AMH - NYSE

Greetings, and welcome to the AMH First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Nicholas Fromm, Director of Investor Relations. Thank you, Nicholas. You may begin.

Good morning, and thank you for joining us for our first quarter 2025 earnings conference call. With me today are Bryan Smith, Chief Executive Officer; Chris Lau, Chief Financial Officer, and Lincoln Palmer, Chief Operating Officer. Please be advised that this call may include forward-looking statements. All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. All forward-looking statements speak only as of today, May 2, 2025. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. A reconciliation of GAAP to non-GAAP financial measures is included in our Earnings Press Release and Supplemental Information Package. As a note, our operating and financial results, including GAAP and non-GAAP measures, are fully detailed in our Earnings Release and Supplemental Information Package. You can find these documents, as well as SEC reports and the audio webcast replay of this conference call, on our website at www.amh.com. With that, I will turn the call over to our CEO, Bryan Smith.

Welcome, everyone, and thank you for joining us today. As expected, we have a strong start to 2025. Our top-line metrics have sequentially accelerated each month since the start of the year, driving $0.46 of core FFO per share for the first quarter, which represents growth of 6.6% over the same period last year. A lot has happened in the broader economic environment since we exited the first quarter. Despite this recent market uncertainty, our confidence in strong sector fundamentals and our proven business model remains high. First, housing is a basic need, and our high-quality, well-located homes continue to be prioritized by American families. Second, the supply and demand imbalance persists. The U.S. is still short millions of quality homes, and through our unique in-house development program, we continue to deliver new inventory to an undersupplied market. In fact, we were recently recognized as the 37th largest home builder in the country by Builder Magazine, up from 39th last year. And demand isn't slowing. As millennials continue to age into household formation years, they're driving sustained interest in our homes as they seek out the benefits of single-family living without the burdens and cost of homeownership. Finally, AMH's focus on the resident experience is unmatched. Our residents choose us for our prime locations, high-quality homes, and outstanding service. This results in an industry-leading customer experience that is reflected in our national Google score from the first quarter of 4.7 out of 5 stars. Simply put, AMH is well-positioned for strength and resiliency because of our investment-grade balance sheet, diversified portfolio footprint, leading operating platform, and strong resident base. This brings me to our first quarter results. Same-home average occupied days continued to strengthen to 95.9%. And we delivered new, renewal, and blended rental rate spreads of 1.4%, 4.5%, and 3.6% respectively. Together, these drove same-home core revenue growth of 4.3% for the quarter. Core operating expense growth came in at 4.2%, driving same-home core NOI growth of 4.4% for the quarter. Notably, we were successful on two key revenue optimization objectives this quarter. First, we began to see the results of our lease expiration management initiative, which is designed to strategically align lease expirations with the heightened demand of peak leasing season. Second, we successfully grew occupancy by 50 basis points while absorbing the timing of move-outs that resulted from our lease expiration initiative. This is a testament to the demand for our high-quality, well-located homes and the resiliency of our resident retention, which remains in excess of 70%. Importantly, we accomplished these objectives while also accelerating new lease rate growth each month, which continues to be at the top of the residential sector. Turning to April, leasing activity continues to strengthen. Same-home average occupied days was 96.3%, and new lease spreads accelerated by 170 basis points over March to 3.9%. Renewal and blended leasing spreads were 4.4% and 4.3%, respectively, which is consistent with our expectations at the start of the year. Turning to our investment programs, the quarter landed as expected for development deliveries and their initial yields, which were in the low 5% area. As we outlined on our last call, we expect yields to increase as we move through peak leasing season, averaging to the mid-5% range for 2025. As a note, given the timing in the year, we do not expect any potential impacts from tariffs to materially affect full-year deliveries and their associated yields in 2025. In addition, there are no changes to acquisition expectations or the pace of dispositions this year. We are remaining patient until attractive opportunities present themselves, and we will continue to lean into the disposition program for the time being. To close, our strong first quarter performance reflects both discipline execution. And continued demand for our high quality and well located homes. With that, I will turn the call over to Chris.

