Earnings Call: Q3 2020

Nov 6, 2020

Greetings, and welcome to the American Homes 4 Rent Third Quarter 2020 Earnings Conference Call. As a reminder, this conference is being recorded. At this time, I'd like to turn the call over to Ann McGinnis, Manager of Investor Relations. Please go ahead. Question comes from the line of David Shinglin, Chief Executive Officer question comes from Brian Smith, Chief Operating Officer Jack Corrigan, Chief Investment Officer and Chris Blough, Chief Financial Officer of American Homes 4 Rent. Question comes from the line of David. At the outset, I need to advise you that this call may include forward looking statements. All statements other than statements of historical fact included in this conference call are forward looking statements that are subject to a number of risks and uncertainties that could cause actual results question could differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. The current and expected future economic impacts question comes from the line of the conference. Please note that the conference call is being recorded. Question will be answered by the SEC. Please note that the SEC is being recorded in the SEC. Please note that the SEC is being recorded in the SEC. Please note that the SEC is being recorded in the SEC. Please note that the SEC is being recorded in the SEC. Please note that the SEC is being recorded in the SEC. Please note that the SEC is being recorded in the SEC. Please note that the SEC is being recorded question comes from the line of the call. A reconciliation to GAAP of the non GAAP financial measures we are providing on this call is included in our earnings press release. Question comes from the line of David. As a note, our operating and financial results, including GAAP and non GAAP measures, are fully detailed in our earnings release and supplemental information package. Question comes from the line of David Gendron. Question comes from the line of David Gingren. Thank you, Anne. Good morning, question and answer session. During one of the most challenging periods in the country's history, question comes from the line of John. Before the team reviews this quarter's results, I will review how our prior strategic decisions have been the foundation to today's strong operating performance question or cornerstones. First, our high quality and diversified portfolio is the foundation of our operating resiliency question comes from the line of David. This diversification strategy with no single market representing More than 10% of our footprint provides a more stable long term performance with lower risk. In addition, our broader footprint delivers more growth opportunities across a wider array of markets in contrast to our peers. 2nd, our best in class operating platform delivered leading customer service and consistent strong results. We have utilized technology to scale an industry that was previously believed to be unscalable. Our highly efficient technology driven platform enhanced our ability to adapt quickly to COVID's unforeseen conditions with few disruptions or additional costs. During these challenging times, we continue to deliver timely maintenance with no deferred work orders. Question comes from the line of David. We have the only investment grade balance sheet in the sector. We have demonstrated consistent ability to access capital through all capital channels. The latest examples of our financial liquidity are our $400,000,000 upsized common stock offering in August, question comes from the line of David. First, by pursuing our unique internal built for rent development program second, by capitalizing on our deep national homebuilder relationships And finally, by purchasing homes in the traditional manner. AMH Development is now America's leading builder Single family rental home communities that are revolutionizing the housing industry. This is evident By the number of companies attempting to replicate our success, there are 5 competitive advantages that make our development program difficult to duplicate. First, we combine our development of single family rental homes with the leading operating platform. Question please. 3rd, we have confidence in our ability to raise capital to commit to our growth programs. 4th, our development platform is more than 4 years in the making. And finally, we continue to acquire and develop land question is located within our existing footprint with dozens more under development. We see our external growth As we look forward, our differentiated strategy is paying off and we are positioned to deliver significant cash flow And FFO growth for years to come. While demand for single family rental is not new, COVID has further highlighted the value of our high quality modern homes and well located communities. People appreciate single family homes for rent and view it as an attractive alternative to multifamily living and homeownership. In fact, the number of rental homes has increased from 13,000,000 to 17,000,000 in the last 10 years, This is an extremely exciting time for us. We have achieved significant growth in the past, But the future looks even more promising as we continue to capitalize on the strong single family rental demand. Our corporate strategy has paid off and has delivered outsized risk adjusted returns for our shareholders this year and positions us question and answer session. Before I turn the call over to Brian, Let me highlight a recent change to our Board of Trustees. Since the beginning of 2019, Our Board's ongoing refreshment process has added 5 new independent trustees, including most recently in September, Michelle Carrick, Former Deloitte West Region Market Leader and Los Angeles Managing Partner, our Board, including its 9 independent trustees, brings diverse skills that focuses on delivering superior performance question and answer session. And now I'll turn the call over to Brian. Thank you, Dave, and good morning, everyone. Single family rental fundamentals are as strong as we have ever seen and our best in class operating platform is translating this demand into superior results. Our success is directly related to the strategic operational investments that we have made over the past 10 years as we revolutionized the question. One of