Invitation Homes Inc. (NYSE:INVH) Q1 2024 Earnings Call Transcript

Invitation Homes Inc. (NYSE:INVH) Q1 2024 Earnings Call Transcript May 1, 2024

Invitation Homes Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings and welcome to the Invitation Homes First Quarter 2024 Earnings Conference Call. All participants are in a listen-only mode at this time. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Scott McLaughlin, Senior Vice President of Investor Relations. Please go ahead.

Scott McLaughlin: Good morning and welcome I’m here today from Invitation Homes with Dallas Tanner, Chief Executive Officer; Charles Young, President and Chief Operating Officer; Jon Olsen, Chief Financial Officer; and Scott Eisen, Chief Investment Officer. Following our prepared remarks, we’ll conduct a question-and-answer session with our covering sell-side analysts. In the interest of time, we ask that you limit yourselves to one question and then re-queue if you’d like to ask a follow-up question. During today’s call we may reference our first quarter 2024 earnings release and supplemental information. This document was issued yesterday after the market closed and is available on the Investor Relations section of our website at www.invh.com.

Certain statements we make during this call may include forward-looking statements relating to the future performance of our business, financial results, liquidity and capital resources and other non-historical statements which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated. We describe some of these risks and uncertainties in our 2023 annual report on Form 10-K and other filings we make with the SEC from time to time. Except to the extent otherwise required by law, Invitation Homes does not update forward-looking statements and expressly disclaims any obligation to do so. We may also discuss certain non-GAAP financial measures during the call. You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures in yesterday’s earnings release.

I’ll now turn the call over to Dallas Tanner, our Chief Executive Officer.

Dallas Tanner: Good morning, everyone and thank you for joining us. Our teams kicked off 2024 with a great start to the year. In particular, our first quarter results reflect high same-store average occupancy, accelerating same-store rent growth and strong same-store core revenue and NOI growth. We believe this puts us in a great position as we begin our peak leasing season. That being said, operating and leasing success is only one aspect of our anticipated growth this year. When we spoke to you in February we told you that our 14,000-home property and asset management agreement with Starwood was just the beginning. Less than three months later we’ve added over 7000 more homes onto our management platform, including through last night’s announcement of our joint venture with Quarterra, Centerbridge and other high-quality investors as well as our agreement with Nuveen that we signed in March.

We are honored to work with each of these respective partners who highly value our coast-to-coast SFR management expertise and best-in-class operating and management capabilities. We believe this is just the beginning of the journey to grow our professional management and services business which as a reminder offers many benefits to Invitation Homes. First, we are an attractive property and asset management fees that are commensurate with our unmatched expertise and scale. Second, we’re able to grow earnings in a capital-light manner including through the opportunity to potentially acquire these homes at a later date. Third, we developed deeper insight via the operational data we collect which help us to better operate our own homes and markets.

And fourth, we can further leverage the combined power of scale and density by spreading our costs across a larger number of homes thereby, improving our margins. We believe our partners and residents also benefit from choosing Invitation Homes as their manager. In addition, to getting direct access to our operating, leasing and asset management expertise, our partners can realize potential savings from utilizing our vast vendor network, our staffing optimization and our advantageous pricing agreements. Residents in turn, receive our signature Genuine Care and ProCare services, along with the value-add amenities we offer including for example, our Internet bundle that we buy in bulk in several of our markets and provide the residents at a discount to retail pricing.

Another area of growth for us remains, our new product pipeline. We announced last month, that we added several large homebuilders to our growing list of relationships including, D.R. Horton, Meritage Homes and Dream Finder Homes. We’re under contract with them to build approximately 500 new homes, primarily in Charlotte, Jacksonville and Nashville, with deliveries expected to start later this year. Underwritten cap rates on these acquisitions are in line with our previously stated targets of roughly a 6% yield on cost, which I will remind you is a return that’s effectively free of any development risk to us today. Given the dynamic environment we’ve seen in the last couple of years and the volatility in land pricing, cost of materials and interest in cap rates, our contracts are designed to protect us from the risks inherent, with on-balance sheet development while achieving what we believe are a far superior risk-adjusted total return.

