Greetings, and welcome to the AMH Fourth 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, you may begin.

Good morning, thank you for joining us for our Fourth 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, February 23, 2024. 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.

Thank you, Nick. Good morning, everyone, and thank you for joining us today. As you may have seen in last night's press release, I announced my intent to retire at the end of the year. It has been an honor to lead this company over the past 12 years, and I cannot be more proud of the leadership team we have in place, who are ready to take the reins. I want to congratulate Bryan Smith, our Chief Operating Officer, who is named to be our next Chief Executive Officer upon my retirement. Bryan is a talented and experienced executive who has driven our business strategy and operations since the beginning. Additionally, we have elevated Chris Lau to the role of Senior Executive Vice President and Chief Financial Officer. I know with this highly talented management team, AMH stands ready to seize the opportunities ahead. Now I will provide some brief comments before I turn the call over to Bryan and Chris. 2023 marked another year of resilient and durable growth at AMH. For the full year, core FFO per share grew nearly 8% driven by sustained long-term rental demand, superior operational execution supported by our strategic initiatives, and consistent production from our development program. The single-family rental sector and the AMH platform continued to benefit from supply-demand imbalances. The national housing shortage, driven by limited homes for purchase in the open market, has created challenging home affordability dynamics for homebuyers. AMH is doing its part to solve this housing shortage. We are adding new supply to the market and operating high-quality assets in desirable family-friendly locations at a significant discount to the cost of ownership. We are well-positioned to deliver consistent results for years to come. On the growth front, our primary growth channel is internally developed homes that are well-located, high-quality, and have superior maintenance CapEx profiles compared to our legacy portfolio. Having full control of the growth program allows us to dial up or dial down our delivery phase in certain markets to appropriately manage our capital plan. Our Traditional and National Builder acquisition channels continue to be largely on pause, given our current cost of capital. When these acquisition opportunities become more attractive, we will be ready to quickly capitalize and supplement our in-house development deliveries. While the acquisition and capital market environments are not conducive to accretive growth from the MLS or National Builder channels, it does continue to be a great time to lean into dispositions. The single-family rental asset class has the unique ability to be managed on an asset-by-asset level, which provides the ability to recycle capital at attractive economics. On a personal note, it is bittersweet leaving AMH where I co-founded the company and had a hand in building the SFR industry and team from top to bottom. I am proud that AMH is well-positioned to continue our success in delivering high-quality housing to our residents and superior returns to our investors. I will see many of you over the next 10 months, but I know after I retire, I will miss the people I've worked with, within and outside the AMH community. I'm eternally grateful for those relationships that have been created. And now, I will turn the call over to Bryan for an update on our operations.

Thank you, Dave. I'm excited to have the opportunity to be the next CEO of AMH. Over the next 10 months, Dave, Chris, and I will work together to ensure a smooth and seamless transition. Our strategy remains the same, with stability, consistency, and predictability at the center. On a personal note, I want to congratulate Dave on his planned retirement. Dave, thank you for your leadership, your mentorship, and your friendship. I'm honored to follow in your footsteps. 2023 was another great year at AMH characterized by strong execution from our teams and the full return to seasonality. Demand remains strong as we approach the spring leasing season. And although some metrics have normalized, we continue to see improvements in key areas such as website traffic, which was up 11% year-over-year in the fourth quarter. Moving on to fourth-quarter operating results, Same-Home average occupied days was 96.2%, representing normal seasonal effects and slightly elevated turnover. This modest decline in occupancy was balanced by strong fourth-quarter new renewal and blended rate growth of 4.5%, 6.2%, and 5.7%, respectively. All of this drove 5.5% Same-Home core revenue growth for the quarter, meeting the midpoint of our full-year revenue guide of 6.5%. Turning to expenses, fourth-quarter core operating expense growth was 4.5%, primarily driven by negative property tax growth due to a true-up in the same period of last year. For the full year, core operating expense growth was 9.1%, which was slightly below the midpoint of our expectations due to better-than-expected controllable expenses. All of this resulted in 6% and 5.1% Same-Home core NOI growth for the fourth quarter and full year, respectively. Turning to our 2024 outlook, the year is off to a steady start as we head into the spring leasing season. For the month of January, Same-Home average occupied days was 96%. New and renewal spreads were 4.3% and 5.7%, respectively. This resulted in blended rate growth of 5.3% for the month. On a full-year basis, our Same-Home core revenue growth outlook is 4.75% at the midpoint. This was primarily driven by forecasted growth in average monthly realized rent of 5% to 5.5%, which breaks down to an earn-in of approximately 3% from last year's leasing activity and the partial year contribution from expected 2024 spread in the high 4% area. On the occupancy front, we expect sector demand drivers to continue to fuel sustained occupancy levels in a low 96% area, which continues to be above our long-term average. Looking ahead to core property operating expenses, our 2024 Same-Home expense growth outlook of 6.25% at the midpoint reflects another year of elevated property taxes and inflationary impacts specific to our business. Chris will provide more details on the expense components in a moment. But I want to emphasize that overall expenses continue to moderate and our teams have done a great job keeping controllable expenses in check. Taking the midpoint of our Same-Home revenue and core operating expense guidance, Same-Home core NOI growth is expected to be 4% in 2024. In closing, I'm very pleased with our position as we start the year. We will continue to focus on operational execution from the core, a continued commitment to providing the best possible resident experience, and responsible growth from our investment programs. With that, I will turn the call over to Chris.

