Invitation Homes Reports Fourth Quarter 2019 and Full Year 2019 Results

DALLAS, Feb. 18, 2020 /PRNewswire/ -- Invitation Homes Inc. INVH ("Invitation Homes" or the "Company"), the nation's premier single-family home leasing company, today announced its fourth quarter 2019 and full year 2019 financial and operating results.

Fourth Quarter 2019 Highlights and Full Year 2019 Highlights

• Year over year, in Q4 2019, total revenues increased 2.7% to $444 million, total property operating and maintenance expenses increased 5.3% to $168 million, and net income attributable to common stockholders increased 107.0% to $52 million, or $0.10 per share. In FY 2019, total revenues increased 2.4% to $1,765 million, total property operating and maintenance expenses increased 2.2% to $670 million, and net income attributable to common stockholders increased by $151 million to $145 million, or $0.27 per share.
• Year over year, in Q4 2019, Core FFO per share increased 6.1% to $0.32, and AFFO per share increased 10.8% to $0.28. In FY 2019, Core FFO per share increased 6.2% to $1.25, and AFFO per share increased 8.9% to $1.03.
• In Q4 2019, Same Store NOI grew 3.8% year over year on 4.3% Same Store Core revenue growth and 5.3% Same Store Core operating expense growth. In FY 2019, Same Store NOI grew 5.6% year over year on 4.5% Same Store Core revenue growth and 2.5% Same Store Core operating expense growth.
• In Q4 2019, Same Store average occupancy was 96.0%, flat year over year. In FY 2019, Same Store average occupancy was 96.3%, up 50 basis points year over year.
• In Q4 2019, Same Store renewal rent growth of 4.5% and Same Store new lease rent growth of 1.6% drove Same Store blended rent growth of 3.4%. In FY 2019, Same Store renewal rent growth of 5.0% and Same Store new lease rent growth of 3.8% drove Same Store blended rent growth of 4.6%.
• As previously announced, in December 2019, the Company closed a bulk sale of 708 homes in Nashville, its smallest market by home count, for gross proceeds of $210 million. With this transaction, Invitation Homes leveraged strong investor demand for single-family rental homes in Nashville to sell 89% of its portfolio in the market, as part of a strategic decision to exit Nashville and focus on other high-growth markets where Invitation Homes has greater scale and density.
• Net debt / annualized adjusted EBITDAre decreased from 9.0x at December 31, 2018 to 8.0x at December 31, 2019.
• As previously announced, Blackstone completed the exit of its position in Invitation Homes. After a secondary offering of 57.6 million shares of Invitation Homes common stock in November 2019, and distribution of 0.3 million shares to its partners, Blackstone no longer beneficially owns shares in Invitation Homes.

President & Chief Executive Officer Dallas Tanner comments:  "2019 was an excellent year for Invitation Homes, marked by Same Store NOI growth near the top of the REIT sector, further refinement of the best-in-class resident experience we provide through ProCare, significant portfolio enhancement through capital recycling, completion of merger integration activities with greater synergies than anticipated, and meaningful reduction in balance sheet leverage.  Furthermore, we ended 2019 with strong occupancy, positioning us well operationally for 2020.

"We are encouraged by the momentum we are carrying into 2020, and see further opportunities for both organic and external growth.  Fundamentally, supply and demand trends remain favorable across our high-growth markets, and we believe our refined operating platform, high-quality portfolio, and scale efficiencies position us to execute better than ever before.  As we continue to raise our already-high bar for resident service, we'll also seek to grow our home count in 2020 if today's accretive acquisition opportunity persists as expected.  In addition, we'll continue to build on growth initiatives related to ancillary services, leasing efficiency, and value enhancing capex in 2020.

"With these growth drivers at our back, we expect FY 2020 Same Store NOI growth of 4.25% at the midpoint of our guidance."