our original goals was to combine the inherent benefits of single family living question comes from the line of the Class A multifamily experience. For years, we've been offering quick and easy leasing, Excellent service, high quality assets and great locations. Our balance an efficient centralized approach with a local patch. All of this enabled us to deliver a best in class resident experience For the quarter, we achieved impressive same home core NOI growth of 4%, driven by 3.6% growth in core revenues 3% growth in core property operating expenses. If we exclude incremental COVID related bad debt, Same home core NOI growth would have been nearly 6%. Again, because of the strength and quality of our platform, We've been able to capture the surging demand and buck the typical seasonal trends. As a key example, Rather than the typical end of summer leasing slowdown, we were able to drive an acceleration in same home average occupied days Throughout the quarter, from 96.4 percent in July to 97% in August and 97.2% in September. And this trend is held into the 4th quarter, which with average occupied days of 97.2% in October. And on the rental rate side, our proprietary pricing system translated this record demand into our highest ever third quarter new lease spread 6.1 percent for the portfolio. In the Q4, we expect to continue this trend We began returning to normal operating practices in August. And based on renewal increases set to date, we Expect 4th quarter effective renewal rate spreads to be around 4%. As we look forward, it's important to understand question comes from the line of David. As we witness a suburban renaissance, America's Families has gained a newfound appreciation for the advantages of suburban living, such as extra living space, Private yards, high quality schools and a sense of neighborhood community. Our own migration data continues to support these trends. We are seeing in real time multifamily to single family migration, question comes from the line of Kevin Durant. And most significantly, we've seen dramatic increases in migration from areas like California to higher quality of life markets such as Phoenix, Las Vegas and Seattle. Notably, The distance of these moves indicates the permanency of these shifts. I'm excited about our future. Question. Our superior operating platform uniquely positions us within our industry to capitalize on the surging demand and the growth opportunities that come with it. Now I will turn the call over to Jack. Thank you, Brian, and good morning, everyone. As we capture the wave of demand using We strategically designed our growth programs based on a 3 pronged approach, which positions us for consistent growth question and to be able to take advantage of the most attractive growth opportunities through various points in the cycle. Today, I want to focus on our overall question and Chris will provide specific details around our Q3 investments later in the call. First, our one of a kind build for rent AMH development program, which I will expand on in a moment. Question comes from the line of David. And third, our traditional channel, which consists Many years ago, when we began to formulate the prongs of our growth programs, we knew that internal development was a key discipline that was necessary to unlock Our ability to grow throughout various points in the cycle. And right now, historically low MLS and homebuilder inventories We began our AMH development program 4 years ago. Question comes from the line of David. Please go ahead. We have assembled a team of accomplished industry leaders, question and answer session. Our first question comes from the line of John Franzreb. Please go ahead. Thank you, John. Our first question comes from the line of John Franzreb. Complementary and highly efficient property management platform. The long term advantages of our development program are tremendous. We are building homes and communities that are tailored to the way residents want to live and that are designed to be efficient from a maintenance and management perspective. These efficiencies translate to ongoing margin benefit and combined with our lower all in investment costs result in enhanced yields when compared to other growth question Adding new construction homes also hardens our asset base as we reduce our average portfolio age question can be even more strategic in adding density with our new community concept. Importantly, To pursue this plan takes a fortress balance sheet and clarity for long term capital that others may not have. Additionally, our complementary and highly efficient property management platform is difficult to replicate. Question comes from the line of Alex. Please go ahead. We will now begin the question and answer session. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thanks to our visionary long term strategy and outstanding execution, AMH is well positioned to continue outperforming. Question comes from Chris. Thanks, Jack, and good morning, everyone. I'll cover 3 areas in my comments today. First, a brief review of our quarterly operating results and growth activity second, an update on our balance sheet and recent capital markets activity question comes from the line of David. And third, I'll close with some final thoughts around our corporate strategy. And to kick off the quarterly discussion, I'd like to reiterate question comes from the line of David. Our strategy and its foundational cornerstones have required years of investment, but those investments have now been made and they are paying off question comes from the line of John Franzrebrenco Securities. And on an FFO share and unit basis, we generated $0.29 of core FFO, representing an impressive question comes from the line of Chris. A key driver of this quarter's results was our best in class operating platform that produced a strong performance within our same home portfolio, question comes from the line of Alex. Where we generated 4.4% growth in rental revenues, driven by a 160 basis point increase in occupancy question comes from the line of John. And a 2 70 basis point increase in average monthly realized rent, which was further benefited by 10 basis points of contribution from higher fees question and answer session. And partially offset