Thanks, Bryan, and good morning, everyone. Before I get into my regular updates, I wanted to say thank you to Dave. Dave, I genuinely appreciate your many years of vision and mentorship, and I look forward to helping carry on the AMH legacy. Additionally, I also wanted to say congratulations to Bryan and I look forward to our next chapter. Now turning back to my regular updates, I'll cover three areas this morning. First, a brief review of our year-end results. Second, an update on our balance sheet and recent capital markets activity. And third, I'll close with an overview of our 2024 guidance. Beginning with our operating results, we closed out 2023 with another quarter of consistent execution, with net income attributable to common shareholders of $76.6 million or $0.21 per diluted share, and $0.43 of core FFO per share and unit, representing 8.8% year-over-year growth. And for full-year 2023, we generated net income attributable to common shareholders of $366.2 million or $1.01 per diluted share, and $1.66 of core FFO per share and unit, which represents the high-end of our most recent 2023 guidance range. From an investment standpoint, during the quarter, we delivered 503 total homes from our AMH development program. This was comprised of 456 homes and 47 homes delivered to our wholly-owned and joint-venture portfolios respectively. On a full-year basis, we delivered a total of 2,317 AMH development properties, which was modestly better than the midpoint of our expectations. Outside of development, our Traditional and National Builder acquisition programs continued to remain largely on pause as we acquired just 25 homes during the quarter. On the disposition front, we saw another quarter of solid activity, selling 241 homes at an average disposition cap rate in the mid-3% area, generating $72.5 million of net proceeds. Next, I'd like to turn to our balance sheet and recent capital activity. At the end of the year, our net debt including preferred shares to adjusted EBITDA was 5.4 times. We had $59 million of cash available on the balance sheet and our $1.25 billion revolving credit facility, adding a $90 million drawn balance. Additionally, throughout the fourth quarter and beginning of January, we sold approximately $3.7 million Class A common shares under our ATM program, at an average sales price of $36.36. These sales generated total net proceeds of approximately $133 million and will be used to fund a portion of our 2024 capital plan that I will talk more about in a couple of minutes. Additionally, last month we opportunistically took advantage of an attractive market window and proudly became the first single-family rental REIT to issue unsecured green bonds. In addition to being an important capital raise, our green bond issuance further highlights our commitment to responsible business practices and sustainable building standards. From an execution standpoint, the transaction was meaningfully oversubscribed with investor demand which allowed us to drive attractive pricing, with an all-in interest rate of 5.5% and upsize the transaction to $600 million, which will be used to fund a portion of our 2024 capital plan. Thank you to the team for making this transaction possible and helping us set another industry milestone. Next, I'd like to share an overview of our initial 2024 guidance. For full year 2024, we expect core FFO per share and unit of $1.70 to $1.76, which at the midpoint represents year-over-year growth of 4.2%. And for the Same-Home portfolio at the midpoint, our expectations contemplate core revenue growth of 4.75%, which Bryan discussed a few minutes ago, along with core property operating expense growth of 6.25% driven by property tax growth in the low 7% area, which as expected is beginning to reflect moderation from the past few years, and 5.25% growth on all other expenses reflecting the general inflationary environment and insurance expense growth in the high single digits based on a successful renewal campaign that becomes effective at the end of this month. In putting together our Same-Home portfolio revenue and expense growth expectations, we expect 2024 Same-Home core NOI growth of 4% at the midpoint. From an investment standpoint, as we shared last quarter, given the nature of the ongoing capital markets environment, responsible and controlled growth remains a top priority in 2024. With that in mind, we have strategically sized our 2024 investment programs to remain consistent with last year and expect to deploy between $1.1 billion and $1.3 billion of total capital in 2024, adding between 2,200 and 2,400 newly constructed AMH development homes through our wholly-owned and joint-venture portfolios. Specifically for our wholly-owned portfolio, at the midpoint of our ranges, we expect to invest approximately $1 billion of AMH capital, consisting of $750 million or 1,900 homes added from our development program along with $250 million combined investments into our wholly-owned development pipeline, pro-rata share of JV investments, and property enhancing CapEx programs. Additionally, as we talked about last year, we have two legacy securitization loans that matured during the fourth quarter of this year. As a reminder, the two securitizations have a combined principal balance of approximately $940 million with an average interest rate of 4.4% and are now freely pre-payable without penalty. After the success of our January green bond offering, we recently gave notice to pay off one of our upcoming maturities by the end of the first quarter. In addition to responsibly addressing a portion of this year's maturity schedule, the payoff will unencumber approximately 4,500 properties that can now be fully reviewed by our asset management and disposition teams. With respect to our remaining 2024 maturity, we expect to opportunistically monitor the market for refinancing windows and have contemplated a midyear payoff in guidance. With that said, we have the ability to be patient and if necessary, can comfortably backstop our remaining 2024 maturity using our $1.25 billion revolving credit facility. From an overall capital plan perspective, taking into consideration our investment programs and securitization maturities, we expect total 2024 AMH capital needs to approximate $1.9 billion that we plan to fund through a combination of retained cash-flow, approximately $400 million to $500 million of recycled capital from dispositions, equity capital including approximately $130 million of the ATM equity net proceeds I talked about earlier, $600 million from last month's green bond issuance, and approximately $500 million of additional capital that we plan to raise for the unsecured bond market over the course of 2024 or warehouse on our revolving credit facility if needed. Finally, as we also announced this week, given the ongoing growth in our business and taxable income, our Board of Trustees recently approved an 18% increase in our quarterly distribution to $0.26 per share. Needless to say, this is yet another testament to the strength and consistency of our platform as we continue to create value for our shareholders into this next chapter for AMH. And with that, thank you again for your time. We'll open the call to your questions.

