Earnings Call: Q1 2020

May 8, 2020

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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, are Stephanie Heim. Please go ahead. Good morning. Thank you for joining us for our Q1 2020 earnings conference call. I'm Stephanie Heim, Chief Governance Officer, and I'm here today with David Singelin, Chief Executive Officer Brian Smith, Chief Operating Officer are Jack Coravin, 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 Our forward looking statements 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-nineteen pandemic, including extraordinary increases in national unemployment, may pose headwinds to our future results. All forward looking statements speak only as of today, May 8, 2020. We assume no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. A reconciliation to GAAP to 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. And with that, I will turn the call over to our CEO, David Singelin. Thank you, Stephanie, and good morning, everyone. To begin with, I hope everyone on this call and their families are well as we navigate are experiencing a significant impact on our performance. 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 Today, I will briefly talk about our Q1 results. I will then provide you with an update on activity so far in the Q2 and wrap up with thoughts about the balance of 2020. I am proud of our strong operating performance in the Q1 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. Well, I am pleased with our first quarter that our Q1 was strong. That is not today's story. Today's story is the COVID-nineteen crisis. At the end of the Q1, while same home occupancy was slightly behind last year, we continue to experience this demand with a are in 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, are 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. And through May 5th, May rent payments represented approximately 82% of rent due. This is approximately 94% of what we typically collect during the 1st 5 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. Brian will address our plans with it 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. 1st, compared to most other real estate asset classes, Housing is a non discretionary need and single family rentals are better positioned in the COVID-nineteen environment and should benefit in both the near and long term. Strong demand for housing continues. We are seeing the traditional strong demand for single family rental homes increase 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 increase showing activity in the Q2 that I previously mentioned. 3rd, 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. 4th, Our best in class operation and technology platforms also differentiate us during this time. Although not originally designed with natural disasters and global pandemics 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 are 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, secure our homes, submit applications and execute leases, all while following social distancing guidelines. We are still executing terms 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 to compete with our residents in their homes. And 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 JPMorgan Asset Management is $625,000,000 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 will 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 Brian, I am pleased to announce that yesterday, the Board of Trustees appointed Kenneth Willey and independent Chairman of the Board. Ken has been a trustee since the inception of the company. Ken is the Founder and former are the CEO of Extra Space Storage, which he currently serves as its Chairman. Over the course of his career, His wealth of diversified business experience is extremely valuable, and I look forward to his continued service to the company as Chairman, Camry Duskeffensen, 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 support, the company has emerged as a leader in the single family rental space. I'll now turn the call over to Brian to provide greater operational details. Thank you, Dave, and good morning, everyone. The past couple of months have been quite challenging with the COVID-nineteen pandemic affecting everyone's way of life. The current situation has driven us closely evaluate our priorities and examine all aspects of our operations. 1st and foremost, I would like to reemphasize 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 and adapting to this new environment have been inspiring. In particular, I would like to recognize and personally thank are field team members and 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 to Rent. Today, I would like to start by talking about our Q1 results and then move to some additional updates on the COVID-nineteen 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 were 95.3 percent 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 Q1 of 2019. On the expense side, Total same home core property operating expenses were up 4%. Overall, this drove the Q1 year over year increase in core net operating income are in the same home pool of 3.8%. While our Q1 results were not significantly impacted by the spreading COVID-nineteen 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-nineteen 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 are in this unprecedented and challenging environment. We continue to be fully operational and our teams are performing at a very high level while implementing enhance 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, and 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 are 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 off through May. Pricing decisions remain fluid. And 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 2nd 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's 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 2 weekends, we had over 9,500 physical showings, Which represents nearly 6 distinct tours per available home over just 4 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 are in 2020. In addition, April retention was very good with move outs 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 2nd quarter leasing results have been strong. So we recognize the uncertainty of the current environment and are closely monitoring all operational metrics. Now I will address 2nd 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 1st 5 days of the month remain strong As we have collected approximately 82% of rent due, which is tracking with the 1st 5 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 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-nineteen related collection issues on chargebacks and move outs. Finally, from a portfolio management standpoint, we sold 4 10 homes in the Q1 for approximately $80,000,000 We have 960 homes held for