Financial Results

Net Income (Loss)
Net income in the fourth quarter of 2019 was $0.10 per share, compared to net income of $0.05 per share in the fourth quarter of 2018.  Total revenues and total property operating and maintenance expenses in the fourth quarter of 2019 were $444 million and $168 million, respectively, compared to $433 million and $159 million, respectively, in the fourth quarter of 2018.

Net income in FY 2019 was $0.27 per share, compared to a net loss of $0.01 per share in FY 2018.  Total revenues and total property operating and maintenance expenses in FY 2019 were $1,765 million and $670 million, respectively, compared to $1,723 million and $655 million, respectively, in FY 2018.

Core FFO
Year over year, Core FFO in the fourth quarter of 2019 increased 6.1% to $0.32 per share, primarily due to lower adjusted G&A and property management expense and lower cash interest expense.  As previously announced, and as included in FY 2019 guidance, Core FFO in the fourth quarter includes a $2.1 million favorable timing impact related to accelerated cost within Other, net, in the third quarter of 2019.

Year over year, Core FFO in FY 2019 increased 6.2% to $1.25 per share, primarily due to an increase in NOI and lower cash interest expense.

AFFO
Year over year, AFFO in the fourth quarter of 2019 increased 10.8% to $0.28 per share, primarily due to the increase in Core FFO described above and lower recurring capital expenditures.

Year over year, AFFO in FY 2019 increased 8.9% to $1.03 per share, primarily due to the increase in Core FFO described above and lower recurring capital expenditures.

Operating Results

Same Store NOI
For the Same Store portfolio of 70,799 homes, fourth quarter 2019 Same Store NOI increased 3.8% year over year on Same Store Core revenue growth of 4.3% and Same Store Core operating expense growth of 5.3%.

FY 2019 Same Store NOI increased 5.6% year over year on Same Store Core revenue growth of 4.5% and Same Store Core operating expense growth of 2.5%.

Same Store Core Revenues
Fourth quarter 2019 Same Store Core revenue growth of 4.3% year over year was driven primarily by a 4.0% increase in average monthly rent and a 10.8% increase in other property income, net of resident recoveries.  Same Store average occupancy was 96.0%, flat year over year.

FY 2019 Same Store Core revenue growth of 4.5% year over year was driven primarily by a 4.1% increase in average monthly rent and a 50 basis point increase in average occupancy to 96.3%.

Same Store Core Operating Expenses
Fourth quarter 2019 Same Store Core operating expenses increased 5.3% year over year, driven primarily by higher repairs and maintenance expenses and property taxes, as expected.

FY 2019 Same Store Core operating expenses increased 2.5% year over year.  Same Store controllable expenses, net of resident recoveries, decreased 3.3% year over year, driven most significantly by lower personnel and turnover expenses.  Controllable expenses also benefited from a favorable first quarter comparison resulting from higher-than-normal repairs and maintenance work order volume in the first quarter of 2018.  The favorable factors impacting controllable expense growth were partially offset by a negative impact from last year's realignment of utility bill-back timing that resulted in higher than normal resident recoveries in the first quarter of 2018.  Fixed expenses, net of resident recoveries, increased 6.5% year over year, driven primarily by higher property taxes.

Investment Management Activity
In the fourth quarter of 2019, Invitation Homes acquired 627 homes for $197 million, including estimated renovation costs, and sold 1,354 homes for gross proceeds of $372 million, resulting in a total portfolio home count of 79,505 homes as of December 31, 2019.

In FY 2019, the Company acquired 2,153 homes for $653 million, including estimated renovation costs, and sold 3,455 homes for gross proceeds of $900 million.

As previously announced, the Company intends to exit Nashville, its smallest market by home count, and focus on growing accretively in other high-growth markets where the Company has greater scale and density.  In December 2019, the Company leveraged strong investor demand to close a bulk sale of 708 homes in Nashville, or 89% of its portfolio in that market at the time, for gross proceeds of $210 million.  As of December 31, 2019, the Company owned 87 homes in Nashville, which will be marketed for sale across multiple disposition channels.