Operator Instructions. Our first question comes from Juan Sanabria with BMO Capital Markets. Please state your question.

Hi, good morning. Just curious if you could talk a little bit about leasing trend expectations for 2024 assumed in your guidance. If I look historically, the fourth quarter tends to be a bit below the average for the following year given some seasonality. So just curious on some of the puts and takes assumed at the start of the year in your full-year guidance for 2024.

Hi, Juan, this is Bryan. Thank you for the question. As we talked about before, our objective exiting '23 was to be in a position of strength on occupancy with good momentum into January to capitalize on that real increase in demand that we typically see at the end of January into February. The beginning of the year is playing out largely as expected. We've seen great acceleration into February. And we posted some healthy rate growth numbers in January and expect a little bit of improvement, I think into February. But for the full year, our expectation on new lease rate growth will be in the low 4%s and renewal rate growth to be in the 5% area, blending into a high 4% for 2024.

Great, Thank you. And then maybe just if you could talk a little bit about that, how much should be kind of COVID non-compliant is still left? And what was the prior run rate pre-COVID, just to get a sense of any maybe potential conservativism in the bad debt assumptions assumed or built into the guidance for '24?

Yes, sure. Good morning, Juan. Chris, here. Why don't I start, and then Bryan can fill in some other details if helpful? But taking a step back, I would say that bad debt is really continuing to play out pretty consistent with our expectations. Fourth quarter is a good example landing once again in the low 1% area. And as we've shared on prior calls, collections and our collection processes are essentially back to normal at this point. Except that, we have a number of municipalities and court systems across the country that are still moving a little bit slower than historic norms. And that is the piece that continues to really hold bad debt modestly above our long-term run rate of 80 basis points to 100 basis points or so. And then you look at this point, we really haven't seen much change from a local court system perspective since our last update. And since that is completely out of our control, we really just can't count on it in guidance yet. And so as a result, our outlook contemplates that bad debt remains in the low 1% area or so over the course of this year. But look, I think we would love to be wrong on that assumption and potentially see some bad debt tailwind over the course of this year. We just can't count on it. And then, if you'd like some mathematical context here, hypothetically, if our bad debt returned to normal on a full-year calendar basis, that would translate into about, call it, 30 basis points to 40 basis points of additional Same-Home revenue contribution.

Yes. In response to your question about COVID residents still living in the houses, we've made significant progress in resolving delinquency. There are still a few isolated areas, particularly in Seattle and parts of Atlanta. However, this situation is primarily influenced by the local municipalities and court systems.

Thank you. Our next question comes from Jeff Spector with Bank of America.

Great, thank you. And first, congratulations to Dave and Bryan. My first question, if we can focus on the January new, comparing to your peers, your new rate in January came in much stronger. Can you talk about that a little bit more, is it specific markets like what do you see and what could you share with us? Thanks.

Sure, thank you, Jeff, this is Bryan. We're taking a very balanced approach to our pricing and the way that we're managing the entire revenue line. We're very pleased with our January results. As I said, we were expecting really strong return in demand. Some of the seasonality that we saw in Q4 continued into the beginning of January. But we are still able to post some really good new lease rate growth. And it's not isolated to any specific markets. A little bit of it is a testament to our diversified portfolio. But it shows pretty good strength relative to I think some of the other numbers from other residential peers. Shows pretty good strength across the board.

Thank you. Dave, could you share an initiative or a specific achievement you're particularly proud of and plan to focus on in the months leading up to your retirement, which investors may not fully recognize? Thank you.

