Greetings, and welcome to the American Homes 4 Rent First Quarter 2023 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. It is now my pleasure to introduce your host, Nick Fromm, Director of Investor Relations. Thank you, sir. You may begin.

Good morning. Thank you for joining us for our first quarter 2023 earnings conference call. With me today are David Singelyn, Chief Executive Officer; Bryan Smith, Chief Operating Officer; and Chris Lau, Chief Financial Officer. Please be advised 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, May 5, 2023. We assume no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. A reconciliation of GAAP to non-GAAP financial measures is included in our earnings release and supplemental information package. 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.amh.com. With that, I will turn the call over to our CEO, David Singelyn.

Welcome, everyone, and thank you for joining us today. The early spring leasing season is off to a strong start at AMH. Our property management teams are doing a great job capturing the strong demand for single-family rentals, and our development program continues to deliver consistent and predictable growth through the addition of premium, new construction rental homes. Like everyone else, we are following the broader market, disruptions in the banking system, and choppy economic waters. But no matter what's ahead, we continue to have confidence that AMH and single-family rentals, which have now matured into a core asset class, have the ability to outperform in any economic environment. To frame this further, three important things come to mind. First, SFR sector fundamentals are strong. Our country continues to suffer from a persistent housing shortage, and the current interest rate environment has created a housing affordability crisis. In this backdrop, the single-family rental value proposition has never been stronger. We offer a simple and accessible way for our residents to enjoy the American dream of single-family living. Second, the AMH balance sheet shines in times of capital market uncertainty. Our investment-grade balance sheet, staggered maturity profile, and focus on long-term fixed-rate debt minimize our exposure to near-term interest rate volatility. Additionally, our leverage profile, which ended the quarter at 5.4 times, positions us for further resiliency as well as flexibility for growth. And third, our ability to deliver consistent and predictable growth is unmatched. As announced earlier this week, AMH is now proudly the 39th largest homebuilder in the country based on the 2023 Builder 100 list. With our internal development program as the backbone and no reliance on equity financing, we continue to grow our portfolio where we want and when we want, regardless of external market factors. Overall, we are in a great position as we navigate these uncertain times. Now turning to the quarter. We started off 2023 on solid footing, delivering $0.41 core FFO per share, representing 8.6% year-over-year growth. As expected, we are seeing our normal seasonality curve return with an acceleration in demand heading into spring leasing season, which Bryan will touch on shortly. On to the investment front and our three-pronged growth strategy. Our main focus continues to be our internal development program. The other two acquisition channels remain largely on pause due to pricing dynamics in the open market as well as cost of capital considerations. We continue to have ongoing discussions with market participants and we'll be ready to act should conditions change. For the quarter, we delivered 466 AMH development homes to our wholly owned and joint venture portfolios, keeping us nicely on track with our full year guidance expectation as the team continues to successfully navigate a dynamic supply chain environment. We continue to see gradual input cost improvements as we work towards deliveries with yields in the 6% area by year-end. Lastly, I am proud to report we released our fifth annual sustainability report, which can be found in the Investor Relations section of our website. The report details the company's ESG performance and priorities with notable highlights, including implementation of an environmental management system, expanded greenhouse gas inventory, and other social initiatives impacting communities. Sustainability remains a priority for the company, and I am proud of how far our programs and initiatives have come in a short period of time. In closing, 2023 is off to a strong start, and we are well-positioned as we enter spring leasing season and continue to navigate the uncertain and unpredictable economic environment. As we continue our journey, we remain committed to being a resilient, sustainable, and inclusive organization that has earned the trust of those who rely on us while delivering long-term value creation for our shareholders. Now I'll turn it over to Bryan for an update on our operations.

