Capital Markets Day Transcript - INVH 2026-06-02

John Flangos, Analyst — BNP Paribas

Hello, everyone. Thank you for joining us today for a Q&A with the Executive Management Team of Invitation Homes. For those of you who might not know me, my name is John Paul Flangos, and I'm the Residential and Self-Storage Reed Analyst at BMP Paribas. Today, we are joined by CIO Scott Isen, CFO John Olson, CEO Dallas Tanner, and COO Tim Wobner. Before we jump into the Q&A I'd like to turn the table over to Dallas for any opening remarks.

Dallas Tanner, CEO

Hey thanks again it's good to be with everyone there's sort of three major themes we've been hitting in a majority of our meetings first on the fundamentals our spring leasing season is tracking well same store occupancy and blended lease rate growth accelerated nearly 100 basis points from the first quarter of this year until May quarter to date to 97.2 percent from an occupancy perspective and two and a half percent from a blended rate perspective that you could sort of deduct is you know April as we talked about at 2.3 percent with May getting to 2.8 percent on our blends we're seeing a nice acceleration new lease rate growth was also positive in both of those months and we continue to see strong demand for our homes we're anxiously you know looking forward to the the rest of our summer leasing season on capital allocation we've been able to be deliberate as capital allocators as you know and as we mentioned on our earnings call we were purchased nearly five hundred million dollars of our shares back in in the first quarter and in addition to that our disposition program continues to be robust in the second quarter our disposal likely look a lot like our first quarter and we'll continue to be prudent and judicious in our use of capital when and where we allocate on regulation we've also been emphasizing that we've been closely watching the Road to Housing Act and are encouraged by what came out of the House of Representatives, current bills and materially improved outcome relative to the earlier versions that we had seen. Whatever path this takes in the Senate we are confident in our ability to continue to operate effectively and we provide a housing option that's not only needed but wanted and desired to create genuinely affordable homes for American families and nothing about this legislation would change that with or without the legislation with that I'll turn it back over to you for questions and answers yeah thanks for the update Dallas that was helpful color maybe to just zoom out a little bit and set the stage for any generalists or individuals who are not super familiar with the story could you kind of just give a quick version as to what makes SFR structurally different from other residential real estate assets and then maybe as you look over the next several years how do you parse out the demand drivers between the structural tailwinds and then the more cyclical ones yeah great question so just taking a step back we we own and operate roughly 90 000 homes and then we have another 20 000 plus or minus that we operate in jvs and in third-party management um our scale is is for the most part unmatched in the country in terms of what a single family residential offering offers from a risk perspective as you think about investing in the space one of the really unique things about sfr is the bespoke nature of our portfolio now in the early days as we were kind of building this business and figuring out how to manage it it created quite a bit of complication because we don't have the same floor plan really anywhere but at the end of the day the bespoke nature of our assets actually allows us a pretty meaningful differentiator and that our homes are in neighborhoods where people want to live and so our average like the stay is pushing close to four years uh five years in california the customer renews probably 75 to 80 percent of the time. So you have an inherently strong customer that tends to renew quite a bit. Second, most of our customers today have a credit score close to 700, rent to income ratios between four and five times. And so on a weighted basis, they're spending about plus or minus 20 percent of their monthly wages on our call it cost to rent. That is about a thousand dollars a month in terms of a meaningful difference from between the cost to own versus the cost to lease that same home in the neighborhood so structurally to your question we are very different than maybe multifamily or some of the other housing sectors as you sort of break up demand you know just taking a step back we had a pretty epic bull run in terms of housing values and value creation home price appreciation and rent growth from really 2012 through about 2023 23 plus or minus and we basically been in call it four to six quarters of sort of a reset and I think Tim would tell you the same thing here is that we actually see a little bit better fundamentals this year than we did last year going into the summer leasing cycle but cyclically it feels like we're probably in the beginnings of hopefully what is a reset for both the residential space and also for the housing market in aggregate. Home prices were unsustainable for some period of times in terms of the amount of growth that they were receiving on a year-over-year basis. And the pandemic actually added to some of that problem and created an even wider gap in the cost of lease versus the cost to own. Going forward, I think there are also some things that make retention and renewals pretty favorable for our business. You know, with mortgage rates in the mid to high sixes, the path to ownership is a bit trickier. And so the value proposition we offer is not only one that's just you know effective from a cost perspective but just for consideration about 80 percent of our customers come to us because they have rented a single family home before so it's not a newness to it's not like we're necessarily pulling from multi-family there's just a huge segment of this of this country that prefers to lease they want a yard they want a garage they want all those you know common spaces and so I think that's sort of the setup and and and I think you know just on taking a step back about a third the country have leased something going back to lbj to the mid-60s and it's about the same today home ownership rates about 67 so we're in a really healthy sort of normal setup uh with hopefully a cycle that's starting to reset and

