By the Numbers

Low turnover, high occupancy and rising rent lift SFR operators

| August 13, 2021

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.

The single-family rental business notched another strong performance in the second quarter of this year, based on results of the three largest public operators. Invitation Homes (INVH), American Homes 4 Rent (AMH) and Tricon Residential (TCN) all expanded their footprint faster, aided by new joint venture capital and build-to-rent initiatives. Robust performance and strong fundamentals continue to attract new money to the sector.

Tricon, the smallest of the big three public operators, has the most aggressive development plan: to double in size over the next three years, increasing its portfolio of homes from about 25,000 to 50,000 (Exhibit 1). Tricon expanded the number of homes in its portfolio by over 1,400 during the second quarter, giving it the fastest rate of expansion among the three operators at over 6%.

Exhibit 1: Changes in SFR portfolio holdings during 2Q 2021

Note: *Total portfolios of single-family rental homes include holdings of homes in joint ventures. Average investment cost and proceeds per property for Tricon are estimated based on acquisition and disposition amounts listed in their financial statements. All data as of 2Q 2021.
Source: Company financial statements and supplemental earnings releases, Amherst Pierpont Securities

All three operators have been adding properties at a higher average cost than those they are selling, likely in an effort to improve performance and consolidate holdings in areas where they benefit from economies of scale. Although the three operators also target somewhat different price points and average monthly rents, their recent performance in terms of rent growth and occupancy rates are quite similar (Exhibit 2). Rent growth blending new and renewed leases hit 8.0% for all three companies, and occupancy was in the neighborhood of 98%.

Exhibit 2: Same home portfolios performance metrics 2Q 2021

Note: Same home portfolios are stabilized properties owned during the prior (2Q 2020) and current (2Q 2021) reporting period.
Source: Company financial statements and supplemental earnings releases, Amherst Pierpont Securities

Performance metrics for single-family rentals have been improving steadily since the pandemic exacerbated the housing shortage and drove workers into the suburbs (Exhibit 3). Average occupancy rates have increased, turnover rates are down, and rents are higher across the board with sharp increases in rents for new leases. The data in this is clearly the case for Invitation Homes, the largest SFR operator with the highest price point for properties and average monthly rent, but the same trends are evident in data from American Homes 4 Rent and Tricon.

Exhibit 3: Invitation Homes – same home portfolio quarterly performance

Note: Same home portfolios are stabilized properties owned during all reporting periods.
Source: Company financial statements and supplemental earnings releases, Amherst Pierpont Securities

Future development

Tricon has the most aggressive plans for expansion, which include buying existing homes for sale and leveraging build-to-rent. The company has raised a combined $6.5 billion through two joint ventures  to add about 25,000 homes to their portfolio over the next three years.

Invitation Homes has $1 billion of capital that it is deploying to add about 2,500 homes to its portfolio through the end of this year. American Homes 4 Rent currently own over 9,000 lots that it plans to build homes on for future delivery.

Those additional 36,500 homes that could be added to the big three SFR operator portfolios would increase the institutional footprint from roughly 280,000 properties (1.9%) to 316,500 properties (2.1%) in the 15 million home single-family rental sector.

Mary Beth Fisher, PhD
marybeth.fisher@santander.us
1 (646) 776-7872

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