Greetings, welcome to the American Homes 4 Rent fourth quarter and full year 2019 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. To ask a question, press star one 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 fourth quarter and full year 2019 earnings conference call. 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 that 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. All forward-looking statements speak only as of today, February 28, 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 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 financial 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, I will turn the call over to our CEO, David Singelyn.
Thank you, Stephanie. Good morning, everyone. In my comments this morning, I will first recap our 2019 objectives and related results. I will provide an update on the trends we're seeing in the single-family rental home industry, discuss our growth expectations for 2020, and finally, touch on our recent announcement regarding the addition of a new trustee to our board. The fourth quarter 2019 represented a strong finish to what was a fantastic year for American Homes 4 Rent. As we entered 2019, we talked about four objectives: operational excellence, consistent and accretive growth, financial strength and flexibility, and superior customer service. Now I'll highlight our successful execution against each of these objectives. First, operationally, we generated excellent results, including strong Core FFO per share growth of nearly 7% and industry-leading Adjusted EBITDA margins. Second, on the growth side, we accelerated our unique development program.
We have built a team with extensive home building experience, primed a pipeline of land, and are ready to take this to the next level in 2020. Third, our fortress balance sheet remains intact. We ended the year at a net debt to Adjusted EBITDA of 4.7 x. As we enter 2020, we expect to retain more than $300 million of annual cash flow, have a fully undrawn $800 million credit facility, have multiple other sources of capital, including a new institutional JV. Finally, our superior customer service continues to improve as our resident surveys and our Google ratings hit their highest levels in 2019. 2019 was a great year. It is just the beginning. From a macro perspective, single-family rental fundamentals remain strong, with high demand and limited supply. We enjoy stable occupancies, rising rental rates, and increased showings per available home.
We're extremely pleased with our diversified national portfolio, where the majority of our markets are characterized by favorable cost of living and taxes. These areas are precisely those that are experiencing high levels of new population and employment growth, with many of the households and jobs moving from higher cost of living areas. In fact, population growth within our markets is more than three times the national average, which is creating demand for new rental housing. We will continue to be part of the housing solution by providing high-quality homes through our development program and traditional acquisition channels. Moving on to talk about growth expectations. Today, American Homes 4 Rent is uniquely positioned to pursue its growth plans through three investment channels. First, through our traditional channels of buying homes. Second, through our relationships with national home builders. Lastly, through our in-house build for rent development program.
As we look to 2020 and beyond, these three channels provide us the ability to significantly ramp up our investment pace. Over the past three years, we created a home development infrastructure to control our long-term external growth that provides flexibility and is sustainable through all housing cycles. In fact, the success demonstrated by our initial results convince us that our in-house development opportunity is much larger than we initially thought. This opportunity provides us high-quality assets, the best returns on investment, and homes our residents prefer. We believe AMH is uniquely able to do this for several reasons. To start with, we have an investment-grade balance sheet, strong cash flows from operations, and ready access to capital, which provides us with the confidence to make multi-year capital commitments necessary for a development program that can require multiple years from sourcing an opportunity to delivering a project.
In order to take greater advantage of these opportunities in the future and to provide additional diversified options of future capital, yesterday, we announced a new joint venture with institutional investors advised by JPMorgan Asset Management. This is an exciting relationship, providing us a new source of attractive long-term capital, as well as another high-quality partner. Today, our one-of-a-kind development program is operating in 15 of our 35 markets, led by an experienced team of senior personnel with significant prior home-building experience. During 2019, we doubled our land inventory, providing us the pipeline for future deliveries. Before I move on, let me share with you a few unique attributes of our development program. It starts with amenities that residents desire, in the home and in the community. Various design considerations and energy-efficient and durable materials reduce future maintenance needs and costs.
We believe the ability to build new rental housing that residents want at an attractive yield is a game-changer for the rental home industry and the housing market, and we have a big lead in this area. Given the favorable economy and compelling demographics and the investments we have made to our platform, we start 2020 firmly in the driver's seat and ready to accelerate our growth. In other words, we're looking at a future with great opportunity, and we've only scratched the surface. This is driving our industry-leading Core FFO growth per share guidance for 2020 to north of 7%. I'd like to take a moment to discuss our recent announcement regarding our new trustee. On behalf of the entire board, I welcome Matt Zaist to our board of trustees.
Matt was President, Chief Executive Officer, and a member of the board of William Lyon Homes, a publicly traded national home builder that recently merged with one of its peers. Matt's appointment reflects our commitment to having trustees with strong relevant experience, as well as our commitment to refreshing the board with diverse and independent perspectives. Matt's experience leading one of the largest housing developers in the United States and his in-depth knowledge of our industry will be invaluable as we expand this important growth area for our company and successfully advance our plan to further enhance shareholder value. Overall, over the past year, we have added three new independent trustees with diverse but complementary experience. Wendy Webb brings investor relations, governance, and large-scale branded real estate development experience from two decades at Disney.