Tim Lobner, COO

we're starting to see green shoots of that in our own portfolio got it that's helpful and then in terms of supply new btr deliveries have been a source of pressure over the past few years could you kind of speak to where we are in the current cycle how impactful the lease up overhand currently is and then expectations on a go-forward basis Tim you want to talk about supply sure okay you know the question comes up a lot about build to rent supply but that's only a portion of the story look there's a couple different components to supply there's scattered single-family there's build to rent there's mom-and-pop owned properties then there's institutional properties and so there's there's a lot of different cohorts in that supply one of the things that we've been talking with investors about and we covered on our Q1 earnings call was how supply at the beginning of the year was extremely elevated over 2025. So if you think about January 2026 versus January 2025, pretty large volume of homes year over year on the market for lease. And what I mean by that is on the internet listing services When you aggregate what is available through Zillow, Realtor.com, Apartments.com, and then you kind of disaggregate that, come up with a number, year-over-year, pretty high. That number has come down. We saw that over Q1, so that year-over-year growth is down, and we continue to see it stay down. It's right on top of what we saw last year. The largest cohort of houses that have come down in terms of that inventory is really the scattered site properties owned by mom and pops. And I think that's a contributing factor to why we're seeing better pricing power as we move deeper into peak leasing season. I think it's hard to talk about supply without also talking about demand. Your setup was good about why the fundamentals of the business long term make sense. But, you know, the reality is we're seeing demand on a gross lead basis year over year stronger in 2026 than we saw in 2025. Obviously, that's spread out over more homes that have been on the market. So on a normalized basis, it's a little bit lower year over year. I think the major takeaway or headline that I think is worth calling out is that there is still a strong demand for single-family rental houses, especially those managed by professional operators. So, again, supply coming down, the build-to-rent component, you know, if you look at John Byrne's data, the build-to-rent peak delivery time is in the rearview mirror in all markets. So the fundamentals are lining up nicely, and we've seen that in our operational performance year-to-date.

John Flangos, Analyst — BNP Paribas

Got it. And before moving into the operational update, I just wanted to touch on one more supply point. There's been conversations about shadow supply emerging in some markets, which is for-sale housing converting to rentals. Could you kind of speak to the pressures you're seeing on that front? Is it meaningful, immaterial, and then, you know, what kind of channel checks do you guys use for that?

Tim Lobner, COO

So when you look at the industry, institutional owners and operators account for about 2% to 3% of all inventory. So that other 97%, that's mom and pop. So it's a meaningful portion of the market. Over the last three years, if you were to look at those supply numbers that I was referencing a moment ago, the largest growth that we saw was in mom and pop owned properties. Over the last three to four months, maybe five months, the largest area where we've seen a decline in on-the-market available rental housing product is also in the mom and pop. so we're seeing that number tail off we don't know exactly why but we don't have exit surveys or surveys from all those uh the owners and operators of those 97 of houses that make up the market uh but our thought is that that product's getting leased um what we're also seeing is that you know we really look at our markets that's not a broader commentary on the entire u.s housing market but you know you look at the demographics and the migratory patterns of people of consumers. Although it's not quite what it was in the pandemic, we continue to see favorable net migration to Sunbelt markets like ours, and so that we believe is a contributing factor to why that mom-and-pop supply continues to erode in the marketplace.

John Flangos, Analyst — BNP Paribas

Got it, and then sticking with you here, the portfolio update showed solid occupancy and new leases accelerating into April and May, like dallas mentioned um tim just can you give us more commentary on top of funnel demand um you know what are you seeing in terms of traffic leads applications any commentary on the tenant decision making any any color that's a lot but i'll try to hit it off um you know our funnel really starts outside right we look at people that look on google or search on google uh using search words like home for rent, house for lease, a variety of different terms, that's