Thank you, Dave. 2023 is off to a great start with demand accelerating into the spring leasing season. American households continue to seek the high-quality, professionally managed homes in the AMH portfolio for value and stability in these uncertain economic times. This was evidenced by our historically high leasing volume for the quarter, a trend we expect to continue into our busy season. As a result, first quarter same home average occupied days was 97.2%, which represents a 30 basis point improvement over the fourth quarter of 2022. Rate growth was also healthy with new, renewal, and blended rental rate growth of 7.8%, 6.8%, and 7.1% respectively. This drove same home core revenue growth of 7.7% for the quarter. As expected, core operating expense growth for the quarter was 12.2%. Please remember that expense growth will be elevated for the first three quarters because of our property tax true-up in the fourth quarter of last year. On the revenue side, the second quarter is off to a great start. Strong demand continues to fuel solid occupancy and rental rate growth. April same home average occupied days was 97.1% and new, renewal, and blended spreads of 9.4%, 6.2%, and 7.1% respectively are well above our seasonal pre-pandemic norms. Before I finish, I'd like to briefly update you on our Resident 360 program that we announced last quarter. Our staffing and training plans are proceeding as expected, and we are already starting to get positive feedback from our residents. We look forward to providing additional updates as the program continues to mature. In closing, we are pleased with our first quarter results and the spring trends that we are seeing. As I make my annual visits to our field offices across the country, I continue to be impressed with our team's focus on providing the best resident experience in our space. I would like to thank them for their hard work and dedication. With that, I will turn the call over to Chris for the financial update.

Thanks, Bryan. And good morning, everyone. I'll cover three areas in my comments today: First, a quick review of our quarterly results; second, an update on our balance sheet and 2023 capital plan; and third, I'll close with a few comments around our unchanged 2023 guidance. Starting off with our operating results. We delivered another quarter of strong earnings growth with net income attributable to common shareholders of $117.5 million or $0.32 per diluted share. On an FFO share and unit basis, we generated $0.41 of core FFO, representing 8.6% year-over-year growth and $0.37 of adjusted FFO, representing 7.4% year-over-year growth. Underlying this strength was 5.4% year-over-year core NOI growth from our same home portfolio as well as continued strong execution from our development program, which delivered a total of 466 homes to our wholly owned and joint venture portfolios. Outside of development, our acquisition activity continues to remain largely on pause as we patiently await further stabilization in home values and our cost of capital. With that in mind, we acquired just 13 homes during the quarter, consisting of pre-existing national homebuilder contract closings. On the disposition side, however, we had a very active start to the year as we continue to monetize non-core homes and take advantage of private market home values that remain historically strong. During the quarter, we sold nearly 670 properties that were identified through our rigorous asset management process, generating nearly $185 million in net proceeds. Next, I'd like to turn to our balance sheet and 2023 capital plan. At the end of the quarter, our net debt, including preferred shares to adjusted EBITDA was just 5.4 times. We had $256 million of cash on the balance sheet, and our $1.25 billion revolving credit facility was fully undrawn. As previously announced, during the quarter, we settled the remaining 8 million Class A common shares from last year's foreign equity agreement, receiving net proceeds of $298.4 million. As an update on our overall 2023 capital plan, we remain on track to invest approximately $900 million of AMH Capital, which we still expect to fund through a combination of retained cash flow, recycled capital from dispositions, our first quarter forward equity proceeds, and modest debt capacity utilization. Lastly, given the ongoing uncertainty in the capital markets, I wanted to share an important reminder around the sizing of our wholly owned development pipeline, which has been strategically designed to be fundable without the need for incremental common equity capital. As the current capital markets have reminded us, this is a critical element that enables our ability to deliver consistent and predictable growth from our AMH Development program over time. Finally, before we open the call to your questions, I wanted to briefly touch on our 2023 guidance, which remained unchanged in yesterday's earnings press release. As expected, we delivered a strong start to the year and continue to see robust momentum heading into the second quarter. However, given that the heaviest part of the spring leasing season is still ahead of us and many aspects of the US economy remain uncertain, we are currently maintaining our previously provided full-year 2023 earnings guidance. With that said, we remain encouraged by the current trend lines across the AMH portfolio, continue to be driven by our country's housing shortage and unaffordability crisis, the strength of the AMH operating platform, and our unique three-pronged ability to grow in all economic cycles. And with that, thank you again for your time, and we'll open the call to your questions.

Our first question comes from Juan Sanabria with BMO Capital Markets.

I'm just curious a little bit about the renewal spreads. They seem to be moderating, kind of going inverse to the new lease spreads. So curious on the bigger picture thoughts or strategy there and if you could give us a sense of where maybe May and June renewals are being sent out to the population?

What you're seeing really is based on the timing aspect of when the renewal offers are set and mailed. So the 6.2% in April and the March numbers were set last year when we may have had maybe a little bit more of a conservative approach to demand. As we entered this year, we were really excited about what we saw across all the different demand metrics, and it gave us a lot of confidence. So ones that we mailed going forward, I think you could think of it more in the 7% range. So we are seeing acceleration out of April.