Jay Willoughby brings a deep investor perspective and a keen eye for shareholder value creation through his role as Chief Investment Officer of one of the nation's leading investment managers and as a member of the Sustainability Accounting Standards Board. Now, Matt Zaist brings executive and operational leadership and home-building experience to our board. With that, now I'll turn the call over to Bryan.
Thank you, Dave. We are very pleased with our fourth quarter and full year 2019 results, where thanks to our team's hard work and consistent execution, we met or exceeded our operational targets for the year. Underpinning our strong results is our commitment to the resident experience. Due to our unique focus on engaging directly with our residents, we are able to provide responsive service, in great part because of our ability to see things the way our residents do. This focus has driven our improvement in customer satisfaction, as evidenced by our resident survey results and Google ratings. We are proud of this success and know that resident satisfaction is the key to our long-term strategy as we seek to establish American Homes 4 Rent as the brand of choice for single-family rental housing. For the fourth quarter, occupancy within our same-home pool continued to be strong.
Our average occupied days percentage improved by 40 basis points to 95.1%, and our average monthly realized rent increased by 3.3%, driving a 4% growth in core revenues when compared to the fourth quarter of last year. Beyond these historical metrics, we also track leading indicators for demand in our properties, which gives us perspective on the health of the market. In the fourth quarter, foot traffic, as measured by visits per rent-ready property, increased by 12% year-over-year. On the expense side, total same-home core property operating expenses were up 5.4%, with property taxes increasing by 5.9%. Operating expenses, excluding property taxes, were up 4.9%. Overall, this drove a fourth-quarter year-over-year increase in core net operating income in the same-home pool of 3.2%.
For the full year of 2019, on a same-home basis. A 40-basis-point improvement in our average occupied days percentage and a 3.5% increase in our average monthly realized rent drove core revenue growth to 4.1%. While our core property operating expenses were up 4.9%, expenses excluding property taxes increased by 3.8%, which was inside the range of our expectations at the beginning of the year. Most importantly, our core NOI was up 3.7%, or 20 basis points above the midpoint of our expectations. Our positive top-line performance continued into January with strong same home average occupied days of 95.2% and blended leasing spreads of 3.5%. Occupancy was in line, and leasing spreads improved by 40 basis points over January of 2019. As we look ahead to 2020, we expect top-line growth to be in the 3.2%-4.2% range, driven by strong, sustained occupancy and modest improvement in rental rate growth.
On the expense side, we expect operating expenses, excluding property taxes, to increase 3.2%-4.2%. This reflects wage, labor, and material inflation offset by improvements in execution. Chris will provide additional detail later on the call. As I mentioned in my opening remarks, creating a superior resident experience is at the center of our strategy for our existing portfolio. Many of our homes are in neighborhoods where the market has a proven willingness to pay a premium for upgrades. For example, in certain Houston neighborhoods, we completed kitchen, bathroom, and flooring upgrades that drove incremental returns on investment of 10%-20%. These quantitative results don't fully reflect the improvement in the resident experience, which we expect will drive additional benefit through higher retention. Including hard surface flooring, we plan to invest approximately $20 million-$40 million into our property-enhancing CapEx program this year.
Over time, we expect it to expand, and we believe that these targeted capital expenditures, which have been leveraged for years to great benefit in the multifamily industry, are yet another way for us to drive incremental growth. Finally, our detailed asset reviews drive our asset management process, including identifying appropriate disposition candidates. Strategic pruning of our portfolio allows us to recycle capital into opportunities with better long-term returns. During the fourth quarter, we sold 376 homes for approximately $69 million, which brought our full year 2019 disposition volume to 1,330 homes or $248 million. As of December 31st, we had 1,187 homes held for sale. To close, I am thrilled with the opportunity in front of us, and I look forward to continuing our momentum throughout 2020. Now I will turn the call over to Jack.
Thank you, Bryan, good morning, everyone. As David stated, the big story of 2019 was our AMH Development program. We expect that to continue into 2020 as we ramp up our entire external growth program, including our Development program, our acquisitions from national builders, and our traditional acquisition platform. Our plans call for investing $800 million-$1 billion in 2020. To put this in perspective, we expect to be net buyers of approximately 2,200 homes in 2020, compared to net sellers of 231 homes in 2019. In addition, we expect to continue to expand our land pipeline. Over the past three years, we have tested and rolled out our one-of-a-kind Development program to selected markets across our platform, primarily in the Southeast and Western markets.
Our new development homes are built with the long-term renter in mind, including maintenance-resilient features, as well as floor plans, finishes, and other upgrades known to be desirable to our residents. With the ability to build high-quality homes, create neighborhoods, and concentrate assets, we are opening new avenues to efficiently serve our residents and lower our long-term maintenance costs. We believe that American Homes 4 Rent is uniquely positioned to pursue a development channel for growth. We have tested the product and hired the talent, and we are encouraged by our results and resident feedback. This concept is gaining widespread acceptance, as evidenced by our joint venture announcement. We have a pipeline of land holdings with approximately 5,000 lots currently in place for future development, and we expect to continue to grow this land pipeline going forward.