by 90 basis points of drag from COVID related bad debt this quarter, translating into an overall 3.6% core revenue growth. On the expense side, we reported a modest 3% growth in core property operating expenses, comprised of 3.5% growth in property taxes, question on tenant utility reimbursements and a 1.1% combined decrease on all other core property operating expense line items, all of which translated into core NOI growth of 4%. However, normalizing for COVID related bad debts in the quarter, our same home core NOI question would have been nearly 6%. As an update on collections, for the Q3, we recognized revenue equivalent question comes from the line of David. Please go ahead. Thank you, David. Thank you, David. Thank you, David. Thank you, David. Thank you, David. Question and answer session. And finally, before I turn to our growth programs, I'd like to remind everyone that our financial results do not reflect any add backs related to the COVID-nineteen pandemic. Question comes from the line of David. In particular, this quarter's results include $5,900,000 or approximately $0.02 per FFO share and unit of increased question will be answered by the end of July, such as the waiving of late fees question comes from the line of John. And now turning to our growth programs. Question comes from the line of David. Please go ahead. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Thank you, operator. Question comes from the line of John. Our next question comes from the line of John. Hi, John. Hi, John. Hi, John. Hi, John. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. We've been making great progress. And now that we have all three of our growth channels reopened for full year 2020, we expect to invest question comes from the line of David. Between $700,000,000 $800,000,000 of on balance sheet capital into our consolidated growth programs. At the midpoint of our expectations, this consists question comes from the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line question comes from the line of Alex Yao, who will provide a brief overview of our financial results. Thank you, Alex Yao, and good morning everyone. Thank you, Alex Yao, and good morning everyone. Thank you, Alex Yao, and good morning everyone. Thank you, Alex Yao, and good morning everyone. Thank you, Alex Yao, and good morning everyone. Thank you, Alex Yao, and good morning everyone. Including deliveries to our development joint ventures, we are on track to deliver a total of 1500 to 1600 newly constructed AMH Development Homes, question comes from the line of David. Next, I'd like to turn to our balance sheet, one of our 4 cornerstones that has been a top strategic question comes from the line of American Homes 4 Rent. After years of hard work and investment, we cultivated the only investment grade rated balance sheet in our sector, question which has uniquely positioned us with the flexibility to make long term investments into our AMH development program, unlike anyone else question is from the line of Alex. Please go ahead. Additionally, recognizing the tremendous external growth opportunity ahead of us, in August, we raised nearly $412,000,000 question comes from the line of David. In a highly attractive, oversubscribed and upsized common equity offering, which is currently being deployed to fund high return opportunities across question comes from all 3 of our growth channels. At the end of the quarter, reflecting the recent equity raise, our net debt to adjusted EBITDA was just question comes from the line of Alex Yao with Bank of America Merrill Lynch. Please go ahead. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Thanks, Alex Yao with Barclays. Question comes from the line of David. Please go ahead. And speaking of liquidity, at the end of the quarter, question comes from the line of David. We had $316,000,000 of cash on hand and our revolving credit facility, which provides $800,000,000 of total capacity was fully undrawn. Question comes from the line of Edward Miller. Additionally, during the quarter, we generated approximately $71,000,000 of retained cash flow and sold question comes from the line of John. And to close, I'd like to leave you with a few wrap up thoughts around question comes from the American Homes For Rent strategy. Since our founding nearly 10 years ago, we have remained steadfastly dedicated to our mission of becoming the leading provider of single family rental housing in our country, while delivering consistent industry leading cash flow growth and shareholder returns. Our strategy and investments into its foundational cornerstones are paying off just in time as our industry is entering a new renaissance of suburban demand. Question comes from the line of David. First, from a portfolio perspective, our market composition positions us for outsized benefit from today's migration patterns. Second, our operating platform is firing on all cylinders after years of investment into our technology systems, question comes from the line of John. 3rd, our 3 pronged growth strategy led by our internal development program uniquely positions us continued outsized growth, while historically low MLS and homebuilder inventories are creating a challenging acquisition environment. Question comes from the line of American Homes 4 Rent as our strategic vision has now become a reality, which of course would not have been possible question comes from the line of David with Bank of America. And with that, thank you to the team and we'll open the call to your questions. A confirmation tone will indicate your line is in the question Our first Our first question comes from the line of Nick Joseph with Citigroup. Please proceed with your question. Thanks. Maybe just start on operations. How many of your markets are back to normal in terms of late fees and other charges, maybe just outside of the CDC There are a couple of markets that have some specific rules, but it's they're very small in nature. So Probably best to consider that we're operating normally, at least from that perspective, across the whole portfolio. Okay. So the Q4 should be fully back to normal outside of just the eviction moratorium? Yes. Yes. Perfect. And then maybe just on development. What is the kind of how many days is it between