Welcome to the American Homes 4 Rent First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Stephanie Heim. Please go ahead.
Good morning. Thank you for joining us for our first quarter 2020 earnings conference call. I'm Stephanie Heim, Chief Governance Officer, and I'm here today with David Singelyn, Chief Executive Officer, Bryan Smith, Chief Operating Officer, Jack Corrigan, Chief Investment Officer, and Chris Lau, Chief Financial Officer of American Homes 4 Rent. 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 and are subject to a number of risks and uncertainties that could cause actual results to 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 of the COVID-19 pandemic, including extraordinary increases in national unemployment, may pose headwinds to our future results. All forward-looking statements speak only as of today, May 8th, 2020. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The reconciliation to GAAP of the non-GAAP financial measures we are providing on this call is included in our earnings press release. 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. You can find these documents as well as SEC reports and the audio webcast replay of this conference call on our website at www.americanhomes4rent.com.
With that, let me turn the call over to our CEO, David Singelyn.
Thank you, Stephanie, and good morning, everyone. To begin with, I hope everyone on this call and their families are well as we navigate through the COVID-19 pandemic. It has been an unprecedented time, and our focus remains on the health and safety of our employees and our residents. We have implemented comprehensive remote work policies, and our management team members are coming to you this morning from different locations as we follow our state and local government stay-at-home mandates. Today, I will briefly talk about our first quarter results. I will then provide you with an update on activity so far in the second quarter and wrap up with thoughts about the balance of 2020.
I am proud of our strong operating performance in the first quarter with same-home core net operating income growth of 3.8% and our core funds from operations was $0.29 per share, a 7.4% increase over prior year. While I am pleased that our first quarter was strong, that is not today's story. Today's story is the COVID-19 crisis. At the end of the first quarter, while same-home occupancy was slightly behind last year, we continue to experience in demand with a steady rate of showings and strong retention. Throughout April, demand for our homes significantly increased, and we achieved all-time record levels of showing, setting up May well to have good leasing and occupancy results. Now moving to rent payments. April was relatively strong as we collected approximately 95% of original scheduled rent due.
Through May 5th, May rent payments represented approximately 82% of rent due. This is approximately 94% of what we typically collect through the first five calendar days of the month. Our property managers have been in constant contact with our residents during this crisis, including those who are having financial difficulties. Bryan will address our plans for this in his remarks. As we look ahead, our mission to provide safe, high-quality homes for families across the country has never been more important. Several attributes set us apart. First, compared to most other real estate asset classes, housing is a non-discretionary need, and single-family rentals are better positioned in the COVID-19 environment and should benefit in both the near and long term. Second, strong demand for housing continues.
We are seeing the traditional strong demand for single-family rental homes increase as many families are postponing or canceling home purchases during this downturn. Many multi-family housing residents are choosing single-family rental homes to escape high-density community living in consideration of social distancing and personal safety reasons. This is reflected in the increased showing activity in the second quarter that I previously mentioned. Third, our portfolio diversification across 35 markets makes us less susceptible to severe impacted markets, as our largest individual market represents less than 10% of our total portfolio. Fourth, our best-in-class operation and technology platforms also differentiate us during this time.
Although not originally designed with natural disasters and global pandemics in mind, these platforms empower our success in uncertain times like these. Hurricane Harvey and the California wildfires have created a blueprint for remote field working and business continuity that is now embedded in our DNA as a company. With our leading technology-driven mobile platform, all aspects of our operations remain functional, allowing us to meet the strong rental demand. Our proprietary Let Yourself In technology provides full functionality for prospective residents to tour our homes, submit applications, and execute leases, all while following social distancing guidelines. We are still executing turns and servicing homes, responding to a fairly consistent volume of customer service requests. Our field teams are following recommended social distancing and public safety guidelines as they meet with our residents in their homes.
Finally, turning to our balance sheet and liquidity. Our investment-grade balance sheet is a major differentiator today, given the uncertainty in the capital markets. Our financial position was years in the making and reflects our conservative approach to running our business. A quick note. After quarter end, we upsized our previously announced joint venture with institutional investors advised by J.P. Morgan Asset Management to $625 million, providing additional capital to support our leading built-for-rental development program. This is a big vote of confidence in our company during these uncertain times. We are well-positioned to weather this storm and take advantage of opportunities today and going forward. Our strong balance sheet allows us to maintain our flexibility through this event. We are continuing our internal development and construction of new homes but are temporarily deferring acquisitions through our traditional and national builder programs.
Before I turn the call over to Bryan, I am pleased to announce that yesterday the Board of Trustees appointed Kenneth Woolley as independent Chairman of the Board. Ken has been a Trustee since the inception of the company. Ken is the Founder and former CEO of Extra Space Storage, which he currently serves as its Chairman. Over the course of his career, he has developed and constructed over 18,000 apartment units and 600 single-family homes, and acquired and managed an additional 15,000 apartment units. His wealth of diversified business experience is extremely valuable, and I look forward to his continued service to the company as Chairman. , Tamara Hughes Gustavson , former Chairman of the Board, will continue to serve as a Trustee. I want to acknowledge her contributions as Chairman and her support of the company since its inception. Under her leadership and her family's support, the company has emerged as a leader in the single-family rental space.