Our experienced land acquisition team and our proprietary data analytics enables us to strategically identify ideal land opportunities that are within our existing AMH footprint in our high-growth markets. This inventory and additional acquisitions of land will permit us to expand our future development activity. Now moving on to other investment opportunities. While we believe the AMH development program is the best investment on a risk-adjusted return basis, there are still great opportunities in our national builder and traditional acquisition channels. While we are accelerating our investment activities, we will be mindful of the timing of inventory additions to align with market demand and to minimize the impact on other assets in our portfolio. Now let me update you on our expected investment activity for 2020. First, we expect to add between 3,300 and 3,700 move-in-ready homes to our system.
Of these, approximately 500 are designated for joint ventures, and the remainder will be on our balance sheet. Our total on-balance sheet investment is expected to be between $800 million and $1 billion, representing new home additions of approximately $750 million, and increases in land inventory and construction in process of $150 million to feed our pipeline for 2021 and beyond. With our investment of approximately $750 million, we expect to add 2,800 - 3,200 homes to our inventory, of which between 1,200 and 1,500 homes will be from our in-house development program, and the balance will be split between our national builder and traditional acquisition channels. In closing, we are extremely excited with the opportunity in front of us and believe that American Homes 4 Rent is the only platform that is positioned to take advantage of today's favorable market conditions by deploying capital through these three channels.
Now I will turn the call over to Chris.
Thanks, Jack. In my comments today, I'll briefly review our operating results, update you on our balance sheet, provide additional color on our new joint venture, and conclude with a summary of our initial guidance for 2020. Starting off with our operating results for the fourth quarter of 2019, we generated net income attributable to common shareholders of $23.6 million, or $0.08 per diluted share. On an FFO shared unit basis, we generated $0.29 of Core FFO, representing a 5% increase over prior year, and $0.26 of adjusted FFO, representing a 4.7% increase over prior year. For full year 2019, we generated net income attributable to common shareholders of $85.9 million, or $0.29 per diluted share.
On an FFO shared unit basis, we generated $1.11 of Core FFO, which was in line with our expectations, representing a nearly 7% increase over prior year, and $0.99 of adjusted FFO, also representing a nearly 7% increase over prior year. In turning to our balance sheet, we continue to remain in great shape with the only investment-grade balance sheet in our space. At the end of the year, we had approximately $2.9 billion of total debt with a weighted average interest rate of 4.4% and a weighted average term to maturity of 13.1 years. Our net debt to adjusted EBITDA is now 4.7 x, comfortably below our internal leverage target of 5.5 x, providing us with meaningful debt capacity to support our 2020 expanded growth programs.
In terms of liquidity and funding sources going into the new year, our $800 million revolving credit facility remains fully undrawn. We are currently generating approximately $300 million of annual retained cash flow, and we expect to generate between $100 million and $200 million of recycled capital from our strategic disposition program in 2020. Our balance sheet continues to be a key differentiator, which we plan to fully utilize in 2020, uniquely enabling us to accelerate our external growth programs.
However, as Dave and Jack mentioned earlier, we believe that the external growth opportunity, especially from our AMH Development program, is even larger, and we believe that now is the time to capture as much of that opportunity as we can, which is why we are very excited to announce our new development joint venture with institutional investors advised by JP Morgan Asset Management, increasing our access to both public and private long-term capital to expand our development pipeline and capture more of the growth opportunity.
The new JV will start as a $250 million venture with opportunity for future upsizing and be focused on constructing and operating newly built rental homes by AMH Development. AMH will hold a 20% ownership interest with additional economic upside through fees and opportunity for promoted interest. Of note, the venture is structured with an evergreen term, reflecting the long-term alignment of views with our high-quality partner and provides us for the opportunity to earn our promoted interest after construction and initial operation of the venture's properties, creating a unique and efficient opportunity to monetize the AMH Development value creation process without the need to sell assets.
Throughout 2020, the venture will be focused primarily on cultivating its own development pipeline, designed to be incremental to our on-balance sheet development program, with construction deliveries beginning in 2021 and 2022. Although we don't expect any earnings benefit from our new venture in 2020, we are incredibly excited about our new partnership and its longer-term contribution to our outsized growth profile. Finally, I would like to introduce our 2020 guidance, which was detailed in yesterday's release and supplemental information package. For full year 2020, we expect to generate between $1.17 and $1.21 of Core FFO per share in unit. At the midpoint of $1.19, we're expecting an annual increase of over 7%, representing an acceleration over prior year growth. Supporting our range are several assumptions that I'll provide you with more color on.
