Greetings, and welcome to the AMH Third Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Nicholas Fromm, Director of Investor Relations. Thank you, Nick. You may begin.

Good morning. Thank you for joining us for our third 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, October 30, 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. This is a special day for me. Today is my last earnings call before passing the baton to Bryan Smith, the next steward of our great brand. I hired Bryan more than 12 years ago. He has worked alongside me to build this company, many of those as our Chief Operating Officer. Reflecting on the last 12 years, we have accomplished more than I ever imagined. Together with Wayne Hughes, we seized a once-in-a-lifetime opportunity to pioneer the professionally managed single-family rental landscape. Since then, we've changed perceptions of housing in the U.S. and raised the bar on industry standards for service and quality. To control our own destiny, expand our portfolio through every economic cycle, and do our part in addressing America's housing shortage, we build new homes in desired locations across our markets. We invested in our operations. We leverage technology. We looked around corners. And most importantly, we focused on people. We assembled a talented team, including a strong leadership bench that has worked together for the past decade and is ready to lead this company into the next chapter of its journey. Today, our 60,000 homes provide thousands of households with access to high-quality homes at a meaningful discount to the current cost of homeownership. Our residents appreciate the convenience, flexibility, and ease of living we provide. Housing is a fundamental American need, and single-family rental homes have emerged as an important part of the American housing landscape and solution. Building AMH with Wayne and with your support is one of my proudest career accomplishments. I leave AMH with gratitude, pride, and fond memories that I will cherish forever. Thank you all for being a part of my journey. AMH is in capable hands, and I'm excited to see the future successes, not only at AMH but for the SFR industry as a whole. And with that, I will now turn the call over to Bryan.

Thank you, Dave. I remember joining our team over 12 years ago when AMH was only an idea. Since then, we've accomplished many great things, including pioneering an industry. But what stands out to me is the way that you've led the company by being focused on the people, both our team members and our residents. AMH would not be where it is today without you. Thank you for your outstanding leadership and friendship. I look forward to carrying on the AMH legacy. Looking ahead, the future is bright for AMH; long-term business fundamentals are strong. And in the midst of a national housing shortage, we continue to do our part by contributing new housing stock through our development program, working to meet the growing demand for high-quality single-family rentals. More importantly, we remain focused on creating the best resident experience in the industry. AMH homes are well located in high-growth markets are known for their superior quality, and are supported by the best services platform in the industry. Turning to the near-term environment, this year is quickly coming to a close, and we consider 2024 to be a job well done. Operating results in the first half of the year were better than originally anticipated as the team worked hard to capture additional upside during the busy leasing season. In the back half of the year, managing expenses has been key. Our success in controlling costs during the heavy move-out season is reflected in our results and the guidance revision highlighted in yesterday's earnings release. For the third quarter, the teams delivered right on top of expectations with 4.4% revenue growth over the prior year. And on the expense front, another quarter of better-than-expected results was driven by the team's focus on controlling the controllables. This resulted in total Same-Home operating expense growth of 2.6% over the prior year. All of this contributed to strong core NOI growth of 5.4% for the quarter and positive guidance revisions, which Chris will talk about in a moment. For the month of October, preliminary estimates look good with renewal rate growth increases of 5.4%, continuing to anchor our rent growth activity. Occupancy and new lease rate growth stand at 95.2% and 2%, respectively. As we close out 2024, we continue to carry strong momentum but also recognize that we are operating in an uncertain environment given the upcoming election and general economic conditions, pockets of near-term supply in certain markets, and temporary disruptions from a series of significant weather events. With that in mind, for the balance of the year, we will be focused on setting up the portfolio for success in 2025 and plan to optimize revenue by prioritizing occupancy ahead of the holiday season. Moving to our growth programs, we are pleased to report that despite significant weather disruptions in the Southeast, our development program remains on track to deliver approximately 2,300 high-quality attached single-family homes with economic yields averaging in the high 5s for the year. When excluding a reserve for CapEx, the nominal yield for these homes is closer to 6. As a reminder, our land pipeline of nearly 11,000 lots will continue to fuel our stable and predictable new construction growth channel for years to come. Additionally, as outlined in yesterday's earnings release, we are excited to announce that we recently acquired a single-family rental portfolio of nearly 1,700 homes across 13 markets, for a total purchase price of approximately $480 million. These well-located, high-quality detached single-family homes overlay well with our existing portfolio footprint. As Chris will discuss in more detail in a moment, we expect nominal NOI yields in the 6% area once these homes are stabilized on our platform. This represents an attractive and accretive investment that reflects our disciplined and responsible approach to growth as we continue to monitor the market for additional opportunities. The power of the AMH platform was on full display during this transaction. Our diversified footprint, best-in-class operating system, and asset management program allow us to maximize the value of portfolios for AMH while providing a seamless exit solution for sellers; a true win-win scenario. In closing, the teams have done a great job executing our strategy in 2024, and we will be well prepared entering the new year. With our CEO transition nearly complete, I am excited to lead the business into the next chapter of the great AMH story. With that, I'll turn the call over to Chris.