And then just curious on the kind of transactions or home market value perspective. I mean, home values have been fairly sticky, maybe surprising most. So just curious, I guess, where do you think cap rates are today and maybe where are you able to sell these homes that you've been disposing of quite efficiently, just to give us a sense of where that market is on the transaction side?

The market has remained very stable and pricing has been quite consistent compared to a quarter ago. Yields continue to be in the low to mid-5s, while we are looking more towards the upper 5s or possibly the 6% area. We are remaining patient and disciplined in this regard. Regarding sales, I'll pass that over to Chris.

I touched on it a bit in my prepared remarks. But as I mentioned, we saw really good traction this quarter through the disposition program, which is largely being driven by just the sheer scarcity of housing across the country, meaning that our disposition supply, when we bring it to market, continues to be met by really strong buyer demand, enabling us to achieve sales prices at or near asking prices, translating into average disposition cap rates in the high 3s or so, which creates a really attractive capital recycling opportunity to recycle back into our growth programs.

Our next question comes from the line of Chandni Luthra with Goldman Sachs.

So you guys talked about potentially seeing acceleration here in renewals. Obviously, new has been really strong, you talked about blends being well above your seasonal pre-pandemic norms. So as we think about that unchanged 2023 same store guidance, is there potentially some conservatism there? Would love your thoughts.

Again, as I also mentioned in the prepared remarks, look, we reported a really strong first quarter, which we're very proud of. And you're exactly right, we're seeing some real encouraging leasing results from the early spring leasing season with March and April, new leases in particular accelerating up into the 9.2% and 9.4% area. But the keyword that I just used was early, right, early. And we need to remember that our heaviest leasing volumes are still ahead of us in May and June and even into July to a certain extent. So it's really just too early to be revisiting the guide at this point. But if our current trend lines stay on track, we're optimistic that we'll be able to share a nice update next quarter after the spring leasing season.

And switching gears a little bit to the dispositions, so 670 non-core homes. What is the criteria, how do you sort of think about your overall portfolio and assess what homes perhaps do not qualify as non-core? How many more such opportunities do you see for 2023 in terms of disposition and kind of making that arbitrage of that high 3% cap rates in terms of selling?

We're very active in our asset management review process, and the first thing that we look at is the location of those homes. We had some homes that were acquired as part of portfolio transactions as an example that may not be in core locations for us. So location is the first criteria. The second criterion is performance, and we look at performance both from a maintenance perspective and on the revenue side, occupancy, and specialty collections. So we're paying very close attention to that. That's the majority of the reasons for dispositions. There are some other kind of smaller reasons that really aren't material.

Our next question comes from the line of Josh Dennerlein with Bank of America.

Just correct me if I'm wrong, but do you normally get an occupancy uplift in 1Q? And just kind of curious what's driving that? Is that the strategy on your end, the demand, or something else? Really curious for your thoughts.

As we begin the year, demand tends to increase significantly compared to Q4, which is a pattern we observed this year as well. From Q4 to Q1, there is typically a noticeable rise in demand. As we navigate the start of the busy season and the spring leasing period, it’s important to note that we also experience our highest levels of move-outs, leading to fluctuations in occupancy. However, the key takeaway is that demand is very strong, and we have seen excellent foot traffic. One important metric we've previously discussed is the number of showings per rent-ready property, and those figures remain well above pre-pandemic levels. The most significant increase we have observed this year has been in our website activity, with traffic from new users rising nearly 20% compared to 2022. Several positive factors contribute to the strength of our occupancy and rate growth.

And just curious on new move-ins to your homes. Do you survey where folks are moving from? Are they coming from apartments, other rentals? Or any kind of color maybe if they're indicating to you if they're priced out or just can't find a home to buy in this environment?

We run a number of surveys on move-ins. We're asking where they came from. I mean anecdotally, there are a lot of people who are on the sidelines who'd ultimately like to buy. That doesn't necessarily come out in the surveys. But what we look at is, are they coming from multifamily or other single-family? And we've seen that kind of pretty steady. About 20% of our residents are coming from multifamily, the balance from single family on the way in.

Our next question comes from the line of Eric Wolfe with Citi.

You mentioned that the heaviest leasing season is in May and June and, to a certain extent, July. I'm just wondering what percentage of your leases have already been signed for those months because, obviously, people sign their leases ahead and when they move in, particularly maybe one to two months in advance. So I would think you'd have a pretty good idea of where May and June would end up at this point.