For our same-home pool, which will include about 45,000 properties in 2020, we expect core revenues growth between 3.2% and 4.2%, which, as Bryan already covered, is based on our expectation for continued strong occupancy similar to 2019. A slight acceleration in year-over-year growth in average monthly realized rent. Additionally, we expect core property operating expense growth between 4% and 5%, driven by a 4.8% -5.8 % increase in property taxes, which represents a deceleration in growth compared to 2019, as we expect to benefit from the new Texas property tax reform and a smaller proportion of our properties undergoing multi-year reassessments in 2020. Outside of property taxes, we expect all other expense line items to increase between 3.2% and 4.2%. To the bottom line, we expect 2020 same home Core NOI growth to be between 2.8% and 3.8%.
Additionally, as Jack mentioned, we expect to invest between $800 million and $1 billion of total capital this year and take into inventory between $700 million and $800 million of homes from both our development and acquisition programs, with the balance of this year's capital deployment representing investment into our further expanded pipeline of 2021 AMH-developed homes. From a funding perspective, we expect to fund this year's growth through a combination of retained cash flow, recycled capital from our disposition program, and leverage capacity from our balance sheet. Finally, we expect 2020 reported G&A expenses to increase between 3% and 4% over prior year. Before we open the call to your questions, on behalf of the management team, I'd like to quickly reiterate our excitement about 2020.
Over the years, we've been working hard and investing to build the most efficient operating platform in the industry, develop our one-of-a-kind AMH Development program, and cultivate our industry-leading investment-grade balance sheet. Our investments are now paying off, and we're excited to demonstrate the power of American Homes 4 Rent firing on all cylinders in 2020. With that concludes our prepared remarks, and we'll now open the call to your questions. Operator?
Thank you. Ladies and gentlemen, at this time, we will be conducting our question-and-answer session. Please limit yourself to one question and one follow-up question per each time that you queue. You may get back in queue if you have additional questions. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would 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 keys. Our first question comes from Jason Green with Evercore ISI. Please state your question.
Good morning. You guys talked about home builders as one of the channels to deliver more homes. I guess previously it seemed like you had tried that route, and it didn't really work. Has anything changed in your thinking in regards to working with home builders to deliver homes?
This is Jack. Thanks for the question. I don't recall it ever not working. We've consistently acquired homes through the National Builder network and continue to do so. We're just expanding that a little bit. We floated down because our primary investment during 2019 was our AMH Development.
Jason, this is Dave. Let me just add a couple things to that. It's always been, as Jack said, one of our channels. We've used it consistently. I think what you may have heard is that our development program is our primary path. As you see this quarter or at this time, the opportunity in front of us is huge, and we have the capital in place to take advantage of that opportunity. We're going to utilize all the channels available to us.
Got it. Then just on the rate acceleration that we saw in the same-store pool in the quarter, is that attributable to anything specific that you guys are seeing in the market? Is that really just a quarterly trend that we shouldn't really read much into?
Bryan, you want to?
Yeah. Hi, Jason, it's Bryan. I think you're seeing the benefit of some improvements in our execution on renewals. Our renewal rates are really at an all-time high for the quarter. Part of that ties into the improvements in execution on the resident experience and really listening to what our residents want and providing exceptional service. Not only did we improve our renewal rates, we did it in the context of improved retention as well. I think that's the main contributor to that improvement.
Got it. Thank you very much.
Thanks, Jason.
Thanks, Jason.
Our next question comes from Shirley Wu with Bank of America. Please state your question.
Hey, guys. Good morning out there.
Morning, Shirley.
Morning. My first question is a follow-up on Jason's questions on your rates. The renewals were stronger, but the new leases were slightly down year-over-year. As you're setting up for January and you're seeing the blend of leases up 40 basis points, has that continued to come from the renewal side? Or have you seen more strength in also the new side as well?
Yeah, moving forward to January, the improvement in January is largely attributable to the improvement in the renewal rates. Our re-leasing rates were flat for January. What it really shows, too, is that we came into this year from a position of strength on the occupancy side, and we expect that to translate into improvements in rate growth in 2020 as well.
Got it. Okay. Just pivoting now to expenses. Your taxes are 4.8% - 5.8%, lower than previous years on taxes. Just curious in terms of how we should think about that line item moving forward. In terms of tax appeals, your success rate was slightly higher than historical last year. How are you thinking about underwriting your success for this upcoming year?
Yes, good question, Shirley. This is Chris. You're right. Expectation for this year, just as a reminder, is property tax growth in the low 5% range, which also as a reminder, is about 100 basis points of deceleration from what we saw in 2019. Largely coming from some of the benefits we're expecting from the new tax reform coming out of Texas, and then a smaller proportion of our markets or properties experiencing multi-year reassessments in 2020. We are still seeing a number of markets and states experiencing higher increases in assessed values than we're expecting in 2020, which I think is really reflecting just the health and strength there. With that said, as within a year, as you pointed out, we'll challenge where appropriate and aggressively on values through the appeals process.