sale at quarter end. Closings in April continued to be strong as we sold 60 homes for approximately 14,000,000 have an additional $28,000,000 of dispositions in escrow. In summary, While the early Q2 results are encouraging, we recognize a significant uncertainty in this COVID-nineteen environment and we'll remain vigilant as we move forward. Will now turn the call over to Jack. Thank you, Brian, and good morning, everyone. Let me start out by are discussing our Q1 external growth activity and then I will provide some context for our current plan and our longer term view in light of COVID-nineteen. In the Q1, we added 656 homes to our platform for a total investment of approximately $175,000,000 consisted of 401 homes delivered through our proprietary AMH Development and National Building Programs have 2 55 Homes Acquired via Traditional Channels. This was in line with our projected pace of $800,000,000 to $1,000,000,000 have a 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 will be able to reserve capital and liquidity at this time. Given the uncertainty in the housing market, there is less visibility on valuations. Will 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 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 see 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 1,012 100 Homes, down from our original guidance of 1200 to 1500 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 are without being reliant on housing market conditions. Through this program, we control quality, design and finishes, are in the range of locations, pricing and volume of deliveries, and we are the only platform in the single family rental home sector 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. This helps you better understand this important initiative. Now, I will turn the call over to Chris. Thanks, Jack. In my comments today, we'll very briefly review our Q1 operating results, update you on our balance sheet and liquidity position can conclude with some wrap up thoughts around our business and operations in the COVID-nineteen environment. Starting off with our operating results, Simply put, we had a great Q1 of 2020, generating net income attributable to common shareholders of 20 are $200,000 or $0.07 per diluted share. On an FFO sharing unit basis, we generated $0.29 of core FFO, are participating in the call center, representing a 7.4% increase over prior year and $0.26 of adjusted FFO, representing a 7.3% increase are over prior year. And turning to our balance sheet. As we've discussed many times before, we have the only have invested in weighted balance sheet in our sector, which has never been more important than now. We've maintained conservative leverage levels, credit a strong liquidity profile and cultivated access to multiple sources of capital to grow our business over the years as well as weather and economic downturn. Coming into the pandemic, at the end of the Q1, we had approximately $3,000,000,000 of total debt with a weighted average interest rate of 4.3% have a weighted average term to maturity of 12.5 years. Our net debt to adjusted EBITDA was 4.9 times, are well below our internal leverage target of 5.5 times. And as a reminder, we don't have any debt maturities other than recurring are in line with the financial results. Turning to our liquidity. At the end of the quarter, we had $33,000,000 of cash on hand And only $105,000,000 outstanding on our revolving credit facility, which provides the total revolving capacity of $800,000,000 Additionally, during the quarter, we generated approximately $76,000,000 of retained cash flow, which we define have adjusted funds from operations after common distributions and hold 4 10 properties generating $81,000,000 of net proceeds. Have a more current update. At the end of April, we had approximately $30,000,000 of cash on hand with no changes to total debt outstanding during the month. Also during the month of April, we sold an additional 60 properties generating approximately $14,000,000 of net proceeds. And as Dave mentioned, we've upsized our previously announced strategic joint venture institutional investors devised by JPMorgan Asset Management can now provide a total of $625,000,000 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. And finally, turning to the remainder of 2020. As covered in yesterday's release and supplemental information package, Given the unprecedented nature of the COVID-nineteen crisis and uncertainty surrounding its impact to our residents and business, We've withdrawn our 2020 guidance until we have more clarity into the impact 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 by American Homes' Rents' ability to both weather the COVID-nineteen 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 have been participating since 2015 and in the longer term as we expect a pattern of de year renovation as people seek housing alternatives away from city centers are in single family detached residences. 2nd, our portfolio is diversified across 35 markets with no single market are 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 are based on links of local shelter in place orders and composition of local employment industries. 3rd, relative to many other portfolios, have a high credit quality and more resilient tenant base with the majority of our households having 2 working adults providing greater employer diversification, have 1 or more children and an average household income of approximately $100,000 per year, which we can see benefiting our early collection results As a reminder, our reported collections numbers reflect actual cash payments received are without application of security deposits compared to historic collection levels without any modifications for payment plans, abatements or otherwise. And 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 safely weather the COVID-nineteen 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-nineteen pandemic. However, until then, we wish everyone health and safety. We would like to extend a special thank you to our entire team, including over 1300 employees across the country, all of whom are working are ready 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 are safe at home. That concludes our prepared remarks, and we'll now open the call to your questions. Operator? Thank you. At this time will be conducting a question and answer session. 