Despite Solid Revenue Growth, Large Tax Bill Leads to Slight NOI Miss for Invitation Homes in Q4

Invitation Homes reported mixed results compared with our expectations for the fourth quarter, though we didn’t see anything that would materially change our $40 fair value estimate for the no-moat company. Same-store occupancy declined 20 basis points sequentially to 97.3%, slightly worse than our estimate of occupancy remaining flat. Average rental rates increased 9.4% year over year, relatively in line with our estimate of 9.0% growth, leading to same-store revenue increasing 7.6% year over year. However, the company reported an 18.3% growth in property taxes paid as the under-accrual of taxes paid in the first three quarters of the year led to a high catch-up bill in the fourth quarter. Combined with repair costs increasing 14.8% and turnover costs increasing 54.0%, Invitation Homes reported same-store operating expense growth of 16.3% that was well above our estimate of 5.2%. As a result, same-store net operating income, or NOI, growth of 3.7% fell short of our 8.9% estimate. However, core funds from operations, or FFO, of $0.43 per share came in ahead of our estimate of $0.42 as the company reported fewer miscellaneous costs than we anticipated in the fourth quarter.