a completion on average Hi, Nick. This is Jack. Thanks for the question. It's a little different. They both have about 9 to 10 days from lease sign to move in, and the days on market is pretty similar, 15 to 20 days. The only difference from move out question To rent ready, there obviously is no move out, so you're automatically rent ready and you have probably 9, 10, 11 days for getting the house rent ready on a turn. So that's really the major difference. Thank you. Our next question comes from the line of Richard Hill with Morgan Stanley. Please proceed with your question. Hey, you got Ron Camden on the line for Richard. Just going back to sort of the 400 homes That were delivered in the quarter, any sort of early read or anything performance related that we can get on those homes? Just sort of want more color in terms of how are they leasing up, did they come on target, is going to carton plan? Thanks. Yes, Ron, this is Jack Corrigan. Yes, everything is leasing up question is as fast as we could hope for. So that's on target. We're probably slightly ahead of where we projected the rents to be And the amount of time to lease up. So as far as costs, Got it. That's helpful. And then if I can just turn to the same store revenue growth and the 90 basis points On collectible rents, when does that normalize? And does that become a tailwind in 2021? Also sort of similar question on late fees. I know it was only a higher fee, it was only 10 basis points. But The same question is, does that also become a tailwind potentially in 'twenty one as you sort of comp? Yes. Good morning, Ron. It's Chris. Let me start with that one. Maybe first on the bad debt. Look, you're exactly right. There will come a point where bad debt normalizes and the headwind will flip to a tailwind. The trick there is, obviously, none of us have a crystal ball on being able to predict exactly when that flip happens. But question Whenever thinking about it going forward, there will come a point, collections will normalize and that will flip into a tailwind. And then on the fee side, You're correct as well. Keep in mind, late fees and things like month to month premiums were only turned off for 21, that will be a favorable tailwind comp as we're thinking about things on a year over year basis. Our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question. Hey, good morning out there. Good morning. Hey, so I wanted to talk a little bit about your development On balance sheet, I guess your development platform here. You added another 400 homes via your platform this quarter, And most of this was started pre COVID and built through the COVID period. So Sitting here today with the added momentum in the Sunbelt and the new capital source, I guess I'm curious how you think about the opportunity set over the next few years there. I assume we can easily match this year's production again next year and see that as a minimum. But I guess I'm more interested in perhaps what the upside limit question and answer session. And more capital sources with the new JV and what looks to be a very supportive demand backdrop that you discussed. Yes. Good question, Haendel. It's Chris. Why don't I'll lead off on this one and then Jack can come in with some additional color. Question You're exactly right. Look, we've been, as we all know, investing heavily into our own development program question is from the line of John. And you also have another good point. Our teams have been doing a great job keeping us on track to deliver between 15,016 100 homes this year, which importantly is the high end of the range that we were expecting just last quarter. Question comes from the line of John. And when you look at it on a year over year 2019 into 2020 basis, this year's production represents a nearly 70% increase over last year. So we're on a great trajectory. And as we all know, our objective is to continue growing our annual production volumes for years to come. Question Specifically, when we think about 2021, it's probably a little bit too early to be talking hard numbers at this point. But I think we'd like to see our total production volume in, call it, the 2,000 homes area or so, which is a nice increase over this year. Program deliveries with complementary acquisitions through our traditional and national builder programs. Yes. Haendel, this is Jack. I would echo what Chris says, but as far as Our infrastructure, we could handle probably 3000 to 4000 over 15 markets With the infrastructure that we have, 3,000 to 4000 deliveries, if we expand the number of markets, which we're always looking at possibility of doing then that could go higher. Got it. Okay. Thanks. Thank you for that. And just to question the operating strategy here. Clearly, you guys have had a pretty favorable tailwind here. All time high occupancies, retentions Very strong favorable demand. So I guess, here we are in November. I'm curious how much more aggressively and how much Longer, do you think you continue to push pricing here? Or are you starting to get a sense that it's time to pull back a bit? So I guess the question is, how much occupancy We saw fantastic increases in applications for rent ready property in the 3rd quarter, up almost is from 2019, and that's translating into some really good pricing power. Our expectations are that this is going to continue. We've never been in a position of occupancy at these levels going in or closing out a year before. I'm very optimistic about having that ability to push rents into the Q1. Got it. Thanks for that. Brian, if I could follow-up, I see that October renewals were, I think, 3.5%. Curious, what were you asking to get that 3.5%? And then What's the early read on November December renewal? Thanks. Yes. Our difference between Ask and Sign is is usually pretty tight, somewhere in the neighborhood of 10 20 basis points. There's not a ton of negotiation. We're pretty precise, I think, in our renewal pricing offers. The offers for November were up from October slightly into the low to mid 4s. And then on our offers for December January, there's a slight increase off of the November asks as well. Our next question comes from the line of Buck Horne with Raymond James. Congratulations on the results. I'm curious if you could dive a