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? Yes, this is Dave. The CARES Act, if you look at our tenant base, our tenant base is Significantly, individuals that are good color. And I am at this point believe that a number of them may have We don't have actual clarity into each of our tenants that have paid rent. Brian and his team have had significant conversations with those that and it's a very few number That have called in regarding hardships, and we've got a little more clarity there. But those that have paid rent, no, I don't have Clarity on exactly how many of them have received assistance to the CARES Act. Keep in mind that the stimulus Payments did go to most of our tenants and most people in the United States. But the other provisions, no, I don't have And then just on the development yields and the development schedule that you guys provided and 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? And relative to those assets that you're developing, I guess, where are deals 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 are brand new properties, so you're unlikely to see any HVAC or roofing or much of any maintenance for the 1st 5 years and then even then a lighter level of maintenance from 5 to 10 years and they're going more towards normal after that. So the margin on those would be are 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 the line of Nicholas Joseph with Citi. Please proceed with your question. Thanks. Appreciate the operating update for April and then to May. And 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 Brian. Our April results, we had Rent up on the renewal side of 3.1 percent and then on the releasing side was 3.5 And the offers for renewals went out flat and they went out for really For renewals in the May June time period. But on new leasing, you're still seeing Positive lease over lease prices. We are. We are. And we've had fantastic demand in April and into May. I think if 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 is 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 are gouging, but we are moderately crushing 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. Yes. Hey, thanks, Brian. I wanted to follow-up on, so what percentage of the tenants that you're extending these 0% lease renewal offers. What's the uptake on that for and is that just for leases that are coming up in the next couple of months or could anybody extend at that 0% renewal option right now if they wanted to contact you? It's Brian. The uptake has been very good. The offers went out specifically to residents for the May June time period. We haven't had a lot of inquiries for expirations beyond that, but we're going to be mailing The are distributing the July renewal letter soon and we anticipate those going out at 0% as well. Okay. All right. Fair enough. I also want to ask on the build for rent platform. With the new capital commitments 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 auction a bunch of land or do you how do you source and get that capital? Hey, Buck, it's Chris. Why don't I start with that and then Jack can provide other color if helpful. I I'll 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 $250,000,000 with the potential for it to grow further. So I'd say that upsizing has been contemplated from the start. So Really no major change to the strategy. And 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. And so I would say that the sizing is right in line With that strategy from the start, I also balanced with the fact that one of the other benefits that we talked about commence into our pipeline, where we have access to both public and private high quality long term capital. And Given where we are now, I would say we're very, very proud of this joint venture and what it provides to us from are from a capital predictability standpoint. But generally speaking, it doesn't change anything with respect to the strategy that we communicated last quarter on the venture. 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 Brian. Regarding the profile the employment profile of our resident base, The top category is office professional, business office professional. But if you take our top four categories, It represents almost 2 thirds 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. Secondly, I think in your comments, you mentioned that there are There has been a uptick of folks leaving apartment dwellings for single family rental. So 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? Yes. 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 have delayed home purchases, who originally were planning on buying and now decided to rent. But But 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 Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question. Yes, apologies. So a question on the expense side. I know you guys pulled your guidance, but I think you have to make some outlook for some of the key step items and whether there could be some relief and maybe some have incremental pressure from what you're thinking 30, 60, 90 days ago, maybe some thoughts on maintenance costs, unit terms, retention, etcetera? Thanks. Hi, Haendel. It's Brian. Our retention has been very good. So we're hoping to have a little bit of relief on churn costs, But 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 are going to have to address when this thing really starts to wind down. And 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. And we're not going to know that until we really get into the workout period. That impact is on charge backs for utilities and charge backs for turns. So 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. But The most significant ones are going to surround chargebacks and eCollection related to the COVID-nineteen crisis. Okay. That's helpful. On the retention piece specifically, that number hovered around 70 ish here in the last few quarters. You mentioned the pickup in April. Can you give us a sense of how much? And then 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 be maybe 80%, I know you're already there in certain markets, just curious on the overall Yes, I think our April retention is 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 and retention. The difficulty during this time is it's hard to really define how many you're staying because they Because of the coronavirus pandemic and how many are more healthy, normal renewals. But if you want to get to an absolute target, it's hard for me to say, but I do know that we have room for improvement. Got you. That's helpful. And then one last follow-up. I'm sorry if I missed it. Did you guys mention that you offered any concessions anywhere in the So in April May, if so, where and how much? Thank you. Yes. 