We’re proud of the growth we delivered through partnering, with the best and largest homebuilders in the country, while also helping to create much needed new housing supply in the communities we serve. To wrap up, we’re pleased with how our teams have started off this year. I extend my thanks to all of our associates for their hard work, and seamlessly bringing thousands of new homes onto our platform, while at the same time continuing to deliver outstanding operating and leasing results. As we look ahead, we’re excited by our ability to sustain this momentum as we leverage our strategic approach and operational excellence to drive continued growth for our stakeholders through the remainder of the year. With that, I’ll pass the call to Charles Young, our President and Chief Operating Officer.

Charles Young: Thank you, Dallas. Our associates really shined during the first quarter, delivering great results and preparing the business for our peak leasing and maintenance season, all while bringing 14,000 third-party managed homes into our operations. During the first quarter, we maintained high occupancy, accelerated lease rent growth and continue to see our customers stay longer with us. We believe this is all part of a simple formula to sustainable NOI growth throughout the year. Now, let’s cover our first quarter same-store operating results, in more detail. Fundamentals remain strong and thanks to the great performance of our teams, we grew same-store NOI by 4.7% in the first quarter. Same-store core revenues grew 5.6% year-over-year driven by average monthly rental rate growth of 4.6%, an 80 basis point year-over-year improvement in bad debt and a 15.9% increase in other income, primarily related to our value-add offerings.

Same-store core operating expenses in the first quarter increased 7.4%, year-over-year. This was a result of an 11.8% increase in fixed expenses and a 0.5% decrease in controllable costs. For fixed expenses, the largest driver of the increase was property taxes. As we anticipated and previously discussed, due to the under-accrual of property taxes in the first three quarters of last year, we expect property tax expense growth to be higher during the first three quarters of this year, before normalizing in the fourth quarter. Meanwhile, on the controllable side of expenses, we’re pleased to see cost of goods continue to moderate as well as a strong effort by our teams to control costs. This is reflected in our 0.5% reduction in controllable expenses year-over-year as well as our 4.6% reduction in controllable costs from the fourth quarter of 2023 to first quarter 2024.

Of particular note, the first quarter same store turnover rate of 5.2% was flat with last year’s first quarter results. Yet, turnover expense was down 2.4% year-over-year. This is due in part to the progress we’ve made in working through our lease compliance backlog. In that regard, it’s great to see more of our markets returning to pre-pandemic normal levels of bad debt. As a reminder, normal for us is approximately 40 to 60 basis points of bad debt as a percentage of gross rental revenues, which has historically been industry-leading among our SFR peers. Looking ahead, while we still have some work to do in a few of our markets, we remain encouraged by the continued high quality of our new residents, whose average household income over the last 12 months is now approximately $158,000 a year, bringing our average income to rent ratio to 5.6 times.

Now let’s cover our same store leasing trends in the first quarter. Renewals grew 5.8% and new leases increased 0.8% year-over-year. This drove blended rent growth to 4.4%. Average occupancy in the first quarter remained strong at 97.6%. Our preliminary April 2024 results show our peak leasing season has started off well. Renewal rent growth accelerated to 6% while new lease rate growth accelerated to 3.1% delivering blended rent growth of 5.2% in April. Average occupancy generally held steady at 97.5%. With occupancy in a strong position and fundamentals remaining in our favor, we believe we’re in great shape to capture the demand we’re seeing in our markets and continue the great momentum our teams have built. I’d like to thank them again for their focus on resident service and operational excellence along with their diligent efforts as we plan and prepare for future growth.

With that, I’ll now turn the call over to Jon Olsen, our Chief Financial Officer.

