Greetings and welcome to the AMH Second Quarter 2024 Earnings Conference Call. 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, Nick. You may begin.

Good morning. Thank you for joining us for our second quarter 2024 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 facts 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, August 2, 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 press 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 power of the AMH platform continues to be on full display. We posted strong second quarter results with core FFO per share growth of 8.5% year-over-year. Our teams executed well and rental fundamentals continue to be strong leading us to increase our core FFO per share outlook by $0.03 to $1.76 at the midpoint. This represents 6% growth for the full year and was driven by increased same-home core revenue and NOI guidance. In addition, we have derisked our debt maturities through our recent 10-year unsecured bond issuance. As demonstrated by our results this year, AMH continues to be defined by the following concepts: One, consistency and predictability on the operational front; Two, consistent and predictable growth on the AMH development front through our patient and disciplined approach, when the investments meet our corporate objectives and goals; And three, consistency and predictability with our prudent capital allocation strategy and balance sheet management. Looking at the big picture, housing fundamentals continue to support the single-family rental value proposition. The national housing shortage and population demographics continue to drive a housing supply and demand imbalance. This dynamic coupled with elevated home prices and mortgage rates is resulting in high demand for rental homes from people seeking the benefits of single-family living without the cost or burden of homeownership. At AMH, we are doing our part to satisfy the growing demand for high-quality single-family rental housing by providing a superior resident experience and contributing new housing stock through our development program. Before I turn it over to Bryan, I want to mention that our CEO transition is going smoothly. The AMH team is talented and experienced and our future is very bright. You have seen the power of our platform over the past decade. You can see it in this quarter's results and you will see it moving forward. Now I will turn it over for an update on our operations and investment programs.