little bit further into the discussion about question The migration patterns you're seeing or picking up in your leasing traffic, to the extent you have it, I'm just question is from the line of Alex. I'm curious what percentage maybe of new leases are you seeing from Addus versus maybe a more typical year prior question or any other indication, what percentage upticks are you getting from former apartment renters? Any sort of quantification in terms of these Thank you, Buck. This is Brian. Yes, we're We're still seeing increased application activity from people coming from multifamily. It's probably most pronounced in a couple of states, Arizona, Georgia and Colorado come to mind where the increases are in the 25% to 30% range year over year. Again, as I mentioned in my prepared remarks, probably the most dramatic increases are the interstate movement that we're tracking. Question comes from the line of John. As an example, our applications for prospects coming out of California into Arizona is up 91% year over year. California to Nevada is in excess of 100%, and California to Texas is up over 90% as well. So we're seeing And then on the flip side, you get to the East Coast and we're seeing a big uptick in migration out of New York and New Jersey question comes from the line of John Baugh. Baugh:] In Florida, with applications up into the state of Florida, over 120% year over year. So those are probably the most dramatic changes. We're really pleased with the activity and our expectation is that this is going to continue. Yes. Wow, those are huge statistics. Those are really helpful. Curious now with this Shift in lifestyle, these shifting migration patterns and a lot of it driven by this work from home culture that we're all living through, Does that change how you think about the product you're building development wise? Are you getting Request from customers that they need more space or need a dedicated kind of work from home area. Are you building stuff like that in question To the product now, how are you adapting the need into the development platform? Hi, Buck. This is Jack. Thanks for the question. Yes, we're building in extra bedrooms. We're building in office nooks question and office areas inside the home. We started and when I say we're building in, This thing really started in March and it took us a little bit, maybe a month or 2 to Kind of get the plans redrawn to have these things in it. And so we're just starting to deliver homes with these additional features. Great. All right. Thanks, Jack. Appreciate that. And real quick, is the land market changing at all in terms of question comes from the line of Chris Murphy. Pricing for the communities or maybe locations that you can build these communities at? Yes. I mean, there's a lot of competition. A lot of the national builders and local builders kind of shut down their land acquisitions question comes from March and now they're trying to catch up. So we're definitely seeing question A lot of competition. It's one of the advantages that we have is that we're we have a highly diversified portfolio, question comes from the line of David. And so We're able to get the number of lots that we may have to buy more in Columbus and less question comes from the line of Alex. Okay. Thanks, guys. Congrats. Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question. Thank you very much. Couple of big picture questions. You all formed the company during the housing crisis in the 2,009 era And at the cusp of the formation of the single family industry for rent in terms of Institutionalization. So the first question is how do you compare the investment opportunities in front of the company today with that of the post-two thousand and nine era? And question Secondly, if you believe investment opportunities are increasing in the SFR space, what strategies will AMH employ to differentiate itself and accelerate that Jade, it's Dave. There is A lot of comparisons between the two. There are some differences. But the one thing that differentiates American Homes today And we have the capital in place and access to capital that we need to take advantage of those opportunities. Today, question comes from the line of John Baughman of Bank of America Merrill Lynch. Please go ahead. The acquisition market of existing homes as well as those from National Builders question is a little more challenging, a little tighter. The build for rent is our best product, but we're still getting question to take advantage of those opportunities. And secondly, not a related question, but what are your expectations for bad debt expense in the coming one question comes from the line of David. In the coming 1 to 2 quarters, do you expect a continued downward trend question or should we be thinking about something similar to what we saw in the Q3? Is off to a really good start. You probably caught this in my prepared remarks, but October collections are actually running at 101% question comes from the line of Q4 payment patterns. With that said, as we're thinking about the Q4, I would probably expect to Slightly less rollover revenue into the Q4 compared to what we saw in the Q3 just given comparisons in revenue recognition 3rd quarter versus 2nd quarter. Question comes from the line of Alex. And like I said, it's really difficult to speculate. If I had to and I was holding everything constant with today, question I could see 4th quarter bad debt kind of in the twos, if I were hypothetically holding everything constant with today, but again, it's a really difficult area to predict. A lot of factors outside our control, obviously. But if you look at question Our portfolio and our tenant underwriting. Our portfolio being well diversified, it's end markets. I think we presentation in a couple of our slide decks previously. With our underwriting of the markets looking for high job growth as well as Population growth. We have seen significantly below national average unemployment in the markets that we have our homes. In fact, it's better than the rest of the residential public companies, with the exception of 1 multifamily company. So our underwriting is very strong. Our tenant underwriting is our market underwriting is strong, our tenant underwriting is strong, And all of those