It's not uncommon in any one year for us to challenge north of 20,000- 25,000 individual property values through our appeals process. I wouldn't expect that to look too far different for this year, but it is early in the year. We'll be monitoring it throughout the year and keep you updated on how the appeals process plays out.
Thank you. Our next question comes from Rich Hill with Morgan Stanley. Please state your question.
Hey, good morning, guys. Congrats on what we thought was a pretty solid quarter and good guidance. I wanted to talk about two things in particular. First of all, the development projects. I completely recognize the benefits of delaying CapEx spend or mitigating CapEx spend, should I say. Could you just walk us through sort of the development yield equation? I know you talked about this in the past, I'd love to have a little bit more color on what the development yields look like and how much the upfront costs for developing a home or maybe a portfolio of homes.
Yeah. The yield or pro forma yields that we come in with are developed much like our traditional homes. You have your pro forma rents and your anticipated expenses, including property taxes as the main one. A slightly reduced repairs and maintenance, actually heavily reduced in probably the first five years. We look at what the yield is after year one and then at year five and then at year 10. By year 10, we're getting to more normalized expenses on the repairs and maintenance. Although still better because we're building them to be maintenance-resistant.
Hey, Rich, it's Dave. Let me add a couple of things to the yield. The yield has obviously got two components. It's got the cash flow that you're going to generate, but it's also the investment equation. When you're building for your own account, you're much more efficient. It's a much more efficient way for us to be able to invest. The cost of the project, the total that we need to invest is less. There's no sales and marketing costs. Development profit is basically a reduction in the investment price. The denominator here is going to be lower. It's going to therefore translate into permanent superior yields. I think the equation's even bigger than that. Not only are the maintenance costs cheaper, but the desirability of the product by our residents is far superior, just because it's built with the resident in mind.
Got it. That's helpful, Dave. Is there a number you can sort of put around the development yield, or is it just there's a lot of different parts that go into it and you're still working through that?
Well, initial yields, including normalized expenses on the repairs and maintenance, is in the low sixes.
Got it. Okay. Helpful. Hey, I wanted to talk about some of the various different regions that you're in. We were crunching some numbers, and it looks like you had some pretty nice revenue growth upticks in markets like Salt Lake City, for instance, San Antonio, and even some of the markets that have maybe lagged, at least by our measure, Nashville and Tampa. Maybe just talk about Salt Lake City, because it looks like a really strong market to us. Is there anything specifically happening there? Because you're one of the only SFR REITs that actually owns in that market.
Yeah. This is Dave. Bryan will answer a couple of those detailed questions. You highlighted something that I think is very important here, and that is we have a diversified portfolio, and as time goes on, we are seeing a number of our markets improve, and we're not reliant on any one market. You mentioned Nashville as a little bit of a lagger, I would tell you Nashville, I'm very bullish on. In Wall Street Journal, it was one of the top two markets for job growth. If you've been in the market, there's cranes everywhere, that's going to be a fantastic market for us in the long term. Specifically, the performance in the fourth quarter for Salt Lake City. Bryan, do you have some numbers on that?
Yeah. Salt Lake City is a very strong market for us. It has been. We're one of the few major owners in the market. It's performed very well from an occupancy perspective and from a rate growth perspective, and that's why we're continuing to invest in that market and hopefully really build that portfolio out. The fundamentals are fantastic. There's a lot of growth in companies moving there and expanding some of the tech companies in the Lehi area, for example. Again, it has all the wonderful fundamentals that you'd want to really drive continued investment.
Got it. Dave, you mentioned about your diversified portfolio, which I completely get. As we think about 2020 and the guide, are there any markets that are specifically driving that guide that we should focus on?
No, I think, our portfolio being as diversified as it is, not any one market is going to move the needle. That's one of the benefits that you have, is that you have Not only do you look at it from an operations standpoint, look at it from a growth standpoint, and you have many places that you can grow. When we built this platform, it's not by accident that we're in 30 markets. That diversification, we're seeing the benefit of it right now.
Got it. Thank you, guys. That's all very helpful.
Thank you.
Our next question comes from Haendel St. Juste with Mizuho. Please state your question.
Hey, good morning out there.
Morning.
Morning.
A few questions from me. First, on the JV, the new one with JP Morgan. I'm curious why you're retaining just 20% and effectively ceding control to your partner on that front. As part of that, is this JV going to be region-specific? I recall your last JV, I think, is a Southeast-focused JV, or is it more of a national program? Maybe some more color on the fees, if you would. Thanks.
Yeah. Haendel, it's David. Good morning. I'll start, and then I think on some of the specifics on the JV, Chris can follow up. The JV, first, is an exciting additional form of capital for us. We've been very intentional in building multiple channels of capital, which, looking at this week, I'm very grateful that we have those channels. The current JV and the discussion about control. Yes, we have a 20% ownership interest. You're correct on that. The control provisions, we are the manager. We have the decision-making authority on this joint venture. There are some major events that both parties weigh in. The other piece of this joint venture that is very unique is that it is an evergreen venture, meaning it doesn't have a cliff at a given time where assets have to be sold, et cetera.
