Invitation Homes Reports Fourth Quarter 2020 and Full Year 2020 Results

DALLAS–(BUSINESS WIRE)–Invitation Homes Inc. (NYSE: INVH) (“Invitation Homes” or the “Company”), the nation’s premier single-family home leasing company, today announced its Q4 2020 and FY 2020 financial and operating results.

Fourth Quarter 2020 and Full Year 2020 Highlights

• Year over year, in Q4 2020, total revenues increased 4.5% to $464 million, property operating and maintenance costs increased 0.6% to $169 million, net income available to common stockholders increased 36.0% to $71 million, and net income per diluted common share increased 30.2% to $0.12. In FY 2020, total revenues increased 3.3% to $1,823 million, property operating and maintenance costs increased 1.6% to $681 million, net income available to common stockholders increased 34.9% to $196 million, and net income per diluted common share increased 29.4% to $0.35.
• Year over year, in Q4 2020, Core FFO per share decreased 0.1% to $0.32, and AFFO per share decreased 1.3% to $0.27. In FY 2020, Core FFO per share increased 2.7% to $1.28, and AFFO per share increased 4.6% to $1.08. Excluded from Core FFO and AFFO was a $30 million unrealized gain in Q4 2020 on an investment in Opendoor.
• In Q4 2020, Same Store NOI grew 4.3% year over year on 2.0% Same Store Core revenue growth and a 2.4% decrease in Same Store Core operating expenses. In FY 2020, Same Store NOI grew 3.7% year over year on 2.8% Same Store Core revenue growth and 1.0% Same Store Core operating expense growth.
• In Q4 2020, Same Store average occupancy was 98.1%, up 210 basis points year over year. In FY 2020, Same Store average occupancy was 97.5%, up 130 basis points year over year.
• In Q4 2020, Same Store new lease rent growth of 6.9% and Same Store renewal rent growth of 3.8% drove Same Store blended rent growth of 4.9%. In FY 2020, Same Store new lease rent growth of 4.2% and Same Store renewal rent growth of 3.7% drove Same Store blended rent growth of 3.8%.
• In Q4 2020, revenue collections were approximately 97% of the Company’s historical average collection rate.
• In Q4 2020, the Company began acquiring homes through its previously announced JV with Rockpoint Group. Invitation Homes owns a 20% interest in the JV, which is expected to invest over $1 billion in single-family rental homes, diversifying Invitation Homes’ capital sources available to pursue external growth over a multi-year period.
• In Q4 2020, the Company capitalized on favorable buying fundamentals to increase its acquisition pace, purchasing 1,197 homes for $361 million, of which 1,057 were added to the wholly-owned portfolio for $316 million and 140 were added to the JV for $45 million. Also in Q4 2020, the Company sold 277 wholly-owned homes for $82 million.
• Net debt / TTM adjusted EBITDAre decreased from 8.1x at December 31, 2019 to 7.3x at December 31, 2020.
• As previously announced, in Q4 2020, the Company closed a $3.5 billion sustainability-linked unsecured credit facility, consisting of a $1.0 billion revolver and $2.5 billion term loan, to replace its previous facility and refinance secured debt. As a result, the Company has no debt (excluding convertible notes) reaching final maturity until December 2024, and the Company’s unsecured debt as a percentage of total debt increased from 22% to 35%.

President & Chief Executive Officer Dallas Tanner comments: “Reflecting on 2020, I could not be prouder of the role Invitation Homes played in helping to provide comfortable homes and genuine care to residents in a year when the importance of home has never been greater. While delivering this experience to our residents, we also achieved another year of financial performance near the top of the real estate sector. Executing nimbly to meet strong demand, we increased occupancy in every month of 2020, and closed the year with record-high Same Store occupancy of 98.3% in December and our highest blended rent growth of the year. With a strong and stable resident base, we also continue to collect rents near historical average levels.