Thank you for your kind words, Jeff. Reflecting on the last decade, it has been incredibly rewarding to build both a company and an industry. The most significant accomplishment and reward, however, has been the team I've built around me. Watching their growth, mentoring them, and seeing them succeed has been fulfilling. Stepping down is not an easy decision, and there's no perfect time for it. You want to continue doing what you love, and it's hard to step back during tough times, but this feels like the right moment. We've focused on ensuring that the right people are in the right roles, and we've discussed our succession plans extensively. This includes leadership training at various levels throughout the company. Today feels like the right time. We are in a strong position, and the company's growth prospects are solid. Everything seems to be functioning well, and both Bryan and Chris are ready for the next steps. After a long tenure of 12 or 13 years here, plus 10 years as the CEO of a publicly traded company in Canada, I believe it’s the right moment to transition. Thank you again for your words.

Our next question comes from Steve Sakwa with Evercore ISI. Please go ahead.

Yes, thanks. Congrats again, Dave and Bryan. I just wanted to see maybe could you provide any February stats? I realize the month is not over here, but just trying to sort of frame out the new and the renewals. I think Bryan, you said 5% or so on renewals for the year. Obviously, the first quarter is off to a good start, and I don't know what that implies as an exit rate. I'm just trying to kind of figure out kind of your level of conservatism on the pricing side. Thanks.

Sure, yes. Thank you, Steve. As I talked about earlier, we saw a really nice acceleration of demand at the tail end of January continuing into February. There's a little bit of a lag before that translates into new leases, but February is off to a fantastic start. I would expect new and renewal leases to be a tick better in terms of rate growth over January, and the effect of that improvement in demand will probably be more obvious in the March occupancy numbers as an example. But we're off to a great start. Rate growth is steady and improving slightly. On the renewal side, there's going to be an expectation that it returns to kind of normal seasonality where the renewal strength is relative to news is strong in Q1 and Q4, with news outpacing renewals during the spring leasing season. And that's our expectation for this year.

Yes, first, let’s consider the overall development program. Going back three to five years, we emphasized that it would allow us to control our own future and grow in any economic climate, which has been validated today as our other growth avenues—our acquisition growth channels, National Builder, MLS—are largely limited due to the current opportunity landscape. For 2023, it's important to note that the homes we're delivering now were built on land we acquired four to six years ago, and they are yielding significantly higher returns than anticipated when we made those acquisitions. Over the last couple of years, it’s been tough; we've seen unprecedented increases in home-building costs across the board. Fortunately, we've experienced strong growth in rental rates, and our yields are, as mentioned, substantially higher. For 2023, we anticipated a potential boost in the latter half of the year, possibly a 5% decrease in some costs, but the reality fell short of those expectations. The home-building market was slow at the beginning of 2023 but picked up as builders leveraged incentives, and the demand for supplies and labor normalized, although the benefits weren't as significant as we hoped. Lumber remained the biggest advantage, and last year we delivered in the high 5% range as we underwrite, which still exceeds what we're seeing from National Builders or MLS in our consistent underwriting across both channels. Looking ahead to 2024, remember that many of these projects were underwritten and acquired years ago, with much of the development already underway, making them still very beneficial. I am very pleased that we have these assets in our portfolio. To answer your question directly, we expect deliveries in 2024 to be in the high 5% range, possibly touching 6%, but let's keep our focus on the high 5% for now.

Your next question comes from Keegan Carl with Wolfe Research. Please go ahead.

Yes, thanks for the time, guys. I guess maybe first just on your property enhancing CapEx, it was down materially both year over year and sequentially. Just wondering if any of this is related to the Resident 360 program or something else that drove it? And then what would be a good run rate going forward?

Thank you, Keegan. This is Bryan. I think what you're seeing on the property enhancing CapEx is the results of our continued LVP hard surface flooring program where we're replacing carpet. We've made significant progress on that, and now homes are going into turns that have the hard surface flooring. So you're going to see a little bit of a reduction on that. The other component of that is what we call revenue-enhancing CapEx, which are specific upgrade projects that we're evaluating on a unit-by-unit basis. They're not nearly as significant, but they provide good returns on a project basis. So yes, we've seen a reduction, I think that probably will hold. But we're going to continue that program until we're completely out of the carpet business.

Got it. And then shifting gears, maybe one for Chris here, just focusing on your real estate tax growth. I guess, are you doing anything differently from a forecasting perspective, just given what happened the last two years and obviously given legislation in Texas, just curious there, what sort of benefit you'd be expecting?

Sure. Good morning, Keegan. Thanks. Look, I would just remind for 2023, our expectations were pretty much right on and even 2022 outside of the Texas curveball. Look, overall, no different than we talked about last year, property taxes continue to play out pretty consistent with what we've been expecting. 2023 was in that 9% area that we started the year with in terms of our expectations and then trend line and expectations into this year, again, very similar to some of the preliminary thoughts that we were outlining last year. Expectation is that we're going to begin to see some level of moderation as rate of home price appreciation has come off the historic highs of the past couple of years. But with that said, we shared this view last year also. We're not expecting property taxes to snap back to long-term average overnight. As we know, property taxes are inherently backwards looking. And although things have cooled, there are good portions of the housing market that have remained really resilient, right? Places like Florida and Georgia continue to remain strong, where we could still see property tax growth in those states in the high single digit to low double digit area. All of which has translated into this year's view in the low 7%s, which again reflects moderation from the past couple of years, but will still likely run above our long-term run rate of 4% to 5%. But I would finish it off by saying things are very much playing out as we've been expecting.