I'll now turn the call over to Bryan to provide greater operational details.
Thank you, Dave. Good morning, everyone. The past couple of months have been quite challenging, with the COVID-19 pandemic affecting everyone's way of life. The current situation has driven us to closely evaluate our priorities and examine all aspects of our operations. First and foremost, I would like to reemphasize that the health and safety of our team members, our residents, and their communities remains our main focus. In March, we quickly implemented comprehensive remote working, and we initiated company-sponsored assistance programs to support all of our team members. Their dedication and resolve in adapting to this new environment have been inspiring. In particular, I would like to recognize and personally thank our field team members who continue to service our homes and residents in person. They are currently the frontline face of the company, and we are proud of the way they represent American Homes 4 Rent.
Today, I would like to start by talking about our first quarter results and then move to some additional updates on the COVID-19 implications to our business. I will also provide a second quarter operational update that will conclude with a recap of our disposition activity. Our first quarter results were strong as we continued to build on the positive momentum from last year. Average occupied days for the same-home pool was 95.3%, and our average monthly realized rent increased by 3.6%. This resulted in growth of 3.9% in same-home core revenues when compared to the first quarter of 2019. On the expense side, total same-home core property operating expenses were up 4%. Overall, this drove a first quarter year-over-year increase in core net operating income in the same-home pool of 3.8%.
While our first quarter results were not significantly impacted by the spreading COVID-19 pandemic, we realized by mid-March that we needed to adjust our day-to-day processes to add further protections for our residents and team members. As a result, we immediately created a COVID-19 task force focused on taking a long-term, socially responsible approach to the current environment, an approach that prioritizes health and safety and ensures that we continue to do what is right for our residents and team members. As Dave mentioned earlier, our operating platform and its extensive use of mobile technology has allowed us to adapt without interruption in this unprecedented and challenging environment. We continue to be fully operational, and our teams are performing at a very high level while implementing enhanced safety measures.
Our ability to communicate directly with our residents to address maintenance requests and other issues through self-service, as well as our Let Yourself In leasing platform enables us to continue to maintain a high level of service and operate our business in compliance with social distancing and other health protection mandates. This crisis is affecting everyone, we are doing what we can to help those who have been hit the hardest. Although we are not forgiving rent, we have suspended late fees and halted evictions. Our team has been in constant close communication with our residents and is actively working with those who are experiencing significant hardships. To date, these hardship requests represent approximately 4% of our total residents. Each case is being reviewed individually to determine the best path for the resident, which in a few instances has resulted in the early termination of leases.
On the pricing side, we illustrated our commitment to our residents by offering renewals with no rent increase. We expect to extend this offer through May. Pricing decisions remain fluid. Although there is a higher level of uncertainty than normal, we expect the blended increase for re-leasing and renewals to be approximately 2% for the second quarter. Finally, with an abundance of caution for our teams in the field and our residents, we have adjusted our occupied maintenance and turn processes. We are following CDC guidelines regarding the use of personal protective equipment and social distancing. The main question is how deeply will our residents and operations be affected by the pandemic? During the second half of March, leasing temporarily decelerated when the pandemic began to escalate. This disruption resulted in an estimated 300 fewer leases during what has historically been the start of our busy season.
April, though, was a different story. Demand roared back and leasing regained momentum. April showing activity was up 5% per rent-ready property, and our overall website traffic was up over 25% from last year. As an example, despite coronavirus-related restrictions, over the past two weekends, we had over 9,500 physical showings, which represents nearly six distinct tours per available home over just four days. We continue to benefit from our technology-driven platform, with more people utilizing our self-service leasing option than ever before. All of this drove higher than expected leasing volume in what was our best April since 2015. In addition, April retention was very good, with move-out down about 6% year-over-year in the same-home pool. Although the effects of the COVID onset drove April's average occupied days percentage down slightly to 95.1%, our strong leasing activity positions us well for improved occupancy in May.
Please note that we were able to achieve April's strong leasing results without having to offer concessions on new leases. The early second quarter leasing results have been strong, but we recognize the uncertainty of the current environment and are closely monitoring all operational metrics. Now, I will address second quarter rent payments. As Dave mentioned earlier, April rent payments have been relatively strong as we have collected approximately 95% of rent due, which is within 4% of our normal pace. May rental receipts through the first five days of the month remain strong as we have collected approximately 82% of rent due, which is tracking with the first five days of April and within 6% of our historical pace. Please note that our reported collection numbers reflect actual cash payments received without application of security deposits, concessions, or payment plans.
However, the longer this crisis continues, the more difficult it may be for some of our residents to maintain regular rent payments. On the expense side, we've taken steps to minimize non-essential maintenance and have added additional safety procedures surrounding turning homes. Keeping everyone safe may result in some short-term inefficiencies and some deferred maintenance to catch up on once the crisis is over. In addition, the crisis may create certain areas of elevated costs, like HVAC as a result of heavier usage during stay-at-home orders, and increased utility and turnover costs as a result of COVID-19-related collection issues on charge-backs and move-outs. Finally, from a portfolio management standpoint, we sold 410 homes in the first quarter for approximately $80 million, and we had 960 homes held for sale at quarter end.