“This momentum positions us well for growth in 2021. In addition to enjoying favorable industry fundamentals, we are also entering the new year more active in the acquisition market than we have been since prior to our 2017 IPO. We’ll remain opportunistic in what we see as a highly accretive environment, and continue to buy with the same discipline and rigor we have exercised throughout our history that led to the high-quality portfolio we have today. As we focus on executing our plan for 2021, we will also continue to prioritize the safety of our stakeholders, and support our residents and associates as we have done consistently throughout these uncertain times. The ever-changing environment of 2020 could not impede us from executing on strategic initiatives to drive growth and enhance the resident experience, and we are excited as we look into 2021 and beyond at strong fundamentals and an opportunity to raise the bar even higher.”

Financial Results

1. In accordance with GAAP and Nareit guidelines, net income per share and FFO per share are calculated as if the 3.0% Convertible Notes due July 1, 2019 (the “2019 Convertible Notes”) were converted to common shares at the beginning of 2019, and as if the 3.5% Convertible Notes due January 15, 2022 (the “2022 Convertible Notes”) were converted to common shares at the beginning of each relevant period in 2019 and 2020, unless such treatment is anti-dilutive to net income per share or FFO per share. See “Reconciliation of FFO, Core FFO, and AFFO,” footnote (1), for more detail on the treatment of convertible notes in each specific period presented in the table.
2. Core FFO and AFFO per share reflect the 2019 Convertible Notes and 2022 Convertible Notes in the form in which they were outstanding during each period. See “Reconciliation of FFO, Core FFO, and AFFO,” footnote (2), for more detail on the treatment of convertible notes in each specific period presented in the table.

Net Income

Net income per share in the fourth quarter of 2020 was $0.12, compared to net income per share of $0.10 in the fourth quarter of 2019. Total revenues and total property operating and maintenance expenses in the fourth quarter of 2020 were $464 million and $169 million, respectively, compared to $444 million and $168 million, respectively, in the fourth quarter of 2019.

Net income per share in FY 2020 was $0.35, compared to net income per share of $0.27 in FY 2019. Total revenues and total property operating and maintenance expenses in FY 2020 were $1,823 million and $681 million, respectively, compared to $1,765 million and $670 million, respectively, in FY 2019.

Core FFO

Year over year, Core FFO per share in the fourth quarter of 2020 decreased 0.1% to $0.32.

Year over year, Core FFO per share in FY 2020 increased 2.7% to $1.28, primarily due to growth in Same Store NOI.

AFFO

Year over year, AFFO per share in the fourth quarter of 2020 decreased 1.3% to $0.27.

Year over year, AFFO per share in FY 2020 increased 4.6% to $1.08, primarily due to the increase in Core FFO per share described above and lower recurring capital expenditures.

Operating Results

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

1. Includes both rental revenues and other property income. Rent is considered to be due based on the terms of the original lease, not based on a payment plan if one is in place. Security deposits retained to offset rents due are not included as revenue collected. See “Same Store Operating Results Snapshot,” footnote (1), for detail on the Company’s bad debt policy.
2. Represents the period from October 2019 to March 2020.

Same Store NOI

For the Same Store portfolio of 71,433 homes, fourth quarter 2020 Same Store NOI increased 4.3% year over year on Same Store Core revenue growth of 2.0% and a 2.4% decrease in Same Store Core operating expenses.

FY 2020 Same Store NOI increased 3.7% year over year on Same Store Core revenue growth of 2.8% and Same Store Core operating expense growth of 1.0%.

Same Store Core Revenues

Fourth quarter 2020 Same Store Core revenue growth of 2.0% year over year was driven by a 3.3% increase in average monthly rent and a 210 basis point increase in average occupancy to 98.1%. As a result of the increases in average monthly rent and average occupancy, Same Store rental revenues increased 5.7% year over year on a gross basis before bad debt. With respect to Same Store Core revenue growth, two factors related to COVID-19 partially offset the favorable increases in average rent and average occupancy: 1) an increase in bad debt from 0.3% of gross rental revenues in Q4 2019 to 2.5% of gross rental revenues in Q4 2020, which was a 221 basis point drag on Same Store Core revenue growth, all else equal; and 2) a 35.3% decrease in other property income, net of resident recoveries, which was a 125 basis point drag on Same Store Core revenue growth, all else equal, due primarily to non-enforcement and non-collection of almost all late fees in the quarter.