Thanks, Brian and good morning. Everyone as usual, I'll cover three areas in my comments today. First, a review of our quarterly results. Second, an update on our balance sheet. And third, I'll close with a few thoughts around our unchanged 2025 guidance. Starting off with our operating results, we delivered a strong start to the year with a net income attributable to common shareholders of $110 million or $0.30 per diluted share. On an FFO share and unit basis, we generated $0.46 of core FFO representing 6.6% year-over-year growth. And $0.42 of adjusted FFO representing 5.4% year-over-year growth. From an investment perspective, our development program continues to perform in line with expectations. And delivered a total of 545 homes to our wholly owned and joint venture portfolios during the quarter. Specifically, for a wholly owned portfolio, we delivered 424 homes for a total investment cost of approximately $173 million. Additionally, consistent with our plan, we continue to lean into our disposition program. Selling 416 properties in the quarter, generating approximately $135 million of net proceeds at an average economic disposition yield in the 3%. Next, I'd like to turn to our balance sheet. At the end of the quarter, our net debt including preferred shares to adjusted EBITDA was 5.3 times. We had approximately $70 million of cash available on the balance sheet. And we had a $410 million drawn balance on a revolving credit facility. Additionally, as discussed on our last call, we fully repaid our 2015-SFR1 securitization at the end of the first quarter using cash from the balance sheet and capacity from our revolving credit facility, they would expect to opportunistically refinance into the unsecured bond market over the course of 2025. And finally, I'm happy to share that S&P Global recently revised AMH's credit rating to Positive Outlook. This underscores our relentless commitment to prudent balance sheet management and a continually improving credit rating profile over time. Lastly, before we open the call to your questions, I wanted to briefly touch on our 2025 outlook. As expected, the year is off to a strong start with healthy demand and strong leasing activity. That said, the bulk of the spring leasing season is still ahead of us. And we remain mindful of the quickly evolving landscape of potential economic uncertainty ahead. With that in mind, we've left our 2025 guidance unchanged and would like to share a few reminders on the demonstrated strength and resiliency of AMH. Simply put, housing is a necessity. And to this day, our country still needs more high-quality options. On top of that, the AMH portfolio has been thoughtfully constructed with a strategic focus on high-quality markets and intentional geographic diversification. Our resident base has proven its durability and resiliency, and the consistency and predictability of the AMH operating platform is unmatched, which we believe will continue to position us for strength and further separate AMH going forward. And with that, thank you again for your time, and we'll open the call to your questions. Operator?

Thank you. We will now be conducting a Q&A session. [Operator Instructions] Thank you. Our first question comes from the line of Jamie Feldman with Wells Fargo. Please proceed.

Great. Thanks for taking my question. I was hoping you could dig more into the strength in your Midwest markets. You've outsized rent growth there. We're curious if that's more of a catch-up versus Sunbelt, given high rent growth in the Sunbelt markets during COVID. What do you think these markets could continue to outperform on a multi-year outlook? And with that backdrop, what's your appetite to grow your land bank and your development pipeline there, given most of your land is in more southern markets?

Thanks, Jamie. I'll make a couple of comments on the Midwest markets themselves, and I'll pass to Bryan for comments on potential portfolio expansion. The Midwest, as you mentioned, continues to be a fantastic market for us. We saw that continue into April. New lease spreads there were almost 9% off of 5.8% for first quarter. So great acceleration. As far as what's driving the activity there, we really think it's because of the quality of life and the affordability of those markets. It's part of the reason why we are there. And we just continue to see some migration patterns that look great going into the Midwest. And I think in addition to the people that are going to that area, we're also seeing people who just value the AMH platform. They value our quality product. They value the areas that we're in. And so I'll let Bryan comment on the portfolio.

Hi, Jamie. This is Bryan. In terms of expansion, there's a couple of interesting points. One, if you noticed, we do have a land pipeline in the Columbus market. We're very excited about getting those lots prepared and developed and into the system. It's been a fantastic market for us, so we're looking forward to the results there. And then another one of the benefits to the portfolio deal that we did at the end of last year was we got to add to the Indianapolis portfolio in a time where it's been really difficult through other channels. So, yes, we are actively looking for ways to continue to expand our footprint there, but we're doing it responsibly.

Okay. Thank you for that. And then can you talk about the puts and takes of the heavy presence of public builders in North Florida and Texas, specifically the increased competition for more build-to-rent supply, also entry-level single-family homes with rate tie-downs? And does this provide an opportunity for external growth or more of a headwind on demand and competition?

Yeah, there are a number of different things at play there. You can see the effect of some of the build-for-rent supply and some of the for-sale supply in the performance of the San Antonio market over the past year or so. We're seeing in Texas there, a little bit in Austin as well. The portfolio is still performing well, but the effect of that additional supply is peaking through. With regards to Florida, there's been a lot of discussion around Tampa and North Florida. And we're seeing pretty good activity there, despite the dynamics of the for-sale market and some of the additional supply. We believe that's going to be temporary in nature. There are good indications that build-to-rent supply may have peaked, and you can see it in some of the improvements in occupancy, not just in the Texas and Florida markets, but in Arizona as well.

Thank you. Our next question comes from a line of Steve Sakwa with Evercore ISI. Please proceed.

Yeah, thanks. I guess good morning out there. Are you doing anything, I guess, proactively to adjust the leasing strategy at this point? I realize the uncertainty out there has grown, but the fundamentals on the ground today still seem to be quite strong. I just wasn't sure if you were redirecting the field to do anything differently, or is it pretty much business as usual until you see meaningful changes in the leasing dynamics?

Yeah, thanks, Steve. This is Bryan. We have made some changes, as I talked about in prepared remarks, and obviously we didn't anticipate some of the things that are happening in the current environment. But we had a couple of revenue optimization initiatives that are starting to show. Notably, our lease expiration management initiative is an evolution of our revenue management objectives. And you can see that in the additional move-outs that we saw in first quarter. The strategy there is very simply one where we're trying to move expirations into the period of the year that exhibits higher demand and potential for higher rate growth. That's been a change over our approach historically. In terms of what's happening today and in reaction to the changes in the current market, we're seeing fantastic demand that has produced really good results, accelerating April and looking great for Q2 hasn't led us to make any changes on the ground. Incoming applicants and prospects, the quality has been consistent with what we've seen over the past four or five months.