Tim Lobner, COO

really the top of the funnel externally, and those numbers are healthy year over year. They're in line with last year, which aligns with our lead volume. As I mentioned earlier, it's very healthy year over year. You know, as you get through the funnel, it's interesting, not every lead is a good lead, Just like any consumer walking into a bricks and mortar store, not everybody is going to buy something. So our goal is to make sure that our leads or at least try to position the application process such that only the leads that really are going to make it through make it through. For example, we introduced a rent calculator at the very front end of our leasing process so that people can type in their household income to see whether or not they're going to qualify for that house before actually going through the application process. That's been very helpful for us. We'd like to see people self-select out. That's reduced the number of leads to a better number of leads to, I'd say, a higher strike rate cohort of leads. We're also looking at other ways of making the application process much, I guess, easier to navigate. So I think the overall metrics as it comes to the funnel are very strong. our operating fundamentals are good our teams in the field are doing a great job I talked a little bit at our investor day back in November about how we're really trying to not shift our lens away from our asset centric approach because we're a REIT we understand we always have to think about things in terms of asset centricity but also layering in a degree of customer centricity and one of the things that we're implementing right now as a CRM platform customer relationship management. That's going to help us even more with that process as you navigate the funnel, really being able to target our efforts on leads that matter. So the dynamics are changing, but they're healthy right now.

John Flangos, Analyst — BNP Paribas

Got it. And then on rent growth, renewals have been a bright spot while the team has been able to keep retention high. I'm just curious, how sustainable is that going forward? And specifically, what metrics do you guys look at that kind of tells you you can lean into renewals a little bit more now or you have to pull back?

Tim Lobner, COO

Look, I'll start with the second part of your question. You know, I think occupancy, one of the things you're always trying to balance is occupancy and rent growth, rent growth being made up of 75% on the renewal side, 25% on the new lease growth side. But you really have to not balance because you don't want a perfect balance in terms of occupancy and rent growth. You just want to know when you've got enough occupancy that you can start to really test on the renewal growth and new lease growth, for that matter. And so, look, we're always trying to be really nimble in terms of how we price, how we negotiate on renewals, and, you know, we don't make the market. You know, the 97% mom and pop, 3% us, and we're a small part of that 3%. You know, we've got to be nimble in the marketplace. In terms of how long is the pricing power there? Look, on the renewal side, rent growth, it generally stays, I'm not going to say flat, but within 100, 150 basis points year-round. You're kind of mid-threes, low-threes, all the way up to mid-fours, high-fours, depending on the time of year and depending on the cohort of homes and existing rent prices in the homes that are turning over during a specific period. But that's a pretty stable part of our business. It's 75%, 80% of our book, and it performs well. And I'd also say, look, our 75%, 80%, somewhere in that range, I think is a reflection of the service that we offer, the product that we offer, good location, good value. Our value-add services program is something that differentiates. We offer Internet in homes for a very discounted rate. We're now offering washers and dryers in several of our markets. So we're trying to make it about the whole leasing experience, not just renting a house. There's more to it than just renting a house. We want people to be sticky. And, you know, look, people often compare the multifamily to the single family. You look at the makeup. We have generally it's a household that's got two incomes. You've got kids, likely a pet. These people are sticky. And so we believe the renewal side of the business will remain strong.

Dallas Tanner, CEO

Can I have two points? Just real quick, two things on fundamentals. So one is on the new lease side relative to last year. Tim, we mentioned this in my earlier remarks. We peaked a lot earlier last year from where a new lease perspective is, and we still see that accelerating. And then while we'll give a more robust update in our July call, we certainly see renewals accelerating in the summer as well.

John Flangos, Analyst — BNP Paribas

And then, Tim, you mentioned Internet services. I kind of wanted to touch on the non-lease-related revenue. The team's done a great job at growing that through value-add services like Internet. The third-party property management income and then most recently fee-billed income. How is the team thinking about the growth of this bucket over the next several years and how much more penetration remains on the value-add front?

Tim Lobner, COO

Well, I can talk about the value-add, but then I'll turn it over to Scott. On the value-add side, like, you know, we believe that the value-add number continues to grow. Our number that we're targeting for this year on a gross basis is about $100 million, and that number still has room to grow after that. You know, the makeup of our growth, it's about half of that growth is from existing programs that are already well-received by our resident. We just need to earn into them. I'll give you an example on the Internet service package. We only have about 40% of our houses on that program today. We've expanded our offerings, so now we're including Spectrum, AT&T, and Comcast. They've got different footprints, but we're able to offer it to more and more of our houses, so we're excited about the earn-in there. and then you know that's about half of the future growth going into all the way into 2028 the other half is on new programs that we feel confident based upon our surveying of residents in terms of what they're looking for that it will land well with them so but I'll let Scott talk about the other aspects of our non core revenue right and then on the the other two aspects you mentioned were the third-party property management business and also the our recent acquisition of resi belt just to be clear those aren't counted in the value-add services bucket bucket from a reporting perspective but on the third-party property management business we now