Jon Olsen: Thanks, Charles, and good morning, everyone. Today, I’ll cover our financial results for the first quarter 2024, followed by an update on our investment-grade rated balance sheet before opening the line for questions. I’ll start with our first quarter 2024 financial results. Core FFO increased 5.7% year-over-year to $0.47 per share, primarily due to an increase in NOI. These results also reflect the first quarter of contribution from the 14,000 home portfolio, we started managing in mid-January. The fees we earned were partially offset by investments we made in resources and support to help prepare for anticipated future growth. These items are included on our income statement under management fee revenues and property management expense respectively.

Meanwhile, higher core FFO drove our 6.8% year-over-year increase in AFFO to $0.41 per share. We’re pleased with these results and appreciate the considerable efforts of our associates to help us begin the year strong. Turning now to our investment-grade rated balance sheet. We had over $1.7 billion in available liquidity at the end of the first quarter through a combination of unrestricted cash and undrawn capacity on our revolving credit facility. Our net debt to trailing 12-month adjusted EBITDA ratio was 5.4x at March 31, 2024, down slightly from 5.5x as of December 31 and just below our 5.5x to 6x targeted range. We have no debt reaching final maturity until 2026. In addition, 99.5% of our total debt is fixed rate or swapped to fixed rate and over 76% of our total debt is unsecured.

This week we received further validation of the strength of our balance sheet. Specifically I’m referring to our announcement that Moody’s recently upgraded the company to Baa2 from Baa3 joining both S&P and Fitch with BBB flat investment-grade ratings. Looking forward, we believe this ratings upgrade further enhances our positioning for when compelling opportunities arise. In summary, we believe Invitation Homes is at the beginning of a new phase of our business and which exciting opportunities could become more actionable and the quality of our balance sheet systems and talent are the best they’ve ever been. All of this puts us on a path from which we believe we can continue to deliver outsized results for our stockholders and the best possible experience for our residents.

That concludes our prepared remarks. Operator, please open the line for questions.

Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Michael Goldsmith from UBS. Please go ahead. Your line is open.

See also 20 States With the Most Beautiful Flags According to Reddit and 25 Most Underrated Cities in Europe to Visit in 2024.

Q&A Session

Michael Goldsmith: Good morning. Thanks for taking my question. In the past, you’ve talked about starting to push rate around the Super Bowl so mid-February. So it seems like this year it kind of maybe took a step back — maybe these spreads going to take a step back in March before your recent comment that they accelerated in April. So just trying to get a sense of kind of the sequential trajectory of the new lease rent range during the quarter and into April? And if there was any factors that was influencing maybe some of the choppiness which has resulted in where it is now it seems kind of on pace. Thanks.

Charles Young: Sure. This is Charles. Appreciate the question. Look, we’ve seen a really healthy acceleration through the quarter. As we talked about last quarter, we had solved for occupancy coming out of last year, as we had some lease compliance turnover that spiked. We did exactly what we said we were going to do. We got occupancy up from 97.1% to 97.6% for the quarter which is really healthy. And then we started pushing rates in January in anticipation as you’re talking about for February to jump. So from January to February, we went up over 300 basis points continue to push into March to the high 2s. And looking at April here in the high 3s that’s all new lease rent growth. The blend has also accelerated the last three, four months as we anticipated.

What’s really great though is we’re still 97.5% occupied and we’re seeing further acceleration into May. So we set ourselves up really nicely to capture the demand that comes this time of year in peak season. So really haven’t seen any kind of dislocation from what is the typical seasonality that we expected. And if there was anything it was just us setting ourselves up to take advantage of the demand that’s in front of us by getting occupied.

Operator: Our next question comes from Eric Wolfe from Citi. Please go ahead. Your line is open.