FY 2020 Same Store Core revenue growth of 2.8% year over year was driven by a 3.5% increase in average monthly rent and a 130 basis point increase in average occupancy to 97.5%. Bad debt increased from 0.4% of gross rental revenues in FY 2019 to 1.7% of gross rental revenues in FY 2020, which was a 133 basis point drag on Same Store Core revenue growth, all else equal. Other property income, net of resident recoveries, decreased 21.1% year over year, which was a 72 basis point drag on Same Store Core revenue growth, all else equal.

Same Store Core Operating Expenses

Fourth quarter 2020 Same Store Core operating expenses decreased 2.4% year over year, driven by a 7.9% decline in Same Store controllable expenses, net of resident recoveries.

FY 2020 Same Store Core operating expenses increased 1.0% year over year, primarily due to higher property taxes that were partially offset by a 2.8% decrease in controllable expenses, net of resident recoveries, as well as lower insurance and HOA expenses.

Investment Management Activity

In Q4 2020, Invitation Homes increased its pace of acquisitions to its highest level since the second quarter of 2014, leveraging the advantages of its in-house local teams in conjunction with proprietary “AcquisitionIQ” technology to source $361 million of acquisitions through multiple channels. Fourth quarter wholly-owned acquisitions totaled 1,057 homes for $316 million, including estimated renovation costs. In addition, 140 homes were purchased for $45 million through the Company’s unconsolidated joint venture with Rockpoint Group (the “Rockpoint JV”), of which Invitation Homes owns 20%.

Included in the Company’s wholly-owned acquisition activity in Q4 2020 was a previously announced bulk acquisition of 273 homes in Dallas and a bulk acquisition of 54 homes in Phoenix that overlap closely with Invitation Homes’ existing footprints in those two markets. In total, the homes in these transactions were acquired for $75 million at a 5.5% NOI yield based on in-place rents, and the Company sees upside to NOI in the portfolios by bringing them onto its platform.

Dispositions in the fourth quarter of 2020 totaled 277 wholly-owned homes for gross proceeds of $82 million.

In FY 2020, in its wholly-owned portfolio, the Company closed on acquisitions of 2,252 homes for $691 million, including estimated renovation costs, and sold 1,580 homes for gross proceeds of $443 million, resulting in a total wholly-owned portfolio home count of 80,177 homes as of December 31, 2020. In the Rockpoint JV, 140 homes were purchased for $45 million in FY 2020, resulting in a Rockpoint JV home count of 140 homes as of December 31, 2020.

Opendoor Investment Update

In Q4 2020, Invitation Homes’ private investment in Opendoor converted to approximately 2 million public shares of Opendoor common stock (NASDAQ: OPEN) as a result of Opendoor’s merger with a special purpose acquisition company. Invitation Homes’ original Series E private investment in Opendoor was made in March 2018 and consisted of $10 million of convertible notes. That investment, which has since converted to common shares of OPEN, was valued at $46 million as of December 31, 2020. In addition to being a successful investment for Invitation Homes, Opendoor has been and continues to be a valued partner for Invitation Homes in the growing iBuyer channel of the single-family home transaction market.

The investment in OPEN is now carried on Invitation Homes’ balance sheet at its estimated fair market value and is included in Other Assets, net. The unrealized gain on investment that Invitation Homes recorded in Q4 2020 to mark the value of its OPEN investment to fair value is included in net income under GAAP and FFO as defined by Nareit, but is excluded from Core FFO and AFFO.

Balance Sheet and Capital Markets Activity

As of December 31, 2020, the Company had $1,213 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 December 31, 2020 was $8,083 million, consisting of $5,238 million of secured debt and $2,845 million of unsecured debt. Net debt / TTM Adjusted EBITDAre at December 31, 2020 was 7.3x, down from 8.1x at December 31, 2019.