Balance Sheet and Capital Markets Activity
As of December 31, 2019, the Company had $1,092 million in available liquidity through a combination of unrestricted cash and undrawn capacity on its revolving credit facility.  The Company's total indebtedness as of December 31, 2019 was $8,518 million, consisting of $6,673 million of secured debt and $1,845 million of unsecured debt.

In Q4 2019, the Company used cash on hand, including proceeds from its bulk sale of homes in Nashville, to repay $199 million of secured debt that carried a weighted average interest rate of LIBOR + 201 basis points.

In Q4 2019, the Company issued 1,286,119 shares of common stock under its at-the-market equity agreement ("ATM Equity Program"), at an average price of $29.67 per share, for gross proceeds of $38 million.  Proceeds were used primarily to acquire homes.  $743 million of capacity remained under the ATM Equity Program as of December 31, 2019.

Net debt / annualized Adjusted EBITDAre declined to 8.0x at the end of 2019, down from 9.0x at the end of 2018.

Dividend
As previously announced, on January 30, 2020 the Company's Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock, representing a 15.4% increase over the prior quarterly dividend of $0.13 per share.  The dividend will be paid on or before February 28, 2020 to stockholders of record as of the close of business on February 12, 2020.

Full Year 2020 Guidance Details

Earnings Conference Call Information
Invitation Homes has scheduled a conference call at 11:00 a.m. Eastern Time on Wednesday, February 19, 2020 to discuss results for the fourth quarter and full year 2019.  The domestic dial-in number is 1-888-317-6003, and the international dial-in number is 1-412-317-6061.  The passcode is 9650856.  An audio webcast may be accessed at www.invh.com.  A replay of the call will be available through March 19, 2020 and can be accessed by calling 1-877-344-7529 (domestic) or 1-412-317-0088 (international) and using the replay passcode 10138573, or by using the link at www.invh.com.

Supplemental Information
The full text of the Earnings Release and Supplemental Information referenced in this release are available on Invitation Homes' Investor Relations website at www.invh.com.

Glossary & Reconciliations of Non-GAAP Financial and Other Operating Measures
Financial and operating measures found in the Earnings Release and Supplemental Information include certain measures used by Invitation Homes management that are measures not defined under accounting principles generally accepted in the United States ("GAAP").  These measures are defined in the Glossary and Reconciliations section of this press release and in the Supplemental Information and, as applicable, reconciled to the most comparable GAAP measures.

About Invitation Homes
Invitation Homes is the nation's premier single-family home leasing company, meeting changing lifestyle demands by providing access to high-quality, updated homes with valued features such as close proximity to jobs and access to good schools.  The company's mission, "Together with you, we make a house a home," reflects its commitment to providing homes where individuals and families can thrive and high-touch service that continuously enhances residents' living experiences.

Investor Relations Contact

Greg Van Winkle
Phone: 844.456.INVH (4684)
Email: IR@InvitationHomes.com

Media Relations Contact

Kristi DesJarlais
Phone: 972.421.3587
Email: Media@InvitationHomes.com

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which include, but are not limited to, statements related to the Company's expectations regarding the performance of the Company's business, its financial results, its liquidity and capital resources, and other non-historical statements, including without limitation the information under the heading "Full Year 2020 Guidance Details."  In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "guidance," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of these words or other comparable words.  Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the single-family rental industry and the Company's business model, macroeconomic factors beyond the Company's control, competition in identifying and acquiring properties, competition in the leasing market for quality residents, increasing property taxes, homeowners' association ("HOA") and insurance costs, the Company's dependence on third parties for key services, risks related to the evaluation of properties, poor resident selection and defaults and non-renewals by the Company's residents, performance of the Company's information technology systems, and risks related to the Company's indebtedness.  Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. The Company believes these factors include, but are not limited to, those described under Part I. Item 1A. "Risk Factors" of the Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission (the "SEC"), as such factors may be updated from time to time in the Company's periodic filings with the SEC, which are accessible on the SEC's website at http://www.sec.gov.  These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the Company's other periodic filings.  The forward-looking statements speak only as of the date of this press release, and the Company expressly disclaims any obligation or undertaking to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except to the extent otherwise required by law.