Eric Wolfe: Hey thanks. I know you get asked this question a lot, but the Wall Street turn article the other day, you brought up regulatory risk again and then generated some more questions. So, I was just curious from your perspective, what you’re advocating for that you think would help the housing affordability issues. If it’s not limits on ownership or rent control, what do you think would improve housing affordability and what role are you going to play in that?

Dallas Tanner: Yes. We really appreciate the question. Clearly, the cost of housing in the country is a bit high generally. And it keeps getting worse particularly due to higher mortgage rates and lack of supply. Now, what we can do is our best to encourage that new supply coming into the market which is why we’re working with so many of our homebuilder partners, helping them start large new communities that often include a mix of for sale and for lease housing. And you have to remember there’s 47 million households in the US that rent something somewhere. It’s about one-third of the country. And it’s been that way really for decades. And so, it’s also important to remember that we learned this from our residents they tell us time and time again that they want choice and flexibility of leasing home.

And it’s at a significantly lower cost than earning. If you look at our West Coast markets today, it’s upwards of almost $2000 a month cheaper to lease a home in markets like Seattle and Southern California, than it would be to own. So the — John Burns covers a lot of this data really well, but attempts to restrict companies like ours, for being a need or a desired option for consumers seems sort of to be misguided. It’s also counterproductive. I think that’s why as noted in that article that you mentioned, none of the anti-leasing and anti-professional management bills actually get very far to date at both national and state levels. So, regardless of the narrative that kind of — it’s a populous thing to try to point fingers at companies that are providing housing solutions.

We’re going to continue to work with our trade associations. We work at the state and local levels very effectively. And candidly, you’ve seen some really positive legislation go through in the states that are much more proactive in this housing debate and trying to create access for private capital to come into the housing market and to provide additional dwelling units. So, that’s our goal is to be part of that narrative, which would be to bring new supply into the market over and over and over. And we’re not going to stop. And as we’ve announced in our script, we’re working with some of the best and brightest in the country doing that.

Operator: Our next question comes from Brad Heffern from RBC Capital Markets. Please go ahead. Your line is open.

Brad Heffern: Thanks. Jon, is there any context that you can give for the incremental contribution from the new third-party management agreements to earnings? I know you’re obviously not changing the guidance, but just some sort of scale on that would be great.

Jon Olsen: Sure. So I think it’s important to note that as you point out, we had guided to $0.02 of earnings contribution from third-party management. Included in that guide were both the Starwood and the Nuveen agreements. The upwards America agreement that we announced yesterday is not in there. I think it’s also important to note however, that only one of those three portfolios has been onboarded at this stage, just the Starwood portfolio, the Nuveen portfolio is scheduled to be onboarded in mid-May and then upward America, sometime in the third quarter. So, I think as we approach those onboarding dates, we get better and better visibility into the operating metrics specific to those portfolios of homes and we’ll have better insight into what we think the potential is.

So, I think time will tell. We’re still very early on. But as we approach those onboarding dates and we get more time under our belt actually managing those portfolios, we’ll see if there’s some upside to what we’ve guided thus far.

Operator: Our next question comes from Steve Sakwa from Evercore ISI. Please go ahead. Your line is open.

Steve Sakwa: Great. Thanks. Good morning. Charles, I don’t know if you had touched on the renewal increases that had maybe gone out for kind of the April, May, June and maybe even July period. So any commentary around that would be great.

Charles Young: Yeah. I had mentioned it. We went out for May and June in the mid-seventh, which was similar maybe slightly lower from what we did with April. And we ended up April at 60 which was accelerating from all of Q1. So it still healthy as you looks back on any historical means.

Operator: Our next question comes from Austin Wurschmidt from KeyBanc Capital Markets. Please go ahead. Your line is open.

Austin Wurschmidt: Yeah. Hi. Good morning. Just have a question related to transaction activity. And I was hoping you could provide some additional comments around the more significant entrants in the Nashville, whether or not you’re looking at other new markets to enter. And then just more broadly about activity in the transaction market and whether you think there’s enough in the pipeline to kind of hit that full year acquisition guidance.