Thanks, Bryan, and good morning, everyone. Before I jump in, I want to share an additional congratulations and thank you to Dave. Dave, you truly helped pioneer an industry and positively change housing across America. And under your leadership, we've built AMH into the industry leader that we are today. Thank you, Dave, and I wish you all the best. Now turning back to the quarter, I'll cover three areas in my comments today: First, a review of our quarterly results, including a summary of our estimated financial impact of the recent series of hurricanes; second, an update on our balance sheet and recent capital activity; and third, I'll close with commentary on our further increased 2024 guidance and some additional thoughts around our recently acquired bulk portfolio. Starting off with our operating results, we delivered another strong quarter, demonstrating the strength of the AMH platform and our ability to efficiently control costs during the heaviest move-out season of the year. Simply put, our teams did a great job executing on our objective of controlling the controllables this quarter with net income attributable to common shareholders of $73.8 million, or $0.20 per diluted share, which included a $3.9 million estimated total loss from Hurricanes Beryl, Debby, and Helene. After quarter end, as we all know, Florida was further impacted by Hurricane Milton, which we preliminarily expect to result in another $3 million to $4 million of hurricane damages in the fourth quarter. This hurricane season delivered an unprecedented series of consecutive storms, and our teams did a fantastic job standing up to the test, working tirelessly to protect our residents and portfolio through our industry-leading disaster preparedness and response programs. Through their hard work and a little bit of good fortune with some of the storm paths, our portfolio avoided catastrophic losses with our damages largely consisting of cleanup costs and repairs such as roofing shingles, landscaping, fencing, and other minor items. Excluding our estimated hurricane loss during the third quarter, we generated $0.44 of core FFO per share and unit, representing 6.3% year-over-year growth and $0.38 of adjusted FFO per share and unit, representing 8% year-over-year growth. On the investment front, for the third quarter, our AMH Development Program delivered a total of 753 homes to our wholly-owned and joint venture portfolios. Specifically, for our wholly-owned portfolio, we delivered 640 homes for a total investment cost of approximately $250 million, which was right in line with our expectations. Outside of development, we continue to actively monitor the one-off acquisition markets, with the majority of opportunities continuing to be outside of our disciplined buy box. With that in mind, we acquired just 16 properties during the quarter for approximately $5.5 million. On the disposition side, we saw another active quarter selling 256 homes, generating over $81 million of net proceeds at an average economic disposition yield in the 3%, creating a highly attractive capital recycling opportunity. 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 5.0x. Our $1.25 billion revolving credit facility was fully undrawn. We had approximately 3 million shares outstanding on a forward basis that were settled after quarter end for approximately $110 million, and we had over $160 million of cash available on the balance sheet. As a reminder, during the quarter, we repaid our 2014-SFR3 securitization using proceeds from our June bond offering, which unencumbered over 4,500 homes that can now be reviewed by our asset management and disposition teams. Next, I'll cover our updated 2024 guidance, which was increased again in yesterday's earnings press release. As we've talked about many times before, we've been thoughtfully and proactively investing into our platform and expenditure management programs for years. These investments are now paying off, enabling us to control the controllables and produce expense results better than our previous expectations. With that in mind, we've reduced the midpoint of our full year non-property tax-related expense growth expectations by 100 basis points to 4%. On the topic of property taxes, we've now received most of our final assessed values and are happy to report modestly better-than-expected assessment outcomes in a number of states, including Florida, Georgia, and Texas. Although most tax rates aren't published until the fourth quarter, given our favorable assessment outcome, we reduced the midpoint of our full year property tax expectations by 100 basis points to 6%. Considering our improved outlook for both property taxes and controllable expenses, we have lowered the midpoint of our full year Same-Home core operating expense growth expectations by 100 basis points to 5%. In turn, we've increased the midpoint of our full year Same-Home core NOI growth expectations to 5% and full year core FFO expectations to $1.77 per share, which now represents 6.6% year-over-year growth. Next, I'd like to share a few additional thoughts around the bulk portfolio we acquired after quarter end. As Bryan mentioned, the portfolio consists of approximately 1,700 properties located in 13 markets and was acquired for a total purchase price of roughly $480 million that was funded through a combination of cash on the balance sheet and modest capacity from our credit facility. Additionally, the portfolio is highly synergistic with our existing footprint and includes over 1,500 properties that are directly within the AMH buy box. These properties are currently being managed by third-party property managers and will be transitioned to the AMH platform over the next several months. Once on our platform, we expect to unlock the AMH value by bringing in-place rents up to AMH standards and implementing our best-in-class expenditure controls. This process will likely carry into 2025, and once stabilized to AMH standards, we expect the portfolio to generate an NOI yield of approximately 6% and an economic yield in the high 5s after reserve for CapEx. Finally, with respect to the approximately 150 homes that did not meet our buy box, we expect to efficiently sell these properties through our disposition program over the next 12 to 24 months and will likely recycle between $40 million and $50 million of capital. Before we open the call to your questions, I'd like to leave everyone with one final thought. As we begin to close out 2024, it's important to recognize the incredible efforts of our team and the results they've achieved this year. As we hoped, during the first half of this year, our teams did a fantastic job capturing the strength of the leasing season, driving meaningful upside against our expectations. As we transitioned into the move-out season in the back half of the year, our teams produced some of the best controllable expense results in AMH history, once again creating further upside compared to our expectations. All told, our current 2024 core FFO growth outlook of 6.6% now stands 240 basis points above our original guidance at the start of the year. No question, this year has exceeded our expectations. For that, we say thank you to the team, and we'll open the call to your questions.

Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question comes from the line of Juan Sanabria with BMO. Please proceed with your question.

Hi, good morning. Just hoping you could talk a little bit about the pricing dynamic for new customers. It seems like renewals are pretty steady, but you kind of talked about focusing on maintaining occupancy and setting yourself up for 2025. So just curious your expectations for new leasing in the balance of the year into 2025. And what the impact of supply is that you're facing any kind of early discounting that you're doing or you're seeing across your various markets? Thanks.

Yes. Thanks, Juan. This is Bryan. We're really pleased with our spread results through the first three quarters of the year, remaining very strong into Q3. Demand is fantastic. There's a shortage of quality housing that everybody talks about. What we saw was a little bit of some temporary effective activity towards the end of Q3 as a result of some of the things that I talked about in the prepared remarks, namely a number of named storms. That reduced activity a little bit can be seen in a little bit of a moderation of new lease rate into October, which is typical of the season as well. But our team did a very good job of recalibrating our asking rates, and we're optimistic that we're able to pick up occupancy as we get through the balance of Q4. That will set us up really well for 2025. For the balance of Q4, you asked what our expectations are from a new lease rate growth. And we're thinking somewhere in the low one, but still a little bit early. But couple that with the fact that renewals represent a much greater proportion of the leases and our expectations for the balance of the year remain strong and in Q4 in the high 4s with low to mid-5s for the full year.

Great. And just as a follow-up, could you give a little color on bad debt? They ticked up as a percentage of revenue sequentially. So just curious on where we stand on cleaning up the remaining kind of post-COVID bad debt issues, et cetera.

Yes. Sure, Juan. Chris here. Look, I would say that collections have been tracking right on top of what we were expecting with third quarter bad debt running in the low ones, very much reflecting the typical correlation that we see with move-out season that we started talking about last quarter. As we move into the fourth quarter, I'd expect bad debt to seasonally moderate down a touch, bringing full year into the 1% area, which is right on top of what we have contemplated in the guide.