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 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 are with Morgan Stanley. Please proceed with your question. Hey, good morning. And look, I appreciate the additional color on the leasing A quick 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 Brian. Yes, It's roughly 70, 30, 2 thirds, 1 third. Okay, great. Helpful. And 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 I'll 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 are scheduled out by quarter. You go to Page 21 of the supplemental. You can get all the numbers right there. You'll see our lease expirations by quarter for the balance of the year and even into next year. And you can use that based on The spread to be provided on a rolling 5 quarter basis as well, a little bit earlier in the supplemental in the same home section. And you can use those to kind of triangulate around how spreads are rolling on and off per quarter and then use a little bit of Brian's thoughts on the second quarter can apply that to our 2Q expirations as well. Got it. That's very helpful, Chris. We'll follow-up on that offline just to make sure I have a better understanding. But thank you guys for the color. That's all I have. Thanks, 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 Just kind of given the balance you're trying to strike between being Yes, we're watching it very closely. This is Brian. We're watching everything very closely at the market level. The 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 open back up, how quickly people get back to work and things start to get to The new normal, I guess. We're watching it 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. Are welcome. Thank you. Our next question comes from the line of John Pawlowski with Green Street Advisors. Please proceed with your question. Good morning. Thanks for the time. Brian, sticking on the re leasing in April and heading into May, everything you see on the ground acknowledge that the total portfolio is strong right now. Are any markets would you expect any markets to put up negative re leasing spreads in 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 will 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, We're still getting nice rent increases. I think that's a testament to the deployment mix of our tenant base. We're just not that heavily concentrated. But Raju still would probably be the one that we're watching maybe most closely. Yes. John, if I could just add, this is Chris. It really just brings to mind again the importance of a broader geographic diversification in our portfolio, right? And the fact that we don't have any single market Greater than 10%. And as much as we talk about Houston, Houston is less than 6% of the portfolio. So as we watch things closely, To the extent that there are one off markets here and there that are more significantly impacted, whether it's Houston or based on the shape of recovery at the local market level, Yes, we feel good about and really like the diversification of the portfolio helping to smooth out and insulate, I think, as many of the single market moves. Yes. No, just understanding the distress points and if Houston is not even flirting with negative territory right now, it bodes well for The longer term outlook for the portfolio. Maybe, Brian, on a market like Vegas and Phoenix, are pushing re leasing spreads 8% and almost 10%. Is it a fair read that there's given the long length to say there's plenty of embedded growth in some of these hot markets and even if market rent growth went flat for the next 2 years, you would still be pushing 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 I topping the strong release and spreads at Phoenix in 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 see a complete mark to market. So 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 see a little bit more conservative to preserve occupancy, so 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 and 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 transparency on the disclosure. What I want to ask about, not to change the tone, but I want to ask about capital allocation. So obviously, you have some will build our own acquisition pipeline. You have the store capital and your stock was at 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. And the other question I have is on preferreds. I know they're not callable for like 2021, but there were a few for the period were yielding almost 9%. Is there some potentially where you can just buy them and hold them on your books? Hardik, it's Dave. And those are all great questions. This pandemic has gone through a number of cycles in a very, very short period of time. And you did properly articulate that for a couple of days. Preferreds were at very, 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 And we are in constant contact with our Board as to strategy as well on a weekly basis And the primary discussions are capital allocations. And this is an unprecedented time And the length of this event and the impact of this event It was hard to measure in the various earliest days. And 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 Builders Program. As we've gotten more clarity in April May, It's given us the ability to continue with a very attractive program to us and as a development program. And today, the opportunities on preferreds and both sets of debt, public debt as well as CMTS debt, are not trading at the same attractive yields. But when they were, we were in the early days and we were really are 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, but just focusing on the development platform, I think people talk about cap rates a lot and it kind of muddies the fixture. I like to think about it on IRR basis, especially because buy a home and 15% of revenue could just be CapEx. It could be a great home, great location, but even after renovation, it could have a high CapEx because it's 30 years old. Can you walk us Through the difference, the powerful return you can get on a brand new home. So the CapEx load is not going to be that great for at least 10 years It's roughly I haven't reviewed it recently, but it's my recollection is $2,200 Per year per home. And if you reconcile back and take out Most of the HVAC costs and roofing costs and garage doors and All the things that you are likely not to see, repainting exteriors and That type of thing, you get to a plus 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 are in the 1st 5 years and then in 5 to 10 years and then thereafter to start migrating towards the 2,200, but it is a much better return. Any specific number that number could be like $1,000 versus $2,200, 1500? What's the range kind of? If I had to put a number on it, it's it will be a different number 10 years from now, both on the 2,200 and whatever I write right on it. But I would say in the $1400 to $1500 range comparatively. Hardik, it's Dave. And 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, but the difference between our investment And market when the homes is completed, does exist. And so there's really 2 benefits here, Downside protection, well, there's 3. Downside protection, you got better economics and you got a better asset just long term that people Thanks, guys. That's really comprehensive. And If you'll indulge me, I really want to focus on proprietary self leasing technology because it's something that a lot of people struggle