I'm very excited to have JP Morgan as one of our partners. I think they bring a lot to the table as well as the capital that they bring.
Haendel, this is Chris. To some of your other questions, no, there are no geographic restrictions with respect to this venture. With that said, there are mechanisms in place in the venture as we think about to ensure that we have appropriate levels of diversification to our pipeline and the ventures in terms of geographies, project types inside into this, is that the venture we will be cultivating kind of an incremental, as I would think about it, development pipeline to feed the venture that is on top of everything that we're doing on our balance sheet. In terms of fees, for obvious competitive reasons, I probably shouldn't comment too much on the fee specifics. I would say there are fee streams back to us for all the services that are being provided to the venture, management, development, et cetera.
Fees are a positive, scale is a positive. Again, I would reiterate Dave's point that some of the really unique upsides to this venture for us is the fact that it is evergreen capital, which is very, very important, and then the really unique aspect of our ability to be able to crystallize the promote inside the venture without needing to sell or liquidate any of the assets, which is quite frankly, going to be game-changing for us in terms of our ability to monetize a portion of the tremendous value that's created by our development program.
Okay, fair enough. Appreciate that. Maybe some more on the external growth and capital deployment comment. You mentioned, I think, $750 million of development spend planned for this year. I think that's a bit higher than the $700 million outlined from last quarter. I'm curious what the driver on that front is. You also previously talked about $500 million of dispositions in 2019 and 2020 as a key source of funding for that development spend. I guess I'm curious what your view is on the disposition market and what the backup plan is if there is a seize up in the transaction market. It sounds like you're comfortable using your balance sheet and levering up if need be. Just any comments on those two fronts. Thank you.
Yeah. Haendel, it's David. Let me see if I can unpack that, because that's like 10 questions. Let's start with the sources side. The one thing I'd like to just make sure you're clear on is that, in 2020, we do have million dollars, and all of that capital and funding is already in place, whether it's going to be retained cash flow or our ability to tap the debt market between where we currently sit at a 4.7x EBITDA ratio to our desired place to be at 5.5x, as well as what you mentioned, sales proceeds of $150 million. That's where our guidance is for this year. I'll let Jack talk about our portfolio. We've got about 1,200 homes in the disposition pipeline right now. We're very comfortable in our ability to be able to fund all of our investment opportunities.
As you indicated, there's a slight increase in the 2020 guidance. It is between $800 and $1 billion through all three investment channels. On dispositions, Jack, you might want to go through.
Yeah. Haendel, I think where you got the $500 million was the total amount of dispositions that sales proceeds from the homes held for disposition. We expected $200 million last year and $200 million this year. We ended up with $250 last year, and now we're expecting $150 this year. We just front-loaded it a little bit. The other $100 million will come as homes vacate. Unless we sell them in a bulk sale, we generally wait till the homes vacate and then sell them. That could be to where maybe a little bit of the confusion was.
Yeah.
The disposition market is fantastic. I think there's pushes and pulls on that. We're able to sell them fairly fast. I think everybody's seen that the inventory of available homes for acquisition, it has shrunk up a little bit.
Haendel, the $150 million of guidance is about 2/3 or 800 of the 1,200 homes that are there. As Jack indicated, unless we can sell it to another operator. There's a little less clarity as to the timing of that 150. That's our estimate for this year.
Got it, appreciate that. Just to clarify, I think you previously had talked about a cost of $275,000-ish, I think, Jack, last quarter for the development cost per home. Is that still the ballpark range for us to be thinking here?
Yeah, $265-$275 is a pretty good range.
Okay. Thank you, guys.
Thank you. Our next question comes from Rick Skidmore with Goldman Sachs. Please state your question.
Good morning. Thank you. Just going back to the development program, looks like you delivered a little bit more than 100 homes in the fourth quarter. Is that the right number? What happened with regards to, I think, the initial guide for 2019 was approximately 800. As you look at 2020, getting to that roughly 3,000 homes delivered, how do you think that path looks through 2020, evenly over the quarters through the year or back-end loaded? If you can just give a little color on that. Thank you.
Let me take the beginning, this is Dave, about the guidance for 2020. A little bit about 2019. As we enter into 2020, the big difference between 2020 and 2019 is our land inventories are significantly higher going into this year than they were last year, giving us clarity on our ability to deliver homes. The 3,000 homes that we talk about are 3,000 homes through the three channels. The majority of that is through the development channel, but it's not all of it. The deliveries will be basically pretty different than last year. They'll be more equalized between the first half and the second half of 2020.