Closings in April continued to be strong as we sold 60 homes for approximately $14 million and have an additional $28 million of dispositions in escrow. In summary, while the early second quarter results are encouraging, we recognize the significant uncertainty in this COVID-19 environment and will remain vigilant as we move forward.
I'll now turn the call over to Jack.
Thank you, Bryan, and good morning, everyone. Let me start out by discussing our first quarter external growth activity, and then I will provide some context for our current plan and our longer-term view in light of COVID-19. In the first quarter, we added 656 homes to our platform for a total investment of approximately $175 million. It consisted of 401 homes delivered through our proprietary AMH development and national builder programs, and 255 homes acquired via traditional channels. This was in line with our projected pace of $800 million-$1 billion of total external investment in the full year 2020. However, the world has changed significantly in the past several weeks. We have made some adjustments to our investment program. In mid-March, we paused our traditional acquisition and national builder channels as we felt it was prudent to preserve capital and liquidity at this time.
Given the uncertainty in the housing market, there is less visibility on valuations. We continue to monitor events and may reassess these channels in the future as circumstances dictate, and we have the financial and operational flexibility to restart these acquisition channels quickly. With regard to our proprietary AMH development program, we are continuing activity. Quality single-family housing is undersupplied, and our new purpose-built rental homes continue to be met with sustained demand. As evidenced, during March and April, we leased almost 400 of our newly built homes, which exceeded the 350 homes we added to the inventory. Demand for our built-for-rental product has surpassed our own expectations. Feedback from our residents supports our strategy that the ability to rent a newly built home with amenities that residents desire in sought-after communities is revolutionizing the industry.
To update you on our expectations for 2020 development deliveries, we now expect our AMH-developed homes in 2020 will be between 1,000 and 1,200 homes, down from our original guidance of 1,200 to 1,500 homes. This is primarily due to various delays relating to local permitting and inspection issues. As we continue to monitor the economy, we may adjust this pace later in the year. Over the long term, our proprietary development program allows us to grow without being reliant on housing market conditions. Through this program, we control quality, design and finishes, location, pricing, and volume of deliveries, and we are the only platform in the single-family rental home sector that is positioned to do this today. Please note that we have added disclosure to our supplemental, including details on market exposure, average total investment cost, and average monthly rent per home, as well as our estimated delivery timing. We hope this helps you better understand this important initiative.
Now I will turn the call over to Chris.
Thanks, Jack. In my comments today, I'll very briefly review our first quarter operating results, update you on our balance sheet and liquidity position, and conclude with some wrap-up thoughts around our business and operations in the COVID-19 environment. Starting off with our operating results, simply put, we had a great first quarter of 2020, generating net income attributable to common shareholders of $20.2 million, or $0.07 per diluted share. On an FFO share and unit basis, we generated $0.29 of core FFO, representing a 7.4% increase over prior year, and $0.26 of adjusted FFO, representing a 7.3% increase over prior year. Turning to our balance sheet, as we've discussed many times before, we have the only investment-grade rated balance sheet in our sector, which has never been more important than now.
We've maintained conservative leverage levels, created a strong liquidity profile, and cultivated access to multiple sources of capital to grow our business over the years, as well as weather an economic downturn. Coming into the pandemic, at the end of the first quarter, we had approximately $3 billion of total debt, with a weighted average interest rate of 4.3% and a weighted average term to maturity of 12.5 years. Our net debt to adjusted EBITDA was 4.9x , well below our internal leverage target of 5.5x . As a reminder, we don't have any debt maturities other than recurring principal amortization until 2022. Turning to our liquidity, at the end of the quarter, we had $33 million of cash on hand and only $105 million outstanding on a revolving credit facility, which provides for total revolving capacity of $800 million.
Additionally, during the quarter, we generated approximately $76 million of retained cash flow, which we define as adjusted funds from operations after common distributions, and sold 410 properties, generating $81 million of net proceeds. As a more current update, at the end of April, we had approximately $30 million of cash on hand, with no changes to total debt outstanding during the month. During the month of April, we sold an additional 60 properties, generating approximately $14 million in net proceeds. As Dave mentioned, we've upsized our previously announced strategic joint venture with institutional investors advised by J.P. Morgan Asset Management to now provide a total of $625 million of capital. In addition to being another great vote of confidence for our development program, this upsizing brings additional high-quality, long-term capital, ensuring our ability to continue fueling our one-of-a-kind development program.
Finally, turning to the remainder of 2020. As covered in yesterday's release and supplemental information package, given the unprecedented nature of the COVID-19 crisis and uncertainty surrounding its impacts to our residents and business, we've withdrawn our 2020 guidance until we have more clarity into the impacts of the pandemic. Although much of the future is uncertain right now, I'd like to remind you about a number of factors that we believe uniquely differentiate our asset class and American Homes 4 Rent's ability to both weather the COVID-19 storm and be well-positioned as we emerge from the pandemic.
For starters, remember that we provide an essential product, high-quality housing that remains in need and in demand, which we see benefiting us in the near term, with last month being our strongest April leasing performance since 2015, and in the longer term, as we expect a pattern of de-urbanization as people seek housing alternatives away from city centers in single-family detached residences. Second, our portfolio is diversified across 35 markets, with no single market representing more than 10% of our footprint, which helps to insulate us as the shape of the pandemic recovery will likely vary from market to market based on lengths of local shelter-in-place orders and composition of local employment industries.