Okay, thanks. And then as it relates to the development, I can appreciate the fact that most of the pipeline for this year is built out or committed on price. How do you think about the price risk into next year on the Camden call just finished up? They talked about a very de minimis sort of price increase from kind of the tariffs as they sit here today. Is that sort of your expectation if things were to play out as is that cost increases would be say sub 5% or do you feel like there's more pressure on pricing if tariffs stayed where they are?

Yeah, thanks, Steve. We're looking very closely at that and it seems to be changing quite often. But in the event that things are sticky over the long-term as they stand now, based on our discussions with other home builders and talking with the NHB and so forth. The effect on the tariffs on our development program in particular, we're estimating to be in the 2% to 3% range on our total home delivered home basis. So it is small and that's partly due to the fact that there's a lot of labor and there's a bunch of other components that come in. And the materials that are being, that are subject to tariffs represent a small portion. If they hold, they will have, the effect won't really be seen until the end of the year. A lot of our pricings are already locked in for 2025. So we're talking about kind of further down the line and again, less clarity into whether these are going to continue to stack.

Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed.

Hey there guys. Good morning to you. Maybe just to follow up on the last question from Steve there, just can you remind us what percentage of your development costs for home are labor related? You mentioned that there's more labor availability. Curious if there's a sense that there could be some relief or maybe a benefit on that front. Thanks.

Thanks Haendel, this is Bryan. It's not an exact estimate, but if you think about the vertical costs, roughly 55% is labor, 45% materials varies a little bit here and there, but thinking about it in terms of nearly an even split and that's on vertical, not including land and horizontal costs, obviously have a larger labor component as well.

That's fair. I guess we'll monitor and see how that evolves on the labor front. My other question was tied to the uptick in turnover in the first quarter, anomaly versus your peers, but again, understanding that you have the strategic initiative that you're employing here. I guess I'm curious if you have a sense of how much turnover maybe would have been without the program and perhaps help us understand how much longer we could be seeing higher turnover from this program. Thanks.

Yeah, thanks Haendel. I want to make a distinction between turnover and retention. The turnover, we had higher turnover in Q1 because of the lease expiration management initiative, but our retention remained consistent, remained the same as what we saw last year and what our expectations were for the year. So it's really a timing issue. You saw it in the first quarter, there'll be a continuation of that to a certain extent in the second quarter as we're pulling that kind of a ratio of expirations more heavily into the first two quarters to match those demand levels. But yeah, the increase in turnover is nearly completely attributable to that initiative.

Thank you. Our next question comes to the line of Eric Wolfe with Citi. Please proceed.

Thanks, it's Nick Joseph here with Eric. Recognize it's early in the year and the macro uncertainty that you're seeing, but just given the results through April on same store revenue, if you hit the midpoint of guidance in the sense of a deceleration of about 100 basis points for the remainder of the year. Is that just a conservatism given everything that we've talked about or are there headwinds in the back half of the year either on other income or occupancy or other things that we should be mindful of?

Yeah, hey Nick, Chris here. Look, I think you led kind of part of the answer. No question we are watching the economic environment extremely closely. But even if you hypothetically held that to the side, I would just remind everyone that it's also still early in the year, right? We very much had a great start and are really encouraged by the activity and the demand we've seen along with our early spring leasing results that Bryan was talking about and prepared remarks that continue to accelerate into the peak of leasing season. But that's really the key point, right? Peak leasing season is still ahead of us. And with that in mind, no different than past years. At this point, it's just a little bit too early to be talking about the guide. But with that said, we very much look forward to sharing additional updates as we progress throughout the balance of peak leasing season and importantly get to the end of the second quarter.

Makes sense. And I know you collect a lot of data. Are you seeing anything from the data you collect for weakening consumer or weakening demand?

Thanks, Eric. This is Lincoln. We haven't seen any indication so far of a weakening in demand or in consumer behavior. As we go into April, we saw foot traffic increase in our homes from first quarter to April. We saw leasing improve year over year. And that's on top of the improved month over month rate growth and occupancy that we saw. So we have no concerns so far.

Thank you. Our next question comes to the line of Adam Kramer with Morgan Stanley. Please proceed.

Hey, good morning, guys. Thanks for the time here. Look, I think the April results kind of showed you were able to push occupancy, build occupancy at the same time as pushing rent. I was wondering as you kind of sit here today, kind of what's the priority here? Is it to kind of further build occupancy or do you feel pretty good with where occupancy is today? And, you kind of shift to being able to push on the new lease side a little bit more.

Hey, Adam, this is Bryan. It's always a balance in revenue optimization and the timing, the seasonality of the business really plays into that as well. That was really the impetus for our movement with this lease expiration management program. We don't have specific targets for either, but we're looking at the right balance as we get into the spring leasing season. And then once we enter that season, which we see a peak of releasing rate growth and generally a peak in occupancy, we spend the balance of the year trying to preserve those occupancy levels and be really thoughtful about maintaining good strength coming in as we exit the year. So the way we're seeing it this year is maybe a little bit of a flattening of the occupancy curves as to what we saw last year. But in the end, that consists of that occupancy with 2024.

Great. And maybe just a higher level question here. When you think about your BTR portfolio, your development portfolio, I think you're over 10,000 homes at this point. Is there any kind of noticeable difference in the demographics between, the kind of residents in the development homes versus the kind of scattered site, traditional SFR homes? Any kind of demographic differences, be it age, be it kind of number of people in the household, children, et cetera?