Thank you. And our next question comes from Jamie Feldman with Wells Fargo. Please state your question.

Great. Thank you. This is Cooper Clark from Jamie. Just wondering, we've heard from your peers that BTR supply has been increasing in cities like Las Vegas and Phoenix. We appreciate the quicker absorption here when you do see pockets of supply, but wondering what markets in 2024 you would call out as higher supply, where you may see slight weakness in a given quarter?

Yes, this is Dave. Let me address this part, and then Bryan can chime in. I have some differing views on that perspective. We are noticing an increase in build-to-rent, but it's primarily outside the main areas of the city, in secondary and tertiary markets. A significant amount of build-to-rent projects have entered the market in the past three to four years, whether from national builders or various equity sources. Many of these projects have been available for us to consider midway through their development, but due to their location and quality, we have chosen to pass on them. Additionally, there are numerous build-to-rent projects being marketed to us. The intention behind most of these projects was to construct, rent, stabilize, and eventually sell to realize a profit. While there are quite a few of these assets available for trade, their pricing falls in the 4% range. Over the past year, we've seen thousands of properties listed from both national and local builders. However, when we evaluate the quality and pricing, which again are in the 4% range, they simply do not present an appealing investment opportunity. Currently, a noticeable trend among national home builders is that homes previously designated as 'built to rent' are now being reclassified as for sale or retail properties. This reflects the challenge in moving these homes unless they are in desirable locations or offered at significant discounts, which is often necessary in secondary and tertiary markets. Therefore, I don't perceive as much build-to-rent actually exchanging hands as some may suggest. Bryan, do you want to add anything?

Yes. Cooper, specifically looking at supply in certain markets, you're correct. Phoenix is one of the markets that's seen some additional supply, not only in build to rent, but also in just a regular way, scattered site. It's evident, I think you can see in the performance from an occupancy perspective. Phoenix has been a top-performing market for the past five years, both in rate and in occupancy. But we are seeing a little bit more supply. John Burns estimates that supply is up about 25% year over year in Q1. The good news for us is that we believe that'll be absorbed relatively quickly. We have a fantastically well-located portfolio in Phoenix, and we see this as a temporary supply. We expect Phoenix to return to kind of historical performance pretty quickly. Las Vegas, there has been an increase in supply in Las Vegas, specifically from build to rent, but our portfolio is performing very well there, and we're still seeing occupancy into the 96s. Now, the other market really comes to note for me is San Antonio, where we've seen some increased supply as well. But as we talked about earlier, this is part of the benefit of having the well-diversified portfolio, in that we do have markets that have seen a decrease in supply, specifically in the Midwest. So we're really happy with the position that we're in now.

Our next question comes from Eric Wolfe with Citi. Please state your question.

Hi, thanks, and congrats, Dave and team. If I look back at 2023, you ended up beating your guidance by about $0.05 with around $0.02 of that coming from higher, same-store underline. So I was just curious what ended up surprising you to the upside to drive that $0.03 extra and how you're thinking about some of those line items in 2024?

Yes, sure. I think it sounds like Nick. Good morning, Nick. It's Chris here. Yes. As we look back on 2023, I think we are really pleased with how the year ended up playing out and also in particular the momentum we're carrying out of '23 into '24. I would say notable areas as we think about the outperformance from a Same-Home perspective, I think we did a great job on the rate side, leaning into and pushing rate over the course of the year. I think we saw that especially through the spring leasing season and some of our updates at the end of the second quarter. I would say that was kind of the theme of the first half of the year. And then the other piece, we talked about this a lot in the second half of last year is what a great job the team did around controlling controllables, controlling controllable expenses in large part as Resident 360 started to be rolled out across the portfolio. We saw nice expense controls around R&M and turn in the third and the fourth quarter. And so I think it was really rate growth through the spring, nice topline trajectory balanced with tight expense controls, notably in the back half of the year and through turn season, that really translated into the outperformance last year. And as we think about this year, just taking a step back, I would remind us all that, look, it's early, right? It's early in the year. It's not lost on us that there's still some economic uncertainty out there in the environment that we're thinking about this year. There's still some question marks out there across the environment, and we're going to make sure that we come out of the gate prudently at the start of this year. But I think it's very important. Again, we really like the position that we're in. We exited '23 nicely. We had a great fourth quarter, and we're seeing really nice trend lines into January and February like Bryan was talking about. Sure, yes. Let me tie those together. Best guess on dispositions is that we'll probably see an environment fairly similar to this past year 2023, $400 million to $500 million of sales with dispo cap rates probably somewhere in the threes again. But look, tying into the broader capital plan. Look, I would zoom us out for a minute. As you know, we have a large $1.9 billion capital need for this year when you take into consideration both our growth programs and securitization refinancings. And although the planned primary funding blocks for this year consist of retained cash flow, importantly recycled capital from dispositions and debt, we're always evaluating all options. And when the stock was trading at a small discount to consensus NAV, as an example, all things considered, including our relative cost of borrowing in the mid 5s and the totality of this year's capital needs a little bit of equity made sense. But again, I would remind you we're only talking about $130 million. It's not needle moving in terms of capitalization of the company, but we think it's a very nice complement to help round out this year's larger total capital need.