Third, relative to many other portfolios, we have a high credit quality and more resilient tenant base, with the majority of our households having two working adults, providing greater employer diversification, one or more children, and an average household income of approximately $100,000 per year, which we can see benefiting our early collections results through April and the beginning of May. As a reminder, our reported collections numbers reflect actual cash payments received without application of security deposits compared to historic collection levels without any modifications for payment plans, abatements, or otherwise.
Lastly, as I already covered, our investment-grade balance sheet, strong liquidity profile, and diverse access to capital are key differentiators that will enable us to safely weather the COVID-19 storm while maintaining our current distribution level and continuing to invest into our one-of-a-kind AMH development program. Additionally, as we look forward, it is the strength of our investment-grade balance sheet that will position us with the ability to maintain opportunistic flexibility as we all emerge on the other side of the COVID-19 pandemic. However, until then, we wish everyone health and safety and would like to extend a special thank you to our entire team, including over 1,300 employees across the country, all of whom are working tirelessly to support our residents during this difficult time. We have a fantastic team and are confident that their efforts and dedication will help keep our residents safe at home.
That concludes our prepared remarks, and we'll now open the call to your questions. Operator?
Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. In the interest of time, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Jason Green with Evercore ISI. Please proceed with your question.
Good morning. Just curious your insight into the impact of the CARES Act on your tenants. Have the majority of your tenants received funds from the government, and if so, do you guys feel like it's had any impact on your collections to date?
Yeah, this is Dave. The CARES Act, if you look at our tenant base, our tenant base is significantly individuals that are [audio distortion] blue collar. I, at this point, believe that a number of them may have received it. We don't have actual clarity into each of our tenants that have paid rent. Bryan and his team have had significant conversations with those that, and it's a very few number, that have called in regarding hardships. We've got a little more clarity there. Those that have paid rent, no, I don't have clarity on exactly how many of them have received assistance through the CARES Act. Just keep in mind that the stimulus payments did go to most of our tenants and most people in the United States. The other provisions, no, I don't have straightforward clarity on it.
Just on the development yields and the development schedule that you guys provided, thank you for providing that. If we were to throw a 65% margin on the data points that you point out in that schedule, it indicates roughly a 5.6% yield. Is that what you guys are seeing? Relative to those assets that you're developing, I guess, where are yields pricing out on a cap rate basis?
Hi, this is Jack. Great question. What you have to understand on the development properties is that we build them to be maintenance resistant. Plus, they're brand-new properties, so you're unlikely to see any HVAC or roofing or much of any maintenance for the first five years, and then even then, a lighter level of maintenance from 5- 10 years, and then going more towards normal after that. The margin on those would be higher than that, and we underwrite generally to a minimum of a 6% return.
Got it. Thank you very much.
Thanks, Jason.
Thank you. Our next question comes from line of Nicholas Joseph with Citi. Please proceed with your question.
Thanks. Appreciate the operating update for April and into May. I think you talked about blended lease rate growth. I was wondering if you can break out April between what was executed for new leases and then what was executed on the renewal side.
Hi, Nick. This is Bryan. Our April results, we had rent up on the renewal side of 3.1%, on the re-leasing side was 3.5%. The offers for renewals went out flat, and they went out really for renewals in the May, June time period.
On new leasing, you're still seeing positive lease-over-lease pricing?
We are. We've had fantastic demand in April and into May. I think if you remember from the prepared remarks, we had record leasing volume in April, at least as good as it's been since 2015. Fantastic website activity. A lot of distinct shoppers. The demand side's very strong. Leasing velocity is great, and it's continuing to be strong through May. We're not pushing prices, pushing rents on re-leasing as we might in a normal environment. We don't want to be seen as gouging, but we are moderately pushing them in the 3% range.
Thank you.
Thank you. Our next question comes from the line of Buck Horne with Raymond James. Please proceed with your question.
Yeah. Hey, thanks, Bryan. What percentage of the tenants that you're extending these 0% lease renewal offers, what's the uptake on that? Is that just for leases that are coming up in the next couple of months, or can anybody extend at that 0% renewal option right now if they wanted to contact you?
Buck, it's Bryan. The uptake's been very good. The offers went out specifically to residents for the May and June time period. We haven't had a lot of inquiries for expirations beyond that, but we're going to be mailing or distributing the July renewal letters soon, and we anticipate those going out at 0% as well.
Okay. All right. Fair enough.
Yeah.
I do also want to ask on the Build for Rent platform, with this new capital commitment from the investors, will you be looking to immediately go out and source new land? How quickly does that capital come in? How does that accelerate the development capability of the platform? Do you go out and option a bunch of land, or how do you source and use that capital?
Hey, Buck, it's Chris. Why don't I start with that, and then Jack can provide whatever color is helpful. I start by saying, if you think back to when we first announced the joint venture last quarter, we spoke to it as an initial sizing of about $250 million, with the potential for it to grow further. I'd say this upsizing has been contemplated from the start. Really no major change to the strategy. If you recall some of our commentary from last quarter, one of the great things about this joint venture is it provides us the opportunity to further increase the size, scale, and volume of our program incremental to what we're doing on our own. I would say this upsizing is right in line with that strategy from the start.