Yeah, this is Brian. Surprisingly, we've seen a lot of consistency from the incoming affluent profile between built-to-rent and the scattered site. We haven't seen much of a difference. Obviously, in some cases, the rents are a little bit higher on some of the brand new product relative to some of the older product in markets like Atlanta. So there'll be a little bit of a difference in income, but the ratios are still very strong. Our incoming residents, the age, demographics, the household makeup has been remarkably consistent over the past decade with the changes in incomes maybe slightly outpacing rent growth. So a little bit of improvement from that side, but everything else has held pretty constant.

Thank you. Our next question comes from the line of Jeff Spector with Bank of America. Please proceed.

Great, thank you. Just to follow up on guidance, April payrolls did come in stronger than expected today. I guess, can you talk about the potential or historical lag between the labor market weakening and its impact on your business and demand trends? Thanks.

Hey, Jeff, this is Bryan. The impact on demand trends, we haven't seen that direct of a reaction to any changes in job reports or any kind of immediate effects of macro changes. I think it's for a couple of reasons. One, you look at our product and the fact that housing is a fundamental need and we have supply issue in these good markets that comprise our portfolio on kind of the high end. And then finally, as you get down to kind of the street level the demand backdrop is so strong. We have such a depth of demand. The way that we lease homes is, you can think of it in terms of a first in process but there's a bunch of demand behind that. So we haven't seen any effects of movements in either direction. I think the strength of the labor market may have more of an effect on cost of labor and increases or so forth over the long run but nothing in the immediate.

Sorry, and I meant really just trying to get back to like thinking about the historical lag, meaning it's obviously we're seeing a lot of strength through April, the jobs number came in strong. So again, we think about the guidance for this year and what could potentially change that or change the trajectory of demand, right? What would be the lag between if we saw a weakening in the labor market and an impact on your business? Is that historically, 3 months, 6 months, 12 months?

It's difficult to put a fine point on it for a bunch of different reasons. I was talking to you some of the merits of SFR but one of the things that we haven't talked about on the call yet is just the difference and the unaffordability of owning a home as one example. That's probably has a bigger effect than anything else. Think about the cost of owning similar homes to the ones that we're delivering in the development program. Mortgage rates are extremely high. You've got the issue of insurance, which has run away in places like Florida, maintenance, et cetera. So it's very difficult to draw a direct correlation between labor that's any stronger than what you'd see on the affordability measure.

Thank you. Our next question is with Rich Hightower with Barclays. Please proceed.

I'll take Ritz Tower as my cue here, guys. I just want to talk about CapEx for a second here. So if I go to just recurring CapEx for home, it was up quite a lot year on year, but then obviously down quite a lot as we kind f look sequentially over the prior four quarters. So just maybe talk a little bit about the movement, maybe the seasonality in those figures? And just looking at the age of the portfolio, how that metric factors into the decision to sell a property. And when you say you're selling at a kind of an implied 3-ish cap rate to an end user, does that factor in to CapEx you're not spending in the way you think about that metric? Just a little more color on that topic.

Yeah, thanks, Rich. This is Lincoln. What you're seeing is a mix of a couple of things. One is we're coming off of a very low column from first quarter of last year. So that's part of the difference. And then the second part is what Bryan already talked about, that lease expiration management program that we've initiated that is aligning those expirations with our demand curve. Those incremental move outs in the quarter drove much of that CapEx. And as we pointed out, we've run consistently low for the last several quarters. And setting aside kind of those two issues, we imagine that the run rate for CapEx to be in line with our net return.

Yeah, and Rich, this is Bryan. You're exactly right. There's a very clear correlation between age and the CapEx needs within our portfolio. It's one of the benefits that we've talked about on the new development side, where not only are we bringing new homes into the portfolio to help with the average age, but these are also purpose built for long-term durability with extra investments and just some really kind of expensive kind of heavier CapEx areas surrounding HVAC roofs as an example. So what's coming into the portfolio should have a much better long-term CapEx profile, but certainly a dramatic better in the near term. And then when you look into the way that we're evaluating homes through asset management, evaluate them for disposition, CapEx age is a factor. It's one of the inputs that we do look at. There are a number of different things, locations, probably the top, but getting the non-core assets out, including some homes that are old and might have kind of an expected heavy CapEx burden going forward would certainly be a factor. And then when we talk about the three CapExes, we're looking at that from the buyer's perspective. And more importantly, you need to understand who we're selling to, and that's the end user. So it's really a difference in use. We're selling good homes into the market. You can see by the disposition prices that we're getting. There's not a ton of deferred CapEx in there, but it is a consideration when we're evaluating individual homes.

That's great. I'm impressed. I think you guys got every single part of my multi-part question there. And then I think just a follow-up, in terms of AMH acquiring properties sort of in the open market. I mean, do you guys, remind me, do you guys buy anything directly from other home builders, or is the fact that you have in-house development, somehow -- is there somehow a gating factor that would prevent that from really being an active source of acquisitions for you guys? Just tell me how that works.