We've had, obviously, a good number of leases signed for May, but we're moving these houses pretty quickly with the exception of some of the pre-leasing activity. The signed leasing activity for June is still relatively light. But even though we're still in day five of the month in May and we're not ready to conclude on exactly where that's going, all I can tell you is that it continues to be very positive.

And then a question on new lease growth. You mentioned that it jumped from 7.1% through February to over 9%, I think, 9.2% in March, 9.4% in April. I was wondering what a typical seasonal increase would look like, whether it was sort of stronger than what you would have normally expected for this time of year? And then secondly, if there's an update to give us on the loss to lease right now?

Yes, I'll start with the loss to lease, Eric. It's similar to what it was last quarter in the 6% area. I think the expectation historically for this time of year is that you'd see an increase in re-leasing rate growth towards the start and through a busy season, historically maybe in the 5% range or so. So this has been really strong from a historical perspective.

Our next question comes from the line of Steve Sakwa with Evercore ISI.

Bryan, I was just wondering if you could make any broad comments on any trends you're seeing in the various markets. You've got a pretty wide spread with like a San Antonio blended spread up 4%, other markets up 9%. And I'm just trying to see if you're seeing any trends by market, if there are supply issues, job issues, just anything that would maybe explain some of the large discrepancies within the markets?

I think the easiest place to start is with some of the Midwestern markets. They tend to be more susceptible to weather and seasonality. Indianapolis, as an example, still was strong in the mid-96s in the first quarter. But as we got into March and April, we've seen nice acceleration there. So some of the markets that may appear to be a little bit lagging in the first quarter have recovered into the early spring leasing season. From a supply perspective, I think it's most visible in the Phoenix market. Phoenix has been an extremely high flier for a number of years and it's the one market where we've seen an increase in supply that has kind of brought maybe back down to earth a little bit. But the good news for us in that particular market is we have extremely well-located assets, and we expect any sort of pullback that we've seen to be temporary.

And then on the development front, I don't know if you or Dave could just comment on sort of how you're underwriting new developments today. I know material costs were really rampant; they seem to be coming down. I'm just curious sort of where yields are penciling today and are you starting to see any relief on the trade front?

On the supply side or the material and input cost side, we have seen and we saw this prior to the last quarter. So this is a repeat of what we said in the first quarter. We have seen a significant reduction in lumber prices. At the market level, we have seen some reductions throughout the quarter in input costs, but they have kind of reverted back to where they were a couple of months ago. However, we are seeing reductions in the input cost in our homes, and it's really more a function of efficiency from putting in systems last year that we are now seeing the benefits of in managing and fine-tuning exactly the amount of product that we need to put in each home. So the input costs are coming down. It's more a function of internal efficiencies from investments that we made last year. I would correlate that a little bit to investments we're making this year in Resident 360. We would expect to see some benefits there next year. But that's where we're seeing the benefit. Steve, on your question on yields, where we are looking to basically add to our portfolio would be in the upper 6% range when we underwrite the homes. We are still, for the most part, pretty much on the sidelines there as well. But we are seeing some movement, but we're not quite where we would be willing to start loading up the truck.

Our next question comes from the line of Jamie Feldman with Wells Fargo.

I guess just sticking with internal operating efficiency. Can you talk about the average R&M turn for the AMH developed homes for the rest of your same store pool? Just wondering how much more efficient you can be on that front.

So let me just give you a couple of numbers. When you look at our entire portfolio, what we call a cost-to-maintain number for all of the homes for the first quarter, it was about $625 to $630 if you take out some of the landscaping cost, that is what we would contract as part of the rent. If you look at what we are doing when we buy new homes from national homebuilders, it's a little bit above $300. And when you look at the cost from our development homes, it's about $230. So when you look at the national builders and the development homes, those have the same age; those are really comparable homes. It's a testament to the efficiency of building your own homes and building them with maintenance in mind and putting in better materials into the homes. So that's a little bit of background on the cost to maintain.

And then, I mean, clearly, it sounds like you're feeling pretty good about heading into spring leasing with the April results so far and the first quarter being slightly ahead of expectations. I mean what is there that could surprise to the downside, maybe on the expense side or maybe the volume of dispositions you did? Did that have any impact on an earnings headwind? Just thinking about where things might not be quite as rosy as we head into the rest of the year.