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 and congratulations, Dave, on the transition.

Thank you.

So thinking about what you just said about October and into the year-end, I mean thinking about the 1% new lease rate growth, I think you said 2% in October. I mean how much of that would you attribute to the storms cleanup from the storms versus just seasonality? And then I guess just thinking beyond 4Q, I mean, how do you think that accelerates into the beginning of the year?

Yes. Thank you, Jamie. As we talked about, there are a number of different things that are kind of contributing to the current environment. The reality, though, is that there's just a ton of demand for our product, our well-located high-quality homes, single-family detached homes. That's going to play out really nicely as we get into next year. Our objective is to finish the year strong as we talked about with the expectation of accelerated activity that we see every January as we get into the spring leasing season. We're going to be prepared to really capture the momentum of that top line opportunity from day one going into next year. As you look into next year, there are a couple of things that we're starting to see. There were some estimates on market rent growth given by John Burns for our markets for 2025 in the 3% to 4% range. So we're expecting to capture some of that going into next year as well.

Okay, that's helpful. And then I guess thinking about the acquisition, you mentioned nominal yield of 6% cash after CapEx high 5s. Can you just talk about the going-in yield on the portfolio and where you think the areas are where you can get that number up? Whether it's revenue optimization, economies of scale, or adding it to your blanket insurance, just kind of what are the big levers here to hit your numbers?

Yes, sure. Jamie, it's Chris here. I'd be happy to take that one. Look, on the topic in general, I would really start by saying that no question, this portfolio is a great transaction for us. But just for a second, if I could zoom us out to the bigger picture, I think that this transaction is also a really great example of the broader consolidation opportunity at large that we've been talking about for some time now. In particular, what we really love about these types of transactions is our ability to unlock value in these portfolios by consolidating them onto our platform. To your point, in terms of this one, if we want to use it as the example, look, for starters, we paid approximately $280,000 per unit, representing a very attractive entry point with in-place cash flow yields right around 5% or so, given that the portfolio is currently being managed by a number of different third-party property managers. However, once the portfolio is transferred to our platform and operations are optimized up to our standards, and that's really across the board, right? It's optimization around the top line collections and bad debt, and then really overlaying our best-in-class expenditure control. You mentioned insurance. I would also add in our expenditure management programs around controlling the controllables and leveraging our property management platform, et cetera, all of which translates into stabilized yields in the high 5s to 6% area once on our platform, which represents 75 basis points plus of yield creation because of the AMH platform. I know Bryan mentioned this briefly in prepared remarks, but I think it's worth underscoring this transaction really creates a win-win-win all the way around, right? No question, creating value for AMH and our shareholders, but also adding value to the residents of the portfolio through the quality of our AMH service programs and then providing, of course, a seamless exit solution for the seller of the portfolio as well.

Great, thanks.

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

Thanks. It's Nick Joseph here with Eric and congratulations, Dave. Given your October occupancy, but when you look at either your lease percentage or forward exposure, what does that tell you about where occupancy should go over the next few months? And how comfortable are you letting occupancy drop further from here, just given the strong demand that you talked about?

Thanks Nick. This is Bryan. We talked about a little bit of the affected activity due to a few different things at the end of Q3. October activity has picked up nicely though. So we're expecting to pick up some occupancy or a little bit of occupancy over the last couple of months of the year. The objective is to have really nice momentum, leasing momentum going into 2025, and we seem to be on track with that.

Great. Thanks. And this is Eric. I guess given that there's only two months left in the year, could you just share your early thoughts on earning for next year or anything else that you think we should be considering when it comes to your growth potential? I think you mentioned John Burns Consulting is predicting like 3% to 4% rent growth. I don't know if you think that's a reasonable starting point. But just anything you can kind of say about what you think about your growth potential for next year.