are going to benefit us as we navigate these uncertain waters. Our next question comes from the line of Oluya Oskobrecht with Bank of America. Please proceed with your question. Hi, everyone. So just going back to markets a Hi, hello, it's Brian. We're really pleased with the performance of all of our markets on the occupancy side. We've seen gains in each of the markets in occupancy year over year. Question And the demand that we talked about earlier is really throughout the entire portfolio. If you want to talk about the markets that may be a little bit more challenged on the question comes from a collections perspective. It's similar to what we saw last quarter, a little bit in Las Vegas, question and to a certain extent our Chicago markets, but they're still holding up well. They would be kind of at the Lower end of the pack from a collections perspective. Got it. Thank you. And then also looking at the utility question. I know the bad debt has decreased from 2Q, but how are the collections in terms of the utility reimbursements compared to the question because I think I remember you guys saying there was a bit of a difference. Yes. Directionally, Louis, this is Chris. Question Directionally, we've seen continued strength on both sides. We obviously saw some nice continued collections question comes from the line of Alex. On both fronts into the Q3, kind of this concept of rollover receipts from the Q2. But directionally, I would say they're both Our next question comes from the line of Rick Skidmore with Goldman Sachs. Please proceed with your question. Good morning. Brian, if I could just follow-up on the migration pattern question that you answered. What's sort of the absolute delta that you're seeing, Those 100% increased numbers, is that off a base of 100, off of 1,000 in terms of the application numbers? I don't have the exact numbers in front of me, but all of the statistics that I cited question or significant increases off of a significant base. So thinking in terms of doubling off of the 100 for a particular market would question. Okay. And then Brian, just on occupancy, how much further do you think you can raise occupancy? Question. What sort of that frictional number for your portfolio do you think? Yes. We've seen fantastic improvements in retention. We still think there's a little bit of room there. Our pre leasing efforts are starting to really pay dividends. We've reduced our churn times dramatically year over year. So I think there still is a little bit of room. Obviously, it's different scenario when you're in the 97s as when you're in the 95s, but we're optimistic that we can maintain And maybe pick up a little bit of incremental occupancy as we go forward with this robust demand. Great. Question. And then Chris, one question for you. How do you think about or how should we be thinking about real estate taxes as we go into 2021? Thanks. Yes. Good morning, Rick. Good question. It is I'll start by saying it's a little bit early to provide any Hard quantitative thoughts at this point. Remember that this is the exact time of year where we're working very closely with our team of Property tax experts and in market advisers to form a view on property taxes, including assessed value trajectories and even rates going question comes from the line of Alex. And next quarter, I'll be able to provide more precise and quantitative thoughts on it. With that said, from a high level where we stand now question comes from the line of David. On the valuation side, I think it's no surprise that we continue seeing strong home price appreciation. And so I'd expect that to question comes from the line of David. We continue to pressure property tax values into next year. However, I would remind everyone that we have one of the best property tax teams in the industry in Super robust appeals process that each and every year files upwards of 25,000 individual property tax appeals. Question And so in this environment of home price appreciation, we will definitely plan to continue leveraging and utilizing that into next year. And then on the rate side, it's just a little bit too early question I'll speculate on that quite frankly, but we're watching the situation very closely with our dedicated team of experts. And like I said, we'll be able to provide Another update with more formal thoughts on property taxes next quarter. Thanks, Chris. Our next question comes from the line of Douglas Harter with Credit Suisse. Thanks. I was wondering if you have or could share with us any kind of early results of the initial Build to rent portfolio, kind of how retention looks and the ability to get rent renewals, how that looks relative to kind of question Yes. Thanks for the question, Douglas. It's pretty early to tell. We have a relatively small group that we can compare to Same home or that are in our same home portfolio. But as far as that group question is we're seeing similar retention rates and similar increases, and It's market specific. So if we had a development in Arizona, we're seeing significant increases and question More significant than maybe other areas. The one area that we're seeing that's Very positive is that the turn and maintenance costs are running about 25% of what our same home portfolio Our next question comes from the line of John Pawlowski with Green Street Advisors. Just a few questions from me. Dave, on your portfolio market footprint, question comes from the line of Kevin Dillard with Bank of America Merrill Lynch. Please go ahead. Does the amount of capital flowing into the space make you take a step back and evaluate maybe More meaningful market shifts, market dispositions as you see it today? No. At this time, we're very We've looked at our markets. If you go back a couple of years ago, we had more than 40 markets and we have done a little bit of printing. Today, we're very happy with our footprint. Not only is it performing very well as you see in the numbers, But we also it also gives us a lot of growth opportunities throughout the portfolio. So at this time, I don't see us There will be properties here and there consistent with our past question is from the line of David. And then, I'll turn the call back to the operator for questions. Okay. And then, I'll turn the