Thank you, Dave, and good morning, everyone. Our 2024 spring leasing results were solid, with seasonally strong operating metrics throughout the second quarter. Our teams have done a great job executing across all areas of the business, driving better-than-expected results in both top line revenue and controllable expenses. During the second quarter, we maintained consistent Same-Home average occupied days of 96.6%. We accomplished this while accelerating new lease growth in each month of the quarter up to 6.3% in June and 5.7% overall. As we discussed last quarter, we continued our balanced renewal strategy, as we entered the move-out season and posted renewal increases of 5.2% for the quarter. This resulted in blended spreads of 5.3%, driving Same-Home core revenue growth of 5.5% by slightly exceeding our expectations on rental rate spreads and resident collections. On the expense front, tight expense controls across the organization largely drove Same-Home core operating expense growth of 4.8%, which was better than what we were expecting. All of this resulted in Same-Home core NOI growth of 5.9% for the quarter, demonstrating the power of the AMH platform and our team's ability to deliver consistent and predictable results through the spring leasing season. Looking forward, we expect to see normal seasonality in the back half of this year. The team has done a great job building momentum due to the leasing season and is now shifting focus to managing our turnover inventory. For the month of July, Same-Home average occupied days remained strong at 96.3%. This was in line with our expectations and reflects the impact of the start of move-out season. Leasing spreads continued to hold steady, with new and renewal rate growth of 6.2% and 5%, respectively. Our strong performance in the first half of the year combined with our outlook for the remainder of the year, has led us to increase our full year Same-Home core NOI growth guidance by 50 basis points to 4.5% at the midpoint. This reflects a 25 basis point increase in our full year core revenue outlook, driven in part by a 50 basis point increase in our rate growth expectations for the back half of the year. In addition, the updated outlook reflects a 25 basis point reduction in our full year core expense growth. Lastly, on the investment front, we remain patient and disciplined as we continue to invest into our vertically integrated in-house development program. We are on track to deliver between 2,200 and 2,400 newly developed homes this year at average economic yields in the high 5% area based on year-on rents, stabilized expenses, and a reserve for CapEx. As a reminder, we fully control our land pipeline of over 11,000 lots. Not only does this fuel our growth for the next few years, but it also reduces our dependency on the resale market or in other homebuilders for external growth. This is another example of the consistency and predictability that is at the core of the AMH strategy. In closing, the first half of the year was characterized by great execution across the organization. Our momentum from the spring leasing season and our increased outlook represents the power of the AMH platform and the continued strength of fundamentals in the single-family rental sector. 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 review of our quarterly results; Second, an update on our balance sheet and recent capital activity and third, I'll close with commentary around our increased 2024 guidance. Starting off with our operating results, we delivered another solid quarter of consistent operational execution with net income attributable to common shareholders of $92.1 million or $0.25 per diluted share. On an FFO share and unit basis, we generated $0.45 of core FFO representing 8.5% year-over-year growth and $0.39 of adjusted FFO representing 9.4% year-over-year growth. From an investment perspective, for the second quarter, our AMH Development program delivered a total of 670 homes to our wholly owned and joint venture portfolios. Specifically for our wholly owned portfolio, we delivered 580 homes for a total investment cost of approximately $224 million. Outside of development our acquisition programs continue to remain largely on pause as we acquired just 10 homes during the quarter. Additionally, during the quarter we sold 391 properties generating approximately $125 million of net proceeds at an average economic disposition yield in the mid-3% area. Next, I'd like to turn to our balance sheet and recent capital activity. At the end of the quarter, our net debt including preferred shares to adjusted EBITDA was down to 5.1 times, our $1.25 billion revolved credit facility was fully undrawn. We had approximately three million shares outstanding on a forward share basis for estimated future net proceeds of $109 million and we had over $700 million of cash available on the balance sheet, which includes the proceeds from another successful and opportunistically timed unsecured bond offering during the month of June. The transaction was meaningfully oversubscribed, priced with an attractive coupon of 5.5% and raised total gross proceeds of $500 million that will be used to repay our 2014-SFR3 securitization during the third quarter. Following the June bond offering, our 2024 debt maturities are now fully derisked, which further strengthens our financial flexibility and firepower to take advantage of additional growth opportunities when they present themselves. Additionally, following the end of the quarter we successfully closed a new $1.25 billion revolving credit facility, which proactively replaced our previous credit facility that was initially scheduled to mature in the first half of 2025. Terms of the new credit facility include a modestly improved cost of borrowing, fully extended five-year term and enhanced sustainability feature that is now linked to the energy efficiency of our newly constructed, AMH development homes. And before we open the call to your questions, I'll cover our updated 2024 earnings guidance which was positively revised across the board in yesterday evening's earnings press release. Starting with the Same-Home portfolio, recognizing our strong leasing spreads and improved bad debt outlook that we now expect to approximate 100 basis points on a full year basis, we've increased the midpoint of our full year core revenue growth expectations by 25 basis points to 5%. And on the expense side, factoring in our team's ongoing solid cost control execution, as well as a modestly favorable property tax information. We've also reduced the midpoint of our full year core expense growth expectations by 25 basis points to 6%, which translates into an overall increase of 50 basis points to the midpoint of our full year core NOI growth expectations to 4.5%. And from an FFO perspective, we now expect an additional $0.02 of FFO contribution from our increased core NOI expectations across the entire portfolio as well as an extra $0.01 of contribution from our modestly improved full year outlook around interest income and G&A expense. And in total, we have increased the midpoint of our full year 2024 core FFO per share expectations by $0.03. Our new midpoint of $1.76 per share reflects the high end of our previous range and now represents a year-over-year growth expectation of 6%. And as we open the call to your questions, I'd like to share a quick thank you to our team. This was a solid quarter for AMH across the board that demonstrates the total power of the AMH platform and our ability to consistently and predictably deliver shareholder value creation again and again and again. And with that, thank you for your time and we'll open the call to your questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Juan Sanabria at BMO Capital Markets. Please go ahead with your question.

Hi, good morning. Could you discuss the July trend? I believe you provided the new lease rate growth for July, but I'm interested in the renewals for that month and where you're sending those out. Additionally, you mentioned an increase of about 1% in your blended lease rate expectations for the second half. Any further details on that would be appreciated.

Thank you, Juan. This is Bryan. July was strong. We posted new lease rate growth of 6.2%, and renewals came in at 5%. We're mailing renewals in the low 5s, which is part of our balanced revenue management approach. Our outlook for the second half has been raised by 50 basis points regarding spreads. This is supported by outstanding demand across our diverse portfolio, especially in regions like the Midwest and the Carolinas. We have significantly increased our new lease expectations, and we anticipate renewal rates, both new and renewals, to be in the high 4% range for the second half of the year.