Sure. Bryan started to touch on it. The demand for housing is strong, and we expect activity to return robustly as we enter the new year, as is typical. We'll provide updates on this as we move into next year. Regarding what we know currently, we anticipate earn-in going into next year will be around low 2s based on this year's activity. Bryan mentioned that recent third-party market estimates for rent growth and market rate growth next year are in the range of 3% to 4%. Loss to lease will depend on the next few months of activity, likely in low single digits. It's still early to discuss 2025 in detail, but the demand and need for housing are present, and we feel optimistic about it.

Hi, guys. Good morning out there and congrats to you, Dave, and also Bryan again. I wanted to follow up on the reduction in the OpEx guide, specifically the tax side of that. You mentioned better-than-expected property tax assessment outcomes from Florida, Georgia, Texas. I guess I'm curious if that outperformance was from millage rates or property assessed values flat lining. And any kind of early read for 2025, curious if this is a tailwind that we can see continue into next year? Thanks.

Good question, Haendel, Chris here. Just talking about our update so far, keep in mind, this time of the year, we now have values back for the majority of the portfolio. But as I mentioned in prepared remarks, we still don't have much information on property tax rates yet. Those are generally available a little bit later into the fourth quarter. But given the assessed value data that we have on hand at this point, like I said, we feel good about our reduced full year midpoint of 6%. To the second part of your question on 2025, I think you probably know what I'm going to say in that it's a little bit early to be talking about specifics, so I'll tread lightly on this one, especially given that our property tax forecasting process really runs over the course of fourth quarter and into the beginning of next year. But look, as we've talked about many times, our general expectation is that we've been expecting our rate of property tax growth to continue cooling, given that home price appreciation growth has continued moderating since it peaked in, call it, 2022 or so. With that said, we know that we've actually already captured a bit more moderation this year than we were originally expecting. We're also mindful that we have a couple of unknowns on the table for next year. For next year, we know that the 2022 Texas property tax reform that lowered rates a couple of years ago is expiring at the end of this calendar year. We're watching very closely a couple of multi-year revaluation states that have seen some pretty hot home price appreciation over the last couple of years that we'll be resetting next year. But again, I would take that against the backdrop of a more broadly cooling home price appreciation and property tax value environment. Like I said, we'll have a much better update for you next quarter after we get through our budgeting process.

Appreciate the color, Chris. Thank you. One follow-up just on the portfolio purchase. I don't know if I missed it, but did you guys mention the timeline to which you expect to get to that 6% stabilized yield at that end of next year? And then I guess I'm more curious broadly on the motivation, maybe who the seller is, if you could share, but also their motivation here? Was it just perhaps an opportunity given maybe lower rates and perhaps an ability to get maybe a better price? And just also the tone of conversations that you're having more broadly with other potential sellers; are you sensing that maybe there's a greater chance of likelihood for more similar type of activity, not just for you, but more broadly in the space into the next year? Thanks.

Sure. Chris here again. I'll start and then Bryan can chime in as well. Just from a timeline perspective, in prepared remarks, I characterized it as over the course of 2025. The way that we're expecting it to play out is it will take the next several months to get the third-party management relationships transitioned over to our platform. That will take us probably into the beginning of 2025 or so. At that point, we can start overlaying our AMH practices and begin to bring things up to our standards. Again, that does not happen overnight. By the middle of 2025 or so, we should be in a pretty good spot. We'll continue to keep you all updated over the next quarter or two as we really start to get into it.

Haendel, this is Bryan. To the second part of your question, regarding some seller specifics, I respect the transaction, and I don't want to get into too many specifics on their motivation, but I can tell you what we offered in the transaction. We've talked at length about our diversified footprint that makes us very flexible in looking at various parts of the United States and portfolios that come online. I think that was an advantage. The strength of our asset management platform was clearly valuable in the transaction. Our ability to effectively solve some of the sellers' issues, provide a seamless transaction—we have a lot of expertise in the space. We were able to quickly get in and get comfortable with the assets and get comfortable with the value lift that we would see on our platform. Just a really good transaction for us. Specifically to bulk opportunities that we're seeing in the marketplace: we have seen an uptick in activity of late. We reviewed a number of other portfolios over the past three or four months. I think, as expected, we're going to start seeing more of those come through. Keep in mind, though, that we're very specific and intentional on asset type, quality, and location. Some of the ones that we've seen of late checked some of the boxes, and we're just really, really pleased with the one that we did close because it's one of the best we've seen in many, many years, the best we've seen in many, many years. So we're optimistic that we'll see other opportunities like that in the future and it seems that channel is beginning to open up.