Also balanced with the fact that one of the other benefits we talked about last quarter of this type of really high-quality private long-term capital is it provides us the confidence that we need from a long-term capital perspective to continue making the investments into our pipeline where we have access to both public and private high-quality long-term capital. Given where we are now, I would say we're very proud of this joint venture and what it provides to us from a capital predictability standpoint. Generally speaking, it doesn't change anything with respect to the strategy that we communicated last quarter on the venture.
Okay. All right. Thanks, guys.
Thanks.
Thanks, Buck.
Thank you. Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.
Thanks very much. Nice to hear from you, and hope you're all doing well. Regarding the tenant profile, I was wondering if you could give any color on perhaps employment industry and also if you're aware of what the unemployment rate would be across the tenant base.
Hi, Jade. It's Bryan. Regarding the employment profile of our resident base, the top category is office professional, business office professional. If you take our top four categories, it represents almost 2/3 of our tenant base, those being office professional, healthcare, tradespeople, and public sector. We're pretty well protected, at least from the results of this data, from some of the harder-hit areas.
Okay. Thanks very much.
Thank you.
Secondly, I think in your comments you mentioned that there has been an uptick of folks leaving apartment dwellings for single-family rental. I was wondering if there's a possibility of quantifying that. Do you have any initial statistics of what percentage of the increase relates to that segment?
Yeah. I don't have exact data on that, but we have seen an uptick, obviously, in activity, as I mentioned, distinct shoppers, people touring our homes, a dramatic uptick in website activity. Anecdotally, we're hearing a lot of people moving from apartments, other people who delayed home purchases who originally were planning on buying and have now decided to rent. It's really anecdotal in nature. It's difficult to pin down the exact source of each of the leads, but we are surveying them. The data just isn't clean enough for me to report exact numbers.
Thanks very much.
Thank you.
Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question. Mr. St. Juste, maybe your line is on mute.
Yes, apologies. Didn't see that. Good morning, guys. Good to hear your voices. A question on the expense side. I know you guys pulled your guidance, so I'm thinking the structure has the near-term outlook for some of the key expense items, and whether there could be some relief and maybe some incremental pressure from what you were thinking 30, 60, 90 days ago. Any thoughts on maintenance costs, unit turns, retention, et cetera? Thanks.
Hi, Haendel. It's Bryan. Our retention's been very good, we're hoping to have a little bit of relief on turn costs. It's difficult to see much difference. We have, as I mentioned in my prepared remarks, there is an element of some deferred maintenance costs that we're going to have to address when this thing really starts to wind down. Most importantly, the thing that we don't know, which makes this answer difficult, is what's going to be the impact of recoveries on residents who can't pay. We're not going to know that until we really get into the workout period. That impact is on chargebacks from utilities and chargebacks for turns. That's probably the biggest unknown. We're watching it carefully.
On the other side, there's a little bit of relief from some expenses that we would normally incur surrounding travel and some other operational things. The most significant ones are going to surround chargebacks, and collection related to the COVID-19 crisis.
Okay, that's helpful. On the retention piece specifically, that number hovered around 70%-ish here the last few quarters. You mentioned it picked up in April. Can you give us a sense of how much? Looking ahead, how much higher do you think retention can get to, and how long it stays there, given some of the factors you mentioned earlier? Could it be 75%, maybe 80%? I know you're already there in certain markets. I'm just curious on the overall portfolio.
Yeah, I think our April retention picked up by about 6%. It's one of our key focus points. There's a combination of a number of different things. There's obviously the economic environment, the customer service aspect. Our customer service ratings through Google were at an all-time high in April, so we're executing well on that end. My expectation operationally, though, is that there is a lot of room for improvement in retention. The difficulty during this time is it's hard to really define how many are staying because of the coronavirus pandemic and how many are more healthy normal renewals. If you want to get to an absolute target, it's hard for me to say. I do know that we have room for improvement.
Got you. No, that's fair. That's helpful. One last follow-up. I'm sorry if I missed this. Did you guys mention if you offered any concessions anywhere in the portfolio in April and May? If so, where and how much? Thank you.
Yeah. We did not offer any concessions in April or May. When the pandemic hit, we had a little bit of a slowdown in leasing for a couple of weeks. We moderated asking rents in reaction to that. Again, we still saw a healthy 3.5% rent growth in April, but that is without offering any concessions.
Thank you.
Thank you. Our next question comes from the line of Rich Hill with Morgan Stanley. Please proceed with your question.
Good morning. Look, I appreciate the additional color on the leasing spreads. A question for you. On that 2% that you mentioned for 2Q, could you break down what percentage is renewals versus new leases?
Hi, Rich. It's Bryan. Yes, it's roughly 70/30, 2/3, 1/3.
Okay, great. Helpful. Then as we think about how much of your rent is driven by leasing activity last year, what should that number be? I guess what I'm trying to ultimately get back at is how much of your tenant base is rolling in 2Q and maybe for the rest of the year as well.
Hey, Rich, it's Chris. What could be helpful here, actually, you can see it scheduled out by quarter if you go to page 21 of the supplemental.
Yep.