Yeah, sure, Rich. Chris here. Over the years, we've developed and cultivated a very large network of relationships with all of the major home builders out there. And we very much actively monitor and keep our finger on the pulse of all aspects of the acquisition market. To give you a little bit of color on what's going on right now, we have seen a pretty notable uptick in builder inventory opportunities. Just to give you some numbers to illustrate the point, this quarter, through that network of national builder relationships, we screened plus or minus 25,000 newly constructed national builder properties, which is a pretty considerable increase. Last quarter, I want to say we screened something more like 15,000 opportunities, so pretty big uptick quarter over quarter. But similar to our last update, as we screened those properties this quarter, we found that over 80% of them or so fell outside of our disciplined buy box in terms of location, quality, and then importantly, single-family detached property type. With the remainder of the homes that did come close to our buy box with yield averaging somewhere in the fours when you use our methodology for underwriting that we consistently apply to both acquisition opportunities and development, which I think really underscores the importance of the development program. The development program provides us the ability to consistently and predictably grow with properties of just unmatched quality and location that you can't buy anywhere else.

Thank you. Our next question comes from the line of David Segall with Green Street. Please proceed.

Hi, thank you. Maybe just following up on that, if pricing for those assets is in the four-handle range, how's that compared to nearby suburban apartment product?

Hi, David. This is Bryan. I think my understanding of cap rates for suburban multifamily would be consistent in kind of the high fours, but we watch multifamily, but we're not experts in the acquisition market for that.

Great, thank you. And I'm curious about what you think the kind of fair run rate occupancy is for the SFR business since prior to the 2020, you're averaging around 95% occupancy. Since then you've had a few years at 97 or higher. Last year was low 96 and sounds like you're expecting similar this year, but what do you think the long run fair occupancy level is?

Hey Dave, that's a really good question. It's something that we're thinking about. And you can see some of the things that we're discussing this quarter, like the lease expiration management initiative that they're kind of addressing that. I've talked about it on prior calls where you're exactly right. 95% was kind of the norm called pre-COVID. And now our expectations kind of move the bar up into the 96% range. And there's a number of different reasons for that. One, I think there's a greater appreciation for single family rentals, especially those that are professionally managed. So I think there's recognition from the consumer and then specifically to AMH our platform's improved. And we're starting to see a lot of appreciation for services side of the business with competes -- you can see it in our Google review scores, our customer service scores that I did in the remarks, so there are a lot of good things that are working in our favor that would support long-term expectations of the 96% area.

Thank you. Our next question comes from the line of Brad Heffern with RBC Capital Markets. Please proceed.

Yeah, thanks. On the leasing spreads to start the year, it's obviously been a number of years since we've seen kind of a typical leasing trajectory. Can you just frame what we've seen so far this year? I'm suspecting you'll say that it's above average. But how does it look compared to -- how you would typically expect to be the normal year?

Yeah, Brad, you're exactly right. The last, call it, six months or so, haven't been typical when you think about the seasonality, COVID wasn't typically there, and there's been a lot of movement around. But it is common to pick up to have rate improvement as you enter the New Year, demand picks up strong in January, foot traffic picks up. The activity, applications, leasing, everything as you get into the spring leasing season. So the normal trajectory of pickup January and to, call it, maybe the major -- the peak potentially April depending on the year. We're seeing that. And then it's just a question of how steep that curve is. Last year, we had really nice movement in the beginning of the year and then saw some changes in the back half of the year that we're that were a little bit different than normal expectations. And our expectation this year is to have maybe a little bit of a flatter curve and protect the back half of the year differently.

Okay. Got it. And then on the development program, you reiterated the 5.5% yield. It does seem pretty tight to acquisition opportunities in kind of the high 4s. I guess what's the yield premium that you need over other growth options for that program? And then do you see the benefits of the consistency and all the other things that you talked about with that sort of offsetting maybe the normal development math that we would normally think of like 100 or 150 basis point spread?

Yeah. Thanks, Brad. There are a number of different things. I'm going to start with what we're delivering through our development program and the quality in the locations. These are homes that you just couldn't buy. You certainly couldn't buy the locations. And then when you add the fact that these are purpose built to our specifications you're incorporating over a decade of experience from the rental side, a very, very in-depth analysis into what our residents and consumers are looking for. And we've optimized that delivery not only in the way that it's designed but in the materials that we're putting in. We saw some great opportunities to come in and put in upgraded materials that are strong from a maintenance and durability perspective and also really appreciated by the residents. So we're building a little bit of a different. And second, we're very focused on single-family detached. I've talked about it in prior calls and a lot of the build to rent, a lot of the other product out there is townhome in nature. If I remember, John Burns estimates that around 20% of build-to-rent deliveries were single-family detached in some of the markets. So what we're delivering is a slightly different product. The locations are outstanding. It's not the same location or product that's being offered by the national builders. So when you look at the yield premium, if we were to try to go out and buy what we're buying, we get -- we're getting at least 100 basis point premium on top of that. And then we're also talking about the yields going in, the day one yields as those homes are being delivered, in many cases into actively delivering communities and active construction sites.

