Invitation Homes Reports Third Quarter 2020 Results

Rhea-AI Summary

Invitation Homes (NYSE:INVH) reported a 3.6% increase in total revenues to $459 million for Q3 2020, while property operating expenses rose 1.4% to $178 million. Net income fell 3.2% to $33 million, with net income per diluted share down 7.2% to $0.06. However, both Core FFO per share and AFFO per share saw increases of 1.9% and 5.8%, respectively. The company acquired 544 homes for $175 million in Q3 and formed a joint venture expected to deploy over $1 billion for further acquisitions.

Positive

• Total revenues increased 3.6% to $459 million.
• Core FFO per share rose 1.9% to $0.30.
• AFFO per share increased 5.8% to $0.24.
• Same Store NOI grew 3.6% year over year.
• Same Store average occupancy reached 97.8%.

Negative

• Net income available to common stockholders decreased 3.2% to $33 million.
• Net income per diluted common share declined 7.2% to $0.06.
• Bad debt as a percentage of gross rental revenues increased to 2.1%.

DALLAS--(BUSINESS WIRE)--Invitation Homes Inc. (NYSE:INVH) ("Invitation Homes" or the "Company"), the nation's premier single-family home leasing company, today announced its third quarter 2020 financial and operating results.

Third Quarter 2020 Highlights

• Year over year, total revenues increased 3.6% to $459 million, and total property operating and maintenance expenses increased 1.4% to $178 million. Net income available to common stockholders decreased 3.2% to $33 million, and net income per diluted common share decreased 7.2% to $0.06, due in part to lower gains on sale resulting from lower disposition volume.
• Year over year, Core FFO per share increased 1.9% to $0.30, and AFFO per share increased 5.8% to $0.24.
• Same Store NOI grew 3.6% year over year on 2.4% Same Store Core revenue growth and 0.4% Same Store Core operating expense growth.
• Same Store average occupancy was 97.8%, up 190 basis points year over year.
• Same Store renewal rent growth of 3.3% and Same Store new lease rent growth of 5.5% drove Same Store blended rent growth of 4.0%.
• Revenue collections in the third quarter of 2020 were 98% of the Company's historical average collection rate.
• After resuming sourcing acquisitions in June 2020, the Company ramped up its acquisition pace over the course of the third quarter of 2020, finishing the quarter with $175 million of acquisitions and $115 million of dispositions.
• Subsequent to quarter end, as previously announced, the Company augmented and diversified its capital sources available to pursue external growth over a multi-year period by entering into a joint venture ("JV") with Rockpoint Group, L.L.C. ("Rockpoint"). The JV is expected to deploy over $1 billion to acquire and renovate homes to be operated as single-family rental properties, and will be capitalized with a total equity commitment of $375 million, of which $75 million (20%) will be provided by Invitation Homes.

President & Chief Executive Officer Dallas Tanner comments, "We continued to execute well in the third quarter, raising the bar higher for resident care in a time when it has never mattered more. The difference we are making in our residents' lives is being reflected in both our all-time-high resident satisfaction survey scores and in our financial results. Same Store occupancy has now increased for eleven consecutive months, and we are executing well to capture the market rental rates afforded by strong fundamentals in our markets. We also continue to collect rents near historical average levels. As a testament to the strength and stability of our business, year-to-date AFFO per share is up almost 7% versus last year in an environment that is challenging many other businesses inside and outside of the real estate sector.

"Importantly, we are achieving these results while continuing to put the safety of our stakeholders above all else. Our self-show technology and virtual experience that we have utilized for years is helping to protect prospective residents throughout the leasing process, and the freestanding nature of our assets is allowing us to safely serve residents and maintain homes. I could not be prouder of our associates for the way they are diligently adhering to safety protocols as they deliver the Invitation Homes experience to residents. We continue to provide our associates with proper PPE to protect themselves and our communities, and we continue to offer COVID-specific benefits and flexibility to associates designed to promote their health and wellbeing.

"With strong fundamentals in our business and with teams that have adapted well to continue operating safely and efficiently, we are ramping up external growth. We are also staying on the front foot with respect to strategic initiatives centered around enhancing the resident experience, including expansion of ancillary services. Put simply, we believe we are well-positioned for both the near-term and the long-term, and we are staying nimble and opportunistic to maximize both the near and long-term value we bring to our residents, our communities, and our shareholders."

Financial Results

Net Income, FFO, Core FFO, and AFFO Per Share — Diluted
		Q3 2020				Q3 2019				YTD 2020				YTD 2019
Net income (1)		$	0.06			$	0.06			$	0.23			$	0.18
FFO (1)		0.27				0.27				0.89				0.81
Core FFO (2)		0.30				0.29				0.96				0.93
AFFO (2)		0.24				0.23				0.81				0.75

1. In accordance with GAAP and Nareit guidelines, net income per share and FFO per share are calculated as if the 3.0% Convertible Notes due July 1, 2019 (the "2019 Convertible Notes") were converted to common shares at the beginning of 2019, and as if the 3.5% Convertible Notes due January 15, 2022 (the "2022 Convertible Notes") were converted to common shares at the beginning of each relevant period in 2019 and 2020, unless such treatment is anti-dilutive to net income per share or FFO per share. See "Supplemental Schedule 1," footnote (1), for more detail on the treatment of convertible notes in each specific period presented in the table.
2. Core FFO and AFFO per share reflect the 2019 Convertible Notes and 2022 Convertible Notes in the form in which they were outstanding during each period. See "Supplemental Schedule 1," footnote (2), for more detail on the treatment of convertible notes in each specific period presented in the table.