You can get all the numbers right there. You'll see the lease expirations by quarter for the balance of the year and even into next year. You can use that based on the spreads that we've provided on a rolling five-quarter basis as well, a little bit earlier in the supplemental in the same-home section. You can use those and kind of triangulate around how spreads are rolling on and off per quarter, then use a little bit of Bryan's thoughts for the second quarter and apply that to our 2Q expirations as well.
Got it. That's very helpful, Chris. Let's follow up on that offline just to make sure I have a better understanding. Thank you guys for the color. That's all I had.
Sure, Rich
Thank you. Our next question comes from the line of Douglas Harter with Credit Suisse. Please proceed with your question.
Thanks. Can you talk about how long you might consider offering the 0% renewal rents, just kind of given the balance you're trying to strike between being fair to your existing tenants, but encountering that with the strong demand that you're seeing?
Yeah, we're watching it very closely. This is Bryan. We're watching everything very closely at the market level. As I mentioned earlier, we're planning on offering 0% renewals for July. There's a significant lead time for that offer because people need to start planning, knowing that their leases are coming due. I don't have perfect visibility into anything beyond that. A lot of it depends on how quickly these markets get opened back up, how quickly people get back to work, and things start to get to the new normal, I guess. We're watching it extremely closely, but we're going to be responsible and be very targeted when we do go back to normal renewal increase offers.
Great. Thank you.
Thank you. Our next question comes from the line of John Pawlowski with Green Street Advisors. Please proceed with your question.
Hey. Good morning. Thanks for the time. Bryan, sticking on the re-leasing in April and heading into May, everything you see on the ground acknowledges that the total portfolio is strong right now. Are any markets, would you expect any markets to put up negative re-leasing spreads in the coming months?
There are a couple of markets that are having a little bit more pressure, I think. Houston might be a good example. It's hard to predict where it'll be in the coming months, but that's one where I doubt we'll be pushing rents very hard. What's interesting is a couple of the markets that were pretty heavy in the hospitality, meaning Orlando and Las Vegas, are still getting nice rent increases. I think that's a testament to the employment mix of our tenant base. We're just not that heavily concentrated. Houston would probably be the one that we're watching maybe most closely.
Okay.
Yeah. John, if I could just add, this is Chris. It really brings to mind, again, the importance of a broader geographic diversification in our portfolio, right? The fact that we don't have any single market greater than 10%. As we watch things closely, to the extent that there are one-offs here or there that are more significantly impacted, whether it's Houston or based on the shape of recovery at the local market level. We feel good about and really like the diversification of the portfolio helping to smooth out and insulate against any of the single-market moves.
Yeah. No, just understanding the stress points and if Houston's not even flirting with negative territory right now, it bodes well for the longer-term outlook for the portfolio. Maybe, Bryan, on a market like Vegas and Phoenix pushing re-leasing spreads 8% and almost 10%, is it a fair read that given the long length of stay, there's plenty of embedded growth in some of these hot markets? Even if market rent growth went flat for the next two years, you would still be pushing or re-leasing spreads would still be in the, call it, mid-single-digit range as just the homes turn. Is that a fair interpretation of some of those eye-poppingly strong re-leasing spreads in Phoenix and Vegas?
I think it is. I don't know the exact numbers, but there are cases where we're offering healthy increases on the renewal side that may not be a complete mark-to-market. For example, if there are areas where rents have skyrocketed, Phoenix and Vegas are two good examples, and we may not push it all the way to the market level on a renewal. We might be a little bit more conservative to preserve occupancy. There might be a little bit of catch-up there. Phoenix is probably a better example in this environment.
Okay, great. Thank you.
Thanks, John.
Thank you. Our next question comes from the line of Hardik Goel with Zelman & Associates. Please proceed with your question.
Hey, guys. Thanks for taking my question. First of all, great execution in what is a difficult environment, and great transparency on the disclosure. What I want to ask about, and not to change the tone, but I want to ask about capital allocation. Obviously you have some spare capital. You are never planning on using equity to fund any of the acquisitions or developments, and you have pared back on the national builder and acquisition pipeline. You have this spare capital and your stock with high levels that we haven't seen in a few years. Was there an internal conversation ever about buying back stock at some point? I know you've talked about investing for the long term, but I'm pointing to the spare capital that you may have had.
The other question I have is on the preferreds. I know they're not callable till 2021. There was a short period where they were yielding almost 9%. Is there some potential where you can just buy them and hold them on your books?
Yeah, Hardik, it's Dave. Those are all great questions. This pandemic has gone through a number of cycles in a very short period of time. You did properly articulate that for a couple of days, preferreds were at very attractive prices. I guess I would start with the fact that our capital allocation is one of the primary things that we are looking at on a day-to-day basis at the management level. We are in constant contact with our board as to strategy as well on a weekly basis, and in-person or on the phone with everybody at least once every other week. The primary discussions are capital allocations. This is an unprecedented time, and the length of this event and the impact of this event was hard to measure in the very earliest days. So we have taken a couple of steps to preserve liquidity.
As we talked about in prepared remarks, we did temporarily suspend the acquisition through our MLS and through our national builder program. As we've gotten more clarity in April and May, it's given us the ability to continue with a very attractive program to us, and that's our development program. Today, the opportunities on preferreds and both sets of debt, public debt as well as the CMBS debt, are not trading at the same attractive yields. When they were, we were in the early days, and we were really preserving liquidity at that time due to the tremendous uncertainty that existed in those days.
