Invitation Homes Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone Q4 report. Invitation Homes is a REIT that owns and operates single-family rental homes; it reported 80,177 homes across 16 markets at year-end.
Key financial and operating metrics
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Rental revenue and other property income | $1,822.8 million | $1,764.7 million | +3.3% |
| Net income | $197.4 million | $147.1 million | +34.2% |
| Diluted EPS | $0.35 | $0.27 | +$0.08 |
| Net cash from operating activities | $696.7 million | $662.1 million | +5.2% |
| Total portfolio occupancy | 96.1% | 94.2% | +1.9 percentage points |
| Average monthly rent per occupied home | $1,875 | $1,809 | +3.6% |
| Total portfolio NOI (non-GAAP) | $1,142.3 million | $1,094.7 million | +4.3% |
| Adjusted FFO per diluted share (non-GAAP) | $1.08 | $1.03 | +$0.05 |
Total expenses were $1,709.6 million, down 0.9%. Property operating and maintenance expense rose 1.6% to $680.5 million; interest expense fell 3.6% to $353.9 million. Depreciation and amortization was $552.5 million, a significant non-cash expense. Same Store occupancy was 97.5%, and Same Store NOI was $1,043.5 million.
Cash used in investing activities was $425.2 million, versus cash provided of $102.2 million in 2019, reflecting lower home-sale proceeds and higher acquisition, renovation, and joint-venture investment. Cash used in financing activities was $146.0 million. Unrestricted cash was $213.4 million; together with the undrawn $1.0 billion revolving facility, the company reported $1,213.4 million of available liquidity.
Debt principal outstanding was approximately $8,080.5 million at year-end ($8,031.5 million net of financing costs and discounts). The December 2020 unsecured credit facility provides $3.5 billion of capacity, including a fully undrawn $1.0 billion revolver and a $2.5 billion term loan. The company reported compliance with debt covenants. Approximately 91% of variable-rate borrowings were effectively fixed through swaps; management estimated a 100-basis-point LIBOR increase would raise annual interest expense by $5.7 million, while a decrease would raise it by $15.8 million because of LIBOR floors.
Material changes and notable items
- Revenue growth reflected higher occupancy, rent per occupied home, and utility reimbursements, partly offset by increased bad debt, lower fee income, and a lower average number of homes owned.
- Same Store turnover fell to 26.1% from 29.7%, and average time between residents declined to 36 days from 46 days. The filing attributes some of the occupancy benefit to pandemic-related reluctance to move and eviction moratoriums.
- Bad debt increased to 1.7% of gross rental income from 0.5%. Revenue collections were 96% of billings from April through December 2020, compared with a historical average of 99%.
- Net income also reflected $29.7 million of unrealized equity-security gains, compared with $6.5 million in 2019, and lower impairment and other expense ($0.7 million versus $18.7 million). Gain on sale of property declined to $54.6 million from $96.3 million as homes sold fell to 1,580 from 3,455.
- The company raised $447.5 million net in a June public offering and $239.2 million net through its at-the-market program. Shares outstanding increased to 567.1 million from 541.6 million.
- In October, the company formed a joint venture with Rockpoint: Invitation Homes committed 20% of $375 million in equity, with total deployment expected to exceed $1 billion including debt. It reported a further $59.4 million capital commitment at year-end and a 20% ownership interest.
Outlook, risks, and contingencies
The filing provides no quantified earnings or operating guidance. Management said it resumed acquisitions at a pre-pandemic pace after pausing activity from mid-March through May, and expected near-term operating cash flow generally to support operations and dividends. It emphasized that the pandemic’s effects on collections, rent increases, occupancy, and future results remained uncertain.
COVID-19-related eviction, rent-increase, late-fee, and collection restrictions may constrain revenue and enforcement of leases. The company offered hardship payment plans without late fees. Management said pandemic-related procedural changes had not significantly disrupted its business model in 2020, but noted continuing risks to resident payments, vendor operations, capital access, and debt covenant compliance. Geographic concentration, property taxes, HOA and insurance costs, renovation and maintenance requirements, short leases, competition, cybersecurity, natural disasters, and LIBOR transition are also cited risks.
Quarterly dividends were $0.15 per share throughout 2020, totaling $0.60 per share, versus $0.52 in 2019. After year-end, the board declared a $0.17-per-share dividend payable February 26, 2021. The company disclosed no material litigation and stated it believed it was in compliance with debt covenants. A $1.75 million impairment of a vacated office lease asset and a $3.1 million accelerated hedge loss recorded as interest expense were among notable items.
Important facts for investors to verify
- Whether collection rates and bad debt improve as pandemic-era payment restrictions and eviction moratoriums change.
- Mortgage maturity and extension status: several securitized loans had 2021 maturities under the extensions exercised at year-end; one further extension was approved in January 2021 and another was requested.
- Cash available for dividends and capital investment after debt service, recurring capital expenditures, and the remaining Rockpoint contribution.
- How much reported earnings growth depends on non-cash equity-security gains, property-sale gains, and non-GAAP measures such as NOI, FFO, and Adjusted FFO.
- Exposure to variable rates and the transition from LIBOR, including the effect of hedge settlements and expiring or replacement rate caps.