Net Income

Net income per share in the third quarter of 2020 was $0.06, compared to net income per share of $0.06 in the third quarter of 2019. Total revenues and total property operating and maintenance expenses in the third quarter of 2020 were $459 million and $178 million, respectively, compared to $443 million and $175 million, respectively, in the third quarter of 2019.

Net income per share in YTD 2020 was $0.23, compared to net income per share of $0.18 in YTD 2019. Total revenues and total property operating and maintenance expenses in YTD 2020 were $1,359 million and $512 million, respectively, compared to $1,320 million and $502 million, respectively, in YTD 2019.

Core FFO

Year over year, Core FFO per share in the third quarter of 2020 increased 1.9% to $0.30, primarily due to growth in Same Store NOI.

Year over year, Core FFO per share in YTD 2020 increased 3.6% to $0.96, primarily due to growth in Same Store NOI.

AFFO

Year over year, AFFO per share in the third quarter of 2020 increased 5.8% to $0.24, primarily due to the increase in Core FFO per share described above and lower recurring capital expenditures.

Year over year, AFFO per share in YTD 2020 increased 6.8% to $0.81, primarily due to the increase in Core FFO per share described above and lower recurring capital expenditures.

Operating Results

Same Store Operating Results Snapshot
Number of homes in Same Store portfolio:		71,810
		Q3 2020			Q3 2019			YTD 2020			YTD 2019
Core revenue growth (year-over-year)		2.4	%					3.0	%
Core operating expense growth (year-over-year)		0.4	%					2.2	%
NOI growth (year-over-year)		3.6	%					3.4	%
Average occupancy		97.8	%		95.9	%		97.3	%		96.3	%
Bad debt % of gross rental revenues (1)		2.1	%		0.4	%		1.5	%		0.4	%
Turnover rate		7.3	%		8.7	%		20.4	%		23.3	%
Rental rate growth (lease-over-lease):
Renewals		3.3	%		4.8	%		3.7	%		5.1	%
New leases		5.5	%		4.2	%		3.4	%		4.4	%
Blended		4.0	%		4.6	%		3.6	%		4.9	%

1. Invitation Homes reserves residents' accounts receivables balances that are aged greater than 30 days as bad debt, under the rationale that a resident's security deposit should cover approximately the first 30 days of receivables. For all resident receivables balances aged greater than 30 days, the amount reserved as bad debt is 100% of outstanding receivables from the resident, less the amount of the resident's security deposit on hand. For the purpose of determining age of receivables, charges are considered to be due based on the terms of the original lease, not based on a payment plan if one is in place. All rental revenues and other property income, in both total portfolio and Same Store portfolio presentations, are reflected net of bad debt.

Revenue Collections Update
		Q3 2020			Q2 2020			Pre-COVID Average (2)
Revenues collected % of revenues due: (1)
Revenues collected in same month billed		92	%		92	%		96	%
Late collections of prior month billings		5	%		4	%		3	%
Total collections		97	%		96	%		99	%

1. Includes both rental revenues and other property income. Rent is considered to be due based on the terms of the original lease, not based on a payment plan if one is in place. Security deposits retained to offset rents due are not included as revenue collected. See "Supplemental Schedule 3(b)," footnote (1), for detail on the Company's bad debt policy.
2. Represents the period from October 2019 to March 2020.

Same Store NOI

For the Same Store portfolio of 71,810 homes, third quarter 2020 Same Store NOI increased 3.6% year over year on Same Store Core revenue growth of 2.4% and Same Store Core operating expense growth of 0.4%.

YTD 2020 Same Store NOI increased 3.4% year over year on Same Store Core revenue growth of 3.0% and Same Store Core operating expense growth of 2.2%.

Same Store Core Revenues

Third quarter 2020 Same Store Core revenue growth of 2.4% year over year was driven by a 3.2% increase in average monthly rent and a 190 basis point increase in average occupancy to 97.8%. As a result of the increases in average monthly rent and average occupancy, Same Store rental revenues increased 5.3% year over year on a gross basis before bad debt. With respect to Same Store Core revenue growth, two factors related to COVID-19 partially offset the favorable increases in average rent and average occupancy: 1) an increase in bad debt from 0.4% of gross rental revenues in Q3 2019 to 2.1% of gross rental revenues in Q3 2020, which was a 175 basis point drag on Same Store Core revenue growth, all else equal; and 2) a 26.8% decrease in other property income, net of resident recoveries, which was a 94 basis point drag on Same Store Core revenue growth, all else equal, due primarily to non-enforcement of almost all late fees in the quarter.

YTD 2020 Same Store Core revenue growth of 3.0% year over year was driven by a 3.6% increase in average monthly rent and a 100 basis point increase in average occupancy to 97.3%. Bad debt increased from 0.4% of gross rental revenues in YTD 2019 to 1.5% of gross rental revenues in YTD 2020, which was a 106 basis point drag on Same Store Core revenue growth, all else equal. Other property income, net of resident recoveries, decreased 16.0% year over year, which was a 54 basis point drag on Same Store Core revenue growth, all else equal.