In Q4 2020, the Company issued 6,525,758 shares of common stock under its at-the-market equity agreement (“ATM Equity Program”), at an average price of $28.47 per share, for gross proceeds of $186 million. Proceeds were used primarily to acquire homes. $500 million of capacity remained under the ATM Equity Program as of December 31, 2020.

As previously announced, in Q4 2020, the Company closed a $3,500 million sustainability-linked senior unsecured credit facility (the “Credit Facility”), consisting of an undrawn $1,000 million revolving line of credit (the “Revolver”) and a fully funded $2,500 million term loan (the “Term Loan”). Initial maturities of the Revolver and Term Loan are in January 2025, with each carrying two 6-month extension options. The new $1,000 million Revolver replaced the Company’s previous $1,000 million revolver, which had no balance drawn at the time the Credit Facility closed. Proceeds from the new $2,500 million Term Loan were used to: 1) fully repay the Company’s previous $1,500 million unsecured term loan facility that was due to reach final maturity in February 2022; 2) fully repay the $731 million principal balance of the SWH 2017-1 securitization that was due to reach final maturity in January 2023; and 3) voluntarily prepay higher-cost classes of certificates of various securitizations due to reach final maturity between March 2025 and January 2026. For both the Revolver and Term loan, spreads at closing, based on the Company’s total leverage ratio, were 5 bps lower than the spreads most recently in effect for the Company’s previous credit facility. Based on improvement in total leverage ratio from September 30, 2020 to December 31, 2020, the Company expects the interest rates applicable to its Term Loan and used portion of its Revolver both to decrease by another 10 bps, effective February 2021, to LIBOR + 155 bps for the Term Loan and LIBOR + 160 bps for the Revolver.

As a result of these transactions, the Company has no debt reaching final maturity until December 2024, with the exception of $345 million of convertible notes maturing in January 2022. In addition, the Company’s unsecured debt as a percentage of total debt increased from 22% as of September 30, 2020 to 35% as of December 31, 2020, and the percentage of homes in the Company’s portfolio that are unencumbered increased from 51% as of September 30, 2020 to 57% as of December 31, 2020.

Dividend

As previously announced on January 29, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per share of common stock, representing a 13.3% increase over the prior quarterly dividend of $0.15 per share. The dividend will be paid on or before February 26, 2021 to stockholders of record as of the close of business on February 10, 2021.

FY 2021 Guidance

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

Earnings Conference Call Information

Invitation Homes has scheduled a conference call at 11:00 a.m. Eastern Time on February 17, 2021 to discuss results for the fourth quarter of 2020. The domestic dial-in number is 1-888-317-6003, and the international dial-in number is 1-412-317-6061. The passcode is 3180201. An audio webcast may be accessed at www.invh.com. A replay of the call will be available through March 17, 2021 and can be accessed by calling 1-877-344-7529 (domestic) or 1-412-317-0088 (international) and using the replay passcode 10151712, 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 the nation’s premier single-family home leasing company, meeting changing lifestyle demands by providing access to high-quality, updated homes with valued features such as close proximity to jobs and access to good schools. The company’s mission, “Together with you, we make a house a home,” reflects its commitment to providing homes where individuals and families can thrive and high-touch service that continuously enhances residents’ living experiences.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which include, but are not limited to, statements related to the Company’s expectations regarding the performance of the Company’s business, its financial results, its liquidity and capital resources, and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the single-family rental industry and the Company’s business model, macroeconomic factors beyond the Company’s control, competition in identifying and acquiring properties, competition in the leasing market for quality residents, increasing property taxes, homeowners’ association (“HOA”) and insurance costs, the Company’s dependence on third parties for key services, risks related to the evaluation of properties, poor resident selection and defaults and non-renewals by the Company’s residents, performance of the Company’s information technology systems, risks related to the Company’s indebtedness, and risks related to the potential negative impact of the ongoing COVID-19 pandemic on the Company’s financial condition, results of operations, cash flows, business, associates, and residents. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Moreover, many of these factors have been heightened as a result of the ongoing and numerous adverse impacts of COVID-19. The Company believes these factors include, but are not limited to, those described under Part I. Item 1A. “Risk Factors” of the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, 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 other periodic filings.

Contacts

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

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