Glossary and Reconciliations

Glossary:

Average Monthly Rent
Average monthly rent represents average monthly rental income per home for occupied properties in an identified population of homes over the measurement period, and reflects the impact of non-service rental concessions and contractual rent increases amortized over the life of the lease.

Average Occupancy
Average occupancy for an identified population of homes represents (i) the total number of days that the homes in such population were occupied during the measurement period, divided by (ii) the total number of days that the homes in such population were owned during the measurement period.

Core Operating Expenses
Core operating expenses for an identified population of homes reflect property operating and maintenance expenses, excluding any expenses recovered from residents.

Core Revenues
Core revenues for an identified population of homes reflects total revenues, net of any resident recoveries.

EBITDA, EBITDAre, and Adjusted EBITDAre
EBITDA, EBITDAre, and Adjusted EBITDAre are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. We define EBITDA as net income or loss computed in accordance with accounting principles generally accepted in the United States ("GAAP") before the following items: interest expense; income tax expense; and depreciation and amortization. National Association of Real Estate Investment Trusts ("Nareit") recommends as a best practice that REITs that report an EBITDA performance measure also report EBITDAre.  We define EBITDAre, consistent with the Nareit definition, as EBITDA, further adjusted for gain/loss on sale of property, net of tax and impairment on depreciated real estate investments.  Adjusted EBITDAre is defined as EBITDAre before the following items: share-based compensation expense; IPO related expenses; merger and transaction-related expenses; severance; casualty losses, net; interest income; unrealized gains from an investment in equity securities; and other miscellaneous income and expenses. EBITDA, EBITDAre, and Adjusted EBITDAre are used as supplemental financial performance measures by management and by external users of our financial statements, such as investors and commercial banks. Set forth below is additional detail on how management uses EBITDA, EBITDAre, and Adjusted EBITDAre as measures of performance.

The GAAP measure most directly comparable to EBITDA, EBITDAre, and Adjusted EBITDAre is net income or loss. EBITDA, EBITDAre, and Adjusted EBITDAre are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our EBITDA, EBITDAre, and Adjusted EBITDAre may not be comparable to the EBITDA, EBITDAre, and Adjusted EBITDAre of other companies due to the fact that not all companies use the same definitions of EBITDA, EBITDAre, and Adjusted EBITDAre. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies.  See "Reconciliation of Non-GAAP Measures" below for a reconciliation of GAAP net income (loss) to EBITDA, EBITDAre, and Adjusted EBITDAre.

Funds from Operations (FFO), Core Funds from Operations (Core FFO), and Adjusted Funds from Operations (AFFO)
FFO, Core FFO, and Adjusted FFO are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. FFO is defined by Nareit as net income or loss (computed in accordance with GAAP) excluding gains or losses from sales of previously depreciated real estate assets, plus depreciation, amortization and impairment of real estate assets, and adjustments for unconsolidated partnerships and joint ventures.  In calculating per share amounts, Core FFO and AFFO reflect convertible debt securities in the form in which they were outstanding during the period.

We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization. Because real estate values have historically risen or fallen with market conditions, management considers FFO an appropriate supplemental performance measure as it excludes historical cost depreciation and amortization, impairment on depreciated real estate investments, gains or losses related to sales of previously depreciated homes, as well non-controlling interests, from GAAP net income or loss.