call back to the operator for questions. Okay. And then, For a number of reasons to be disposed of, but it will be minimal against the total number of homes that we own. Okay. And then second question, Jack, could you give us a sense for how cap rates have question has trended in some of just your top few Sunbelt markets in recent months or recent quarters? Yes, that's a good question because you're seeing increased prices for Acquisitions, but you're also seeing increased rents. So we're trying to be balanced in how we're underwriting And acquiring the properties, but I would say there's a little pressure downwards, but not a lot because of the rate increases. Our next question comes from the line of Dennis McGill with question comes from the line of Kevin Owens. When you look at all the interest in the space now with Filter Energy in general, acquiring portfolios, How would you describe what cost of capital has done over the last year? And if you had to speculate, what do you think it would do over the next year or 2? Yes. There's you're absolutely correct, Dennis. There is more capital looking at question comes from the line of the call. The single family for rent concept, in particular, a lot are looking at the built question is from the line of David. In a place that we've got good currencies for ourselves, both in all of our channels, whether it's The common, the debt and there is a lot of JV interest that is expressed to us by a number of parties. The difference between American Homes for Rent and our peers is those cornerstones that we talked about in our prepared remarks, We can marry the development program with an operating program and it's brought or as Jack previously discussed, We have the ability to basically have a feedback loop as to what's going well, how do we need to modify, whether it's Home designs or marketing programs because we control all the different platforms ourselves. But there is more capital. Keep in mind that this is a very fragmented market. We own less than 1% of the assets, less question 0.5% and all our peers with us, all the institutional peers, own less than 3%. So there's a lot of opportunity out there. I am very pleased with where we are sitting today. The investments of the prior years are really putting us in a great position going forward. How likely would it be, David, that you do more joint ventures over the next year or 2 versus growing organically or with partners you already have? Yes. Look, the joint ventures are 1 channel. And joint ventures Our joint venture partners to date have been very high quality and they've been they've brought more to the table question They bring opportunities, etcetera. So teaming up with them, is a lot more than what you see in the financial statements. At the end of the day, we our preference is to do as much as we Okay. That's helpful. And then just one more, I'm not sure if it's Chris or Brian, but just looking at recurring CapEx this quarter question comes from the line of Chris. And thinking about the pressure on usage of the home with work from home, if that does end up becoming more permanent, question is from the line of David. How are you thinking internally about underwriting those expenses on a go forward basis? And also any additional color you can provide on the increase that you did see this quarter, are you seeing that geographically concentrated at all or fairly distributed? Hi, Dennis. This is Ryan. Overall, the CapEx for the Q3 came in line with our expectations question as we signaled in prior quarters and through some of our presentations. I don't think it's question is specifically prevalent in any markets. But as an example, we anticipated extra stress on the systems question comes from the line of John with the line of John. With people working from home, with remote learning, people not going on vacations in the summer, and it tracks with our data on question comes from the line of Chris. And then there's subsequent replacements on HVAC that follow that. So we did anticipate it came in line question was what we expected. The difference between the Q2 and the Q3, there was an increase in some appliance question and answer session. And there's been some pricing and supply pressures on appliances nationally. So that contributed a little bit to that increase. But again, it was expected. We made a commitment at the onset of COVID to And there's been a little bit of a premium in some cases on the replacements. Sorry, I was just going to add. If you hold aside the COVID piece of recurring CapEx, which you can see disclosed in the footnotes to the table, Underlying CapEx is running right around the 5% area, which is much closer to Inflationary increases and actually very consistent with what we were expecting at the start of the year as well. Thank you. Our next question comes from the line of Tyler Batory with Janney Capital Markets. Please proceed with your question. Hi, good morning. Thank you. Just to tie together a number of the prior questions, I appreciate you can't give a Specific guidance, but as we look at the Q4 and really into 2021, what are your thoughts about the seasonality of this business? I mean, should we just question on the cost structure as well. Yes. Good morning, Tyler. It's Chris. Definitely for this year, question Brian talked about in his prepared remarks, I think the theme of the Q4 is that we are bucking the typical Seasonal trends, right. As we know, traditionally, our business, our leasing activity, etcetera, begins to taper and question is slow as we enter the end of the summer. Certainly, as we cross over Labor Day, kids go back to school and things definitely seasonally slow down in the 4th quarter. We held our 97.2 percent average occupancy into October, and we are seeing acceleration in blended spreads as renewals are returning to normal levels throughout the Q4 and we're continuing to push on new lease rates and our question there for the Q4 is that we'll see 6% plus. I don't think we've ever seen that before. And so clearly, I think Our expectations are demonstrating that the seasonal trends are being bucked for this year. What that means for next year and beyond, honestly, difficult for us to speculate. Question and it is likely that some portion of the