We're very pleased with our first quarter and the momentum we have as we enter the second quarter. However, the leasing season has just started, so there is still a lot of time for developments. Currently, we don't see any significant concerns for the remainder of the year, but it is still early. We just completed the first quarter, and we have three more quarters ahead. Overall, we're very satisfied with our position and the momentum moving into the second quarter, but it's important to note that it is still early.

Our next question comes from the line of Dennis McGill with Zelman.

First one, just, Chris, on dispositions. I think in the fourth quarter, you had expected around $200 million to $300 million this year, obviously running ahead of that pace. Are you expecting to slow, or would the $200 million to $300 million be late on where you'll probably end up this year?

I think on a quarterly run rate basis, we'll moderate a touch over the balance of the year. We're likely on track on a full-year basis to do a bit better than our outlook at the start. At this point right now, I could see the full year landing in the $300 million to $400 million area.

And then on CapEx, both recurring, I think was up around 20%, non-recurring or property enhancing, up 10% or so for the quarter. What would your expectations be for that for the full year?

On a full-year basis, I think we shared this last quarter, recurring CapEx, we could see up in or around the 20% area, probably pretty similar to the run rate we saw in the first quarter. And then from a property-enhancing CapEx perspective, again, fairly similar to what we saw last year. I think last year, on a same home basis, we landed in the $50 million to $60 million area, which will probably be pretty similar again this year in 2023.

Our next question comes from the line of Keegan Carl with Wolfe Research.

First one here, just how are you thinking about turnover rate the rest of the year and the subsequent impact it would have on your expense growth?

Keegan, we are really happy with our retention rates right now. Obviously, the higher the retention rates, the better protection we have on turn costs. But our expectations for occupancy this year are that the retention rates are going to remain high. In the event that we had more turnover, the good news is we're able to bring these homes back to market quickly, and we're seeing outstanding re-leasing rate growth. But obviously, increase in turnover would have an effect on expenses as well.

And maybe it's too early to tell, but I'm just kind of curious, what sort of returns you guys see on Resident 360? Is it meeting your expectations so far?

It is. It's early in the rollout. We were substantially hired for the positions, but many of the markets are still in the training phase. But the early indications that we're seeing from resident feedback from the markets that are fully trained has been wholly positive. So the return immediately is improvement in the customer experience, scores from our customers.

Our next question comes from the line of Handel St. Juste with Mizuho.

It's Barry Luo on for Handel St. Juste. I was just wondering on your bad debt. So it looks like it increased sequentially, up like $300,000. Just wondering, what's driving that? And is the focus on a particular region, and how is that debt overall trending against your expectations?

Look, generally speaking, I would say that first quarter bad debt landed very consistent with what our expectations were at about 1.4% for the same home pool. Some color there, if you recall from our discussion last quarter, we continue to have a small subset of our residents that are taking a little bit longer to work through the COVID resolution process, just given that some of the court systems are still moving a little slower than normal. You'll also likely recall from our discussion last quarter that guidance conservatively assumes that our full-year bad debt runs somewhere in the 1.4% area just like it is right now. With that said, it's too early to comment quantitatively but we're optimistic that we'll have the opportunity to potentially work through some of this process quicker and could have potential for improvement in the back part of the year. But again, it's a little bit early and too premature to count on that just yet.

Our next question comes from the line of Linda Tsai with Jefferies.

Just on the dispositions. Could you remind us, are those primarily done via MLS listings or do you sell to investors as well?

It's a very good question, because the shift has been to almost entirely MLS sales this year. I think it has to do with the disconnect between the value of these assets to the homeowner versus those to the investor. Chris cited some pretty aggressive exit cap rates. But to answer your question, it's been almost all MLS.

And then just one follow-up. On Nashville, the occupancy declined a little bit there more than the portfolio average. Just any color there?

Nashville is a very strong market for us. We saw outstanding occupancy last year. We had maybe a little bit of elevated move-outs in March, but we expect that to recover. It's still very strong.

Our next question comes from the line of Daniel Tricarico with Scotiabank.

I have a broader question on portfolio construction and sort of a follow-up to Steve's question. In an economic downturn, how would you think your secondary markets would perform in relation to your more primary market exposures on average? And any commentary you see that the value of geographic diversification today versus maybe building market concentration into your markets?