Thank you. Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.

Yes, great, thanks. I guess just going back to some of the comments, Bryan, you made about the occupancy in the October trends. The 95.2% puts you about 100 basis points below kind of the fourth quarter last year. I guess with 1% pricing on new and let's call it, low 5s on renewals, how confident are you that 95.2% comes up materially? I guess, would you expect the year-over-year decline in occupancy, say, 4Q to 4Q to kind of match the decline you saw in 3Q to 3Q?

Yes, thanks, Steve. If we're looking at the occupancy trends for Q4, we are confident that we've seen a nice change in activity in October. It's translating into a strong close to that month. It's not over yet completely, but we are very pleased with that uptick coming out of kind of a post-Labor Day, September that had a lot of other things going on. We are confident that we'll be able to pick up some occupancy, most importantly, really good momentum as we exit the year. I wouldn't expect to have a huge increase as we get into November and December, but I would expect it to move positively and then have that momentum continue into 2025.

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

Sure. Hi, guys. Bryan, you mentioned there were some other portfolios that you looked at in the past few months, but passed on. Were there any kind of common boxes that didn't get checked across the portfolios you passed on?

Yes, thanks, Josh. I think the general observation that we have is there was probably a higher proportion of townhomes and attached product than what we're comfortable with. Like I said, we're unique in that we have this diversified footprint and a robust asset management program. But we're pretty firm in our belief that the single-family detached homes provide better long-term returns. In a couple of cases, they just had a too high proportion of attached product. Not to mention, in a couple of cases, the location was a little bit outside of our investment box.

Thank you. Our next question comes from the line of Julien Blouin with Goldman Sachs. Please proceed with your question.

Yes, thank you for the question and all the best, Dave. Bryan, you talked about demand continuing to be strong, which sort of sets you up well going into next year. I guess what specific sort of metrics or data points are you looking at that give you that confidence? And relatedly, one of the data points I think you've given in the past is sort of the stated incomes of incoming residents continuing to improve. How much of an indicator of demand is that? Is that showing you that higher income households are coming into the portfolio and seeing better value in renting versus owning?

Yes. Thanks, Julien. There's a couple of good questions in there. Let me start with some of the demand metrics that we're seeing. If you look at Q3, we had nearly a million new users come on to our website, come on to our platform, and we track very carefully their behaviors when they're on that platform. We're seeing a lot of people utilizing our unique search functions where they're setting up accounts and monitoring activity in available homes. We saw a huge uptick in that activity. So people are coming into the ecosystem. We're really pleased with that. Again, it's a testament to the quality of our assets and locations within the markets. When you start to talk about the profile of the incoming applicants, we're very pleased that incomes remain very strong into Q3 in excess of $150,000 of stated household income. It's, again, a testament to the quality of our assets. These are homes that single-family detached with a yard, well-located, and we're starting to see the benefits of that focus on that level of quality.

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

Thanks. Chris, with respect to the financing of the portfolio acquisition, I'm curious how you weighed issuing equity versus just selling more assets into what is still an extremely aggressive bid that owner-occupants are willing to pay for your homes?

Sure. Good morning, John. Good question. As we're talking about financing of the transaction, I think it's important to keep in mind that the transaction was closed and financed directly from the balance sheet using cash and capacity off of the revolver. It's important to point out that, in part, this portfolio was made possible because of the strength and opportunistic flexibility of the balance sheet, right? That's what enabled us to be able to act quickly and provide that seamless exit solution that we keep talking about for the seller because we were able to close directly from the balance sheet while importantly maintaining leverage at targeted levels with net debt-to-EBITDA still in the 5s. What that does is that now keeps us in a position to be able to take advantage of incremental debt in equity capital for further consolidation opportunities and more growth. More broadly, as we think about the capital plan, you're exactly right in terms of the attractiveness of the disposition program. We are fully leaning into that. For this year, we continue to be on track to sell plus or minus 1,500 properties or so. We think that there's good, robust opportunity there heading into 2025 and beyond as well, especially as we continue freeing up the remaining previously encumbered homes by the securitizations that are being refinanced off of the balance sheet.

