was right for the company. And Blackstone, you'd have to ask Blackstone with regards to how they're choosing to set how much they want to sell, when they want to sell and things like that. We're certainly aren't privy to that. And if there's opportunity for us to be efficient and do it all at the same time, then we would get together and do what makes the most sense for the shareholders to get that accomplished. Blackstone, first and foremost, is focused on what makes sense for the shareholders. And they certainly have made their intentions known in what they want to do. But they also have, as you know, Michael, a lot of shares to sell, and they want to make sure they're doing that in the smartest way they've demonstrate with other platform companies. And today, they've demonstrated with Invitation Homes. So expect nothing less than that going forward.

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Operator [68]

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Our next question comes from John Pawlowski with Green Street Advisors.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Analyst [69]

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Dallas, on the dispositions in this quarter and in recent quarters, could you share what NOI growth for these homes, these lower quality homes would look like over the next several years if you're still operating them?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [70]

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Yes. It's a little bit of a tricky question, John. In terms of what we've sold. I have to go back and look and where you're summing. The NOI growth, probably more or less is kind of a longer lines of what you'd see from the company, maybe a little bit less, and that's one of the reasons why we might be selling some of these homes. You'll remember, we do sell for reasons outside of just, I mean, obviously, NOI growth is key and something that we focus on. We want to make sure that the homes in our portfolio long term are ones that are going to provide some of the best risk-adjusted returns to shareholders. What we've typically been doing so far through the first 4 months of the year and much of like what you saw in fourth quarter is we've been selling homes at either, A, an outlier geography or parts of the portfolio that just are really inefficient for us to manage. B, homes that are either suboptimal in nature because of fit finish, potential CapEx risk down the road. Or C, we've been selling homes that have been a bit bigger, too. We have homes in our footprints that there are too big from a square footage standpoint. And so if you look at the types of homes that we're typically buying, we want -- our sweet spot is kind of between 1,600 and 2,200 square feet, 2,300 square feet. And so for those variety of reasons, we might be a net seller. And typically, we see lower growth coming out of some of those homes.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Analyst [71]

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Okay. Then if NOI growth is not -- and maybe a bit lower, could you share how much higher their all-in cost to maintain is?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [72]

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It vary. It would vary. Again, to my earlier points around square footages and geographies. We have different fit and finish standards, for example, in a home like Seattle, where we might put down the vinyl plank flooring every time. And so if a home were coming through our asset management review in that market, we would certainly take into consideration some of those longer-term CapEx needs that, that home might need. Whereas maybe a home in one of our warmer Southwest markets may have a little bit different CapEx approach and our margins may be better. So we may be inclined to keep that home a bit longer. It just it all goes into kind of a cycle of how we do our rebuy analysis on a home-by-home basis.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Analyst [73]

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Okay. On the portfolio acquisition. I understand the margin benefits, could you share how far below you think the market rents were -- the rents were versus market?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [74]

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Yes. I think to just high single digits from a rent perspective in terms of where we think there's immediate turn on these rents as they renew. And then also or kind of going in price, as I mentioned earlier, being kind of 5 7, 5 8, in-place cap rates is much higher than we typically are able to see in that marketplace. Vegas is a hard market to buy in. So we're actually thrilled with our ability to buy this type of a portfolio.

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [75]

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Yes. John, I'd say, yes, if you look at our supplementals, you've seen Vegas has really ramped up in terms of new lease growth rates in the last year for us. And the vast proportion of the portfolio was in Vegas. So just the embedded loss of lease in the portfolio is higher than we would typically see in our portfolio. So between that and then the fact that they were running at a very high occupancy, so we don't think they were pushing as much as we might have chosen to do, they're choosing to run the business a little bit differently, gives us confidence that we've got potentially an opportunity for some rent bumps on that portfolio as leases turn.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Analyst [76]

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Okay. Then one final one for me. Charles, could you share the bad debt trends year-over-year? And any notable outliers by markets either downward or upward inflection points and bad debt?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [77]

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Yes. This is -- I'll answer that one, John. It's Ernie. We've actually see bad debt trends are consistent year-over-year within a few basis points. And we haven't seen any outliers in any markets positive or negative. It's all been relatively consistent on a year-over-year basis.

