AMH - American Homes 4 Rent (AMH) Q3 2023 Earnings Call Transcript
2023-11-03 14:38:02 ET
American Homes 4 Rent. (AMH)
Q3 2023 Earnings Conference Call
November 03, 2023, 12.00 AM ET
Company Participants
Nick Fromm - Director, IR
David Singelyn - CEO
Bryan Smith - COO
Chris Lau - CFO
Conference Call Participants
Juan Sanabria - BMO Capital Markets
Joshua Dennerlein - Bank of America
Eric Wolfe - Citi
Steve Sakwa - Evercore ISI
Haendel St. Juste - Mizuho
James Feldman - Wells Fargo
Michael Goldsmith - UBS
Adam Kramer - Morgan Stanley
Alan Peterson - Green Street
Daniel Tricarico - Scotiabank
Austin Wurschmidt - KeyBanc Capital Markets
Jesse Lederman - Zelman & Associates
Keegan Carl - Wolfe Research
Presentation
Operator
Greetings, welcome to American Homes 4 Rent Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.
I would now turn the conference over to Nick Fromm, Investor Relations. Thank you. You may begin.
Nick Fromm
Good morning. Thank you for joining us for our third quarter 2023 earnings conference call. With me today are David Singelyn, Chief Executive Officer; Bryan Smith, Chief Operating Officer; and Chris Lau, Chief Financial Officer.
Please be advised that this call may include forward-looking statements. All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements.
These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. All forward-looking statements speak only as of today, November 3rd, 2023.
We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. A reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package.
As a note, our operating and financial results, including GAAP and non-GAAP measures, are fully detailed in our earnings release and supplemental information package. You can find these documents as well as SEC reports and the audio webcast replay of this conference call on our website at www.amh.com.
With that, I will turn the call over to our CEO, David Singelyn.
David Singelyn
Welcome, everyone, and thank you for joining us today. Consistency, stability, and predictability continued into the second half of the year as we posted another strong quarter. Robust rate growth and healthy occupancy remain above historical levels, which is a testament to the fundamentals of single-family rentals and the team-strong execution of our operational initiatives.
For the third quarter, we delivered $0.41 of core FFO per share, or 6.6% growth over the same period last year. Due to these strong results and outlook for the rest of the year, we have raised our full-year 2023 core FFO per share guidance by $0.01 at the midpoint to $1.65, representing 7.1% growth on a full-year basis. Chris will add more details later in the call
From a macro perspective, as we near the end of 2023 and begin looking towards next year, there is no question that the U.S. economic outlook remains uncertain. Over the past year, we have had the sharpest rise in interest rates in recent memory. The challenging inflationary environment continues to persist, and the pressure on consumer pocketbooks does not appear to be subsiding. However, this year, the single-family rental sector once again proved its resiliency. It continues to have some of the best fundamentals of all real estate sectors, supported by the ongoing national housing shortage, challenging home affordability dynamics, and growing demand for the single-family rental lifestyle.
Furthermore, thanks to our diversified portfolio footprint, superior operating platform, and one-of-a-kind integrated development program, AMH has produced impressive results over the course of 2023. We are confident that next year will provide another mark of cyclical durability for the asset class and strength for the AMH platform.
Turning to the investment front, our disciplined and patient approach to growth remains unchanged. We are on track to deliver around 2,300 homes as this stable and predictable channel remains the backbone of our growth strategy. Conversely, acquisition market opportunities remain limited given resilient home values and the high cost of capital environment.
Our teams are continuously assessing acquisition opportunities, and we're acquiring only when the economics make sense. We are prepared to take advantage of any opportunities in a more material way when conditions change. To capitalize on the current housing environment, we continue to be active on the disposition front. Our teams have done a terrific job executing sales through the first three quarters of the year.
In addition to the portfolio optimization benefit, disposition proceeds represent a highly attractive form of funding in today's cost of capital environment. Overall, this was a great quarter that demonstrates the power of the AMH platform. And thanks to consistent execution from our teams and resiliency of the single-family rental sector, we look forward to a strong close to 2023.