Okay. And then last one for me is a two-part question. Just so I understand the build-to-rent impact on same-store numbers. Could you help quantify the NOI growth lift that the rolling in of build-to-rent properties has had on 2024 same-store NOI growth this year? And then I have a follow-up.

The new build-to-rent homes currently make up a small fraction of the Same-Home pool, under 10%. The benefits will become apparent in the future as more of these homes are incorporated. This small segment shows favorable characteristics, such as slightly higher occupancy rates and faster turnover times, indicating good performance. However, because they represent such a minor part of the Same-Home pool, their impact is not yet significant.

Okay. Is there any effect given certain quarters have smaller sample sizes or lease signings? Has there been any basically lift to new lease or renewal growth rates this year from the rolling in of build-to-rent communities?

Again, they're small. The re-leasing rate growth for Q3 for new development homes was higher than the scattered site portfolio. The scattered site portfolio had slightly higher renewals due to a more baked and loss to lease, but again, still a small portion. I don't think it had any noticeable effect.

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

Hi, thanks for the time and congrats to everyone. I just want to ask, I guess it's a little bit of a similar question around kind of the infill properties versus build-to-rent. If you could quantify the difference in kind of how each property type is behaving relative to some of the new supply. I think we've heard a lot about kind of new supply. I think a lot of it is maybe more build-to-rent, more periphery of markets. So maybe just walk us through kind of how your BTR is performing relative to infill with regards to the new supply impacts.

Yes, thanks, Adam. I think the easiest way to get insight into that question is to take a look at what's happening in Phoenix. We've talked about it in the past. But Phoenix is really the center of build-to-rent. If you follow some of the John Burns statistics, they've had the largest ads there. The proportion of those build-to-rent that's actually single-family detached like our product is in the 20% range. There's about 80% of the supply coming into the market is attached townhomes, rail homes, or horizontal apartments. If you look at the performance of our build-to-rent product, which is, like I said, single-family detached in Arizona, we have fantastic occupancy; it's in the 96-plus percent range, which exceeds that of the scattered site in that particular market. Our product that we're bringing to market through our development program is performing extremely well relative to the other build-to-rent products coming out and in the case of Phoenix relative to the scattered site portfolio as well.

Great. That's really helpful. And then just on bad debt. I was wondering if you could just remind us the kind of pre-COVID bad debt kind of level or a rule of thumb for what bad debt was pre-COVID and then obviously, I would imagine still elevated today relative to that number. So maybe just on kind of the path to getting back there. Is that something that can happen next year? Is it a multiple-year? Is that something where, hey, maybe we stay elevated relative to history over the long run even? Just maybe kind of the levels of bad debt.

Sure. Adam, it's Chris here. To the first part of your question on the reminder, as a reminder, historic bad debt for us typically ran 70 to 90 basis points or so. The reason why I give a range is naturally, bad debt has always had some level of seasonality to it, no different than what I was just talking about in terms of what we've been seeing this year with slightly higher levels of bad debt in the second and really third quarters very closely correlated with the move-out season. As we think about this year, keep in mind that the first half of this year was back to sub-1%, again, and what was encouraging about that is that was even with the fact that we still have a number of municipalities in local court systems like we've been talking about that are still continuing to process at a slower speed, which I think speaks to the health and financial resiliency of our resident base. As we've gotten into the back half of this year, just like we were expecting, we saw a tick up in bad debt correlated with the move-out season. As we move into 2025, it's still a little bit early to say exactly where we think 2025 is likely going to be at this point right now. Nothing has really changed just yet in terms of processing time at the local municipal and court system levels. We do think that that's probably going to be a factor into 2025. Otherwise, resident financial health collections in general feel good. We feel good about the levels that we're at, and I would remind you also that we're talking about realistically tens of basis points away from where we were historically pre-COVID.

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

Thank you. For your markets that haven't seen as much HPA since COVID, some of your Midwest markets, they're now seeing stronger new lease rate growth outperforming the broader portfolio. Is this a dynamic that you'd expect to continue next year?