That's a great response, Dave. I'll catch up with you guys offline a little bit about some other opportunities on the capital side. Just focusing on the development platform, I think people talk about cap rates a lot, and it kind of muddies the picture. I like to think about it on an IRR basis, especially because you buy a home and 15% of revenue could just be CapEx. It could be a great home, great location, and even after renovation, it could have a high capital expense because it's 30 years old. Can you walk us through the difference, the powerful return you can get on a brand-new home where the CapEx load is not going to be that great for at least 10 years versus a comparable acquisition?
Yeah. If you look at our same-home cost to maintain, I haven't reviewed it recently, but my recollection is it's about $2,200 per year per home. If you reconcile back and take out most of the HVAC costs and roofing costs and fixing garage doors and all the things that you are likely not to see, repainting exteriors and that type of thing. The way we build them is to be maintenance resistant, so we're already putting in all hard surface flooring throughout the house and on the stairs, and other items that we do for decks and things just to make them maintenance resistant. You really get to a much lower cost to maintain per house, particularly in the first 5-10 years, and then thereafter, it'll start migrating towards the $2,200. It is a much better return.
Any specificity on what that number could be, like $1,000 versus $2,200, $1,500? What's the range?
If I had to put a number on it'll be a different number 10 years from now both on the $2,200 and the whatever number I put on it.
Right. Of course.
I would say in the $1,400-$1,500 range comparatively.
Wow.
Hardik, it's Dave. You mentioned at the very beginning the concept of IRR and the concept of the cost of the acquisition. MLS, as we know, you're buying typically close to market, if not at market. What we have with the development program, in addition to the favorable economics on cash flow on a go-forward basis, resulting from the things that Jack just mentioned. When we're acquiring these assets, we have a lot more downside protection as well as the acquisition investment in these properties is significantly less than market. We have an embedded development profit in these properties. You don't see it. It's just a reduction of our investment. It's a difference between our investment and market when the homes is completed. It does exist. There's really two benefits here. Downside protection. Well, there's three.
Downside protection, you got better economics, and you got a better asset just long term that people and prospective residents desire.
Thanks, guys. That's really comprehensive. If you'll indulge me, I really want to focus on proprietary self-leasing technology because it's something that a lot of people have struggled with and it looks like you got it right. Credits to Bryan and his team. Can you talk about what makes it different and what is the problem that you're able to solve that other vendors have not been able to solve?
Hi, Hardik. It's Bryan. We're proud of that platform. Just as a point of reference, we went to the Let Yourself In platform back in 2013. We have seven years of experience with this. The real value of the platform, not only is it very easy to use, but it's perfectly integrated into our sales system, and we're able to drive really good efficiencies with that. I think the issue that some of the others have is they're just making it too complicated. What happens with us is if you want to see our house, you can drive up to the home. There's clear instructions how to go in, self-service without speaking to anyone. If you want to speak to someone, we have a live agent available to talk you through the access process.
Then there's a very clean handoff to our local sales team, who's going to get into contact with you while you're in the home. We can really design, kind of customize the level of touch that a particular prospect wants. Some people like to go purely self-service. We're seeing an uptick in that this year, especially over the last couple of months, where people are accessing without even utilizing the call center. We've designed it to be very convenient. We've designed it to be simple, and it's perfectly integrated. We just have a lot of experience doing it. We're nearly 100% on self-service access.
That's great. Thank you so much for answering my questions, guys. Appreciate it.
Thank you, Hardik.
Thanks, Hardik .
Thank you. Our next question comes from the line of Ryan Gilbert with BTIG. Please proceed with your question.
Hey. Thanks, guys. First question on the development program. Can you tell me how much cash you expect to invest in the properties that you're going to be delivering over the remainder of 2020? How much you expect to invest in 2020 for the future quarters?
So I think this is--
Yes. We're checking some of those numbers. Jack had in his prepared remarks. We have reduced the number of deliveries in 2020 slightly. Today it's somewhere between 1,000 and 1,200. It looks like Chris may have gotten [ audio distortion] slightly wrong the numbers for your direct question. There is a slight reduction year-over-year, and those additional properties that we're not going to deliver this year will flow into future years. Chris?
Yeah. Ryan, it's Chris. Let me add just a little bit of color to the full balance of the year so everyone understands kind of what our expectations are right now for capital outlay. Keep in mind, even though, as we've commented on several times now, that we have frozen new acquisitions, whether it's through our traditional channel or from buying newly constructed products from other builders. That doesn't mean that there were not transactions that were already in process, either under contract or in escrow. Just to give you kind of an earmark for the dollars associated with that will go out throughout the remainder of this year. It'll probably be about call it $60 million-$65 million there of just finishing out acquisitions that were already in process.
In terms of dollars associated with the remainder of this year's development pipeline, call it $200 million-$250 million or so, something in that range. Then as we've spoken about before, our earmark for this year for investment into the pipeline for future year deliveries coming into the year expectation was about $150 million or so into that component of the program. We deployed about $50 million there in the first quarter, which leaves us probably about $100 million, give or take, this balance of the year into our future pipeline investments. All told, that's somewhere right around $400 million for the balance of the year.
