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Thursday, Mar 28, 2024

Economy Pushes Up American Homes 4 Rent

In a conference call with analysts to discuss fourth-quarter financial results, executives at American Homes 4 Rent, the Agoura Hills single-family home rental company, were upbeat about how the economy and job growth are impacting the business. “The overall economy is healthy, with underlying job growth within our markets increasing about one-third faster than the national average,” Chief Executive David Singelyn said during the call in February. “Additionally, housing demand continues to outpace new supply in most markets and renting remains the preferred housing option for many families.” American Homes provides rental properties in 22 states, from California across the southwest and south to Florida and up into the Midwest. Its most recent quarterly results show the company in a good financial position. American Homes 4 Rent reported for the fourth quarter net income of $17.6 million (6 cents a share) for the period ending Dec. 31. That compared to a net loss of $22 million (-8 cents) in the same period a year earlier. Revenue increased by 11 percent to $270 million. Shares closed at $23.55 on April 24. In the conference call, Chief Financial Officer Chris Lau said the guidance range for the current year would be from $1.06 to $1.14 for funds from operations, the standard metric for real estate investment trusts. But Ryan Gilbert, an analyst with BTIG LLC, in San Francisco, said in a research note on American Homes after quarterly results were released on Feb. 22 that he believes the guidance is conservative in light of rent growth, occupancy and expense improvements “However, growth in 2018 underwhelmed relative to our assessment of supply/demand fundamentals and any further downward revisions from here will require a rethink of our (American Homes) investment thesis,” Gilbert put in the note. The firm’s investment thesis for American Homes calls for $600 million to $800 million of real estate investment in 2019 and $300 million to $500 million of portfolio additions. Additionally, Gilbert forecasts a 5 percent increase in funds from operations per share for this year and 6 percent the following year, which he called “an attractive growth rate relative to the REIT industry overall.” During the conference call, Gilbert said he was surprised to see that turnover was flat at 7.8 percent and asked if fall hurricanes had any impact on that number or any markets with an increase in move-outs to homeownership. Chief Operating Officer Jack Corrigan responded that while for the fourth quarter turnover was flat, for the year and so far in this year, turnovers were down. “I’m not sure exactly why it flattened out for the quarter, but I expect it will be down again in 2019,” Corrigan answered.

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Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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