Now I'll turn it over to Bryan for an update on our operations.
Bryan Smith
Thank you, Dave. Q3 was another solid quarter for AMH. Demand for our high-quality, well-located homes continue to drive seasonally strong occupancy and rate growth. Our team has done an excellent job navigating this year's peak turnover season, and we are well-positioned as we finish 2023 and head into next year.
For the third quarter, we posted new, renewal, and blended rate growth in the same-home pool of 7.2%, 7.1%, and 7.2% respectively. Same-home average occupied days remained healthy at 96.4%, which drove 5.8% core revenue growth for the quarter. These results were in line with our expectations and continue to remain significantly above historical averages for our portfolio.
On the expense side, same-home core operating expense growth of 10.7% came in slightly better than our expectations. Because of these results and our revised outlook on the fourth quarter, we have modestly reduced our full-year expense growth guidance by 25 basis points.
Please remember that the third quarter represents this year's final period of elevated property tax growth resulting from the timing of last year's accruals. All of this drove same-home core NOI growth of 3.2% for the quarter.
Heading into the fourth quarter, both rate and occupancy in the same-home pool are trending as expected. October's new, renewal, and blended spreads were 5%, 6.1%, and 5.8% respectively, and average occupied days was 96.2%. These blended spreads are more than 200 basis points higher, and occupancy is more than 100 basis points better than our long-term averages for this period.
Before I wrap up, I would like to provide a quick update on our Resident 360 program. The rollout is continuing as planned, and our fully-staffed teams are completing the training and implementation stages. Although the program is still in its early phase, we are already starting to see the benefits of our resident-focused investments. Both internal and third-party resident surveys have shown marked improvement in maintenance satisfaction scores. In addition, our Google Review scores across the portfolio have improved. We look forward to realizing the extensive benefits of this program over time. In closing, we're very pleased with the results from the first three quarters of 2023 and are well positioned for a strong close to the year.
Now I'll turn the call over to Chris for an update on the financials.
Chris Lau
Thanks, Bryan and good morning, everyone. I'll cover three areas in my comments today. First, a review of our quarterly results. Second, an update on our balance sheet and capital plan. And third, I'll close with an update on our 2023 guidance, which was increased again in yesterday's earnings press release.
Starting off with our operating results, the AMH platform produced another quarter of solid operational execution. Our teams did a great job navigating peak turnover season while continuing to capture ongoing robust demand for single-family rentals into seasonal occupancy and leasing spreads that remain above long-term historic averages.
On an FFO per share and unit basis, we generated $0.41 of core FFO, representing 6.6% year-over-year growth, and $0.35 of adjusted FFO, representing 7.1% year-over-year growth. Underlying this quarter was 3.2% year-over-year core NOI growth from our same home portfolio, as well as consistent execution from our development program, which delivered a total of 714 homes to our wholly owned and joint venture portfolios.
Outside of development, as Dave mentioned, our traditional and national builder acquisition programs continued to remain largely on hold. And we had another active disposition quarter, selling 224 properties at an average cap rate in the mid-3% area, generating approximately $72 million of net proceeds.
Next, I'd like to share a quick update on our balance sheet and capital plan. At the end of the quarter, our net debt, including preferred shares to adjusted EBITDA, was 5.4 times. We had approximately $70 million of cash on the balance sheet, and our $1.25 billion revolving credit facility was fully undrawn.
And from an overall 2023 capital plan perspective, we remain on track to deliver between 2,200 and 2,400 total AMH development homes, and invest between $900 million and $1 billion of total AMH capital, which contemplates this year's newly constructed home deliveries, as well as ongoing investments into our development pipeline, joint ventures, and property enhancing CapEx programs.
Before we open the call to your questions, I'll cover our updated 2023 guidance, which was increased again in yesterday's earnings press release. Simply put, the AMH machine is performing at a high level. Our technology-centric leasing platform continues to capture the robust demand for single-family rental housing, sustaining occupancy and leasing spreads well above long-term historic averages. And despite the ongoing inflationary environment, the AMH operating platform and our focus on innovative investments are producing controllable expense results that are tracking better than our previous expectations.
