Invitation Homes Inc (INVH) — Q3 2018 Earnings Call Transcript

Thank you. Good morning. And thank you for joining us for our third quarter 2018 earnings conference call. On today's call from Invitation Homes are Dallas Tanner, Interim President and Chief Investment Officer; Ernie Freedman, Chief Financial Officer; and Charles Young, Chief Operating Officer. I'd like to point everyone to our third quarter 2018 earnings press release and supplemental information, which we may reference on today's call. This document can be found on the Investor Relations section of our website, at www.invh.com. I'd also like to inform you that certain statements made during this call may include forward-looking statements relating to the future performance of our business, financial results, liquidity and capital resources, and other non-historical statements, which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated in any such statements. We described some of these risks and uncertainties in our 2017 annual report on Form 10-K and other filings we make with the SEC from time to time. Invitation Homes does not update forward-looking statements and expressly disclaims any obligation to do so. During this call, we may also discuss certain non-GAAP financial measures. You can find additional information regarding these non-GAAP measures, including reconciliations of these new measures with the most comparable GAAP measures, in our earnings release and supplemental information, which are available on the Investor Relations section of our website. I'll now turn the call over to our Interim President and Chief Investment Officer, Dallas Tanner.

Thank you, Greg. We are pleased to report our seventh consecutive quarter of double-digit Core FFO growth, with Core FFO per share in the third quarter increasing 21% year-over-year. Trailing 12 months' turnover reached its lowest level in our history as a public company, at approximately 34%, as residents continue to value the high-quality living experience and service we provide. This contributed to a 50 basis point year-over-year increase in Same Store occupancy to 95.5% in the third quarter. The favorable supply and demand fundamentals we are experiencing in our markets show no signs of abating, with renewal rent growth of 4.8% in the third quarter, and new lease rent growth consistent with the prior year. We also took a number of steps in the third quarter and October to improve the efficiency of our R&M platform. While we still have fine-tuning to do before the next peak work-order season, R&M expenses for the second half of 2018 are tracking in line with our expectations we revised mid-year. However, we are experiencing some pressure on real estate taxes that we expect to impact our fourth-quarter expenses unfavorably versus our prior expectations. Ernie will talk more about this later. Before we get into the details of the quarter and expectations for the rest of the year, I want to step back, because it's the bigger picture that makes us really excited about this business. We continue to see a multitude of opportunities creating a long runway for growth. First is simply the fundamentals of supply and demand. In our select high-growth markets, household formations in 2019 are forecasted to grow at a rate of 1.9%, which is 90% greater than the U.S. average. There remains a shortage of housing supply to meet this demand. And we expect that to remain the case near-term in our markets with home prices still well below replacement cost. We think renting should continue to become increasingly attractive versus owning for single-family home seekers, with interest rates rising and home prices in our markets still increasing approximately 6.5% year-over-year. To that point, move-outs to homeownership within our portfolio continue to track lower compared to last year. Looking further ahead, demographics should become even more of a tailwind. There are 67 million people in the U.S. currently aged 20 to 34. And they are coming our way as they reach the life stage in which their needs change to align with our product and our service. We continue to see many newly formed households choosing to come into Invitation Homes, where they can combine the ability to live in a high-quality well-located single-family home with the convenience of leasing from a professional manager that puts the resident first. That brings me to the next opportunity, service, which is the most important part of the value proposition we offer residents. We think the service we provide is best in class, and the reason we experience such high resident retention. But we're always looking to get better. In 2019, we'll expand our ProCare best practices to further enhance the resident experience. Longer term, we think there are more opportunities to enhance that experience that will also benefit ancillary income. One way we do that today is with our Smart Home technology. But we can envision many more products and services that might ultimately make residents' lives more convenient. Near term, we are focused on the final phase of merger integration. We've accomplished a tremendous amount to date, on or ahead of schedule and with more synergies than initially expected. Synergies unlocked to date total $41 million on a run-rate basis, meaning we've achieved our year-end 2018 target months ahead of our previous expectations. The last step of integration is to roll out our unified operating platform to the field, which should unlock remaining synergies. And once we cross the integration finish line and have all aspects of the company working together as one, we'll look for even more ways to leverage our scale and experience to further fine-tune that efficiency. On the portfolio front, our investment management team is actively working to further enhance our location and scale advantages. We're on track in 2018 to dispose of roughly $0.5 billion of homes with lower long-term growth prospects. And are using these proceeds to acquire homes in better locations and deleverage our balance sheet. We've purchased over $200 million of homes with higher expected IRRs. And we've reduced net debt by $150 million so far in 2018. We've also invested over $10 million in value-enhancing CapEx. Last but not least, we're excited about the abundance of new private capital coming into the single-family rental space. It's coming because others see the same fundamentals and potential for attractive risk-adjusted returns that we see. It also creates even more opportunity for us to shape our portfolio at the margins. We believe many of the private platforms are looking to build scale by acquiring homes that match the profile of what we are seeking to sell. Case in point is the series of bulk sales we executed in September and October, which I would like to spend a little time talking about. We ran a process to dispose of a cohort of lower rent band homes that no longer fit our long-term strategies. These homes had an average in-place rent of $1,404, 25% below the rest of our portfolio, and were concentrated in Chicago, the Southeast, South Florida, and parts of Tampa. We received multiple bids on these pools of homes and optimized value in execution by splitting it into five separate transactions, totaling 1,375 homes for gross proceeds of $214 million. The primary use of these proceeds will be to prepay debt. In addition to the homes sold in bulk, 147 of which closed in the third quarter, we sold another 266 homes in one-off transactions during the third quarter. We also purchased 249 homes in the quarter, at an average cap rate of 5.6%. Acquisitions were focused primarily in Seattle, Denver, Phoenix, Orlando, and Atlanta. Before I turn it over to Charles, let me sum up everything I just talked about. First, although we're working through some near-term expense challenges, we feel great about overall single-family rental fundamentals today and into the future and continue to see very strong occupancy and rent growth. Second, we feel even better about Invitation Homes' growth prospects, in particular given the location, scale, and service advantages which we enjoy. And third, we maintain an entrepreneurial energy and focus on creating value through initiatives around merger integration, service platform optimization, ancillary income, capital recycling, value-enhancing CapEx, and balance sheet deleveraging. Lastly, I'd like to say thank you to all of our teams in the field and our corporate offices. I just talked about a lot of exciting things we have going on at Invitation Homes. And it's our innovative and hardworking people that turn those opportunities into realities. To those all across our company that are committed to serving residents and dreaming of ways to make the resident experience better, you will be the driving force behind the value we create for both residents and shareholders as we move forward. And I thank you sincerely for your dedication to that mission. With that, I'll turn it over to Charles Young, our Chief Operating Officer, to provide more detail on our operating results in the third quarter.

Thank you. I'd like to echo Dallas' sentiment about our people. It's been a busy year and I'm most proud that through all the change, the commitment of our field teams to providing outstanding customer service has never wavered. Resident satisfaction remains high, as evidenced by further improvement in the turnover rate to 33.9% on a trailing 12 month basis. To my partners in the field who earn the loyalty of our residents every day, thank you. I'll now walk you through the details of our third quarter 2018 operating performance. Same Store Core revenues in the third quarter grew 4.4% year-over-year, in line with our expectations. The year-over-year increase was driven primarily by average monthly rental rate growth of 3.8% and a 50 basis point increase in average occupancy to 95.5% for the quarter. The strong top line results drove Same Store NOI growth of 4.9%, as Same Store Core expenses increased 3.7%. R&M expenses remain elevated, in line with our expectations prior to optimization of our R&M platform. And strong home price appreciation continues to drive property tax increases, but these factors were partially offset in the third quarter by year-over-year decreases in various other controllable expenses. As a reminder, we expect both R&M expenses and property taxes to accelerate higher year-over-year in the fourth quarter. Last year, service requests related to Hurricane Irma and Harvey were prioritized in the fourth quarter of 2017, which pushed routine, non-storm related service requests that normally would have been resolved in 2017 into the first quarter of 2018. This resulted in a benefit to R&M expenses in the fourth quarter of 2017, creating a difficult comparison for this year's fourth quarter. Property taxes also face a difficult comparison in the fourth quarter of 2018, as last year's fourth quarter benefited from lower-than-expected real estate tax assessments that drove favorable accrual true-ups. I also want to update you on our efforts to optimize our recently integrated R&M technology platform. Since the beginning of the third quarter, we have implemented many changes to our systems and processes that determine whether work orders should be addressed in-house or by third parties. How the corresponding service trips get scheduled and the optimal routes for the technicians, who make those trips. Just last week, we rolled out an important update to our technology platform that enables all of our internal technicians, regardless of legacy organization, to perform work orders on any home in our portfolio, not just the homes associated with their legacy organization. We still have work to do though and will continue implementing process improvements and ProCare enhancements in the months leading up to next peak work order season. We also think the unification of our field teams and property management platform in 2019 will be a key catalyst for unlocking efficiencies in our R&M platform. Next, I'll cover third quarter 2018 leasing trends. Fundamentals in our markets remain as strong as ever. Net effective renewal rent growth increased to 4.8% in the third quarter of 2018 from 4.7% in the second quarter of 2018. New leases were 3.3% in the third quarter, in line with both the prior year and our expectations as we managed rates to ensure we exit at peak leasing season with strong occupancy. This resulted in blended rent growth of 4.2% in the third quarter 2018 and an occupancy gain of 50 basis points year-over-year to 95.5%. Western U.S. markets continue to lead the way for growth, with Northern and Southern California, Seattle, and Phoenix remaining our strongest. With fundamental tailwinds at our back, we are focused on executing to finish the year strong. Our field teams are also well prepared for the rollout of our integrated operating platform, which will be piloted in our first markets soon. We look forward to leveraging that platform in 2019 to deliver the leasing lifestyle our residents desire in an even more efficient manner. With that, I'll turn the call over to our Chief Financial Officer, Ernie Freedman.

Thank you, Charles. Today, I will cover the following topics: balance sheet and capital markets activity; financial results for the third quarter; integration synergy update, and 2018 guidance update. I'll start with our balance sheet and capital markets activity. We remain focused on achieving an investment grade rating and have made good progress to date. We have de-risked our maturity profile by refinancing over $3 billion of 2019 and 2020 debt maturities in the first half of this year, extending our weighted average maturity to 5.2 years, up from 4.1 at the beginning of the year. Only 11% of our debt is subject to changes in interest rates on average over the next nine years. The size of our unencumbered pool has increased by over 10% to approximately 39,000 homes or almost half our assets. In the third quarter and October, we prepaid another $250 million of securitized debt maturing in 2021 using proceeds from our June 2018 refinancing activity and cash on hand. We'll continue to be opportunistic in refinancing and prepaying debt as it makes sense going forward. And as Dallas mentioned separately, we have received proceeds of $214 million from bulk sales in September and October. We intend to use almost all the proceeds from these transactions to prepay debt, modestly improving our net debt-to-EBITDA ratio. Our liquidity at quarter end was over $1.1 billion through a combination of unrestricted cash and undrawn capacity on our credit facility. I'll now cover our third quarter 2018 financial results. Core FFO and AFFO per share for the third quarter increased 21.3% and 10.2% year-over-year respectively to $0.29 and $0.22. The primary drivers of the increases were growth in NOI per share in addition to lower adjusted G&A and lower cash interest expense per share. Supplemental schedule one provides a reconciliation from GAAP net income to reported FFO, Core FFO, and AFFO. I'll next provide an update on our merger integration. We continue to expect $50 million to $55 million of synergies from our merger. On a run-rate basis, we have achieved $41 million to date, outpacing our previous expectation for 75% achievement by year-end 2018. $36 million of those synergies achieved to date relate to G&A and property management costs, $4 million are NOI synergies, and the remaining $1 million is CapEx. Of the synergies remaining to be achieved, we expect about two-thirds to relate to NOI. Last thing I will cover is updated 2018 guidance. The primary change to our Same Store guidance is related to expenses and due almost entirely to revised property tax expectations. Charles mentioned already that we have a difficult comparison in the fourth quarter on real estate taxes due to lower-than-expected assessments in last year's fourth quarter that drove favorable accrual true-ups. This year, we are experiencing the opposite; property tax reassessments received in October 2018 have trended higher-than-expected, especially in Florida and for Prop 13 related reassessments in California triggered by our IPO. We will appeal reassessments in cases where we feel it is appropriate. However, property taxes, which make up almost 50% of our overall operating expenses, are likely to be higher in the fourth quarter of 2018 than what was contemplated in previous guidance. Excluding real estate taxes, all other operating expenses are expected to fall within the previous range of guidance expectations, but some are trending towards the higher end of that previous range. However, repairs and maintenance expenses are on track for the midpoint of what was contemplated in previous guidance. As a result, we now expect 2018 Same Store core operating expense growth of 5.4% to 6%. For core revenue growth, we are narrowing our guidance range to 4.4% to 4.5%, resulting in revised Same Store NOI guidance of 3.5% to 4%. Taking into account revised expectations for Same Store results and other items, we are updating our 2018 Core FFO guidance range to $1.16 to $1.18 per share, and our AFFO guidance range to $0.93 to $0.95 per share. The midpoint of these ranges implies growth of 13% and 7.4% respectively versus the prior year. Stepping back, I'd like to finish our prepared remarks with three thoughts. First, expense growth has surprised us from our initial expectations at the beginning of the year. Our growth in real estate taxes is due to the values of our homes increasing and in addition, outsized increases above our expectations in the reassessments of our homes due to our IPO in early 2017. We are very focused on improving results and other expenses. Charles provided a number of details on the steps in the progress we are making relative to repairs and maintenance challenges. Second, our revenue growth is tracking to our original expectations. Rate growth is solid, turnover continues to trend favorably, and as a result average occupancy has improved. We like how we are positioned as we close out the year. Third, importantly, the overall fundamentals of our industry are strong. Macroeconomic supply, demand, and demographic factors are favorable. For those that might be considering owning a home versus leasing is becoming increasingly more difficult for them to do so. When you consider the various external and internal opportunities for continued growth as well as improvement to our portfolio and balance sheet, we believe we are still in the early innings of value creation. With that operator, would you please open up the line for questions?

Thanks. Can you talk about any pressures you're seeing on employee retention in the field?

Yes. This is Charles. Look, we have seen very little actually turnover in the field, nothing extraordinary. But as we pay attention to what's happening in the business, there are new entrants in this space, also new ventures that are in the peripheral space. And we have talented people. And they're naturally going to look at those people; however, no material loss, just a handful of one-off in a couple of markets. Last thing I'll add to that is, part of what helps retain our employees is they're enthusiastic about our position in this space as the best-in-class leader, take pride in our mission, and enjoy our dynamic and high-energy culture. And we think all this helps us retain our talent. So we haven't seen much employee turnover.

I guess, following up on that, have you seen any incremental sort of cost to retain, or you haven't really seen the pressure on that to this point?

Nothing material. As individual circumstances come up, like I said, there's been a few. We've addressed them and haven't had to make any across-the-board changes.

Hi, this is actually Shirley Wu with Juan Sanabria. Thanks for your time. So for your revenue guidance, you're implying acceleration in Q4. What's the benefit from occupancy, and when do you expect that to normalize from the hurricane?

A couple things there, Shirley. One, we're very pleased with how things are playing out for the rest of the year, and specifically for October, just to give those results as well, we've had a 60 basis point increase year-over-year. Our October average of daily occupancy was 95.8%. Last year, it was 95.2%. And we've seen good strength from renewal increases, 4.7%, which is about 20 basis points off of last year. But we see new lease accelerate to 1.8%, which is 40 basis points better than we had last year. So the blend came in very similarly. So we expect to continue to see better year-over-year occupancy results like we saw in the third quarter. That's certainly helping us. And we're seeing rate activity right now which is consistent or slightly better than what we had last year, especially when you look in September and October.

Got you. So you're not expecting any benefit from the hurricane from last year or…?

No, I - go ahead, Charles, if you want to talk to that.

Minimal in occupancy in the Florida markets. Outside of that, nothing, nothing across the board.

We didn't see a big degradation in occupancy from them, so we wouldn't expect to - they're an easy comp relative to occupancy.

Okay. And on real estate taxes, how many of the valuations are you appealing? And historically, how many of those appeals have you actually won?

Sure, it varies by state by state. And we're sorting through those as they come in. And as we talked about in October, a big chunk started to come in Florida. So we haven't made a final determination yet as to how many we will appeal. We have some time. In the past, it varied by market. And we have a valuation team that goes specifically and says which ones we think we have the best opportunity just to make a win on. We don't appeal everything in mass. I know some folks consider doing that. But we take a very thoughtful approach to it. And then we look to try to negotiate as well as appeal with the local jurisdictions. So it's early days to be able to say, Shirley, exactly how many we'll do. In the past, we've had certain successes in some states more than others. Generally, because we're more selective on what we choose to appeal. Win percentage is pretty good, but it varies from year to year.

Thanks. Does update guidance assume maybe level of success on real estate appeal this year?

It does not, Nick. We won't get results from those from anywhere from a minimum of 9 months to sometimes it takes two to three years, so unless we had some appeals from a year or two ago that we expected to get. And in general, we don't guide to that because they can be a bit uncertain. We wouldn't expect any upside from appeals. We're hopeful for the rest of this year.

Thanks. And just other than the real estate taxes, what other expense line items are trending towards the high-end of the guidance range?

Sure. We’ve discussed real estate taxes and repairs and maintenance, and overall, we feel positive about their outlook. I anticipate that leasing and marketing will come in slightly higher than we expected, although they have been performing well year-over-year, as we see strong marketing opportunities to increase occupancy. Utilities are a bit unpredictable, so I built in some caution there, but we might see them come in a bit higher as well. Regarding repairs and maintenance, turnover is behaving similarly, but it may lean more towards the higher end of our previous estimates, while repairs and maintenance are aligning more with the midpoint of our earlier expectations.

Hey, good morning.

Hey, Haendel.

So, I guess, a question on some of the acquisitions and dispositions here. I'm curious how the pricing on what you're looking to potentially buy here, compare on the mid-5 on what you're selling. I guess I'm curious - more curious on what the IRRs of what's coming in versus what's going out on the portfolio look like. And then any color on sort of who is buying here? Is it private equity and maybe some of the underwriting that they're doing?

Yeah, hi, Haendel. So I'll answer it in a couple of ways. We're still seeing really good fundamentals in the mid-5s in terms of the types of properties we can buy. You'll notice that on the buy side for us in the third quarter, we're very active in Seattle, Phoenix, and Orlando, all markets that lend themselves to better performance on a risk-adjusted basis, in terms where we're seeing growth. On the sell side, cap rates can vary. And it just depends on why you're trying to get out of a particular asset. So for us, we mentioned this in the release, we went into a series of bulk transactions, because we're looking for ways to improve our portfolio on the margin. This has been ordinary course for us for a couple of years. We've done this consistently. Our focus specifically with these sales was to get out of some of the lower rent band properties, in and around geographies where we already had a considerable amount of scale and where we saw potentially future CapEx or R&M risk. And so for us, those sales were in the higher-5s, pushing towards a 6. But they were strategic in a sense in that they were about $350 on a per rent band level lower than what our average rents in the portfolio are today. In terms of the new capital that's coming into the space, we spend a lot of time talking to some of these capital and these operators. They come in and are looking for different ways to grow their own portfolio. So we're cognizant of what opportunities might be out there for us from a disposition standpoint. Can't speak specifically to what their IRRs are that they're seeking. We tend to be on at a little bit higher price point, a little bit higher rent band than most of our peers, which creates a really good environment for us when we want to sell on the margin, on some of our lower rent band or mixed geography parts of our portfolio.

Got it. Got it. Thank you. That's helpful. And I guess, a question or two for you, Charles, on the op-side. I guess, curious how the traffic demand trended there in the third quarter, especially with the uptick in rates and what you're hearing or feeling on that front. How do you think about pricing power given some of the comments you guys provided in your prepared remarks about the expected benefit from millennials and the demographic factors, and also, obviously, helped by what could be affordability being stretched here? We're hearing, obviously, that U.S. home sales are slowing. So just curious on how the traffic and demand materialize over the quarter and how you're feeling or thinking about the implications for the business of rising rates into next year.

Got you. That was a mouthful. But we appreciate the question. So I think you're talking on top line demand. So overall, we've seen a good demand in the third quarter. You could see that with our 50 basis points increase in occupancy. Rates have been solid in what we expected seasonally for the quarter. And Ernie gave you the October numbers, which are real good. We're really proud of especially the new lease growth acceleration to 1.8% versus 1.4% last year at this time. So we're seeing good demand. Website stats are up. And our occupancy is, going into this fourth quarter, right where we want it to be, which is part of our plan in the third quarter.

Okay. And, I guess, last one for me. I'm just curious. I was a little surprised, maybe encouraged to hear your comments about labor availability, and I guess, that inflation - cost inflation on the labor side. I'm curious, have you seen or are you anticipating any impact to turn-times in the general shortage of labor? Is that impacting your business at all or did you see an increase in turn-times? And then, did that impact your ability to make homes ready for lease and any impact on your metrics?

Now, we haven't seen any of that. Reality is we have great vendors from both portfolios and we've done a good job of managing those vendors and increasing our turn-times down. We obviously and always want to do better, but we haven't seen any impact across the board maybe some one-off in certain markets, but nothing material. We're about 15, 17 days, which is typically higher than where we want to be, but volume was high in Q3. And so that's difficult. It started to come down now that we're in Q4 and we'll get faster and faster get down in the 10 to 12 days, which we expect.

Hi, good morning. Thank you, guys. First question, probably for you, Dallas, on transactions in the quarter and mentioning some of this was at a lower price band expense. It's kind of two-part question, but really when you look at the difference in rent growth, some of that is impacted by just the geography of the portfolio and understanding different mixes within markets. So can you just elaborate a little bit more on how you think about the sale being price point driven versus market driven as they're skew in what you did in the third quarter and thus far in the fourth quarter or all of these homes generally on the lower band. And then kind of wrapping into that if it is a lower band, it would be the area of demand market where you think would be most impacted by higher rates and qualifications. So I just want to understand how you think about the interim play there.

Yeah. Happy to give a little bit more color there. There's a variety of reasons, I mean, typically we are looking for a bit more of a higher rent band down home, in terms of what we're purchasing in all 17 markets that we're in today. In terms of what we sold, there's a variety of reasons in there, and why we sold what we sold, it certainly centers around lower price points generally speaking across these markets. But we sold 425 homes, for example, in Chicago, and we've mentioned that on a couple of previous calls that we were going to look to that exposure in parts of the Midwest can be smart, in terms of how we're going to try to continue to shape that portfolio. We also sold a couple of hundred homes in South Florida and Tampa as well as some homes in Dallas, which is a market that we're currently buying in. So for us on the margins, just about getting the portfolio right, nine times out of ten, it has to do with kind of where we're seeing the best risk-adjusted growth in that market and then trying to prune our portfolio out of the parts of that market we're seeing less growth generally speaking. That tends to be sometimes most lower rent band type of areas. But, I'll give you a flipside example of that would be if you were to sell homes in Palm Beach County for example, they may be some of our more expensive homes in our portfolio, but we're just not seeing the same type of growth we're seeing in other parts of Dade and Broward County. So it can depend on the margin; it's just important that you just have to make sure that you're getting the right parts of the portfolio sold at the most opportune prices.

So would you look at it almost the lower end of the entry-level price point is where you're struggling with growth more so than the upper end of the entry-level? Or are you stretching to the move to where you see the most strength in growth?

So I would say the fairways typically in the middle and even sometimes at those lower price points where you can see some of the best opportunities for growth, quite frankly, it's just we also sell homes for a variety of reasons around maintenance of future CapEx risk. We've managed a lot of these homes now for six or seven years, we have a pretty good sense of the home health scorecard, so to speak on a home, and we can start to do some predictive thinking around where we probably want to limit some exposure in the future.

Dennis, it's the former of the two that you said is the pressure of that we were under accrued specifically in Florida. We'd assumed that real estate taxes would be up about 6% in Florida, and that's what we've been accruing to all year, we thought that was a reasonable assumption and it wasn't that far off from where it was last year. When assessments and managed rates finally came out in October, and actually it was a taxable just been dropping over the last week we choose to the finalized managed rates, it looks like that Florida's one coming closer to 7.5% maybe even up to 8%. And that's where the main put most of the pressure is almost 40% of our real estate taxes going to the state of Florida. As you know, we own about a third of our homes there, and it is a higher tax regime. It's definitely, and we thought we were accruing at the appropriate rate and sometimes you get right and sometimes you get wrong, in this case we got a little bit wrong unfortunately.

Good afternoon. Since your West Coast markets have been strong, do you mind giving us another update on Costa-Hawkins ahead of the vote, and if there are any steps you can take on a municipal level, if it gets repealed? And if so, how would your game-plan change in California?

Hi, thanks for the question. We're not going to get too much into it, given that today is the voting day in California - or tomorrow, excuse me. Let's see how that plays out. We've commented on it a number of times. And we're obviously supportive of being known on prop 10 for a variety of different reasons. But we hate to comment on it today, being so close.

Yeah, I won't - this is Charles. I won't jump into what's going to happen in 2019. But as we look at this, our residents continue to enjoy our well-located homes and quality service. We've had a good year on turnover. A lot of it's just been around the consolidation of our offices and using best practices from both organizations. As we continue to mature and constantly improve, we expect the residents are going to want to stay with us longer. So I don't want to put specific numbers on it. We like the trend. And we're going to keep working hard to keep it as low as possible.

Just a follow-up on the CapEx question. What drove the spike in the recurring CapEx year-over-year?

Well, it's seasonal, Jade. So we certainly saw that goes up in the third quarter, and typically starts to go up in the second quarter. So you see the number certainly is typically at its highest as you get into the third quarter; you're catching up from activities started in June and then of course July and August a big turnover month. So it's really more of a seasonality thing than anything else so that drove the higher numbers of that you've seen throughout the year.

Have you looked at it on the Same Store basis on a year-over-year basis to see what the specific drivers are?

Both Jade, it's really more of the broadly around the challenges we talked about the past around on R&M, the fact that it was until later into the summer in late June into July. We saw those challenges and start addressing those. So on a Same Store basis, whether you're looking at where the asset came from the portfolio or not, it's just generally across the board, because of the challenges we talked about before.

Okay. And lastly, American homes rent recently announced a joint venture with increased institutional interest in the single-family rental space and a lot of new entrants in the eye buyer base. Is that something you might be looking to do? And also, could you comment on interest from homebuilders, whether there is increased desire to partner with them?

Good question, Jade. And we're always having conversations with homebuilders around specific opportunities. And we've mentioned a number of times, that we're really channel agnostic. We'll look for opportunities that are meaningful. But we care about being location-specific at the end of the day. We really want to be focused on being in-fill, higher barrier-to-entry parts of the sub-markets, where we know there's some of that enhanced demand like we're seeing in our numbers today. And so, for us, it's really about being more in the right locations. We've certainly seen some of those opportunities. And we're open-minded to potential partnerships that, say, present themselves in parts of markets, where we have an intention to invest.

Good afternoon. Thanks for your time. Is it possible to get a sense of the impacts of hurricanes on your operating metrics, namely turnover, occupancy, and any costs associated with home repairs?

Hurricane season has a varied impact regionally based on the severity of the storm and impact areas. In our experience, we’ve seen temporary fluctuations in occupancy and turnover, however, should normalize as we emerge from the season. Costs related to repairs can also spike temporarily post-storm, but we have measures in place to address them efficiently. Overall, we remain focused on our core strategies and expect resilience in our operations.

Hi, thanks, guys. Has the recent increase in resell inventory impacted or pressured your ability to drive rent growth? And I'm just kind of trying to reconcile your positive commentary around demand with the negative spread and blended rent in the quarter.

I'm not sure I'm following the end of your question. But I'll just comment quickly on your question around month of supply. Current month of supply on a national basis is right around 4 in a quarter in terms of months, in terms of months that are on the market. We have not seen - and we know that there's been a little bit of slowdown in some of the homebuilding numbers, and certainly, in transaction counts on a resale basis. But as we look back on a look-back basis across our portfolio in terms of home price appreciation as well as how that's tied into our blended rent growth, we're still seeing really strong numbers.

We certainly have seen year-over-year that last year our blended rent achievement was higher than this year. But that gap has narrowed all throughout the year. So actually, September is the narrowest it's been, where it's only 20 basis points different. And we talked about in October how it's actually flattened out. I don't want to project what that means for November, December or to the early part of the year. Basically, what that tells us is it's very similar fundamental backdrop for us to be able to operate in. And as we operate more and more effectively, residents are staying with us longer, turnover is down. We've been able to hit the market and achieve rental rates that we think are pretty good. So we feel good where things are at. We think the background from a fundamental perspective should allow us to continue to do well.

So, I guess, so maybe the negative spread here is more leaning into occupancy than focusing on driving rent in 2018.

I guess, I'm not following the question. The occupancy is certainly up year-over-year. And we've again narrowed the spreads from - it's not a new story, over the last many quarters, where the year before was a little bit higher. So I think the difference is we're actually seeing that spread narrow, at the same time being able to do from an occupancy perspective. So I'm not following what your question is.

No, I think that makes sense. Thanks. And then on repairs and maintenance, do you have the percentage of work-orders that went to internal techs versus third-party vendors in the third quarter, maybe how that compares to the second quarter?

Yeah, we're trending in the low 40% of in-house tech utilization today. That's up from where we were based on the adjustments we made in Q2, when we consolidate into one platform. These recent enhancements that I described, we expect to start to bring that number up into the mid and upper parts of the 40s. But it's early. We're not to track it. We just implemented these enhancements and we want to try to get as close to 50% as we can. But it's a process and it's going to take time. The real test is going to be how do we do next year in peak season. And this is seasonal too. As you get to peak season, there is some up and down. So it's hard to go and quote just a number right now, because it does go up and down based on demand and turnover, and the seasonality that comes with the warm weather.

Yeah, we don't staff necessarily all the things that we need to do in peak season because it would be inefficient during non-peak season. So Charles is exactly right; we're just trying clear one quarter to the next. It may provide a false indication of what the trend is. You really got to look it over longer periods as Charles talked about.

We appreciate everybody's support. And we look forward to talking to everyone over the next couple of days. Thank you.