Dallas Tanner: Yeah. Hey. This is Dallas. I’ll start and then I’ll ask Scott to add anything that he’d like to it. But first and foremost, we went back into Nashville as part of a transaction last summer that allowed us to get a significant amount of more scale in that marketplace. I think Scott can give you more color on the ground with what we’re seeing real time in terms of the opportunity side. I think we feel very good about our guidance ranges. No change there. And remember, with the new construction that we’re building it’s lumpy. It comes in at different times of the year. And we certainly are looking at some M&A and having discussions. And I think you’ve seen we’ve been extremely active in the last six months with the 20,000 units that we brought on.

One thing I just want to highlight and then, I’ll hand it over to Scott is, I think what’s really exciting about the 3:00 p.m. business for us, is that if you look at the first three transactions we’ve done they’ve all been very different in nature. One is a pure-play third-party management with maybe an option for a take out down the road. The other was us actually acquiring management contracts and thinking about further expansion of that relationship with that particular capital partner. And in the last situation, we bought into a New Home Construction portfolio with both Professional Capital and a professional Homebuilder. And so and participating in the equity stack so to speak it gives us obviously aligned incentives, but also clear a clear view on how to grow that business in that particular portfolio over some period of time.

Scott, do you want to maybe give a little bit more color on what we’re seeing and just sort of from a scale perspective?

Scott Eisen: Sure. And just to address your questions about markets. I mean, Nashville, is a good example where we’re adding new homes in that market both through third-party management agreements and also some communities that we are buying as well. And so that’s just an example of something that we’re trying to take a market where we were undersized before but clearly we’re getting some good scale in the near-run and we hope to grow there more overtime. We have other markets that we’re also eyeing that we’re going to get exposed to through the third-party management contacts and contracts. And we’re hoping to see more like in Austin and San Antonio for example as markets. In addition, one thing that I would add is that we continue to expand our dialogue with the homebuilders.

Obviously, we’ve done a lot historically with Pulte and Lennar, but we’re also adding more national and midsized builder relationships to the table here. We’re doing some deals with Horton. We’re doing some deals with Meritage. We’ve got some other mid-sized builders that we’re adding to this table. We continue to add more of the build for rent product where we’re helping create supply as Dallas, talked about earlier and working with the homebuilders to give them confidence to start new communities and know that we can buy some of the homes and have some of those homes be purchased by retail customers. So we continue to do our part to create more supply and obviously it’s adding to our acquisition backlog and pipeline.

Operator: Our next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead. Your line is open.

Juan Sanabria: Hi. Good morning. Just sticking on the 3 p.m. theme. Just curious about how you think about the overall size of the opportunity. Is there any basic math you could share on what the accretion would be via let’s say 10,000 homes or just whatever metric or you’d like to talk to? And just going back to the previous question about regulation, we’ve obviously seen some negative headlines for the industry about collusion or whatever on pricing. Is there any concern for you guys that as you take on more responsibility of it and you manage third party assets and it’s all in one system that you could be come under threats there or risks around pricing for the industry?

Dallas Tanner: Juan thanks for your questions. I’m going to try to hit them in a few different ways. And then I would say, Jon feel free to add anything on the economic. Look ,I think — and we talk about this over and over and over. You have to remember the size and scale of the US housing footprint. We have about 147 million households that own or lease something in the US today. I mentioned earlier 47 million of those lease. If you look at the single-family rental dynamic in the US, there’s somewhere between call it 15 million-ish homes that are for leased. Roughly about 3% of those are probably operated by we call professional capital that might total maybe 500,000 units. And those are spread amongst at least 60 different companies that I’m aware of.

