Analyst Note| Kevin Brown |
The fourth quarter saw continued growth in line with our expectations for Invitation Homes, leading us to reaffirm our $31.50 fair value estimate for the no-moat company. For the fourth straight quarter, same-store occupancy reached a new high of 98.1% in the fourth quarter, a 20-basis-point improvement over the third quarter. Same-store rents were up 3.3% year over year for the quarter, in line with our estimate of 3.5% rental rate growth. Rent collections remained steady at 97% of the historical average. So, despite solid occupancy and rate growth, same-store revenue growth was only 2.0% for the fourth quarter. However, the company managed to reduce its controllable operating expenses significantly, which caused same-store operating expenses to fall 2.4%. As a result, same-store net operating income increased 4.3%, in line with our estimate. While Invitation Homes renegotiated its credit facility to lower terms and prepaid some maturing debt early, the additional one-time expenses led to core funds from operations of $0.32 in the fourth quarter, flat with the same period in 2019.