We're still a believer in diversification. When you have both strong and weaker times, not all markets perform the same, and so this is a good way to balance out the risk. What we are seeing right now today is those markets that have an appearance of being a little bit weaker, we see very strong demand behind them. If you look at the Midwest, we know right now where we have our portfolio is an area where there's going to be a lot of growth. Cisco is going in with a new plant in the future. So we're very, very pleased with the construction of our portfolio today. Bryan did mention earlier that we have a robust asset management process where we review properties every month; we review markets probably every quarter and where we want to go into as well as where we may want to exit, and we have exited a couple of markets in the past. But we are very pleased with where we are currently positioned. And those homes, whether individually or in a market that don't fit long-term growth expectations, we will mark them for disposition and sell them over time.

And then, Chris, a quick follow-up on the bad debt. Just wondering how much rental assistance you received this quarter? I'm not sure if you have what it was in 1Q last year, but what are those two numbers?

We're definitely trickling down as expected. In the quarter, we received just over $1 million of rental assistance, and I think that compares to just about $5 million in the same quarter last year.

Our next question comes from the line of Adam Kramer with Morgan Stanley.

Just wanted to ask about similar, I think, to an earlier question, just on kind of the February to March acceleration in the new lease growth; really strong kind of month-to-month acceleration. Wondering just kind of internally, was there kind of a change in strategy or something that you guys saw in particular markets or kind of just broadly that maybe caused you to approach the new lease growth a little bit differently, again, February to March?

It really comes down to how we're monitoring demand. Just to remind you, we take properties to market in a pre-leasing stage once we receive notice, and we are often quite aggressive with our asking rents at that time. We closely observe all the activity regarding each specific house, including who is interested, whether we are conducting tours, and moving into the application phase. We noticed outstanding demand, which gave us a lot of confidence. We maintained our prices and improved our pre-leasing activity. Our revenue optimization team is very attentive at the asset level and is quick to respond, enabling us to capitalize on the significant spike we observed in February.

And then just maybe thinking about the full-year guidance. Look, we're still early here. But just thinking through kind of maybe what range of kind of new and renewal or blended rent growth is kind of baked into the assumption for the full-year guidance?

You may recall from last quarter; full-year guidance contemplates blended spreads in the 5% to 6% area. The construction of that is contemplating something in the 7s for the first and second quarters, then moderating into more of the mid-single digits in the back half of the year. Again, we're optimistic that we are on a nice path and track in the second quarter, currently slightly above that, but we need to see how May and June play out.

Our next question comes from the line of Brad Heffern with RBC.

Chris, just sort of sticking with the earning theme. Is there color that you can give on sort of the sequential trajectory? Obviously, $0.41 in the first quarter times 4 is the top end of the guide. So I'm curious if there's a seasonal impact or a one-time benefit in the first quarter that could result in the rest of the year being lower, or would it really just result from some sort of degradation in the fundamentals?

Brad, I hate to get into too much detail on quarterly numbers. Obviously, we don't guide to the quarter, but a couple of different considerations from a timing perspective. Obviously, we see strongest leasing activity through the second and third quarters from a seasonal perspective. Also, keep in mind that we begin to get into turn and turn expense season as we get into the third quarter. But then also very importantly, as we think about the trajectory of NOI and FFO this year, property taxes are going to play a factor as well. So let's not forget about just the timing of how property taxes fell last year, notably out of Texas, where our accruals were lower in the first three quarters, which then were trued up in the fourth quarter of last year, and we'll see that play through this year as well. We saw it in the first quarter with our property tax level. Realistically, property taxes for the first three quarters will run in the low double digits. We'll see that then adjust in the fourth quarter landing full year based on our current midpoint of guidance at 9% on property taxes.

And then you also took me right where I wanted to go next. Just on property taxes. I guess are there any preliminary thoughts you can give? I know it's early, and the millage rates are critical too. But presumably, you've gotten some values across some of the states, including Texas. So I'm curious how those look versus maybe what you heard from consultants or what was in the guide.

For the most part, property tax information is pretty quiet so far, which is how the first quarter typically is from a calendar perspective. You may recall that the property tax calendar falls such that we really start receiving the bulk of our initial assessments during the second and the third quarters, that then kicks off appeals season that runs over the course of the summer. And then to your point, exactly, actual property tax rates and bills are commonly received towards the end of the year. So at this point, we don't have a ton of new information in hand, and our full-year view remains unchanged in and around 9%. On Texas, you bring up a good point. Texas is something that we're watching very closely. We started talking about this a little bit last quarter. As you may all recall, Texas is in a position of a large state budget surplus. Currently, there are proposals that call for about $15 billion of those surplus funds to be used towards property tax relief. As we understand it currently, the exact form of that property tax relief is still being discussed at the state level, which is expected to be finalized over the next month or two as Texas finishes its budgeting process. It's a little premature, but we are very much optimistically watching that process.