Same Store Core Operating Expenses

Third quarter 2020 Same Store Core operating expenses increased 0.4% year over year. Same Store controllable expenses, net of resident recoveries, decreased 4.7% year over year, primarily due to lower turnover expenses. Offsetting the improvement in controllable expenses was a 3.9% increase in fixed expenses, net of resident recoveries, driven primarily by higher property taxes.

YTD 2020 Same Store Core operating expenses increased 2.2% year over year, primarily due to higher property taxes. Same Store controllable expenses, net of resident recoveries, decreased 1.1% year over year.

Investment Management Activity

After resuming sourcing acquisitions in June, the Company ramped up its acquisition pace over the course of the third quarter, leveraging the advantages of its in-house local investment teams in conjunction with proprietary "AcquisitionIQ" technology to source compelling investment opportunities despite tight inventory levels. In the third quarter of 2020, Invitation Homes acquired 544 homes for $175 million, including estimated renovation costs. The Company also sold 403 homes for gross proceeds of $115 million in the third quarter of 2020.

Year to date, through September 30, 2020, the Company closed on the acquisition of 1,195 homes for $375 million, including estimated renovation costs, and sold 1,303 homes for gross proceeds of $360 million, resulting in a total portfolio home count of 79,397 homes as of September 30, 2020.

Subsequent to quarter end, the Company closed a bulk acquisition of 273 homes in Dallas that overlap closely with the Company's existing Dallas portfolio. The homes were acquired for $59 million at a 5.7% NOI yield based on in-place rents, and the Company sees upside to NOI in the portfolio by bringing it onto Invitation Homes' platform.

Balance Sheet and Capital Markets Activity

As of September 30, 2020, the Company had $1,560 million in available liquidity through a combination of unrestricted cash and undrawn capacity on its revolving credit facility, and maintained considerable cushion with respect to the facility's covenants. The Company's total indebtedness as of September 30, 2020 was $8,360 million, consisting of $6,515 million of secured debt and $1,845 million of unsecured debt.

The Company has no debt reaching final maturity before 2022, and weighted average years to maturity was 4.3 years as of September 30, 2020. 51% of the Company's homes were unencumbered at September 30, 2020, and net debt / TTM Adjusted EBITDAre at September 30, 2020 was 7.3x, down from 8.1x at December 31, 2019.

Joint Venture Formation

As previously announced, in October 2020, the Company entered into an agreement with Rockpoint to form a joint venture partnership that will acquire single-family homes to operate as rental residences.

The JV will be capitalized with a total equity commitment of $375 million, of which $75 million (20%) will be committed by Invitation Homes and $300 million (80%) will be committed by Rockpoint. A total of over $1 billion (including debt) is expected to be deployed by the JV to acquire and renovate single-family homes in attractive locations in markets within the Western US, Southeast US, Florida, and Texas, where Invitation Homes already owns homes. The homes are expected to be of similarly high quality and similar characteristics to the homes in Invitation Homes’ existing portfolio.

Invitation Homes will provide investment, asset management, and property management services to the JV, for which it will earn asset management and property management fees and have the opportunity to earn a promoted interest subject to certain performance thresholds.

The JV is anticipated to have a five to eight year term, with certain sale rights in favor of each member, but has the flexibility to continue owning homes for an unlimited period of time if neither member triggers a sale. Upon trigger of a sale by Rockpoint or Invitation Homes, the other member of the JV will have a right of first offer to acquire the homes proposed for sale.

Invitation Homes also maintains the ability in all markets to continue deploying capital from its own balance sheet to acquire homes for the Invitation Homes portfolio, concurrent with the JV’s deployment of capital. In markets where Invitation Homes and the JV are investing concurrently, Invitation Homes’ investment personnel will source acquisitions without knowledge of which entity will acquire the homes, and upon being approved for close, homes will be allocated on a rotational basis between Invitation Homes and the JV according to pre-determined ratios of investment between the two entities. In addition, Invitation Homes maintains the right to enter into portfolio acquisitions of ten or more homes outside of the JV.

Dividend

As previously announced on October 23, 2020, the Company's Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock. The dividend will be paid on or before November 25, 2020 to stockholders of record as of the close of business on November 10, 2020.

Earnings Conference Call Information

Invitation Homes has scheduled a conference call at 11:00 a.m. Eastern Time on October 29, 2020 to discuss results for the third quarter of 2020. The domestic dial-in number is 1-888-317-6003, and the international dial-in number is 1-412-317-6061. The passcode is 7102752. An audio webcast may be accessed at www.invh.com. A replay of the call will be available through November 29, 2020 and can be accessed by calling 1-877-344-7529 (domestic) or 1-412-317-0088 (international) and using the replay passcode 10148238, or by using the link at www.invh.com.

Supplemental Information

The full text of the Earnings Release and Supplemental Information referenced in this release are available on Invitation Homes' Investor Relations website at www.invh.com.