Okay. Got it. Thanks. Very helpful. I guess just back to rent collection. Maybe just any details or color you can add on the conversations you're having with your tenants or just any color on conversations you're having around rent collection with tenants and how that's changed from April to May, and then how that 5% rent not paid in April, how we should be thinking about that flowing into bad debt expense ultimately.
Hi, Ryan. Yeah. I'll start, and then I'll let Chris finish with the relationship with bad debt expense. One of the interesting things over, I guess, the past month and a half is that our property managers have been in very close contact with our residents. They're speaking with them through wellness checks. We had a campaign where we were calling those who paid on time to thank them for choosing to house with us. The feedback that we're getting is that the fact that we've been flexible by relaxing the late fees and allowing people to kind of pay and match some of their paychecks, some of their earnings with rent payment, has been really well received. The number of real hardship requests I mentioned in the prepared remarks was about 4% of our resident base.
A lot of those are discussions on, "I need a little bit more time. I'm waiting for some unemployment checks. I'm waiting for some stimulus." We're working very closely with them. The extreme cases, and they're relatively few, are the ones where it's just better off for us and for the resident to part ways. We've been letting them out of their leases. That number is fewer than 200 cases. It's hard for me to say exactly what the collections are going to be on that remaining 5% piece for April. We are working very closely with them to determine the best resolution.
Ryan, just in terms of how we treat things from a bad debt perspective. Look, our policy always has been to recognize both revenue and then bad debt if necessary, based on the likelihood of collection, which is done on a specific tenant-by-tenant basis, and I don't see any changes to that going forward. I think what that means, just from a practical standpoint, is that as we continue to work through the collections process with each of our tenants, as Bryan was just talking about, we'll use that data to inform our view on whether or not it's appropriate to recognize the related revenue. With that said, given the level of uncertainty out there right now, we'll likely take a conservative approach, and it wouldn't surprise me if our revenue recognition and bad debt ended up tracking somewhat similar to cash basis collections.
Got it. Thanks very much. Appreciate it.
Thanks, Ryan.
Thank you. Our next question comes from the line of Todd Stender with Wells Fargo. Please proceed with your question.
Thanks. Just one for me. It sounded like you haven't given concessions over the near term. If that stance were to change over the course of the next couple of months, what are some examples of concessions that you would use to help leasing activity?
Hi, Todd, this is Bryan. I think you're referring to concessions on new leases. There have been promotions that we've run in the past, $500 off first month's rent, for example. We've used it sparingly, and a lot of times it's in reaction to kind of some other market forces, some of the things that our competitors are doing. Based on the demand statistics, the way things are shaping up for May, I would be surprised if we ended up using concessions as a tool. Again, it's difficult to see too far ahead in the future with all the changes that we have. It's always been market-based. It's always been very focused. In some cases, it's down to neighborhood. Our pricing, it's looped into our pricing and analytics team, and they're asset-specific. I don't see a widespread use of it in the near term.
Okay, dollar amount, then it would be by market by market.
Yeah, neighborhood by neighborhood, even.
Okay. That's helpful. Thank you.
Thanks, Todd.
Thank you. Our next question is a follow-up from the line of John Pawlowski with Green Street Advisors. Please proceed with your question.
Thanks for taking my follow-up. Jack, could you just talk a bit more about the slippage in deliveries this year? I guess I'm surprised with the magnitude of the delays, given that most of these states were slower to lock down, and they're quicker to come back online in terms of shelter-in-place ordinances. A lot of the construction should have been pretty far along for 2020 delivery. A little bit more color in terms of is it all inspection timing or what's going on with supply chains would be helpful.
Yeah. Good question. The state of Washington was the only state that we operate in that determined that building houses was a non-essential business, and we had to completely shut down in that market for a period of time other than securing the construction sites. In other markets, especially in the first month to 1.5 month of the pandemic, where government workers were moving from office work to working from home and trying to determine how to do their job functions while working from home. In other cases, you have public hearings that have to happen that got delayed. There is some delay on the projects. As far as supply chain, we're seeing a little bit of that right now, but on really minor type things.
Aluminum fencing is one thing, but we can still rent the house and put in the aluminum fencing later. I don't think supply chain has been a big issue to date.
Hey, John, it's Dave. Let me just follow up on that. You made an inference that most of these homes are in development today, and that would be delivered this year. The vertical construction timeline is 120-150 days. Some of these homes had not commenced their vertical construction. The delays in the municipalities, both at the inspection level and to some extent in the permitting office, have caused some of these delays.
Okay. Of the roughly 1,000 homes you need to get across the finish line in 2020, what percent do you think are in the bag and what percent are you losing sleep overnight on?
I wouldn't say anything's in the bag until they're complete and rented. I wouldn't say either that I'm losing sleep. I'm kind of in between those two.
All right. Thank you.
Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to management for any final comments.
Thank you, Operator. To close, I want to reiterate that while uncertainty across the economy remains high, I'm confident that American Homes 4 Rent is well-positioned to weather these current challenges. Single-family rental fundamentals remain solid, and we have the portfolio, operational platform, growth strategy, and balance sheet to continue to execute today and emerge stronger in the future. Thank you for joining us this morning, and we all look forward to talking to you next quarter. Have a good and safe day.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.