Daniel, this is Bryan. We're really pleased with the performance of our Midwestern markets. You're right. They may not have seen the same level of home price appreciation in some of our other markets over the past few years. But our portfolio within those markets is really, really high quality, well located, and very clear value proposition for people looking to move from—into the market into really nice homes without having the burdens of ownership in many cases. I think it's more of a testament to the quality of our assets and really the lack of supply of similar quality assets in those marketplaces. We do expect a continuation of really good performance in those markets in 2025.

And Daniel, Chris here. A helpful point to make to Bryan's point, Midwestern markets have been performing great, but they've been difficult to grow in, right? Another unique aspect of this fourth quarter portfolio is that it's giving us access to growth in a number of Midwestern markets, notably Indianapolis, where we've had difficulty growing recently.

Yes, we're still clear about the way to that growth and how we can affect change. Yes, thanks. For the new build-to-rent homes, we're still expecting yields on the high 5s. And I would expect to have similar performance into 2025, at least that's the visibility we have into the next few months or so, but the team is actively looking at ways to optimize that going forward.

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

Thank you. Regarding the portfolio of 1,700 properties you purchased, what's the average age and how does that compare to AMH's overall portfolio? And then are there any homes that are located in new markets?

Hi, Linda. Chris here. Sure. In fact, I can actually just run through a number of fast facts on the portfolio for everyone's understanding. You're exactly right, 1,700 properties, all existing rentals, average year built was 2007, average size is about 2,100 square feet, three to four beds and in-place rents approximately in the $2,000 area or so. The physical nature of the portfolio overlays really nicely with our existing footprint, with— as we keep talking about great opportunity for upside as we optimize the portfolio up to our standards. Just for some additional context, occupancy in the portfolio right now net of bad debt is low—running probably in the low 90s or so. Margins are high 50s to 60 area and once optimized and brought up to our standards, given the natural overlay and fit with our existing footprint. Our expectation is that these properties will perform just like and alongside any of our other existing legacy AMH properties.

Thanks. And then just in terms of the John Burns comment of 3% to 4% rent growth next year, are there certain markets you'd highlight as exceeding this and conversely being below?

Yes. I think the band—this is Bryan. The band of 3 to 4 is pretty concentrated in most of our markets. The leader in rent growth according to Burns across our markets would be in Savannah and Hilton Head, which would be obviously the top end of the range. On the other side, expectations of rent growth in San Antonio would be kind of on the lower end.

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

Yes, thanks. Chris, a stat that you didn't give. Can you say what you underwrote for the loss to lease on the acquired portfolio?

Sure. Thanks, Brad. I'm a little hesitant to get into that level of specificity on the portfolio. But I will say that's just one piece of the optimization opportunity, implementing our pricing standards across the portfolio. As I mentioned, economic occupancy net of bad debt is in the low 90s, and we've got nice opportunities to bring that up to AMH standards. And then a big opportunity overlaying our level of expenditure controls—bringing in our efficiency from an insurance management perspective, all of the good stuff we're seeing right now in terms of controlling the controllables—maintenance and CapEx of the homes, and then, of course, leveraging the scalability of our existing property management platform.

Thank you. Our last question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed with your question.

Great, thank you. You've referenced the 3% to 4% market rent growth projected for next year. I guess, given your operating platform, quality of the portfolio, and just kind of the fragmentation of the business, I guess how has your portfolio grown relative to market rent growth forecast over the years and just curious if there's any outperformance that's worth flagging?

Thanks, Austin. The market rent growth estimates that Burns put out are specific to our markets. I think over the past few years, accepting the period of COVID where it was very unpredictable, we've tracked at the top end of that rent growth. I think coupled with loss to lease, coupled with our expectations and really the value that single-family rentals have relative to ownership today puts us in a really good position into 2025.

Yes, in the case of pricing, we continue to feel confident.

Thank you. There are no further questions at this time. I'd like to pass the call back over to management for closing remarks.

Thank you, operator. This is Dave. And I'll close this call a little differently. I'll close where I started today's call, and that is to thank all of you for your support and being part of my journey over the past decade plus. With Bryan and Chris at the helm, I know AMH is in capable hands as it enters into 2025 and beyond. So I thank you, and all have a good day. Bye-bye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.