Thank you. Our next question comes from Haendel St. Juste with Mizuho Securities. Please state your question.

Hi, good morning and congratulations to both Bryan and Dave. Dave, I wanted to go back to your comments on development for a moment. I wanted to understand perhaps the opportunity to maybe flex up the development deliveries this year from the current guide of $750 million. I think last year you started off with an initial guide of $650 million and then you ended up with $850 million for full year '23. So I'm curious kind of the opportunity and what perhaps you might want to see. And could we see potentially you flex up to a level similar to what you did last year? Thanks.

Yes. So let's talk about the opportunity set. First of all, we are in a really, really good place not only to be able to flex up, but also to maintain a very consistent growth program into the future. We're sitting with 12,000, maybe 13,000 lots right now in our inventory, and those are all in different stages of development. Some are in land and some are ready to go vertical. But that is really going to give us a very, very predictable long-term growth program for many years. We do have a couple of holes in that program, but it's very, very little. It's just a market here and a market there where maybe in the '26 or '27 unit delivery outlook we need to plug a hole. So those are the fine-tuning, and we'll take care of that. The ability to flex up is there, Haendel, it's all about looking at the capital that you have. The capital that is going out from year to year, you have to look at exactly where it's going. In '23, some of that capital was going into not deliveries, but it was going into some land development preparing for deliveries either this year or next year. And so you got to look at both the numbers of homes as well as the dollars. It's not a perfect science that they correlate perfectly because sometimes there's a little bit of a timing difference between how much land development is going on versus deliveries. We do have the ability to flex up and we have the ability to flex up more than just in development. We talked about today we're on the sidelines with National Builder and MLS. We're on the sidelines not because we won't grow through the National Builder MLS because the opportunity set is not there. It's all a function of what the capital markets look like as well as what the acquisition opportunities look like. But it's also about maintaining consistency and predictability in your growth program. So we can flex up. We got to be careful how much we flex up. If we flex up, it can be borrowing from next year because you have to have the land developed. So I know that's a long-winded answer that's a little bit roundabout, but hopefully that addresses your concern.

It does, and I appreciate that. Maybe some comments on the backfilling of the land itself. Curious kind of what you're seeing out there in the market. Any notable changes of any sort? And then potentially any regions or markets you may want to get into or increased exposure to. Thanks.

Yes, let's start by discussing the markets. I don't believe there are any new markets we want to enter at this time. Our development program is in a strong position because we capitalized on the opportunity to purchase land at favorable prices during the COVID period about two and a half years ago, acquiring nearly 7,000 to 8,000 lots in that timeframe. We are well-positioned for the future. Currently, land is available, but its pricing, similar to that of MLS, is relatively high. We're in a fortunate position with our land pipeline. In 2023, we did purchase some land, although it was a limited amount aimed at filling gaps in our future delivery program for 2026, 2027, and 2028. More land will become available, but we are selective about our purchases. We are focusing on land adjacent to national home builders who are acquiring retail products rather than build-to-rent properties, which should yield dividends in the long run. We can be patient, benefiting from our existing pipeline. I am pleased that our development program is robust for the years ahead, and there will be opportunities to speed up land acquisitions in the future. For now, we are adequately addressing immediate needs while maintaining a consistent program for years to come.

Our next question comes from Adam Kramer with Morgan Stanley. Please go ahead.

Hi, guys, thanks for the time and congrats to Dave and Bryan. Just wanted to ask maybe a two-parter here just where does the loss to lease sit today? And then maybe you talked about a little bit earlier, Bryan, but just roughly where are you sending out renewals, I guess for March and April at this point?

Our loss to lease is currently in the low 3% range. Regarding renewals, we've already received many results for February and March, and they are showing slightly better trends than January. We are issuing renewals in the 5% to 6% range for April. As we mentioned earlier, we expect renewals to be around the 5% mark for the next 12 months.