With that in mind, coupled with our unchanged full-year property tax outlook, we have lowered the midpoint of our full-year same-home core operating expense growth by 25 basis points to 9.5%. And in turn, we've also increased the midpoint of our full-year same-home core NOI growth expectations to 4.9%. Contemplating our improved controllable expense outlook across the entire portfolio, along with slightly better-than-expected interest income on cash generated from our robust disposition activity, we have increased the midpoint of our full-year 2023 core FFO expectations to $1.65 per share, which now represents a year-over-year growth expectation of 7.1%.
To close, I'd like to reiterate that this has been another solid quarter, underscored by seasonally strong occupancy and rate growth. And despite the uncertain U.S. economic outlook, AMH continues to be in a great position as we close out 2023, thanks to our diversified portfolio footprint, superior operating platform, and one-of-a-kind integrated development program.
And with that, we'll open the call to your questions. Operator?
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question is from Juan Sanabria with BMO Capital Markets. Please proceed.
Juan Sanabria
Hi. First question, just curious on thoughts on your 2024 debt maturity. I know your balance sheet is in great place with the unused line. But just what you're contemplating in terms of refinancing those expirations in 2024? And if you could just give us a sense of when that happens throughout the year.
Chris Lau
Yes, perfect. Great question, Juan. Morning, its Chris here. As you can imagine, topic, very top of mind for us, something that we're watching very closely. And in general, I would say that our message is pretty similar to our message from prior quarters in that our plan all along has been to refinance our securitizations out into the unsecured bond market, really working our way towards a fully unencumbered balance sheet. The additional consideration at this point, however, is given some of the recent success we've been seeing in the disposition market, especially relative to today's cost of debt, we may have an opportunity to address a portion of next year's maturities with some level of disposition capital, but realistically, this will depend on some of our disposition volumes over the next quarter or two.
And then to your question from a timing perspective, keep in mind that our 2024 maturities, they open up for repayment without penalty starting this fourth quarter of this year, but don't actually mature until the end of 2024. So we have a very nice wide window to be opportunistic, but also find the right timing over the course of next year so that we're not unnecessarily pushing our timing too close to actual maturity.
Juan Sanabria
Great. And then just I think you kind of commented on this a little bit on the prepared remarks with regards to the investments in the systems, etcetera. Just curious on how we should think about the growth off of the 23 base, just to think about what kind of cost inflation we should expect in 2024 for G&A and other operating expense line items.
Bryan Smith
Hi, Juan. This is Bryan. Very good question. The major investment that we made this year was into our Resident 360 program. And that just as a reminder was an investment into doing more of our own work in the field. As an example, improving customer service from our property managers. A lot of it had to do with operational initiatives. And that program is fully staffed. We're finalizing the training and implementation phases. But the majority of the costs, at least from the personnel side, are in 2023 numbers. So I wouldn't expect a major increase in 2024 for that program.
Juan Sanabria
Thank you.
Bryan Smith
Thanks, Juan.
Operator
Our next question is from Josh Dennerlein with Bank of America. Please proceed.
Joshua Dennerlein
Hey, guys. Thanks for the time. Appreciate all the comments on the elevated taxes through 3Q this year, given the accruals from last year. But any kind of color or insights you can give on where tax bills are coming in now?
Chris Lau
Sure. Morning, Josh. Chris here. Taking a step back, general update, and I kind of touched on this at a high level in my prepared remarks. But no different than past years. At this point now, we have values, including post-appeal information, for the majority of the portfolio. And then, although we're still waiting on official tax bills for a majority of the portfolio, we're beginning to receive initial indications on millage rates in a number of locations, including certain counties in some of our largest markets, like Texas and Florida and Georgia.
So keep in mind, we still need to receive final information over the next couple of months. But at this point, we're not seeing any data outside of our range of expectations, which, as a reminder, has a 9% midpoint, that just as a reminder, is developed on a county-by-county basis all across the portfolio.