Glossary & Reconciliations of Non-GAAP Financial and Other Operating Measures

Financial and operating measures found in the Earnings Release and Supplemental Information include certain measures used by Invitation Homes management that are measures not defined under accounting principles generally accepted in the United States ("GAAP"). These measures are defined in the Glossary and Reconciliations section of this press release and in the Supplemental Information and, as applicable, reconciled to the most comparable GAAP measures.

About Invitation Homes

Invitation Homes is the nation's premier single-family home leasing company, meeting changing lifestyle demands by providing access to high-quality, updated homes with valued features such as close proximity to jobs and access to good schools. The company's mission, "Together with you, we make a house a home," reflects its commitment to providing homes where individuals and families can thrive and high-touch service that continuously enhances residents' living experiences.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which include, but are not limited to, statements related to the Company's expectations regarding the performance of the Company's business, its financial results, its liquidity and capital resources, and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the single-family rental industry and the Company's business model, macroeconomic factors beyond the Company's control, competition in identifying and acquiring properties, competition in the leasing market for quality residents, increasing property taxes, homeowners’ association (“HOA”) and insurance costs, the Company's dependence on third parties for key services, risks related to the evaluation of properties, poor resident selection and defaults and non-renewals by the Company's residents, performance of the Company's information technology systems, risks related to the Company's indebtedness, and risks related to the potential negative impact of the ongoing COVID-19 pandemic on the Company’s financial condition, results of operations, cash flows, business, associates, and residents. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Moreover, many of these factors have been heightened as a result of the ongoing and numerous adverse impacts of COVID-19. The Company believes these factors include, but are not limited to, those described under Part I. Item 1A. “Risk Factors” of the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, filed with the Securities and Exchange Commission (the "SEC"), as such factors may be updated from time to time in the Company's periodic filings with the SEC, which are accessible on the SEC’s website at http://www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the Company's other periodic filings. The forward-looking statements speak only as of the date of this press release, and the Company expressly disclaims any obligation or undertaking to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except to the extent otherwise required by law.

Consolidated Balance Sheets
($ in thousands, except shares and per share data)
		September 30, 2020					December 31, 2019
		(unaudited)
Assets:
Investments in single-family residential properties, net		$	16,132,101				$	16,243,192
Cash and cash equivalents		559,567					92,258
Restricted cash		249,341					193,987
Goodwill		258,207					258,207
Other assets, net		551,571					605,266
Total assets		$	17,750,787				$	17,392,910
Liabilities:
Mortgage loans, net		$	6,094,980				$	6,238,461
Secured term loan, net		401,040					400,978
Term loan facility, net		1,495,913					1,493,747
Revolving facility		—					—
Convertible senior notes, net		338,112					334,299
Accounts payable and accrued expenses		261,355					186,110
Resident security deposits		155,871					147,787
Other liabilities		672,139					325,450
Total liabilities		9,419,410					9,126,832
Equity:
Stockholders' equity
Preferred stock, $0.01 par value per share, 900,000,000 shares authorized, none outstanding as of September 30, 2020 and December 31, 2019		—					—
Common stock, $0.01 par value per share, 9,000,000,000 shares authorized, 560,534,032 and 541,642,725 outstanding as of September 30, 2020 and December 31, 2019, respectively		5,605					5,416
Additional paid-in capital		9,521,179					9,010,194
Accumulated deficit		(646,950		)			(524,588		)
Accumulated other comprehensive loss		(598,966		)			(276,600		)
Total stockholders' equity		8,280,868					8,214,422
Non-controlling interests		50,509					51,656
Total equity		8,331,377					8,266,078
Total liabilities and equity		$	17,750,787				$	17,392,910

Consolidated Statements of Operations
($ in thousands, except shares and per share amounts) (unaudited)
		Q3 2020				Q3 2019				YTD 2020				YTD 2019
Revenues:
Rental revenues		$	424,191			$	408,951			$	1,257,858			$	1,223,221
Other property income		34,993				34,375				100,870				97,187
Rental revenues and other property income		459,184				443,326				1,358,728				1,320,408
Expenses:
Property operating and maintenance		177,997				175,491				511,915				502,411
Property management expense		14,824				15,872				43,725				47,053
General and administrative		17,972				16,405				46,626				58,899
Interest expense		87,713				89,067				258,541				278,756
Depreciation and amortization		138,147				133,315				410,440				399,955
Impairment and other		1,723				4,740				4,670				11,803
Total expenses		438,376				434,890				1,275,917				1,298,877
Other, net		(3,049)				4,735				2,035				8,470
Gain on sale of property, net of tax		15,106				20,812				41,473				64,556
Net income		32,865				33,983				126,319				94,557
Net income attributable to non-controlling interests		(211)				(276)				(806)				(1,086)
Net income attributable to common stockholders		32,654				33,707				125,513				93,471
Net income available to participating securities		(114)				(91)				(335)				(306)
Net income available to common stockholders — basic and diluted		$	32,540			$	33,616			$	125,178			$	93,165
Weighted average common shares outstanding — basic		560,598,995				537,771,245				550,722,684				528,209,033
Weighted average common shares outstanding — diluted		561,871,373				538,644,888				551,947,278				529,160,353
Net income per common share — basic		$	0.06			$	0.06			$	0.23			$	0.18
Net income per common share — diluted		$	0.06			$	0.06			$	0.23			$	0.18
Dividends declared per common share		$	0.15			$	0.13			$	0.45			$	0.39

Glossary and Reconciliations

Glossary:

Average Monthly Rent

Average monthly rent represents average monthly rental income per home for occupied properties in an identified population of homes over the measurement period, and reflects the impact of non-service rental concessions and contractual rent increases amortized over the life of the lease.