with and it looks like you've got it right. Credit to Brian and his team. Can you talk about what makes it different and what is the problem that you're able to solve that others or other vendors have not been able to solve? Hi, Hardik, it's Brian. We're proud of that platform. Just as a point of reference, we went to Let Yourself in platform back in 2013. We have 7 years of experience with this. And the real value of the platform, not only is are 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 prepared to available to talk you through the access process. And then there's a very clean handoff to our sales team, local sales team, who's going to get into contact with you while you're in the home. And we can really design kind of customize the number of 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. Plus, we just have a lot of experience doing it. Are nearly 100% on self-service access. That's great. Thank you so much for answering my questions, guys. Appreciate it. Thank you, Arne. Thank you. Our next question comes from the line of Ryan Gilbert with Citi. 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 We're checking some of those numbers. But Matt had in his prepared remarks, We have reduced the number of deliveries in 2020 slightly. And today, it's somewhere between $1,01200, but It looks like Chris may have gotten I found the numbers on your direct question. But there is a slight reduction year over year and Those will be those additional properties that we're not going to deliver this year will flow into future years. Chris, yes. Ryan, it's Chris. Let me add just kind of a little bit of color 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 That doesn't mean that there were not transactions that were already in process Either under contract or in escrow. And just to give you kind of a gearmark for the dollar associated with that, that will go out throughout the remainder of this year, it could be about, call $60,000,000 to $65,000,000 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 $2,000,000 to $250,000,000 or so, something in that range. And then as we've spoken about before, our earmarked for this year for investment into the pipeline For future year deliveries coming into the ERX station, that was about $150,000,000 or so into that component of the program. Deployed about $50,000,000 there in the Q1, which leaves us probably about $100,000,000 give or take for the balance of the year into Our future pipeline investments. So all told, that's somewhere right around $400,000,000 for the balance of the year. Okay, got it. Thanks. Very helpful. And I guess just back to your 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 nonpaid in April, how we should be thinking about that flowing into expense also? Ryan, 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. So they're speaking with them Through wellness checks, we had a campaign where we were calling those who paid on time to thank them The feedback that we're getting is The fact that we've been flexible by relaxing late fees and allowing people to kind of pay and match their 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 are 4% of our resident base. And a lot of those are discussions on I need a little bit more time. I'm waiting for Someone's going to check, somebody for some stimulus. So we're working very closely with them. The extreme cases and they're are 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, but that number is fewer than 200 cases. So it's hard for me to say exactly what the collections are going to be on that remaining 5% But we are working very closely with them to determine the best resolution. And then, Ryan, in terms of how we treat things from a bad debt Our policy always has been to recognize both revenue and in that 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 collection process, both each of our tenants, like Brian 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 in bad debt ended up tracking somewhat similar to cash basis collections. Got it. Thanks very much. Appreciate it. Thanks, Troy. Thank you. Our next question comes from the line of Todd Cinder 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, I guess 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 Brian. So I think you're referring to concessions on new leases. There have been promotions that we've run-in the past, dollars 500 off 1st 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 going using Confessions are the tool, but 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 the neighborhood. Our pricing It's looped into our pricing analytics team and they're asset specific. So I don't see a widespread use of it in the near term. Okay. So dollar amount and then it would be by market by market? Yes, neighborhood by neighborhood even. Okay. That's helpful. Thank you. Thanks, Tom. Thank you. Our next question is a follow-up from the line of John Slough with Green Street Advisors. Please proceed with your question. Thanks for taking my follow-up. Jack, can 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 lockdown and they're quicker to have come back online in terms of shelter in place ordinances and a lot of the construction should have been pretty far along from 2020 deliveries. So A little bit more color in terms of what's is it all inspection timing or what's going on with supply chains would be helpful. Yes. Good question. One of the I mean, Washington the state of Washington was the only state We had to completely shut down in that market for a period of time other than securing The construction sites and then in other markets, especially in the 1st month to month and a half of the pandemic, where the government workers were moving from office work to are working from home and trying to determine How to do their job functions while working from home and then in other cases you have public hearings that have to happen that got delayed. So there is some delay On the projects and as far as supply chain, we are 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. So I don't think supply chain has been a big issue today. 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. So the vertical construction timeline is 120 to 150 days. So some of these homes had not commenced their vertical construction. And 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 At 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, but I wouldn't say that either that I'm losing sleep. I'm kind of in between are ready to take questions. 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 For Rent is well positioned to weather these current challenges. Family, Rental fundamentals remain solid and we have the portfolio, operational platform, growth strategy and balance sheet 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 stay safe. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.