Great. Thanks. Maybe just switching gears and a little bit more of a conceptual question. Just wondering on acquisitions, it seems like it's kind of not being incorporated into guidance. I think you kind of bought a little bit here and there over the course of 2023. And I guess that the conceptual question is, look, if the acquisition market, whether it's MLS or builder partners, were to come back and be more attractive, would you consider that or is kind of the full focus on development, kind of, given all the advantages that program has, and you'd probably stick to development even if the acquisition market came back. And then I guess if you were to kind of go back into acquisitions more because that market did improve, do you kind of have the G&A, scale, and kind of ability to flex that acquisition kind of spigot back on?

Yes. So, Adam, this is Dave. Absolutely, we're not opposed to National Builder and MLS. We look at them as a wonderful supplement to our development program. Our development program, what we said over and over is it allows us to grow in every economic cycle, and that's what is today. But it doesn't mean that we're opposed to the National Builder and MLS. Today, we still have an acquisition team; they continue to underwrite homes every single day, whether it's from National Builders or MLS. The MLS, as we know, has a lot less inventory available on it, but we do underwrite it, and we're underwriting thousands of homes every month and every quarter. We're just not finding them attractive today. As time goes on and cycles, if you go back and you look at where we are today, it's probably very akin to history. You have to go back a long ways, though, probably to the 1980s when you saw the very, very rapid increases in interest rates, et cetera. But those cycles always repeat, and there will be a time when it is going to be very, very attractive to buy any type of product against your cost of capital. And yes, we have the entire infrastructure in place. It's not only in place in the acquisition side, it's also in place in Bryan's management side of the business. So any opportunities that are out there, big or small, we have the ability to execute on them.

Our next question comes from Michael Goldsmith with UBS. Please state your question.

Good afternoon. Thanks a lot for taking my question. As you think about the equation to maximize revenue, right, lease spreads have remained quite strong, while occupancy has kind of come down a little bit from a sequential on a year-over-year basis. Can you just provide a little more detail around the strategy around occupancy versus pushing rate? And did that allow you to push rate a little bit harder than maybe you have in prior years?

Yes. Thank you, Michael. I want to just start with a reminder that we're trying to optimize the entire revenue line and rate, and obviously as a component, it does affect occupancy. Our plan this year was to enter from a position of strength, 96% occupancy is strong, both under any historical lens that you look at. And our expectation as we go into the spring leasing season is that we will have some pricing power. We looked forward to absorbing some homes and maybe a slightly better rate environment, but we had really good rate growth on new and renewals in Q4, continued into January. And keep in mind that's before the demand is really going to kick back in. So we're in an excellent position coming in there, but we're not looking at any individual component in isolation. We're looking at maintaining a very balanced and consistent pricing strategy for the residents that maximizes revenue in the long term.

Thanks for that. And then similarly, turnover is kind of turning up just a tad. I suspect that kind of goes hand in hand with rate. Are you seeing any pushback from residents on renewal rents?

Yes, Michael, there's a couple of components there. You identified one of them. The other one was the return to seasonality that we talked about in Q4. What we're seeing right now is a little bit of negotiation from the rates that we're mailing to the ones that are signed; you can think of the negotiation band somewhere in the 30 basis point range, so it's not huge. But we have really high-quality assets that are well located and we're providing really good value that the residents are appreciating.

Our next question comes from Brad Heffern with RBC Capital Markets. Please state your question.

Hi, everyone. Thanks. I was wondering if you could provide some data on move outs to buy a home. Where have they been recently and where does that sit versus historical levels?

Sure. Thanks, Brad. This is Bryan. As expected, we have seen a decrease in the proportion of our residents who are moving out to buy. In Q4, it was under 30% for the first time that I can remember, and it continued to tick down just a little bit into January, into the 28% range. Historically, that's around mid-30%s, so it is a decrease, but it still is the major reason for or major destination for our residents who move out.

Okay. And sort of related, can you talk about what the expectation is in guidance for how turnover trends in 2024?

Yes. The right way to think about it, Brad, is it's a factor into occupancy. I would also think about it in terms of full-year recall is really the return of seasonality that we started to see into late second quarter, third quarter in the back half of the year. So when we're comping on a full year-over-year basis, we'll probably see a slight uptick in turnover full year, but really more representative of kind of the return to normal seasonality, kind of post-COVID environment that we settled into in the back part of 2023 and all contemplated in this year's occupancy guide in the low 96%s.

Thank you. Our next question comes from Linda Tsai with Jefferies. Please state your question.

Hi. Not sure if you answered this, but just any further color on the occupancy guidance? I'm just wondering why that would stay relatively flattish from where you are today when overall demand seems pretty solid and you aren't really being impacted by new supply.

Hi, Linda, this is Bryan. We posted occupancy of 96% in January and our expectation for the year is below 96%s. So we are expecting to have some absorption. Really think about it in terms of what Chris just spoke about in that we saw a return to seasonality and our expectation is that seasonality will persist this year. So the end of the year may have a little bit of a rebalance after the heavy spring leasing season.

Thanks. And then my second question is just on the negotiation range of 30 bps, which isn't that high, how much does that usually trend, and does that change a lot depending on what part of the year you're in?