With that said, we do try to deliver as best we can into the rental season. It may be weighted a little bit in the second and third quarter, I think you'll see a lot more even distribution in 2020 than you did 2019. The other piece about 2020 versus 2019 is 2019, when we entered the year, we had, as I said, less land. At that time, there appeared to be more availability of vacant developed lots to be able to acquire, which you can develop quickly. Today, we get better yields with land itself. Now that we have the land and have land developed, there's a lot more clarity on our ability to deliver into 2020.
With that said, one thing just to mention, when we talk about our $800 million-$1 billion of investment, a piece of that investment is to grow our land inventory even further. 2021 will be at a higher delivery pace than 2020, because land is the key.
Yeah. One other thing. I'm not sure where you got the 100 homes delivered in the fourth quarter. We had added 341 new homes, 108 through our national builder program and 233 through AMH Development.
Got it. Thank you. Just on the new home, the rent that you expect? Thank you.
The rents are slightly better than we expected. They're leasing up faster than our existing inventory on turns, and the construction costs are right where we expected it to be.
Thank you.
Thanks, Rick.
Our next question comes from John Pawlowski with Green Street Advisors. Please state your question.
Thanks for the time. Dave, do you expect any additional changes to the board over the next year?
That's hard to say. We will be evaluating the board for a potential additional trustee. Whether it happens in 2020 or 2021, I'm not sure. When we went out this time, we were looking for two things. One individual to complement the skills of what we already have on the board, and that was in the home building arena addition. He was in the boardroom yesterday, and his contribution was very valuable. The other we're looking for is, as you know, we're a state of California corporation or entity. We're a trust, actually, but an entity. We will need to add another female to our board in the next two years. Whether that happens this year or next year, I don't know.
Understood. Bryan, I wanted to get your thoughts on a market like Charlotte, which has, in terms of rent and occupancy trends, it has lagged in the last several quarters versus the same store average. From an outsider view, the Charlotte economy is still very strong. Structurally, in your opinion, what makes Charlotte a bit weaker market than like a Phoenix or a Vegas right now?
Yeah. Charlotte's a very good market. I think what you're seeing is the effect of a lot of supply. There's competition there. There's also a reasonably high amount of new development. Charlotte, we've seen some nice improvement coming into 2020 in Charlotte, so we have good momentum there. It takes a little while for that growth and supply to be absorbed. As we've mentioned before in other markets, but over the long run, we're very bullish on the Charlotte economy and our portfolio there.
I guess why hasn't supply picked up in, or competitive supply, repurposing? Why haven't your competitors started to try to steal some of your launch in Phoenix and Vegas when rent growth has been so darn good for the last few years?
Is the question, why is the supply not affecting the growth and occupancy in those two markets?
If supply is picking up in Charlotte, why isn't supply picking up in Phoenix and Vegas when the results have been really good?
Yeah. Vegas is fairly supply-constrained due to just the geography and the heavy BLM landholdings. There's a tremendous amount of growth coming in from California to Vegas and Phoenix as well. I think that the demand for housing is really outpacing supply in those two markets, where it's not exactly the same case in Charlotte.
Okay. Thank you.
Thanks, John.
Our next question comes from Hardik Goel with Zelman & Associates. Please state your question.
Hey, guys. Thanks for taking my question.
Go ahead, Hardik.
I actually had a couple. Just on the revenue guidance, right? If I look at your last year's guidance, you said 3.2%-4.2%. You're coming in at 4.1%. Now I see your renewals are probably the best they've been since IPO. Correct me if I'm wrong on that. The 4.8% is pretty high. It's been a goal to get that up. Even if I assume that 4.8% comes down a little, I have to assume a lot of deceleration and then flow that through to the same through pool to make sense of your revenue growth guidance. I'm coming in closer to the high end. Can you give me some color on why that is?
Sure, Hardik. It's Chris here. Let me start with some color. You're right. 2019 was a really strong year, and one that we're proud of. I would also keep in mind, though, if you think about the various different components driving the revenue line, one piece in 2019 was the fact that we had about 40 basis points in occupancy pickup or improvement over 2018. A portion of 2018 was below a stabilized level on occupancy that we picked up year-over-year from 2018 - 2019. If you were to normalize for that 40 basis points, you would see that 2019 revenue growth was at 3.7%, still very strong and very healthy, and very similar to what we're expecting in 2020, 3.7% at the midpoint, which is a strong level of growth.
Got it. That's helpful. Just a second one. If I look at the second quarter transcript, I have Jack saying that you guys will deliver 700 - 900 homes in the back half of 2019. As we sit here today, it's coming in below the low end of that, even with the 340 or so homes you did this quarter. Now you're telling us that there's going to be 3,000 homes next year, which is more than triple what you did this year. What gives you confidence that is achievable? Should that guidance range be wider? Is there more volatility than we're? Am I just thinking about this wrong?