Thanks. And then just curious one of your peers talked about some impact or negative effects from new supply starting to be felt, a bit more broadly calling out. Florida, as well as through price fatigue. So just curious on, what your guys take is on those two points? Are you seeing that in any particular regions in your portfolio?

Yes. Thanks. I think in terms of supply, the area that seems to be most affected is in Phoenix. Phoenix is really kind of the center point for a lot of the new built-to-rent supply that's coming on with the market. There are a couple of key points though that I'd like to make. One, not all built-to-rent is the same. It's not all created equal. We feel when referring to built-to-rent supply, they're talking about townhomes and row houses and horizontal apartments. In fact, I think John Burns cited that less than 25% of the built-to-rent inventory in Arizona is single-family detached, which is the product that we're building. With increased built-to-rent supply and the increased multifamily supply, there is some pressure on occupancy in a market that's seen outstanding growth over the past five or six years. That's still performing well in the 95% area, but there is a little bit of pressure. Most notably though, the built-to-rent that we're bringing into the market in Phoenix as I said, a single-family detached very well located, and it's performing extremely well. In fact, our new built-to-rent product is in excess of 97% occupied in that particular market. So there is some supply pressure. We believe it will be temporary. It may not necessarily be like-for-like product to ours. But Phoenix remains a very strong market. We expect that to get absorbed in the near term.

Thank you. Our next question comes from the line of Eric Wolfe with Citibank. Please proceed with your question.

Hi. Thanks. I think you mentioned in your remarks, that your bad debt that you're expecting right now is 1%. And I think it was 1.2% last year. So I guess, I would think that would help your same-store revenue by about 20 basis points relative to your original guidance. So I was just curious, like is the blended spread just adding another five bps, just trying to bridge the gap between your original guidance and your new guidance and what's contributing to the 25 bps increase? Thanks.

Sure. Good morning, Eric. Chris here. Thanks for the question. In terms of the guide, I would think of the increased 25 basis points as largely coming, call it half-half, half from our increased spread outlook and half from our better-than-expected bad debt experience. Just on the topic of collections, maybe if I can share a little bit more color. The general update is pretty consistent to our discussion last quarter. We're continuing to see strong collection trends into the second quarter. And I think, what was really encouraging about what we saw, is that our collection patterns were strong pretty much across most areas of the portfolio, which we view as a really positive indication with respect to the financial health of the AMH resident base. To your point, in terms of tying that into the guide. With that said, think about our outlook for the balance of this year. Look, we're very mindful of the fact that bad debt levels typically correlate higher with move-out season. And with that in mind, we've left our bad debt outlook is contemplated in guidance for the second half of the year in the low 1% area or so. We are pretty consistent with the back half of last year as you point out bringing our full year bad debt outlook to 1% on average. But look, I'm hopeful that we can do better than that and provide a nice update in the back half of this year. But at this point, I think it's important that we remain prudent given that the majority of the move-out season is still ahead of us.

Got it. And I guess where is that debt trending today? So I mean, maybe just the last couple of months in terms of where it's been?

Yes. Second quarter ran at 90 basis points.

Thank you, Eric.

Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Great. Thanks for taking the question. So given some of the positive updates on expenses and property taxes in states where you have more visibility, we're wondering what your current guidance assumptions are for Florida and Georgia. And if those assumptions have changed at all? What's the right way to think about taxes in those states rate closer to November?

Sure. Good morning, Jamie. This is Chris. I can provide a broader update on property taxes and include Florida and Georgia. We're currently only about halfway through the property tax calendar year and have received initial assessed values for just over half of our portfolio. This marks the start of the appeals process, which will continue through the summer and early fall. We expect to receive the remaining values in the third quarter, and the majority of tax rates will come in during the fourth quarter. So, it's still early in the year. As I noted in the prepared remarks, we've received some positive news from Indiana, which runs on a different schedule than most states and is contributing to a 25 basis point reduction in our guidance. Outside of Indiana, based on the information we've gathered so far, we are optimistic about achieving a new midpoint of 7% growth for the full year. Regarding Georgia and Florida, we've received a significant portion of initial assessed values in Georgia, which has started the appeals season. However, some values have come in slightly lower than expected, and we currently have no visibility into rates there. Florida, on the other hand, generally experiences activity in the third and fourth quarters.