Brad, it's Chris here. Just to illustrate a few more data points. Probably the better way if we're looking to compare yields between development versus acquisition opportunities is to look at the things and opportunities that we're evaluating in the market right now, right? I already talked about the fact that we screened 25,000 national builder opportunities this quarter. When you look at yields on those using our measuring stick. Those yields, as I mentioned, are somewhere in the 4. Today, as we're thinking about new land going into the development program. There's a few places where we're backfilling land into the pipeline to refill projects that are being delivered and new land that we're looking at is into the 6 area or 6-plus area, right? So pretty meaningful difference between the two when you're using a comparable measuring stick on both sides. And then the other thing that I'd just remind you of is that we're thinking about the development program and the sizing of it, it's really important to keep in mind the capital sourcing of it, right? And the fact that I know that we've kind of broken record at this point, but it's a really important one is that we have the program strategically sized such that any given year of development capital needs is fundable through a combination of retained cash flow from the business, recycled capital from dispositions now in this environment, very attractively. And then a model of debt capacity that grows each year off of the balance sheet as EBITDA grows.

Thank you. Our next question comes from the line of Daniel Tricarico with Scotiabank. Please proceed.

Yeah, thanks for the time. Chris, looking for an update on the FFO Bridge for Q4 release, the $0.09 headwind financing costs. Obviously, there's still some more -- security. So you're thinking about that today, where you could unsecured. And also, you had the anticipated repayment date in April for the 2015-1 but let on the line to repay it. So curious if there's anything to read into there? Thanks.

Great question. And I would start by saying no real changes from a capital plan perspective or expectations on the year. Recall that the $0.09 that you point out, there's a couple of different pieces there. There's a couple of pennies from just regular way growth in terms of financing cost. There's the incremental cost from the fourth quarter portfolio that we acquired, that's about $0.04 of the $0.09. And then I think it was about $0.03 or so that was in there in terms of refinancing of securitizations. You're exactly right. We have two securitizations that we expect to repay over the course of this year. As you pointed one of which we repaid at the end of the first quarter, the second of which we expect to repay in the back half of the year. Importantly, as that second securitization for this year is paid off. That's our last one, which means the balance sheet will become 100% unencumbered at that point, a big milestone for us. And then importantly, over the course of this year as those securitizations are paid off that will free up about 9,000 homes or so it can now be freely reviewed, be reviewed by our asset management and disposition program. So great opportunity there to continue to attractively recycle capital and optimize the folio. In terms of refinancing of those, the game plan remains the same, refinancing into the unsecured bond market, called one to two trips to the bond market over this year is what we're contemplating. What's factored into the guide, still our expectations. As we all know, April had -- was a volatile month in terms of bond market conditions, steel like the last week or so has settled down a touch. There was an issuer in the marketplace yesterday. It sounds like that deal went very -- I think that that's a good sign for the market. And we're going to be very prudent and opportunistic as we think of bond market windows over the balance of this year. Today, if we issue in the market, hard to say exactly, but I guesstimate top high 5s or centers of new issue 10-year unsecured debt.

Helpful, Chris. Thanks. And I want to follow up on Steve's from early, Bryan, on the Q1 call, you said half of the vertical and contracted labor for 25% -- the tariffs. So I'm curious what percentage of the remainder of '25 and '26 of spot today? And then on the 2% to 3% impact you mentioned earlier, can you just more details on the magnitude of increase for the bigger drivers of that?

Sure. Yeah. We had a rough estimate on the first call of -- I think it's been kind of pushed back toward the year. It's difficult to pinpoint it with active developments in different stages. But I was thinking that as less than a half year effect. And what we're talking about too is the event that -- as currently planned. And shifting and adjusting so frequently, it's difficult to really put a fine point on it. But if I had to I think through I'd probably shift that half to effects maybe being seen towards the end of the third quarter, so quarter plus would be my guess. And then as you get into 2026, it's pretty far out there. So I hesitate to speculate too much on how much of that's going to run in the next year because there are a ton of other factors at play, too. If there's stickiness in these price increases, does it affect builder appetite, does it affect other aspects of the business. So it starts to get a little bit long on the assumptions.

Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed.

Good afternoon. Thanks for taking my question. We talked a little bit earlier about the demographic of [indiscernible] but maybe you could talk a little bit about any difference in performance there? And do you see any difference in rent growth and over -- maybe said another way, do people stay longer in a new home? Thanks.

Hey. This is Bryan. We're taking a look at -- let me start by going back to the development the way we talk about kind of initial yields and then the concept of stabilized communities because I think they're very -- the communities want to stabilize, the construction traffic has gone, the amenity centers are complete and they start to kind of operate, as you would expect, longer-term basis without the distraction of a lot of the other things. So if you take a look at those, and those are comprised some of the ones that are in the same home pool for 2025. We're seeing, as expected, a much lower cost to maintain. They're quicker to turn the rate growth is consistent with the scattered site at this point, but we see the upside on that going forward. And then on the retention side, it's important as they continue to season, we'll see improvements as some of the longer-term really stay in these communities. So nothing dramatically different there. But early conclusions support our thesis on the cost and the speed to turn side.

Got it. Thanks for that. And then just a quick year. You maintained your guidance for same-store revenue and expense, but just wondering if there were any kind of under the hood changes in the buildup or assumptions where there may be some offsetting pieces. Thanks.