Our next question comes from the line of Sam Choe with Credit Suisse.

This is Adam on for Sam. Earlier in the year, there’s quite a bit of noise from various MSAs and has tenant protection and rent control. So I was wondering if you had any MSAs you've been watching specifically or potentially in development on that front that you've heard?

Regulatory implications can vary widely for different companies. We have always aimed to be proactive and do the right thing, and we are fortunate not to face any significant government inquiries at this moment. That said, we consistently monitor government affairs and regulations. We were the first to establish a government affairs function to educate various regulatory and government entities about the single-family rental value proposition. This initiative has proven to be very beneficial, allowing us to successfully change perceptions regarding single-family rentals and the positive impact we have on communities and their economic growth.

Our next question comes from the line of Austin Wurschmidt with KeyBanc.

You spoke historically, new lease rates are up in that 5% range into the spring leasing season, and you're clearly outperforming that average this year. But how much of a seasonal slowdown do you typically see from the peak in asking rent values towards the back half of the year? And does the higher increase in the first half necessarily translate into an outsized decrease, or have you seen sort of historically?

Historically, before the pandemic, lease rates would typically be around 5% during the spring leasing season, then taper down to about 2% or 3%, while renewals would show the opposite trend. Our expectations have shifted a bit due to improved demand over the last couple of years. I don't think the positive results from March and April will lead to a significant slowdown. Demand appears to remain strong, and while it's still early, we look forward to providing updates as the year progresses.

And then just secondly, we've heard about some other companies talking about land values decreasing pretty materially, instances as much as 35%. And I'm just curious if you're seeing reductions in land values as well. Should we start to see you banking land sites again going forward? It feels like that number has kind of come down as you patiently, I guess, awaited adding to that future bank.

Land is somewhat mixed in terms of opportunities. There are individual cases where good value can be extracted. A recent report analyzes land values, indicating that A and B category land values have remained relatively stable, while values in the B, C, and D categories have decreased, likely by around 10%. This decrease is not as significant as the 20% to 30% reductions some had anticipated. Despite expecting a larger drop, it hasn't materialized. However, with land prices remaining steady and a slight reduction in input costs, coupled with strengthening revenues and increasing yields, we anticipate that the figures we'll be delivering later this year will be around 6%, up from the current 5.5%. While we are still aiming for the upper 6s, we have yet to fully identify all opportunities, but we are making progress towards future potential.

Our next question is a follow-up question from Steve Sakwa with Evercore ISI.

Dave, it was exactly on that point you just referenced. So just to be clear, on the supplemental when you talk about the deliveries this year, you're saying that $600 million to $700 million is kind of yielding 6%, but for something that you start new today, you would be targeting more of a 6.75%, which is not really in the cards. So is it fair to say that you're not really starting new things? These are just kind of completions and you've got to see either rents up or cost down to get to that yield that you're targeting on new investments?

So Steve, let me clarify a couple of points. The homes we are delivering this year will have returns below 6%. Currently, we are delivering homes in the mid-5% range and anticipate delivering homes later this year at around 6%. This is because these homes were initiated in prior periods when lumber prices were significantly higher. Additionally, we had the necessary funding in place to support this. Our inventory is strong, with 14,000 lots at various stages of improvement. It's worth noting that much of this land was acquired two years ago and has appreciated significantly since. This will positively impact us as we deliver homes. For land we consider acquiring today, we would aim for returns in the high 6% range. Opportunities are limited at the moment, but we are much closer to finding potential than we were a quarter or two ago. We believe it's wise to be patient and disciplined in this process, and that's our current approach. However, this doesn’t imply that we will slow down our deliveries since the pipeline was established in earlier periods. Any new land we acquire today would likely lead to deliveries in 2025 at the earliest, unless the land already has infrastructure work done, allowing for faster delivery. But generally, we are looking at 2025 or 2026 for any new land acquisitions.

Thank you. We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.

Thank you, operator. And thank you to all of you for your time today. We'll see many of you shortly at NAREIT. Have a good afternoon. Take care. Bye-bye.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.