Thank you for the detailed information. Now, regarding the markets, the Midwest has shown particularly strong performance. I would like to hear your thoughts on this. There was a recent article in the Journal discussing challenges in purchasing homes in Milwaukee specifically. What do you think about the Midwest overall? Additionally, it seems the market is anticipating lower mortgage rates ahead. Which of your markets are you most concerned about regarding occupancy issues or increased turnover if mortgage rates decrease?

Thanks, Jamie. This is Bryan. We're very satisfied with how the Midwest markets have performed this year. Our homes in that region are of high quality and located in great areas. We're experiencing strong in-migration, which supports our discussions from the past couple of years regarding the increasing value of single-family homes. In the Midwest, this is represented by good neighborhoods, large yards, and improvements in quality of life. We're truly happy with this performance. I have seen discussions about moderation, and I read those same articles. However, our portfolio is well positioned for ongoing success in that area. If there were to be a change in mortgage rates, it would depend on the supply of new housing, and our markets face significant supply constraints, especially for homes available for sale. This is the primary reason for people moving out, but we've performed well when the difference between the cost of owning and renting has been smaller. Overall, we appear to be resilient through all cycles.

Thank you. Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your question.

Great. Thank you. One follow-up to that Bryan. Can you quantify that last comment because that is still one of the big concerns right investors have on lower mortgage rates means you'll see a flock renters leave to go buy homes. So you commented that when things were tighter on cost to own to rent you had you were resilient. I guess can you quantify that versus today?

Yes. Again as I mentioned in the last question. It's still the top reason for move out. We do have residents that are going to transition into ownership. But the business held up very well during periods of time with low mortgage rates and a lot of supply on new builds. We're obviously not immune to the effect of a major change there. But I think the effect won't be as dramatic as some might be thinking. Again, you've got to get back to the basis though that we are supply constrained for high-quality housing across the board in our markets. And I think that will provide a lot of support for our occupancy and rate.

Hey, Jeff, it's Dave. I think that last point is the key point. We're undersupplied in housing throughout this country. But more importantly we're very undersupplied where migration is moving to and that's the markets that we're in. So we need more housing if rates come down and some people can buy houses, all the better. But it's not going to solve the housing problem. And demand is going to remain very strong. Two other points to it. One is there still remains a very, very large delta between cost of ownership and renting. And the last point is if you go back before the interest rates moved up demand was getting stronger each and every period without the delta. That was due to the lack of housing, especially in migration markets. So we're going to continue to see very, very strong demand in all economic cycles.

Thanks. And then the follow-up question I have on development. The development yield you're earning. You talked about in your opening remarks I think you did say that construction costs are trending down. Is that helping the yield that you think you can earn in year one or year two?

Yes, I don't believe that development costs are decreasing. However, the rate at which they were increasing is definitely slowing down. The market was previously extremely competitive, whether it was for land or trades. Looking ahead for the rest of this year, we've indicated that our performance will likely be in the high-5s. We are beginning to see some opportunities to acquire land, albeit on a small scale. We are identifying strong opportunities across all of our markets, and we expect to invest about $50 million in new land this year. We are also working on additional contracts for next year. Some of this land may take a little longer to close as we need to work with sellers to get the necessary approvals. The expected yields from these investments will be in the low 6% range, certainly above 6%. Thus, we anticipate some improvement as we progress.

Thank you. Our next question comes from the line of Linda Tsai with Jefferies. Please proceed with your question.

Yes. Hi. The 391 homes $125 million in net proceeds and a yield of mid-3%. Would you expect the mid-3% yield to stay stable? And how much visibility do you have on dispositions?

Good morning, Linda. Chris here. I believe that the mid-3s are a good representation of the current marketplace, typically in the mid to high 3s, and we have remained consistent in this range for the last several quarters. Overall, we are seeing strong traction through our disposition program. The teams did an excellent job in the first half of this year, capturing the spring and summer selling seasons. As you mentioned, we sold 391 homes during the quarter, bringing our year-to-date total to 862 properties, which exceeds half of our full-year expectations. This is great for capital recycling, contributing to our interest income while allowing for attractive redeployment into our growth programs. Considering the full-year outlook, we recognize that home sales typically slow in the latter half of the year. However, we feel confident we're on track for our expectation of around 1,500 dispositions, with a disposition cap rate in the 3s seeming appropriate.