So, the data actually on the other 97% of single-family rentals that are out there is sort of in a universe that nobody has access to that information. So no, I think it’s actually the opposite one. As a company we have our own data. We look at all the public information on the listing data and that has informed our thinking around rents and pricing of homes and things like that for the last decade, just publicly available information. Second, in terms of the sizing of what we’re calling 3 p.m. internally, but really it’s the additional scale we can bring on to the platform by being a service provider for other owners of single-family rental. It’s still early. And like I mentioned, there’s about 500,000 units that we can identify as being sort of professionally owned, out of the 15 million.

So it’s about plus or minus 3% of that. We would love to stay active and keep growing our business. I will tell you, if you think about like the strength of the platform adding 20,000 units over a six or nine month period, is going to give us tremendous amount of horsepower even in our own portfolio. You start to think about RFPs that we have out where we’re working on getting more efficient with our own costs and our spend, that’s going to give us additional capacity there to lean in and to give our vendors more work, but at the same time, try to get better pricing for our customers. And so we’re really excited about what that means. We see the landscape currently being tens of thousands or maybe 100,000-plus units. But we expect the SFR industry to keep growing.

And we expect that over time and maybe the next decade that 97% could come in a little bit at much like you’ve seen in multifamily over the last 30 years where if you look at multifamily the numbers are sort of similar. About 15% of the multifamily industry is owned by professional capital where 85% is owned by small family office and people that have one-off investments. So, we would expect SFR over the next couple of decades to hopefully grow in a much better professional manner. Jon, do you want to add anything to that?

Jon Olsen: Yes. I think the other part of your question is the right question. The answer is at this stage of the game, we don’t have a short-hand rubric that we can share in terms of how to think about every x thousand homes brought on the platform through third-party management. I think over time as we onboard the two portfolios that we’re looking forward to the law of large numbers suggest that we ought to be able to do that. But I think it’s also important to remember that there are a lot of variables that make a simplification a little bit challenging, right? Market mix is very price points, very sort of degree of upfront renovation done varies. And so I think as we — through our asset management exercises help shape these portfolios to perform as best they can.

And as we get more homes on the platform and have more sort of actual operating and financial results we can look at I think we’ll be in a much better position to share what we think is a smart way to think about how much those opportunities can potentially add to the bottom line over time.

Operator: Our next question comes from John Pawlowski from Green Street. Please go ahead. Your line is open.

John Pawlowski: Hi. Thanks for the time. Charles or Dallas do you have an internal view of — I know you guys are prioritizing occupancy but this is a question on market rents. And so do you have an internal view of why market rents aren’t growing at a much, much faster clip than they are given the affordability gap you referenced in some of your markets Dallas is supplied more than we think? Or is immigration into the Sunbelt slower than we think? Just curious what you think the culprit is?

Charles Young: Yes. I think, I would look at it as a culprit. If you go back outside of the COVID years, we’re trending above where we’ve been historically on both new lease and renewals. So on a blended rate and we’re more occupied than we’ve ever been. And people underestimate the value of that occupancy to our NOI growth. And so — look I think we’re just seeing back to normal kind of seasonality. And coming off of COVID it feels like it’s a slowdown. But the reality is it’s still really healthy. To your point though there are certain markets that were really humming, during the pandemic and they’re coming back to earth a little bit Phoenix and Vegas being a couple of those that we’ve talked about. I expect that we’ll start to see them move kind of more positive on the new lease rate side in the near future as we’ve gotten them occupied now and things are settling down.

Florida has been humming for a long time. So Florida is still really strong right now. If you look at our rates. But Tampa and Orlando are seeing a little bit of a slowdown relative to what we saw over the last couple of years. So generally it’s really strong. There’s not a lot of demographic changes that are material, but we saw a lot of people moving to Florida and Texas and other markets. That slowed down. And so that’s taken away a little bit of the edge. But that again just takes us back to where we think we are which is kind of a normal seasonality and normal kind of undersupply of homes if you look at us relative to multifamily we know we’re in a good position. Tailwinds are in our favor. We’ve been able to grow occupancy in a slow season get occupied and now we’re going to capture that demand going forward.