Average Occupancy

Average occupancy for an identified population of homes represents (i) the total number of days that the homes in such population were occupied during the measurement period, divided by (ii) the total number of days that the homes in such population were owned during the measurement period.

Core Operating Expenses

Core operating expenses for an identified population of homes reflect property operating and maintenance expenses, excluding any expenses recovered from residents.

Core Revenues

Core revenues for an identified population of homes reflects total revenues, net of any resident recoveries.

EBITDA, EBITDAre, and Adjusted EBITDAre

EBITDA, EBITDAre, and Adjusted EBITDAre are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. We define EBITDA as net income or loss computed in accordance with accounting principles generally accepted in the United States (“GAAP”) before the following items: interest expense; income tax expense; and depreciation and amortization. National Association of Real Estate Investment Trusts ("Nareit") recommends as a best practice that REITs that report an EBITDA performance measure also report EBITDAre. We define EBITDAre, consistent with the Nareit definition, as EBITDA, further adjusted for gain on sale of property, net of tax and impairment on depreciated real estate investments. Adjusted EBITDAre is defined as EBITDAre before the following items: share-based compensation expense; merger and transaction-related expenses; severance; casualty losses, net; and other income and expenses. EBITDA, EBITDAre, and Adjusted EBITDAre are used as supplemental financial performance measures by management and by external users of our financial statements, such as investors and commercial banks. Set forth below is additional detail on how management uses EBITDA, EBITDAre, and Adjusted EBITDAre as measures of performance.

The GAAP measure most directly comparable to EBITDA, EBITDAre, and Adjusted EBITDAre is net income or loss. EBITDA, EBITDAre, and Adjusted EBITDAre are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our EBITDA, EBITDAre, and Adjusted EBITDAre may not be comparable to the EBITDA, EBITDAre, and Adjusted EBITDAre of other companies due to the fact that not all companies use the same definitions of EBITDA, EBITDAre, and Adjusted EBITDAre. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies. See "Reconciliation of Non-GAAP Measures" below for a reconciliation of GAAP net income to EBITDA, EBITDAre, and Adjusted EBITDAre.

Funds from Operations (FFO), Core Funds from Operations (Core FFO), and Adjusted Funds from Operations (AFFO)

FFO, Core FFO, and Adjusted FFO are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. FFO is defined by Nareit as net income or loss (computed in accordance with GAAP) excluding gains or losses from sales of previously depreciated real estate assets, plus depreciation, amortization and impairment of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. In calculating per share amounts, Core FFO and AFFO reflect convertible debt securities in the form in which they were outstanding during the period.

We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization. Because real estate values have historically risen or fallen with market conditions, management considers FFO an appropriate supplemental performance measure as it excludes historical cost depreciation and amortization, impairment on depreciated real estate investments, gains or losses related to sales of previously depreciated homes, as well non-controlling interests, from GAAP net income or loss.

The GAAP measure most directly comparable to Core FFO and Adjusted FFO is net income or loss. Core FFO and Adjusted FFO are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our Core FFO and Adjusted FFO may not be comparable to the Core FFO and Adjusted FFO of other companies due to the fact that not all companies use the same definition of Core FFO and Adjusted FFO. Accordingly, there can be no assurance that our basis for computing this non-GAAP measures is comparable with that of other companies. See "Reconciliation of Non-GAAP measures" below for a reconciliation of GAAP net income to FFO, Core FFO, and Adjusted FFO.

Net Operating Income (NOI)

NOI is a non-GAAP measure often used to evaluate the performance of real estate companies. We define NOI for an identified population of homes as rental revenues and other property income less property operating and maintenance expense (which consists primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel expenses, repairs and maintenance, leasing costs, and marketing expense). NOI excludes: interest expense; depreciation and amortization; property management expense; general and administrative expense; impairment and other; gain on sale of property, net of tax; and other income and expenses.

The GAAP measure most directly comparable to NOI is net income or loss. NOI is not used as a measure of liquidity and should not be considered as an alternative to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our NOI may not be comparable to the NOI of other companies due to the fact that not all companies use the same definition of NOI. Accordingly, there can be no assurance that our basis for computing this non-GAAP measure is comparable with that of other companies.

We believe that Same Store NOI is also a meaningful supplemental measure of our operating performance for the same reasons as NOI and is further helpful to investors as it provides a more consistent measurement of our performance across reporting periods by reflecting NOI for homes in our Same Store portfolio. See "Reconciliation of Non-GAAP Measures" below for a reconciliation of GAAP net income (loss) to NOI for our total portfolio and NOI for our Same Store portfolio.

Recurring Capital Expenditures or Recurring CapEx

Recurring Capital Expenditures or Recurring CapEx represents general replacements and expenditures required to preserve and maintain the value and functionality of a home and its systems as a single-family rental.