Yeah. This is Jack. Thanks for the question. As Dave mentioned earlier, the back half of the year was burdened a little bit by the lack of availability of what we call VDLs or vacant developed lots, which is basically lots ready to build that you can deliver within 90-120 days. I had some field people that were maybe more optimistic than they should have been. If you look at the 2020 guidance, we're not delivering 3,000 homes. That's through all three channels, including the national builder program, which is about 700-800, our traditional acquisition program, which is about 900, and then the balance through our in-house development program.
Got it. If you'll indulge me on R&M, just really quickly, what's going on there? As a percentage of revenue was higher than both 2018 and 2017 on the same store pool.
The increase that we posted. It goes back to our evaluation going into that fourth quarter. One of our main objectives was to preserve occupancy during, really traditionally the slow season, where we lost occupancy in the past. We had a couple of different levers to pull on the leasing side. For example, you could increase commissions, you could introduce a concession program, which was a strategy employed by some of our institutional competitors. Third, we looked at improving some of the cosmetic appeal of our homes. We chose to do that, and it helped drive our improvement in occupancy, the pickup of 40 basis points. About half of the increase in R&M was due to incremental paint and landscaping work to improve the aesthetics of these homes. We're really managing it towards the ultimate improvements in cash flow. That program was successful.
I liked it because it helped us preserve rate and put us into a really good position coming into 2020. More importantly, if you tie it back to the full year expense performance, both our increase in R&M, and more importantly, our increase in operating expenses, excepting property taxes, were in line with our expectations at the beginning of the year.
Got it. Thank you so much, guys, for answering my questions.
Thanks, Hardik.
Our next question comes from Jade Rahmani with KBW. Please state your question.
Thanks very much. I was wondering if you could talk about how occupancy and rent growth might perform in a modest recession. Have you gone back and looked at any precedents to give some kind of baseline of expectations? I would assume that there'd be a modest uptick in bad debt expense pressuring occupancy, and that rent growth would moderate to maybe low 1%-2% range.
Yeah. Jade, it's Dave. Thanks for the question. The benefit of having a diversified portfolio, if you look back at history, is that over the last 30 years that we've looked, we have never seen in one year where rental rates have declined on a national basis, and occupancy on a national basis has always been in the 90% range. Can't be said necessarily on any individual market, because some markets have had some dips, but not on a national average. The benefit of having a diversified portfolio is that we've spread that risk across the entire nation. As you indicate, I know there's some concern in some of the residential companies right now with some of the potential impacts on the coastal states. On the East Coast, yes, we have a little bit of exposure there, but we've got exposure spread across the entire country.
On the top line of having the occupancy there and the ability to maintain our rates and even grow our rates, history tells us that we will do fine there. On the collection side, there potentially will be a small uptick in that. Let me remind you that our tenants have the ability to pay. Our average household is $100,000 of income, and that is more than our three times as our guidelines. It's closer to five times. Will there be one or two that we need to work with? Yes. We'll work with our tenants. That's our general.
The goal is to work with them and not evict them, but there will be a little more bad debt, potentially. Again, we haven't gone through the cycle, but history does tell us that the rent line will be fine on a diversified portfolio.
Turning to the joint venture, is the joint venture going to be pursuing a different build-to-rent strategy than what you are doing on the balance sheet? How big does that capital pool have the potential to be? Will you also be using financial leverage?
Yeah. It's Dave again. No, it's going to be the same development strategy. However, we look at our capital needs and first fill up our balance sheet, then what we do is look and make sure that we've got adequate capital to meet our investment goals in total. It is going to start in the $250,000 range, yes, it does have the ability to upsize, it will have leverage at some point as we build out that joint venture.
Lastly, a question I get a lot from investors is about dividend growth. Do you anticipate increasing the common stock dividend this year? Over what time period would you expect there to be steady growth in the common stock dividend?
Dividend discussion is an interesting discussion. One of the benefits that we have on our growth program, $300 million or a little more than $300 million of cash flow from operations. Today, we have very good opportunities to grow our portfolio, which is enhancing the value to our shareholders. That reinvestment program is a very good use of the funds. You're aware, as we are aware, that there is an obligation to pay out a minimum level of distributions in order to retain your REIT status, and it's tied to your taxable earnings. The taxable earnings for us is not significantly different than our book earning, but it's partially sheltered by net operating losses, which are disclosed in the footnotes to the financial statements.
Okay, thanks.
Thanks, Jade.
Ladies and gentlemen, there are no further questions at this time. I'll turn the call back to David Singelyn for closing remarks.
To reiterate that we're excited about our opportunities in 2020. Let me remind you that the single-family rental fundamentals remain very strong, and our investment-grade balance sheet and best-in-class operating platform and our one-of-a-kind development program give us the ability and momentum to continue our strong growth regardless of the economic cycles that we're in. Thank you for joining us this morning and look forward to talking to you next quarter. Have a good day.
Thanks. This concludes today's conference. All parties may disconnect. Have a great day.