The nation's largest single-family rental landlord is seeking to expand its newly launched third-party property management business for institutional investors and buy up to $1 billion of houses this year as it caters to growing demand from U.S. renters.
Invitation Homes wants to increase the size of its 80,000 single-family rental portfolio by acquiring $600 million to $1 billion of houses this year, with an additional $100 million to $300 million in purchases through its joint ventures. In 2023, Invitation Homes and its joint venture partners bought $1.1 billion of houses totaling more than 3,200 units.
"We are keeping a close eye on the capital markets and will prudently pursue opportunities for growth," said Invitation Homes President and CEO Dallas Tanner on the company's fourth-quarter earnings call.
The landlord's plans to expand its portfolio come as Tanner and his executive leadership team expect slowing growth on a macroeconomic level for the country this year. Persistently high mortgage payments are holding back renters from making the leap into homeownership and staying put in single-family rentals or apartments.
"Our operations team is continuing to make the business more efficient and we are looking at the controllable side of the house," Tanner said.
To meet its acquisition goals, the Dallas-based landlord could sell between $400 million and $600 million of its wholly owned houses, executives told investors.
Invitation Homes expects comparable revenue growth of between 4.5% and 5.5% this year after posting a 6.5% comparable revenue growth in fiscal 2023. The company is planning for its operating expenses to decrease from 10.3% in fiscal 2023 to between 5.5% and 7% this year.
The higher operating expenses were tied, in part, to the turnover of homes with Invitation Homes grappling with what executives referred to as "bad debt," in which they were freed to evict tenants unable to pay rent in California at the beginning of 2023. Executives said the company has no rental assistance or bad debt figured into its spending plans for this year.
In fiscal 2023, Invitation Homes' portfolio was 97.4% occupied with comparable rental rates increasing 6.3%, including renewals and new leases, from the prior year.
The company and its various joint ventures sold 1,489 homes for $547 million last year as it continues to upgrade its portfolio. Invitation Homes plans to continue to acquire newly built houses this year from PulteGroup as well as other homebuilders, executives said.
Managing Growth
At the end of fiscal 2023, Invitation Homes began what the company is calling "a new era" of providing professional property and asset management services to portfolio owners of single-family rental homes.
The service was launched in an inaugural agreement with an undisclosed third-party portfolio owner bringing more than 14,000 single-family homes into the platform, the company said.
During the earnings call Wednesday, Tanner declined to name the third-party portfolio owner, but he responded to a question by an analyst who asked about the opportunities tied to "Starwood," an apparent reference to Starwood Capital Group, and plans to reportedly take over the management of thousands of its rental homes. Starwood didn't immediately respond to a request to comment from CoStar News.
Most homes in the third-party portfolio are in existing U.S. markets where Invitation Homes already operates, including Atlanta, Phoenix, Dallas-Fort Worth, the Carolinas, as well as in the Florida cities of Orlando and Tampa.
The new third-party management business could help Invitation Homes' existing portfolio in certain markets by leveraging procurement opportunities and securing more competitive prices.
"We believe the size and scale of the platform is meaningful in helping to drive down the cost of living," Tanner said. "We want to work with professional capital and scale that will give us better market intelligence on how portfolios are doing" so Invitation Homes can help their business and drive efficiencies for growth.