Rental Rate Growth

Rental rate growth for any home represents the percentage difference between the monthly rent from an expiring lease and the monthly rent from the next lease, and, in each case, reflects the impact of any amortized non-service rent concessions and amortized contractual rent increases. Leases are either renewal leases, where our current resident chooses to stay for a subsequent lease term, or a new lease, where our previous resident moves out and a new resident signs a lease to occupy the same home.

Revenue Collections as a Percentage of Month's Billings

Revenue collections as a percentage of month's billings represents the total cash received in a given monthly period for rental revenues and other property income (including receipt of late payments that were billed in prior months) divided by the total amounts billed in that period. When a payment plan is in place with a resident, amounts are considered to be billed at the time they would have been billed based on the terms of the original lease, not the terms of the payment plan. "Historical average" revenue collections as a percentage of monthly billings refer to revenue collections as a percentage of monthly billings for each of the months beginning October 2019 and to and including March 2020.

Same Store / Same Store Portfolio

Same Store or Same Store portfolio includes, for a given reporting period, homes that have been stabilized and seasoned, excluding homes that have been sold, homes that have been identified for sale to an owner occupant and have become vacant, homes that have been deemed inoperable or significantly impaired by casualty loss events or force majeure, homes acquired in portfolio transactions that are deemed not to have undergone renovations of sufficiently similar quality and characteristics as the existing Invitation Homes Same Store portfolio, and homes in markets that the Company has announced an intent to exit where the Company no longer operates a significant number of homes.

Homes are considered stabilized if they have (i) completed an initial renovation and (ii) entered into at least one post-initial renovation lease. An acquired portfolio that is both leased and deemed to be of sufficiently similar quality and characteristics as the existing Invitation Homes Same Store portfolio may be considered stabilized at the time of acquisition.

Homes are considered to be seasoned once they have been stabilized for at least 15 months prior to January 1^st of the year in which the Same Store portfolio was established.

We believe presenting information about the portion of our portfolio that has been fully operational for the entirety of a given reporting period and its prior year comparison period provides investors with meaningful information about the performance of our comparable homes across periods and about trends in our organic business.

Total Homes / Total Portfolio

Total homes or total portfolio refers to the total number of homes owned, whether or not stabilized, and excludes any properties previously acquired in purchases that have been subsequently rescinded or vacated.

Turnover Rate

Turnover rate represents the number of instances that homes in an identified population become unoccupied in a given period, divided by the number of homes in such population.

Reconciliation of Non-GAAP Measures:

Reconciliation of FFO, Core FFO, and AFFO
($ in thousands, except shares and per share amounts) (unaudited)
FFO Reconciliation		Q3 2020				Q3 2019				YTD 2020				YTD 2019
Net income available to common stockholders		$	32,540			$	33,616			$	125,178			$	93,165
Net income available to participating securities		114				91				335				306
Non-controlling interests		211				276				806				1,086
Depreciation and amortization on real estate assets		136,517				132,266				406,078				396,568
Impairment on depreciated real estate investments		289				3,960				4,202				11,289
Net gain on sale of previously depreciated investments in real estate		(15,106)				(20,812)				(41,473)				(64,556)
FFO		$	154,565			$	149,397			$	495,126			$	437,858
Core FFO Reconciliation		Q3 2020				Q3 2019				YTD 2020				YTD 2019
FFO		$	154,565			$	149,397			$	495,126			$	437,858
Non-cash interest expense		6,883				10,385				26,640				37,422
Share-based compensation expense		6,086				4,625				12,293				13,847
Offering related expenses		—				129				—				2,148
Merger and transaction-related expenses		—				—				—				4,347
Severance expense		133				881				388				8,225
Unrealized gains on investment in equity securities		—				(6,480)				(34)				(6,480)
Casualty losses, net		1,434				780				468				514
Core FFO		$	169,101			$	159,717			$	534,881			$	497,881
AFFO Reconciliation		Q3 2020				Q3 2019				YTD 2020				YTD 2019
Core FFO		$	169,101			$	159,717			$	534,881			$	497,881
Recurring capital expenditures		(33,861)				(36,653)				(87,466)				(93,563)
Adjusted FFO		$	135,240			$	123,064			$	447,415			$	404,318
Net income available to common stockholders
Weighted average common shares outstanding — diluted (1)		561,871,373				538,644,888				551,947,278				529,160,353
Net income per common share — diluted (1)		$	0.06			$	0.06			$	0.23			$	0.18
FFO
Numerator for FFO per common share — diluted(1)		$	154,565			$	149,397			$	507,995			$	443,444
Weighted average common shares and OP Units outstanding — diluted (1)		565,655,768				544,481,679				570,851,976				544,506,626
FFO per share — diluted (1)		$	0.27			$	0.27			$	0.89			$	0.81
Core FFO and Adjusted FFO
Weighted average common shares and OP Units outstanding — diluted (2)		565,655,768				544,481,679				555,751,533				536,183,368
Core FFO per share — diluted (2)		$	0.30			$	0.29			$	0.96			$	0.93
AFFO per share — diluted (2)		$	0.24			$	0.23			$	0.81			$	0.75