seasonal trends may return, but we really don't know. Obviously, the world is different these days with work from home and everything else that the pandemic has brought on. And so hard to say, but Clearly, for this year, we're definitely bucking that seasonal trend heading into the Q4. Tyler, it's Dave. Let me just add a couple of items to that. The trends that you are seeing are not question comes from the line of David. When we got into this industry or into this sector 10 years ago, there were 13,000,000 single family rentals. Today, there are 17,000,000 single family rentals and the occupancies are stronger today than they were. Institutionally, I mentioned that we have a very Small percentage, less than 3%. But we did, as an institutional group, shine a spotlight on the value proposition that single family rentals And COVID has actually increased that awareness of single family rental, whether it's question comes from the line of Brian discussed migration trends. Another state and then when the COVID crisis is back, all move back. So we're seeing a lot of migration trends into our markets. The demand that we see today is totally insatiable, and it's continually growing. Question Whether in next year, there's a little bit more seasonality than this year. As Chris said, that's a wait and see call. But the demand in this industry is getting stronger and stronger. It's a continuum of 8 to 10 years. COVID has just accelerated it. Okay, great. And then just as a follow-up question, can you elaborate a little more on input costs specifically in the build to rent channel. Just curious if that's influencing your underwriting at all? Yes, there's really only been one item that's caused any disruption question comes from the line of David. Our projections of costs and that's lumber. Lumber began to have a shortage and started spiking in July. A year ago, it was about $3.75 per 1,000 board feet and July started moving up, peaking in September at $9.50 which added about $15,000 per home to our costs. That has now started to come back down as more of the plants question comes from the line of the mills. This morning, it was at $5.67 So it's We expect it to come back down to normal and we expect the price disruption or the cost disruption Our next question comes from the line of Ryan Gilbert with BTIG. Hi, thanks. Good morning, everyone. First question for me is on question Another one on the build to rent portfolio. I guess looking across your markets, how do you feel like product against for sale new construction aside from the fact that it's a rental? I mean, the builders are selling as fast as they can build them and we're leasing them as fast as we can build them. So It's hard to say we're doing better, but we're doing just as well. Okay, Great. And then looking at deliveries from the National Builder Program, it was a bit better than I expected given the strength Yes. Well, I'll answer the first part of the question. Most of our homes that we build are We're planning 2 to 3 years out because there's horizontal development and getting all the permits and Then the verticals just to For the National Builder Program. For the National Builder Program, We kind of shut that down for a while from March until, I believe June or July question is my recollection and just in the last quarter or so, pick that back up and we're getting Some response, but it is very competitive. And the builders Seeing a lot of retail buyers out there, but I think they would still like the guaranteed Purchases of an all cash buyer. So we're still getting our share of those products. Okay, got it. And then just very quickly, property management expense went down in the quarter. How should we think about the growth rate question on that expense line item going forward. Yes. Good morning, Ryan. It's Chris. You know, There are a couple of small drivers on the margin. Realistically, it has more to do with the timing of prior year quarterly comps. Question comes from the line of Alex. And if you look at it on a full year basis, we're running 2% to 3%. And that's probably the right way to think about it on a full year kind of something in the inflationary environment, which is Our next question comes from the line of Ki Bin Parra with Berenberg. Please proceed with your question. Hey, thanks for taking my questions guys. So first off, could you give us any color on the demographics of new applicants and residents? Question comes from the line of David. Maybe what jobs and industries are they skewed to? And how would their rental coverage compare to your existing resident? This is Brian. It's a very good question. The profile of the applicants is remarkably consistent pre pandemic to current. We've seen a slight uptick In income, but the credit scores, for example, are right on top of each other. So the quality of the applicant has remained high Okay. Thanks. And just to switch gears a little bit. I mean, given the potential for a second lockdown in certain markets, what sort of plans do you guys have in place? Would you expect to see softness in rental increases again or maybe not as much just given where you're seeing demand at and kind of the strength for your residents? Yes, it's a good question. Again, it's difficult to predict the future on this. I think the initial shock There's some pressure in Illinois, for example, on bars and restaurants and some shutdown that we've noticed. In terms of predicting as dramatic of an effect, if there happens to be a second wave, I think it will be muted a little bit. Our We're very pleased with the fact that we're not susceptible to any specific industries necessarily. So I don't know exactly how dramatic or to the extent of a second wave would be on performance, but My instincts tell me that it won't be as dramatic as the first. Okay. That's it for me. Thanks, guys. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Mr. Singleton for any final comments. Question comes from the line of David. And we see that actually increasing. As strong as this quarter is, The management team here is actually more excited about our future and what potential lies with question is, demand and the fact that all of our systems are in place and ready to take advantage of any opportunities that present themselves.