There's not a huge amount of seasonal variability there. A lot of it has to do with the fact that our offers are fair and they work well in the context of what's being offered for lease in the marketplace at that specific time. Historically, if you go back to pre-COVID periods, it was probably a little bit tighter in the 10 basis point range. We've expanded it a little bit just in light of everything that's happening in the world. But yes, it is still pretty close and we're comfortable at that range.

Thank you. Our next question comes from Jesse Lederman with Zelman & Associates. Please state your question.

Hi, thanks for taking my question and congrats on the retirement, Dave. And congrats to Bryan and Chris on the new roles. My first question is just on February and it's great to hear things have improved a little bit from January. How would you say the improvement feels on pricing power, specifically in February? And maybe what you're expecting in March compared to kind of the normal seasonal lift? Maybe when seasonality was more of a thing pre-COVID to start the year.

Yes. Thanks, Jesse. It's playing out largely as we expected. The acceleration of demand at the end of January is really driving excellent results in February. February is not done yet, but we expected to enter the year in a good position. 96% occupancies is certainly that. So we can push pricing as we accelerate into the spring leasing season.

It’s a very insightful observation. We consider several factors when determining the size of our program. We aim to ensure that our company’s risk profile remains unchanged since its inception. Our company is fundamentally a rental business, and we intend to maintain that focus on our balance sheet. Additionally, we seek to balance having a sufficient pipeline to support future growth across various economic conditions, as previously discussed, and I believe we have achieved that balance. Our current position seems appropriate, though we will adjust when unique opportunities arise. Presently, acquiring land and existing assets is quite challenging, placing us in a strong position. However, we continuously assess our balance sheet, capital markets, and pipeline dynamics as we develop our program over time.

Thank you. And our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please state your question.

Thank you. How does the low 3% loss to lease compare to historical levels for this time of year? Regarding the renewals you mentioned for February and March, it seems like you are mostly finished for those months. How do the acceptance rates trend compared to what you've typically seen during this time of year?

Yes, thanks, Austin. The low 3% loss to lease that we see currently, obviously, it's been a little different in the past couple of years with the massive acceleration in new lease rate growth. Our current position, though, is a testament to our revenue management team and the ability that we've shown to be able to recapture some of that. Low 3% this time of year, I think is a very healthy position. Keep in mind there's going to be seasonal variability to that as we get into the spring leasing season, new leases tend to accelerate pretty heavily at that point, which would cause a change in that loss to lease number with the rest of the portfolio. And then looking forward to the results from February and March, they're not done yet, but we've seen retention as expected. I probably have better visibility into February than we do into March, but it's really playing out as planned.

And then just anything on the rent-to-income ratio as you kind of get a little bit, maybe at the margin, greater pushback than what you've historically seen. Anything on that rent-to-income ratio that's stretching above levels that leads you to dial back the rent increases at any point?

No. In fact, we've been really pleased with the fact that incomes have kept pace with changes in rent, certainly from our applicant pool. That's been something that we've seen even the past three, four years as rents have accelerated greatly. The health of our incoming residents is very strong.

Thank you. And our next question comes from Tayo Okusanya with Deutsche Bank. Please state your question.

Yes, good afternoon. Again, congrats Dave and Bryan, as well as Chris. My question is around just some of the SFR legislation that's out there, the anti-SFR legislation, wondering if you kind of give us an update on kind of what you're hearing about some of this legislation, possibility of it kind of moving forward in Congress on federal level or even some other things that are happening in any states that you have exposure to.

Yes, Tayo, this is Dave. Thank you for your initial comments. Legislation and regulation have been an ongoing challenge for the last 12 years, constantly evolving. We need to remember that this is an election year, which often brings a lot of rhetoric. Historically, there has been much discussion about various regulations, but very few have been finalized, particularly at the federal level. However, this rhetoric does resonate at the local level. That's why having a strong government affairs function is crucial, as well as maintaining relationships at both federal and local levels. We have invested significantly in that effort. Rhetoric will always be present, but I believe that American Homes has consistently been fair and thoughtful in our dealings, which is what matters most. We are a part of the housing solution, actively building homes. The reason there is so much discussion around regulations is because housing costs have skyrocketed, now consuming almost 40% of many households' income, up from the low 30s. The issue lies not with housing providers, but rather with a significant housing shortage that must be addressed. This can be achieved by relaxing certain regulations and offering incentives for creating the necessary housing. While the rhetoric has intensified, particularly in this election year, it is important to keep this context in mind as we navigate the current cycle.

Thank you. There are no further questions at this time. I would like to turn the floor back over to David Singelyn for closing remarks.

Well, thank you to all of you for participating today. But just from my perspective, thank you for your support over the past 12 years. Over the next 10 months, I will be out with Bryan and Chris, hopefully meeting many of you. And I look forward to that as we transition the role to Bryan of the CEO. So have a good day, and we'll see you over the course of the year. Take care. Bye-bye.

Thank you. This concludes today's conference. All parties may disconnect. Have a good day.