1. In accordance with GAAP and Nareit guidelines, net income per share and FFO per share are calculated as if the 2019 Convertible Notes were converted to common shares at the beginning of 2019, and as if the 2022 Convertible Notes were converted to common shares at the beginning of each relevant period in 2019 and 2020, unless such treatment is anti-dilutive to net income per share or FFO per share.
   In Q3 2020, treatment of the 2022 Convertible Notes as if converted would be anti-dilutive to both net income per share and FFO per share. As such, Q3 2020 net income per share and FFO per share do not treat the 2022 Convertible Notes as if converted.
   In Q3 2019, treatment of the 2022 Convertible Notes as if converted would be anti-dilutive to both net income per share and FFO per share. As such, Q3 2019 net income per share and FFO per share do not treat the 2022 Convertible Notes as if converted.
   In YTD 2020, treatment of the 2022 Convertible Notes as if converted would be anti-dilutive to net income per share and dilutive to FFO per share. As such, YTD 2020 net income per share does not treat the 2022 Convertible Notes as if converted. YTD 2020 FFO per share treats the 2022 Convertible Notes as if converted, thereby adjusting FFO in the numerator to remove the interest expense associated with the 2022 Convertible Notes and adjusting shares outstanding in the denominator to include shares issuable on conversion of the 2022 Convertible Notes.
   In YTD 2019, treatment of the 2019 Convertible Notes as if converted for the period in which they were outstanding, from January 1, 2019 through June 30, 2019, would be anti-dilutive to net income per share and dilutive to FFO per share. Treatment of the 2022 Convertible Notes as if converted would be anti-dilutive to both net income per share and FFO per share in YTD 2019. As such, YTD 2019 net income per share reflects the conversion of the 2019 Convertible Notes for the period from July 1, 2019 through September 30, 2019, but does not treat the 2019 Convertible Notes as if converted for the period from January 1, 2019 through June 30, 2019, and does not treat the 2022 Convertible Notes as if converted. YTD 2019 FFO per share does not treat the 2022 Convertible Notes as if converted, but treats the 2019 Convertible Notes as if converted on January 1, 2019, thereby adjusting FFO in the numerator to remove the interest expense associated with the 2019 Convertible Notes and adjusting shares outstanding in the denominator to include shares issuable on conversion of the 2019 Convertible Notes.
2. Core FFO and AFFO per share reflect the 2019 Convertible Notes and 2022 Convertible Notes in the form in which they were outstanding during each period.
   As such, Q3 2020, Q3 2019, and YTD 2020 Core FFO and AFFO per share reflect the conversion of the 2019 Convertible Notes, but do not treat the 2022 Convertible Notes as if converted.
   YTD 2019 Core FFO and AFFO per share reflect the conversion of the 2019 Convertible Notes for the period from July 1, 2019 through September 30, 2019, but do not treat the 2019 Convertible Notes as if converted for the period from January 1, 2019 through June 30, 2019. For the period from January 1, 2019 through June 30, 2019, cash interest expense associated with the 2019 Convertible Notes has been included in Core FFO and AFFO in the numerators, and shares issued upon conversion of the 2019 Convertible Notes have not been included as shares outstanding in the denominators. The 2022 Convertible Notes are not treated as if converted.

Reconciliation of Total Revenues to Same Store Total Revenues and Same Store Core Revenues, Quarterly
(in thousands) (unaudited)
		Q3 2020				Q2 2020				Q1 2020				Q4 2019				Q3 2019
Total revenues (total portfolio)		$	459,184			$	449,755			$	449,789			$	444,277			$	443,326
Non-Same Store revenues		(40,054)				(37,665)				(33,973)				(34,958)				(37,421)
Same Store revenues		419,130				412,090				415,816				409,319				405,905
Same Store resident recoveries		(21,602)				(18,487)				(18,517)				(17,066)				(17,684)
Same Store Core revenues		$	397,528			$	393,603			$	397,299			$	392,253			$	388,221

Reconciliation of Total Revenues to Same Store Total Revenues and Same Store Core Revenues, YTD
(in thousands) (unaudited)
		YTD 2020				YTD 2019
Total revenues (total portfolio)		$	1,358,728			$	1,320,408
Non-Same Store revenues		(111,692)				(116,972)
Same Store revenues		1,247,036				1,203,436
Same Store resident recoveries		(58,606)				(49,213)
Same Store Core revenues		$	1,188,430			$	1,154,223

Reconciliation of Property Operating and Maintenance to Same Store Operating Expenses and Same Store Core Operating Expenses, Quarterly
(in thousands) (unaudited)
		Q3 2020				Q2 2020				Q1 2020				Q4 2019				Q3 2019
Property operating and maintenance expenses (total portfolio)		$	177,997			$	167,002			$	166,916			$	167,576			$	175,491
Non-Same Store operating expenses		(15,162)				(14,915)				(14,876)				(15,990)				(17,073)
Same Store operating expenses		162,835				152,087				152,040				151,586				158,418
Same Store resident recoveries		(21,602)				(18,487)				(18,517)				(17,066)				(17,684)
Same Store Core operating expenses		$	141,233			$	133,600			$	133,523			$	134,520			$	140,734

Reconciliation of Property Operating and Maintenance to Same Store Operating Expenses and Same Store Core Operating Expenses, YTD
(in thousands) (unaudited)
		YTD 2020				YTD 2019
Property operating and maintenance expenses (total portfolio)		$	511,915			$	502,411
Non-Same Store operating expenses		(44,953)				(53,731)
Same Store operating expenses		466,962				448,680
Same Store resident recoveries		(58,606)				(49,213)
Same Store Core operating expenses		$	408,356			$	399,467