Michael, Chris here. Not particularly, I would say on both sides, things are going pretty according to plan. As we're building into the peak of leasing season in terms of the top line, building blocks, largely still unchanged. Full year outlook, 3.5% at the midpoint. Both Bryan and Lincoln talked a little bit about still expecting occupancy on a full year basis, low 96. That's pretty flat year-over-year. At this point, still see average realized rent growth in the high 3s or so into currently bad debt in the low 1s on a full year basis. So building blocks largely unchanged there and similar story on the expense side. Full year outlook is still unchanged at 4%. As we know, property taxes are essentially back to long-term average at this point in the 4% to 5% area. Obviously, we'll receive more property tax information over the balance of the year. First quarter is a pretty quiet property tax information period. Insurance renewals done at this point, and we see the balance of expenses and controllable still being mid-single digits. So fairly similar to what our expectations were overall and the individual building blocks on a full year basis.

Thank you. Our next question comes from the line of Jesse Lederman with

Thanks for taking the question. Questions on the development pipeline, but maybe thinking a little bit further out. So current deliveries have been a little bit heavier in Florida and the Sunbelt, obviously, based on investment decisions and land that was bought several years ago. And as you think several years from now based on land you're acquiring today, where should we expect growth in the portfolio to come from a geographic perspective?

Yeah. Thanks, Jesse. This is Bryan. It goes back to one of the first questions on the call. There are certain areas that we're focused on. You can see development coming into Columbus further down the pipeline. In terms of specifics, we're constantly evaluating to our asset management program, our landholdings and whether we're matching and allocating to the right areas. I would consider over the long run. We're very pleased with the markets that we're delivering in. If there's any change, we could probably see an acceleration into the Carolinas. Midwest is going to be really good going forward. But there's a bunch of different things to balance. We're matching that investment with demand and also with the availability of land and the type of opportunities that we see. We remain very, very focused on location and a specific buy box. So there's a number of different things at play. But I would expect to see continued investment in the markets that we're investing in now and maybe a little bit of a refocus into Carolinas and potentially a slight uptick in the Midwest.

Okay. That's really helpful. Thanks. Second question is on the portfolio acquisition from last year. Just curious how that's trending relative to your expectations? I know you're assuming some growth in the yield based on kind of assimilating that into your platform. So just curious on how that's trending thus far, though it's early. Any color there would be great. Thanks, again.

Yeah, sure. Thanks, Jesse. Chris here. Update is fairly similar to last quarter. You're right, it's early, but things are going really well so far. At this point, we're now done with our transition plan, moving properties onto the AMH platform. And we're quickly getting to work, as you point out, bringing performance of those properties up to our standards, where we know there's a lot of opportunity to create value, right? As we think about opportunities to improve collections and bad debt, overlay our best-in-class revenue optimization program and then importantly, implement our caliber of cost controls. All of which we see occurring over the course of this calendar year. That was the plan at the start with the portfolio really hitting stabilization by the end of this year. So punchline is going well so far, everything on track.

Thank you. Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed.

Great thanks and hello there. Just curious if you guys continue to see an improvement in your cost of equity, if there's any parts of the business that you'd lean into a little more from a capital allocation perspective, acquisitions, obviously, development. And just wondering if the hurdle rate returns have changed at all just taking into account the greater uncertainty in the economic backdrop.

Hi, Austin. Chris here. Look, I would start by reiterating what I mentioned a couple of minutes ago, as we think about the core of our growth being the development program, again, reminder, intentionally sized that it does not require equity. So then equity or incremental debt for that matter, become opportunistic weapons exactly as you point out. As we think about prioritization of incremental capital opportunities, it depends, right? And it's all relative at the time. But I would say there's opportunity to potentially do more from a development standpoint, national builder opportunities. As I mentioned, we're screening a lot of those. Of course, we continue to keep our finger on the pulse of the MLS. It feels like that's a ways off, but we watch it closely. And then the last point, Austin, is the additional portfolio opportunity side of the business, right? We've talked about this before, but we're very optimistic on the number of assembled portfolio opportunities and now are out there, right? And what we especially like about those, like we were talking about on the last question from Jesse is the potential to uniquely unlock value by bringing those types of portfolios onto the AMH platform, right? I think the fourth quarter acquisition is just a perfect example of the value that we can create there. As I say that, I probably should remind that we also recognize that there is a variety and quality levels out there in many of the assembled portfolios. And as everyone knows, we are unwavering on our commitment to the AMH buyback. And we love the idea of those portfolio opportunities down the road when they meet our buybacks and then importantly, at the right pricing levels relative to our then cost of capital.

And then just pivoting a little bit to an earlier question about the pricing dynamics going on between Midwest versus Sunbelt. You also had some commentary on affordability gap versus owning a home. I guess how does the affordability stream from just a rent-to-income perspective regional and in some of your large core markets?

Yeah. Thanks for the question. This is Lincoln. It's interesting how these dynamics work in our portfolio for a majority of the portfolio we're seeing kind of the same dynamics as we have been in the past with continued affordability rent versus buy. One interesting call out and the data that we're seeing is in our Midwest markets as an example, we have the smallest delta. So it's been interesting to watch and that's just another indication that it's a desirable place to live and there's still opportunity there for families to have quality. Other places where the gaps are biggest is Salt Lake City as an example, is running around 40%. And then rest of the market is kind of averaging to around that 27%, 30%, so overall, we're just pleased with the fact that we continue to see strength despite some of the changes in the dynamics around the available homes. That's been a big question from the home buyside. And we continue to see people just value AMH in our homes and our locations and come into our portfolio, especially during these times, more affordability.