Would you continue to expect to lean into dispositions more as you head into next year?

We would. One of the great aspects of our asset class is its granularity and our ability to make smart asset management decisions at the unit level. We are refining the portfolio and identifying attractive opportunities to effectively recycle that capital into our growth programs. Another factor driving our disposition opportunities is the collateral currently being released from our remaining securitizations coming off the balance sheet. Earlier this year, we had two securitizations maturing, the first of which was paid off in the first quarter. The second, which I mentioned in the prepared remarks following the successful June bond offering, will be paid off in the third quarter. Together, these two securitizations will free up approximately 9,000 homes. Additionally, we have two more securitizations that will be repayable in 2025. Our plan is to refinance those on an unsecured basis, transitioning our balance sheet to a fully unencumbered one, which will also release around 8,000 to 9,000 homes. This will represent the next phase of opportunity from a disposition and asset management perspective.

Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

Thanks. Good morning. Chris, just a few quick questions on expenses. I know it's too early to talk specific numbers, but just in terms of directional moves do you expect any expense line items to reaccelerate next year?

Good morning, John. As we look towards next year, I can say that this year has been particularly positive in terms of momentum and team execution. Overall, we feel confident about our performance. We mentioned that property taxes are expected to decrease by 25 basis points at the midpoint for the full year. Importantly, aside from property taxes, the teams are effectively managing the controllables and achieving excellent results across the portfolio, which is reflected in our revised outlook for non-property tax expenses, down by 25 basis points to 5% at the midpoint. I agree that it may be a bit early to discuss next year's numbers, but the team is doing an outstanding job with the controllables. We're witnessing the benefits of our investments like Resident 360, and I anticipate that these initiatives and the team's performance will carry into next year as well. Regarding property taxes, although I can't provide specific numbers, we've previously noted that property taxes are influenced by property values. Our expectation has been that since the peak in home price appreciation around 2022, property taxes should gradually decline and stabilize over time. We are seeing signs of this trend this year. While I can't predict the future with certainty, it would not be surprising if property taxes continue to moderate into next year. I can't quantify it at this stage, but we feel optimistic about the direction.

Okay. One last follow-up on repair and maintenance and turnover costs, just given the increasing length of stay you turn some of these homes that really haven't turned into post-COVID environments and kind of evictions and bad debt fully normalize. Do you think we'll see a temporary period of above-average R&M and turnover costs because of deferred spending?

Yes. Hey, John, it's Dave. I want to emphasize a few points that Chris mentioned and connect them to your question. We invested in our field teams two years ago with the resident 360 initiative, which has greatly improved our visibility and discipline regarding repair and maintenance. Additionally, the seasonal nature of this business has returned, so comparisons on a year-over-year basis will be much more favorable than in the last couple of years as we transitioned from pandemic patterns to standard seasonality patterns. Lastly, I'm confident in our repairs and maintenance because we are consistently adding new homes to our portfolio that are specifically designed for rental, constructed with materials that support long-term maintenance. The average age of our homes is stable, and the overall portfolio isn't aging significantly. More importantly, while the age of the home matters, the quality—including higher-end plumbing fixtures and the way flooring and decking are constructed—will keep our maintenance costs more manageable than if we did not prioritize these aspects.

Thank you. Our next question comes from the line of Daniel Tricarico with Scotiabank. Please proceed with your question.

Hey, good morning, team. Chris you noted the collateral from the securitization. Could you give us a sense on the magnitude of those disposition opportunities from those assets? And could it be large enough of the source of funds that would lead you to ramp up the development pipeline a little more? Thanks.