Scott Eisen, CIO

have 24 000 homes that we manage two joint ventures and three different institutional third-party management contracts that's a business we got into about three years ago that's a business where you know we wanted to be able to work with external clients that could be part of the invitation home system and, you know, operate homes for third-party fees in markets where we already had an operational presence and economies of scale. It's a business that we've continued to get more sophisticated in terms of our reporting and how we work with our customers, and it's a business that, you know, we are out, you know, every day talking to potential partners and looking for ways to grow that business. I think for us, you know, we're looking for an institutional customer, someone who's got at least 1,000 homes, someone that you know we could be in multiple markets with and that we could have growth potential with we haven't necessarily you know targeted you know the smaller investor that might only have 100 or 200 homes but we're looking for sophisticated institutions and you know sometimes we're approached by the LP who'd like to make a change in manager and sometimes we're approached by a GP that you know might be at a point in their life cycle where they may not have the margins or growth capabilities that they thought they might have had obviously with what's been going on on the political front for last four or five months here i think there's some people that maybe have not been able to grow the platforms as ambitiously as they might have originally thought and those who those are the types of folks who we would like to target for the third party management growth the other business that you referred to was in january we announced that we were buying a build to rent developer called resi built that's based in atlanta they are a platform that operates in three states they operate in georgia actually four states georgia north carolina south carolina and florida they had you know both the business where they would you know be a GP in terms of developing build the rent communities for themselves and a joint venture partner and then they also have a third party feed build business where they act as a general contractor on behalf of other smaller developers that is now part of invitation homes and we're hoping to grow both sides of that business we've started to evaluate opportunities it's early days and you know it's only been four months since we closed but it's early days in terms of evaluating opportunities for us to invest with them and at the same time we continue to have existing third-party clients that we're building for and we intend to continue to do that on a going-forward basis and so we'd like to build both for ourselves and for others and so that that's that's how we manage through both of those business lines got it and then just sticking with you Scott the construction lending platform has grown to close to 300 million in commitments is the current strategy simply an opportunity to step in given the current financing environment or is this a platform that the team would like to scale over time i don't think anything's really changed since what we discussed at our november investor day this is a business where you know as we talk to people in the market we've had a number of people that you know we've talked to over the years where we could potentially buy homes from them they've wanted us to be potentially an equity partner with them and we realized about 15 months ago that there was an opportunity for us to be a construction lender on communities of the same exact types of communities that we either want to own or build for ourselves. It's the same product. It's a three-bed, two-bath, two-car garage, townhome, or detached single-family home, four-bed, two-and-a-half bath, etc. So it's the same buy box that we invest in. It's markets we know. It's product we know. It's rents we know how to underwrite. And so for us, those same people in the market that in the past it tried to sell us stabilized communities, we thought there would be an opportunity for us to be a lender. So our loan book's grown to about $280 million of loans across six different projects. It's in five different cities with five different counterparties, so we've gotten some nice diversification to both counterparty risk and also market risk. And again, I don't think our plans have changed materially from what we outlined in Investor Day, where the goal was to get up to a billion dollars of this. But, look, the average construction loan we're doing is $30 to $50 million, and, you know, it's a business product that we underwrite every day, and I think it's, again, something where we're leveraging the cross-sell on our platform. One of the other interesting cross-sells that we've discovered since we closed on ResiBuilt is that we think there could be a synergy between our third-party business, our fee-build business, and the construction lending business. And, you know, we've had some borrowers come to us that don't have a general contractor, and we've introduced them to ResiBuilt as a potential contractor. We've had some resi-built, fee-built clients that needed a construction loan. Ultimately, I think we could also be in the third-party property management business on behalf of all of those customers. So we're very, very early days in terms of truly understanding the synergies of that flywheel, but I think it's something we're excited about as growth going forward.

John Flangos, Analyst — BNP Paribas

Got it. And then, John, one for you. The stock's been trading at a meaningful discount to its long-term historical averages, And at the current share price, it implies the underlying real estate is cheaper than where homes are trading in the private market. How do you think about that disconnect, and how does that shape capital allocation going forward?

John Olson, CFO

Yeah, that's, I mean, we talked about this at length, as you can imagine, today and on our last earnings call. We have been very deliberate about how we are allocating capital. You know, as you note, there is a significant dislocation between how the public markets are valuing our assets and what the private market is valuing our assets at. And, you know, we talked about that on the last earnings call. We tried to illustrate that by pointing out that, you know, on average in the first quarter we were selling homes in the neighborhood of $425,000 per door. And the public markets at the share price at the time was valuing them around, I think it was 275,000 per door. That's a very marked dislocation. And so from our perspective, if we can, you know, prune from the bottom X percent of our portfolio homes that are, you know, maybe less well located, operationally just don't perform as well as some of the other homes in the same sub market, homes that have experienced material appreciation in the underlying assets, and and therefore maybe don't make sense to continue on as long-term holds, well, if we can sell those assets into the end-user market, recycle that capital into something that is accretive, well, we're going to do that. And I would also note that, you know, I'm obviously biased, but I think we have the best single-family rental portfolio in the United States. It's the most infill in nature. I think it's the most well-located that there is. And if the public market is going to value those homes and the, you know, to say nothing of the platform we've developed over time at a level that we think is sort of divorced from reality, then we want to reinvest in that portfolio at a really attractive valuation. Now, we don't want to, you know, over time and distance have just one sort of avenue of capital deployment. We want to make sure that we're constantly evaluating the whole opportunity set. And so we will, as always, be looking to create shareholder value by redeploying capital accretively into, you know, opportunities that are going to drive growth and margin improvement over time and distance. There are points in time, however, where, you know, the highest and best use of any excess capital is self-evident, and that was our experience in the first quarter.

John Flangos, Analyst — BNP Paribas

That's helpful. Dallas or Tim, beyond the AI-enabled leasing engine that was mentioned at the November Investor Day, where else does the team see opportunity to implement AI, and how much could it move the needle?

Tim Lobner, COO

Yeah, I'll take that. I think there's applications of AI in a lot of different places. I think that a lot of people actually get the opportunity set a little bit wrong in that I think the first thing you look for is just automation. A lot of people confuse automation for AI. So I think where we're going to start is looking for simple automation of processes and workflow. We are using it, as you pointed out, in our leasing operations. We also use it in renewals now as well. I do see application of it in a couple different other places, one being delinquency management in terms of people that don't pay on time. Fortunately, that's not a huge problem. You saw our bad debt numbers. They were about 60 basis points, so it's not a huge area, but it's certainly an area where there's follow-up when there are nonpaying residents. Another area is HOA management. When we have homes and HOAs where we have to pay assessments, we receive a lot of mail, and so processing that mail, processing if there's ever an infraction that we need to follow up on or enforce with a resident and to remain compliant, I think AI can play a huge role there. I think any time that you engage with a resident via any form of communication, you can overlay AI. We're right now building a CRM platform, as I mentioned earlier. There's going to be an AI component to that at some point where we'll be able to consolidate all historical communication with that resident. It makes the jobs a whole lot easier of associates as they navigate conversations and communications with residents. So I do think that there's lots of opportunity as we go forward. You know, the other area that we're focused on is not just, you know, technology enablement. And I talked about this at Investor Day. We're also looking at how we optimize our workflow through centralization. We're centralizing some of these functions right now. That's really important because, you know, running a business with 16 different market offices, you have 16 teams with 16 leaders no matter what the workflow is. it's hard to sometimes ensure like accuracy and easy train easy training and shifts if we have a process shift by consolidating that in a single location we certainly get a better I think experience for our resident better experience for our associates and more consistent service at the bottom line so there's a lot of change that we're driving into the business right now got it then it looks like we're coming up on time Dallas do you have any closing remarks oh look I've got a great team up here but we've got an even you know better team behind us and

Dallas Tanner, CEO

And, you know, there's so much blue sky in our business. I think we're at a really interesting sort of inflection point where fundamentals are starting to reset. We're eating through a lot of the supply. You know, year over year, the home builders are building less and less from a permitting perspective. So we've probably got future tailwinds in our space, both from an asset appreciation perspective and also in all likelihood where rents go. So I think just making sure we execute at a high level consistently, that we roll out a lot of that roadmap Tim just talked about in terms of what we're doing with ai and centralization and then just continually pushing uh into that sort of flywheel that scott talked about i mean there's a lot of synergistic opportunities between what we do operationally our ability to allocate capital ultimately to build for both ourselves and third parties and so i think you know the opportunity set in front of us is pretty wide we just need to execute on it that's how we feel about the business today.

John Flangos, Analyst — BNP Paribas

Thanks.