Thank you. Our next question comes from the line of Linda Tsai with Jefferies. Please proceed.

Yes, hi. Any additional color you could share on your lease segment initiative. How much improvement do you foresee or any other benefits you could quantify? And how long is the tail for this improvement?

Hi, Linda. This is Bryan. The benefits are pretty simple for us. If you want to talk about rate and to mind this is part of really a broader revenue optimization focus that we've been talking about for a long time. There is upside to the program. What we've implemented today really applies to the way we're treating renewals and the timing and length of those renewal options. We will advance that to initial new leases, but this current just focused on the renewal side of the business. We're looking today, balance is somewhere in the neighborhood of maybe 60% of the leases expiring in the first half of the year. And if you look at the re-leasing rate growth between kind of the peak spring leasing season and some of the spring season, you can tuck in to some of the benefits that we would see there. And then when those come due the following year, does continue to accrue and the event of will move out. So there's a bunch of different positives associated with the program. I don't have an exact perfect balance because it's going to be a moving target. But just the starting point of recognizing the seasonality of the business, the difference in pricing power between the months are our target residents are -- this is a very good start.

Is it a multiyear improvement where the benefit is larger initially? And then as it grows, it sort of 80% over time?

Yeah. Well, again, it's part of our business. So in the current year, you might carry a little bit of extra vacancy during the period, but you make up for it and better rates. So there are a bunch of kind of counterbalancing factors. But again, part of a broader initiative this matches kind of work and demand and timing. And the other note that I haven't made yet. This isn't something that we're forcing on our residents. This is something that's very -- residence too. We're giving them choices and they're selecting into the -- so it matches their needs as well, which, over the long run, will be a huge benefit, too.

Thank you. Our next question comes from the line of Omotayo Okusanya with Deutsche Bank. Please proceed.

Yeah, good afternoon. Most of my questions have been answered, but quick one on repairs and maintenance. Just curious how that -- you expect that to trend in the course of the year, just given some of the concerns about tariffs and potential impact on material costs and things of that nature?

Yeah, sure, Tayo. Chris here. I touched on it a bit when I was covering kind of the full year outlook on expenses. But as we think about controllables overall, look, exactly as you said. We're watching the evolving tariff situation very closely. But we remain encouraged by a couple of things. One, just the sheer level of the proportion of work that we are able to perform in-house with our own AMH personnel. And then also, the maturity and versatility of our supply chain that the team has worked really hard to develop and invest into over the years. And so at this point, a full year outlook on controllables, still contemplates mid-single-digit, call it, 4% to 5% overall growth for the full year would just be one call out that general expectation is that we would be first half of the year running slightly above full year average given the timing, the strategic timing of move-outs, from our lease expiration management program. But we'll continue to keep every on dated on tariffs and supply chain over the course of the year as we all have more clarity.

That's helpful. And if I may ask another one, just what is to date, again, they have this proposed new rent control policy, but they kind of included everyone except single type of rent. Just kind of curious whether that was more from a lobbying perspective, where you guys have excluded? Or if you have to talk about why SFR in particular, works from that initiative?

Yeah. Thanks for the follow-up question. This is Lincoln. Our government affairs team is constantly watching these developed across the country. And in conjunction with our legal team, we're drafting adaptations to our business to make sure that we can be compliant. My understanding is that this one hasn't been signed yet, although it has passed both houses. The mechanics of it are essentially rents are capped at the lesser of 7%-plus CPI or 10%. And there is a carve-out for newer homes that are built within the last 12 years, which bodes well for our development program. My understanding is that this does apply to our business outside of that. So we're watching it carefully. We have been deviating in our message that the country needs more housing. AMH where we're proud to be a part of the solution as a provider of rental housing as he finishes 37th largest homebuilder. Despite that intentions, just another regulations like it are only going to serve to discourage kind of investment in housing of all types. And negatively impact affordability, especially for the third of Americans that's to rent. So we're going to continue to adapt. And in the meantime, we're going to just be focused on being part of the solution.

Thank you. Our last question comes from the line of Steve Sakwa with Evercore ISI. Please proceed.

Yeah, thanks. Just one quick follow-on if I missed it. I apologize if you guys touched on bad debt. It was up about 18% in the quarter, and it's running maybe close to 1%. I know your peer reported a number that was probably closer to 70 basis points and theirs was down year-over-year. Just anything going on bad debt?

Yeah, Steve, Chris here. Good question. We actually did not touch on that yet. I would say, as we think about the general collection trends and activities so far in the year. Things are feeling good. You're right. First quarter bad debt landed at 1%. We have touch above same quarter last year, but keeping a last year moved around a little bit, 20 basis points down sequentially over the fourth quarter. The one thing that I would remind us thinking about the year overall, don't forget that collections and bad debt typically have correlation with the seasonal leasing curve quarter is typically one of the lower points for bad debt over the course of the full calendar year.

Great, thank you. That’s it for me.

Thank you.

There are no further questions at this time. I'd like to pass the call back over to management for any closing remarks.

Yeah. Thank you all for your time today. I hope everyone has a good weekend. And I look forward to seeing many of you next month at NAREIT. Thank you.