The nation's largest single-family rental landlord raised its earnings forecast for the year as tenant housing demand helped it overcome a hit from hurricane damage across the southeast United States.
Invitation Homes, a Dallas-based real estate investment trust, said revenue rose 6.9% in the third quarter ended Sept. 30 to $660 million, with a 97% occupancy rate across its portfolio. Funds from operations, a key performance measure for REITs, climbed 6.8% to prompt the company to boost its per share guidance for the year by a penny to $1.88.
"We continue to believe our growth prospects, coupled with the attractive value proposition of single-family rentals compared to homeownership, create a constructive backdrop for the foreseeable future," CEO Dallas Tanner told investors during a call to discuss its results.
Executives told investors there was "limited damage," from storms, including roof and fence damage, at its properties, with an initial expense estimate of $37.5 million in its Florida markets tied to Hurricane Milton and about $14 million of expenses tied to Hurricanes Beryl, Debby and Helene. Insurance carried by Invitation Homes for the portfolio could cover some of the expenses tied to the hurricane damage, executives said.
Invitation Homes, with nearly 110,000 single-family-rental houses in its owned and managed portfolio, plans to continue buying or selling houses to help it manage risks to its real estate. The REIT is seeking to sell homes in South Florida and in areas with flood plains, while buying properties in high-growth cities. The company is also managing expectations in certain U.S. markets where there's been an influx of new rental homes and competitive pricing.
Some high-growth cities in the Sun Belt, including Dallas, Phoenix, Orlando and Tampa, experienced slower leasing velocity in the third quarter with those markets seeing an influx of supply, putting more competition on pricing, Tanner said. He added he's not concerned about the softer demand for rental houses in these markets because he's bullish on their long-term growth.
New Supply
The REIT has grappled with oversupply in Las Vegas, Tanner said, adding the company already has a plan in place to work through the short-term market dynamics in these markets.
"We will work through this period to absorb the new supply and ignore the near-term noise because these markets are attractive" in the long term.
Invitation Homes moved its headquarters office within Dallas from downtown Dallas to Two Lincoln Centre in North Dallas in June, according to SEC filings. CoStar News previously reported on the expected relocation last year.
While Invitation Homes, with the help of its joint ventures, is adding new houses to its portfolio, it's also shaping its real estate portfolio in Florida to steer clear of flood plains and away from South Florida's coasts, even as the REIT is "bullish," on the overall growth profile of the state, Tanner said, adding the company is focused on growing its portfolio in Central Florida.
Charles Young, president and chief operating officer, said in the past four years, Invitation Homes has sold about 1,600 homes in Florida. As flood maps are redrawn, he said, it could send a flag making a house a candidate for disposition.
"We have a large portfolio in the southeast United States and Florida and storms will continue to be a part of life," Young told investors and analysts during the earnings call. "We've had many years with no storm impact and 2024 has proven to be a more active year. But we have a well-established play book, and we are well insured."