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Operator [78]

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Our next question is from Jade Rahmani with KBW.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division - Director [79]

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Just thinking about the cadence of turnover and new lease activity. Do you expect occupancy to dip in June sequentially?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [80]

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Yes. Typically, we'll see occupancy go down in Q2/Q3 as we talked about with the turnover volumes. So we do think that April, while we came in high, as we go deeper into the summer, we're going to see that occupancy number trend down.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division - Director [81]

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Secondly, have you sold any assets to iBuyers such as Zillow or Opendoor? And if so, could you quantify the percentage?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [82]

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Today, we really haven't sold much through the iBuyer platform. It's something we certainly consider, Jade. It's a good question. We've been more of an acquirer of properties, I should say, through the iBuyer platforms. But we certainly look at it as another form for us to be able to transact. And as they develop, their systems get a bit more robust and a bit more user-friendly, you could certainly anticipate they were specially on some of our vacant or end user sales that we might choose to sell through some of those platforms.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division - Director [83]

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And just lastly, in terms of home purchase trends. Are you seeing any change in the percentage of move-outs to buy? Has that declined notably on a year-over-year basis?

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [84]

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Yes. I think a year-over-year basis is just up just a bit. Not much more than anything that's been normal. Typically been between 22% and 25% of our move-outs, and it's still kind of right in that range depending on the month and the quarter.

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Operator [85]

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Our next question comes from Wes Golladay with RBC Capital Markets.

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Wesley Keith Golladay, RBC Capital Markets, LLC, Research Division - Associate [86]

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A quick question on the renewals. It looks like supply and demand is quite favorable, especially compared to last year. So is there anything holding you back from pushing more on the renewals? Do you have any internal governor?

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Charles D. Young, Invitation Homes Inc. - Executive VP & COO [87]

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Really, like we've said before, really set by market. And we look at a number of factors that determine what that price will be. We'll go out with healthy assets we talked about in the low 6s. But we want to find that right balance between keeping occupancy and minimizing turnover. And our revenue management teams working with the field teams do a great job of finding that right balance. So market sets it. And also, it's our performance on our -- the resident customer service that we're providing and do they want to stay with us? And we've been doing better and better as our teams are really focused on making sure we create a great resident experience and so demand has been good for us.

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Wesley Keith Golladay, RBC Capital Markets, LLC, Research Division - Associate [88]

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Okay. And then one quick one on the acquisition, the bulk acquisition. You mentioned about the rental uplift. But do you imagine there's quite a bit of a difference on the margin between your existing portfolio in the market and what you bought? Do you know that offhand? And then would you expect to close most of that in the first year by just plugging it into your platform?

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Ernest M. Freedman, Invitation Homes Inc. - Executive VP & CFO [89]

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No. When we underwrote we expected the revenues to be -- we didn't really dig into the expense history so much on their side, we just -- when we model a bulk acquisition we'll look to see what's happening from an R&M perspective on that portfolio, but we'll run it through our model was with the grades where we expect margins to be. That said, based on where the cap rate -- where it came out for us, we think it was a win-win. We think it's a win for the sellers for where they can run their portfolio. I think they got a fair price and they were clearly pleased with that otherwise we wouldn't have moved forward. And on the flip side, we think it's a win for us because we have a little bit of a different model in terms of how we want to run the revenue side, what we do on the expense side. So whether we have an uplift or not from where they are, we're comfortable that we'll get this to our margins. And as we talked about earlier, especially in a market like Vegas, we increased our footprint by almost 10%, allow us to run even more efficiently across the entire footprint of Las Vegas. Not so much with Atlanta with only a couple of -- about 100 homes we buy in Atlanta with 12,000, it won't have much of a difference there. But certainly, allows us in one of the best markets today, in one of the fastest growing markets today, Vegas, to increase our footprint and improve margins across the whole portfolio in Vegas.

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Operator [90]

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This concludes our question-and-answer session. I would now like to turn the conference back over to Dallas Tanner for any closing remarks.

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Dallas B. Tanner, Invitation Homes Inc. - Co-Founder, President, CEO & Director [91]

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Thanks for joining us today. We appreciate everyone's interest in Invitation Homes. We're excited about where we are today with our business and the opportunities in front of us, and we look forward to seeing everyone hopefully at NAREIT in June. Thank you.

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Operator [92]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.