So I feel like we’re in healthy shape. There’s some dynamics in individual markets. We can get into it if you have further questions. But generally we’re in good shape.

Dallas Tanner: Yes. John, this is Dallas. I just want to add a couple of things that were just sort of anecdotal that I know you’re aware of. With new home construction making up about 30% of the overall kind of home transaction market. People are just staying put a little bit longer too. And I think you’re seeing some of that even in our peers’ information. And then we also — I think Charles sort of mention this in a different way. But we just — we also don’t have as much loss to lease as some of the other books of business that might be out there. We had quite a bit of rate growth which to Charles’ point puts us as much better denominator. The other thing I would add is in that denominator our customer is now ticked over three years on average length of stay.

So I think what Charles and I will kind of solve for with the teams from an optimization perspective will be, making sure that on our renewal business we’re always capturing as much share of rate that’s out there. We obviously, want to get as much new lease growth as we can. But I think a bigger portion of our business is going to be renewals than we sort of ever historically thought of from when we started the company 12 years ago. It just feels like the customer is going to stay longer and longer until we get into a cheaper rate environment where maybe there’s more home transaction availability.

Operator: Our next question comes from Jamie Feldman from Wells Fargo. Please go ahead. Your line is open.

Jamie Feldman: Great. Thank you for taking the question. So I just wanted to shift gears a little and just talk about the balance sheet and debt strategy. Can you just talk through your plans for the rest of the year? And then as you think about next year with the $3.5 billion of interest rate swaps coming due, just what are you thinking about planning for those? And just how should we think about potential earnings, accretion, dilution, as we look through the rest of the year and into next year just based on how you’re currently thinking about your strategy and rates being higher for longer?

Jon Olsen: Yes. Thanks for the question. Look we have about $3.1 billion of debt maturing in 2026. That as we talked about I think on the last call is comprised of two debt instruments. It’s $610 million of our last remaining floating rate securitization IH 2018 for and the $2.5 billion term loan component of our five-year bank facility. We are sitting on the remaining cash from our August 2023 bond deal that cash is available to either grow the business or to pay off debt. Today, if we look at where that 2018 for securitization is swapped to that is swapped to a rate of about 4.15%, 4.2% compared that to what we’re earning on the cash sitting on our balance sheet which is around 5.5%, right? So we’re not in a rush to pay that debt off, despite the fact that we have ample unrestricted cash sitting on the balance sheet to do so.

With respect to the bank facility, we have begun dialogue with our lender partners. We are going to focus on a recast of that facility here over the coming months. We’ll obviously keep you posted as that process progresses. But I would say that we feel very comfortable with our access to capital. We feel very comfortable with the balance sheet. And I think it’s important to remember, we have plenty of time left. We’ve shown that we typically aren’t going to wait till the last minute to do something. But I think we also have bought ourselves the ability to be patient which is helpful. With respect to the swap book, there are some swaps expiring in November of this year. I would point out that those correspond pretty well to that 2018 for floating rate securitization.

So if we assume that that swap expiry potentially aligns with the debt repayment that probably makes sense and I don’t anticipate that we would replace that floating rate debt with anything other than fixed rate debt.

Operator: Our next question comes from Haendel St. Juste from Mizuho Securities. Please go ahead. Your line is open.

Haendel St. Juste: Hey, guys. Good morning. So Dallas, sorry one more on third-party management here. I guess I appreciate your comments earlier on the state of housing in the US and the role that SFRs have historically played. But what’s different in the latest article from the Wall Street Journal is that it’s coming from the Republican governor of Texas, a large and deep red state calling for let’s legislative – some things that we added to the legislative agenda in Texas to protect-families. So you guys are based in Texas. I’m curious, what you’re hearing and potentially expecting on that front and how it might impact your plans to potentially add to your portfolio in Texas, which is still only about 6% of your total revenue? Thanks.