Reconciliation of Net Income to NOI and Same Store NOI, Quarterly
(in thousands) (unaudited)
		Q3 2020				Q2 2020				Q1 2020				Q4 2019				Q3 2019
Net income available to common stockholders		$	32,540			$	42,784			$	49,854			$	51,903			$	33,616
Net income available to participating securities		114				119				102				89				91
Non-controlling interests		211				275				320				562				276
Interest expense		87,713				86,071				84,757				88,417				89,067
Depreciation and amortization		138,147				137,266				135,027				133,764				133,315
Property management expense		14,824				14,529				14,372				14,561				15,872
General and administrative		17,972				14,426				14,228				15,375				16,405
Impairment and other		1,723				(180)				3,127				6,940				4,740
Gain on sale of property, net of tax		(15,106)				(11,167)				(15,200)				(31,780)				(20,812)
Other, net		3,049				(1,370)				(3,714)				(3,130)				(4,735)
NOI (total portfolio)		281,187				282,753				282,873				276,701				267,835
Non-Same Store NOI		(24,892)				(22,750)				(19,097)				(18,968)				(20,348)
Same Store NOI		$	256,295			$	260,003			$	263,776			$	257,733			$	247,487

Reconciliation of Net Income to NOI and Same Store NOI, YTD
(in thousands) (unaudited)
		YTD 2020				YTD 2019
Net income available to common stockholders		$	125,178			$	93,165
Net income available to participating securities		335				306
Non-controlling interests		806				1,086
Interest expense		258,541				278,756
Depreciation and amortization		410,440				399,955
Property management expense		43,725				47,053
General and administrative		46,626				58,899
Impairment and other		4,670				11,803
Gain on sale of property, net of tax		(41,473)				(64,556)
Other, net		(2,035)				(8,470)
NOI (total portfolio)		846,813				817,997
Non-Same Store NOI		(66,739)				(63,241)
Same Store NOI		$	780,074			$	754,756

Reconciliation of Net Income to EBITDA, EBITDAre, and Adjusted EBITDAre
(in thousands, unaudited)
		Q3 2020				Q3 2019				YTD 2020				YTD 2019
Net income available to common stockholders		$	32,540			$	33,616			$	125,178			$	93,165
Net income available to participating securities		114				91				335				306
Non-controlling interests		211				276				806				1,086
Interest expense		87,713				89,067				258,541				278,756
Depreciation and amortization		138,147				133,315				410,440				399,955
EBITDA		258,725				256,365				795,300				773,268
Gain on sale of property, net of tax		(15,106)				(20,812)				(41,473)				(64,556)
Impairment on depreciated real estate investments		289				3,960				4,202				11,289
EBITDAre		243,908				239,513				758,029				720,001
Share-based compensation expense		6,086				4,625				12,293				13,847
Merger and transaction-related expenses		—				—				—				4,347
Severance		133				881				388				8,225
Casualty losses, net		1,434				780				468				514
Other, net		3,049				(4,735)				(2,035)				(8,470)
Adjusted EBITDAre		$	254,610			$	241,064			$	769,143			$	738,464
		Trailing Twelve Months (TTM) Ended
		September 30, 2020				December 31, 2019
Net income available to common stockholders		$	177,081			$	145,068
Net income available to participating securities		424				395
Non-controlling interests		1,368				1,648
Interest expense		346,958				367,173
Depreciation and amortization		544,204				533,719
EBITDA		1,070,035				1,048,003
Gain on sale of property, net of tax		(73,253)				(96,336)
Impairment on depreciated real estate investments		7,123				14,210
EBITDAre		1,003,905				965,877
Share-based compensation expense		16,604				18,158
Merger and transaction-related expenses		—				4,347
Severance		628				8,465
Casualty losses, net		4,487				4,533
Other, net		(5,165)				(11,600)
Adjusted EBITDAre		$	1,020,459			$	989,780

Reconciliation of Net Debt / TTM Adjusted EBITDAre
(in thousands, except for ratio) (unaudited)
		As of				As of
		September 30, 2020				December 31, 2019
Mortgage loans, net		$	6,094,980			$	6,238,461
Secured term loan, net		401,040				400,978
Term loan facility, net		1,495,913				1,493,747
Revolving facility		—				—
Convertible senior notes, net		338,112				334,299
Total Debt per Balance Sheet		8,330,045				8,467,485
Retained and repurchased certificates		(311,499)				(319,632)
Cash, ex-security deposits and letters of credit (1)		(649,382)				(138,059)
Deferred financing costs, net		20,310				36,685
Unamortized discounts on note payable		9,265				13,342
Net Debt (A)		$	7,398,739			$	8,059,821
		For the Trailing Twelve				For the Trailing Twelve
		Months (TTM) Ended				Months (TTM) Ended
		September 30, 2020				December 31, 2019
Adjusted EBITDAre (B)		$	1,020,459			$	989,780
Net Debt / TTM Adjusted EBITDAre (A / B)		7.3		x		8.1		x

1. Represents cash and cash equivalents and the portion of restricted cash that excludes security deposits and letters of credit.