Sure. Morning, Daniel. Yeah, in terms of framing the collateral magnitude. Each one of our securitizations, these are average numbers each one of our securitizations is collateralized by call it 4,500 properties or so? So the two securitizations either paid off or being paid off this year will free up about 9,000 homes. And then as we refinance as I mentioned, our two opportunities next year on an unsecured basis. That will free up another 9,000 homes. Which really as I mentioned creates a great opportunity to fine-tune the existing portfolio and really attractively recycle that capital. The one thing that I would point out though just in terms of timeline to recycle that capital I wouldn't think of it as a flipping of the switch overnight on the recycling of that capital in large part because of the channel through which we are selling those homes, right? Pretty much all of our dispositions these days are being sold through the MLS to end-user homeowner buyers. Which means that we need to have vacant units to be able to put on to the MLS. And as we think about having vacant units to sell, it's a good problem to have, but 96% plus of our homes are not vacant. And so we need to let leases roll. After leases roll residents move out, when homes are identified for disposition. We'll spend a short amount of time prepping those homes for sale and then putting them on to the market after that. So big opportunity ahead of us and I would think of it more of a kind of a gradual runway of opportunity to refine, fine-tune the portfolio, and attractively recycle capital for years to come especially as this collateral is being released.

Thanks for the color, Chris, I guess I'll keep you here. You gave the guidance change breakdown. Nothing specific on occupancy. So the low 96% expectation you had initially unchanged, and I guess just with the strength in demand you're seeing is that keeping you more towards a rate-focused strategy at this time of the year?

Thanks, Dan. This is Bryan. We're not focused on any one component of revenue. Our objective is really just to consistently maximize revenue and revenue growth over time. So the 96% that you're seeing, it is consistent with our expectations at the beginning of the year and our increased rate outlook is us being able to capitalize on that increased demand. But we're not focused on any one metric in isolation.

Thank you Our next question comes from the line of Jesse Lederman with Zelman & Associates. Please proceed with your question.

Good morning and thanks for taking my questions. Looks like you reached a single-digit rate of inflation on insurance expense for the first time since late 2020. Can you give us an update on what you're seeing on the insurance side of the business please?

Sure. Good morning, Jesse, Chris here. Yes, I would say, from an insurance standpoint, that's an actual renewal number at this point. If you recall our renewal falls during the first quarter. And so our renewal was done. We knew the actual number and contemplated it in guidance this year. What we saw in the second quarter, I think is a little bit of a function of where some of the prior year quarterly comps fell on a full year basis as we talked about at the start of the year and as contemplated in guidance we would expect insurance to land in the high single digits from a full year perspective. And I think it really reflects two things. One as I'm sure you've heard from elsewhere the insurance landscape overall has been improving this year, which is great from an insurance and broader industry perspective. And I think it's also a reflection of the favorable risk profile associated with dispersed single-family assets. And then in particular the AMH risk profile, especially in and around weather events in large part, thanks to our team's really mature disaster preparedness and response programs which has differentiated the Image risk profile, which you can see reflected in our insurance renewals.

Great. Thanks for that color. That's helpful. Shifting gears to the development pipeline. It looks like you'll have a high exposure going forward to markets that are already burdened by increased supply. So if I look at Phoenix and Vegas in particular it looks like 30% of your future lots will come from those two markets. And of course, this reflects investments made a couple of years ago and fundamentals in those markets were particularly strong. But is there any concern that such a large percentage of development conceivably will come from areas where more supply is and will be coming online?

Yes, this is Dave. The answer is no, I don't have any concerns. Let me clarify; our built-to-rent model differs from what's emerging in the market, and we are experiencing very high demand for our built-to-rent offerings. The importance of location cannot be overstated, as our homes are situated in infill areas right next to where homebuilders are constructing for retail sale, but not where they are developing built-to-rent properties. As for the type of homes we are creating, we focus on detached homes, which are closer to urban employment centers. We do not engage in building attached homes. Currently, nationwide, only about 21% to 22% of built-to-rent deliveries are detached homes, while attached homes stay on the market longer and often require concessions to secure renters. In contrast, all of our built-to-rent properties are 97% occupied, showing strong demand without any concessions. I view our product as being of higher quality and in greater demand compared to other built-to-rent options, and I do not foresee any occupancy concerns for our built-to-rent deliveries in the future.

Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question.

Hey, guys. Congrats on a really strong quarter in guide raise. I wanted to ask about kind of how you view your cost of capital today? I guess specifically your equity cost of capital looks like active on the ATM a little bit. Last year and a little bit earlier this year but not in the second quarter, it looks like the stock price today is a little bit higher than where you were issuing in the first quarter. So, just again, maybe specifically with your equity cost of capital but even just generically across all the different forms of capital, how you think about kind of cost of capital today?