The GAAP measure most directly comparable to Core FFO and Adjusted FFO is net income or loss. Core FFO and Adjusted FFO are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our Core FFO and Adjusted FFO may not be comparable to the Core FFO and Adjusted FFO of other companies due to the fact that not all companies use the same definition of Core FFO and Adjusted FFO. Accordingly, there can be no assurance that our basis for computing this non-GAAP measures is comparable with that of other companies.  See "Reconciliation of Non-GAAP measures" below for a reconciliation of GAAP net income (loss) to FFO, Core FFO, and Adjusted FFO.

Net Operating Income (NOI)
NOI is a non-GAAP measure often used to evaluate the performance of real estate companies. We define NOI for an identified population of homes as rental revenues and other property income less property operating and maintenance expense (which consists primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel expenses, repairs and maintenance, leasing costs, and marketing expense). NOI excludes: interest expense; depreciation and amortization; property management expense; general and administrative expense; impairment and other; gain on sale of property, net of tax; and interest income and other miscellaneous income and expenses.

The GAAP measure most directly comparable to NOI is net income or loss. NOI is not used as a measure of liquidity and should not be considered as an alternative to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our NOI may not be comparable to the NOI of other companies due to the fact that not all companies use the same definition of NOI. Accordingly, there can be no assurance that our basis for computing this non-GAAP measure is comparable with that of other companies.

We believe that Same Store NOI is also a meaningful supplemental measure of our operating performance for the same reasons as NOI and is further helpful to investors as it provides a more consistent measurement of our performance across reporting periods by reflecting NOI for homes in our Same Store portfolio.  See "Reconciliation of Non-GAAP Measures" below for a reconciliation of GAAP net income (loss) to NOI for our total portfolio and NOI for our Same Store portfolio.

Recurring Capital Expenditures or Recurring CapEx
Recurring Capital Expenditures or Recurring CapEx represents general replacements and expenditures required to preserve and maintain the value and functionality of a home and its systems as a single-family rental.

Rental Rate Growth
Rental rate growth for any home represents the percentage difference between the monthly rent from an expiring lease and the monthly rent from the next lease, and, in each case, reflects the impact of any amortized non-service rent concessions and amortized contractual rent increases. Leases are either renewal leases, where our current resident chooses to stay for a subsequent lease term, or a new lease, where our previous resident moves out and a new resident signs a lease to occupy the same home.

Same Store / Same Store Portfolio
Same Store or Same Store portfolio includes, for a given reporting period, homes that have been stabilized and seasoned (whether under Invitation Homes ownership or Starwood Waypoint Homes ownership), excluding homes that have been sold, homes that have been identified for sale to an owner occupant and have become vacant, homes that have been deemed inoperable or significantly impaired by casualty loss events or force majeure, homes acquired in portfolio transactions that are deemed not to have undergone renovations of sufficiently similar quality and characteristics as the existing Invitation Homes Same Store portfolio, and homes in markets that the Company has announced an intent to exit where the Company no longer operates a significant number of homes.

Homes are considered stabilized if they have (i) completed an initial renovation and (ii) entered into at least one post-initial renovation lease.  An acquired portfolio that is both leased and deemed to be of sufficiently similar quality and characteristics as the existing Invitation Homes Same Store portfolio may be considered stabilized at the time of acquisition.

Homes are considered to be seasoned once they have been stabilized for at least 15 months prior to January 1^st of the year in which the Same Store portfolio was established.

We believe presenting information about the portion of our portfolio that has been fully operational for the entirety of a given reporting period and its prior year comparison period provides investors with meaningful information about the performance of our comparable homes across periods and about trends in our organic business.

Total Homes / Total Portfolio
Total homes or total portfolio refers to the total number of homes owned, whether or not stabilized, and excludes any properties previously acquired in purchases that have been subsequently rescinded or vacated.

Turnover Rate
Turnover rate represents the number of instances that homes in an identified population become unoccupied in a given period, divided by the number of homes in such population.

Reconciliation of Non-GAAP Measures: