Key Takeaways: As expected AMH delivered another beat-and-raise for the SFR sector as 1Q earnings season wraps up, punctuated by a further acceleration in same store new lease rental rate growth of +10% (+3.3%, +4.4%, +5.9%, +7.6% sequentially over the prior four quarters) which also matched INVH's results. Taken together with renewal rate growth, the combined change in rents was just under 7% on signed leases. Thinking through the math on realized rent growth reflected in actual revenue, on the one hand lower turnover (just ~7% in 1Q) is driving down R&M and turnover expenses, but on the other hand is slowing realized rent growth in any given quarter as fewer homes turnover at higher rates. On balance this is a positive, obviously, and we estimate creating a longer tail for accelerating realized rent growth well into 2022 an perhaps 2023, which all else the same means consensus estimates probably need to come up.
Other observations:
- Not unreasonable to assume low-double digit to mid-teens Core FFO growth for 2022 / 2021 following ~10% Core FFO growth this year
- Run, don't walk, from California - in one of the starkest contrasts in capital allocation / market selection (outside of the development program) between AMH / INVH, AMH continued to sell down its remaining CA exposure. On balance we view this as a positive, as it essentially eliminates potential CA property tax resets from the risk discussion for AMH
- We love the development program - in a world where housing prices are mooning, land is way more expensive, and in general acquisitions are much tougher to execute / more competitive, AMH's land bank with over ~7,000 lots and captive development program is an enormous long term strategic advantage
- Finally, because we can't help ourselves, taking out the callable Series D and Series E preferred later this quarter is a smart capital structure decision (hint, hint, PSA!)
Just a reminder that we will be holding our residential REIT best idea presentation on Thursday, 5/20 at 2pm ET.