Good morning, Adam. I think things are generally moving in the right direction, although we would like to see more activity in terms of equity capital. Earlier this year, we took advantage of small equity raises that were prompted by our inclusion in the S&P index, which allowed us to boost our resources modestly at over $37. Going forward, we plan to use that capital opportunistically. It's all about finding the right opportunities that allow us to utilize our capital effectively. It's important to note how we've structured our capital plan specifically regarding our development program. We've been careful to size our development plans so that we can manage our land pipeline without needing additional equity in any given year. Our development program is sustainable through retained cash flow, some capital recycling from asset sales, and leveraging our balance sheet. This means we can consider equity as a strategic tool for future growth opportunities, such as development projects or partnerships with national builders when the time is right. We remain optimistic about these portfolio opportunities moving forward, especially as many assembled portfolios are looking for liquidity given the current cost of debt. These could be great chances for us to enhance value by integrating them into our operations. However, these opportunities must align with our criteria, and since we have solid growth prospects from our development program, we don’t feel pressured to take unnecessary risks. As always, we are committed to our standards regarding location, quality, and price.

Thanks Chris. That was really helpful. Just on a little bit of different note. Just wondering on some of the comments around kind of the renewal rate and where you're going out with renewals today. Maybe just quantifying kind of what the take rate is on renewals either today or maybe your expectations for the second half of the year kind of take rate on renewals? And then how does that compare to history? Just kind of rule of thumb in terms of kind of take rate on renewals?

Yes. Thank you, Adam. This is Bryan. As I talked about a little bit earlier, the 70% retention rate is kind of the expectation going forward. And if you look at that in historical context of a COVID context, it's a pretty significant improvement over to what our run rate was back then for a couple of reasons. One, we've talked about the supply dynamics. But we've also really improved the offering. And I think the residents are appreciating the power of the maintenance platform and the services platform. So 70% is right what we're targeting. And again, really nice improvement over the past five or six years.

Thank you. Our next question comes from the line of Brad Heffern with RBC Capital Markets. Please proceed with your question.

Yes, thank you. For-sale housing supply has picked up in a lot of your markets and I think pricing is looking a little weaker in a few places. Obviously, rents continue to go up as well. So I'm curious if you're closer to a place where you might want to acquire a more active way or if the economics are still quite far from what development gives you?

Yes. Thanks, Brad. This is Bryan. In terms of national builder activity, we continue to review tens of thousands of homes. We're active in reviewing really across the portfolio. And if you look at our specific buy box and the bid-ask spread it's consistent with what we talked about last quarter, somewhere in the 15% to 20% range before they start to make a lot of sense for us in today's current environment. So we aren't seeing any significant movement. But when it happens we'll be ready to take advantage of it.

Sure. No nothing definitely nothing one tiny. I think it's largely a function of timing of prior year quarterly comps as well. And you can see it in the same-store pool a little bit. If you look at property taxes for example that ran sub-5% relative to the full year expectation at 7%. And that really has to do with timing of where some of the things fell on a quarterly basis last year.

Okay. Thank you.

Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

Hey, thanks for taking the follow-up. Bryan I have a kind of a broader question about how you think through your geographic footprint today. So you're in call it 35 markets and there's plenty of diversification within submarkets within every one of those markets. So curious how you think through potential merits of concentrating your capital a shorter list of markets to drive better density and perhaps better efficiency at the corporate level or the property level rather?

Yes. Thanks, John. This is Bryan. We're very pleased with our diversified footprint. We have proven – we built an operating model that allows us to be very efficient in some of the satellite markets, where we may not have a huge presence but the efficiencies are still there. I've talked about it in the past we manage a lot of these markets through kind of a hub-and-spoke system, and it's proven to be a really good way to allow us to have that expansive footprint. In terms of concentration on select markets I think you can see it in where we're targeting our development program and the growth there. We're not developing in every market across the United States. Although, we're very pleased with our portfolio footprint, we're more excited about growth in the development markets. I think we're in 16 markets right now. And that's the area that we're concentrating on growth. And really laying into and it ties right into your question too because remember, in most cases we're delivering communities which have a lot more density obviously, and potential for increased efficiencies on repairs and maintenance and operating side.

Thank you, operator and thank you to all of you for your time today. Have a great weekend and we will speak with you next quarter.

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