Joshua Dennerlein
Okay. Appreciate that, Chris. And then the Resident 360 that you guys are rolling out, just kind of what should we look for as outsiders, as far as, like, its impact to the platform? Like, is there any kind of metrics we should focus in on over the next kind of 12 months?
Bryan Smith
Yes, Josh, this is Bryan. The Resident 360 program is really all-encompassing focus on the resident experience. So we expect to see, over time, improvements in retention, better ability to control costs, and most importantly, improvements in the resident experience that will help us differentiate ourselves from others. The early indications are that the program is working very well. One of the measures that we follow are Google review scores, and we've seen improvements across the board to industry-leading levels for those scores. So early indications are that it's working well. We're looking forward to seeing the impact on retention and cost control in the future, but we're real happy with the current progress.
Operator
Our next question is from Eric Wolfe with Citi. Please proceed.
Eric Wolfe
Hey, thanks for taking my question. Just curious, based on your guidance, any sense for where your lost lease and earn-in will be at year-end?
Bryan Smith
Yes, Eric, this is Bryan. Currently, our loss to lease is sitting in the 4% area and we expect 2024 earn-in to be in the low threes.
Eric Wolfe
Okay, and so the loss to lease by the end of year will probably just be a little bit lower than that low 4%. Just historically probably coming down like a 3% or something by the end of the year, so you'll be like close to 3%.
Bryan Smith
Yes, I think I had a little trouble hearing you there, but I think you were talking about the direction of the loss to lease. We saw a slight reduction off of the last quarter and that's compressed a little bit because of the success that we've had on the renewals, really. So if it continues the strength, it'll be nominal, but we're looking forward to really good momentum into next year.
Operator
Our next question is from Steve Sakwa with Evercore ISI. Please proceed.
Steve Sakwa
Great. First one, Bryan, I just couldn't write all the numbers down quickly. Could you just repeat the October new renewal blended and then could you just give us a sense for where you're sending out renewal notices for say November, where renewals went out for say November, December?
Bryan Smith
Sure, sure. Thanks, Steve. So the October numbers, new spreads were 5%, renewal leases 6.1%, and blended was 5.8%. And then in regards to what we've sent for November and December, we've mailed in the sixes and we're expecting the final results to be similar to what we saw in October.
Steve Sakwa
Okay, and then maybe just on the development program as you kind of look into next year, I know it's early to think about full guidance, but would you expect that program to ramp and where would you be pegging, I guess, development yields today on things that you'd be starting for next year?
David Singelyn
Steve, it's Dave. Good morning. So on the first part of that question, which is sizing, we have capacity and we have a pipeline that we can significantly grow the development program. The moderator is going to be capital and so we will size the program appropriately against the capital that is available. We want to be prudent capital allocators in that program. As it sits today, I would expect that program to be somewhere in the same area as where it is today, funding it primarily through retained cash flow and recycled capital from our dispositions.
When you talk about yields, we talked about this in the prior quarters. We had talked about moving to the sixth area. We already had cost in a number of the properties. We were in the mid fives for both the first and second quarter and now we are in the high fives for the third quarter. So nice improvement there and we're still on track moving into or towards the six percent area and that's where I would expect we would start the year next year.
Operator
Our next question is from Haendel St. Juste with Mizuho. Please proceed.
Haendel St. Juste
Hey, good morning out there. So first question may be for Chris. I was hoping you could set some light on the increase in bad debt in the quarter, the drivers there, and when do you expect broadly to get back to the long-term average? Thanks.
Chris Lau
Yes, morning Haendel. Look, in general I would remind everyone that bad debt will naturally fluctuate over the course of the year, especially when we're talking about the third quarter, which traditionally experiences slightly higher bad debt associated with seasonal move-outs. But overall, third quarter bad debt once again landed pretty consistent with what we were expecting, leaving our full year expectations unchanged in the low 1% area.
And we're in that area, as we've talked about a number of times, as we continue to still have a number of court systems across the country moving slower than normal, that's holding bad debt modestly above our long-term run rate, which if everyone recalls is in called the 100 basis points or slightly below area.
Haendel St. Juste
Got it, got it, appreciate that. Dave, maybe working for you, just thinking more broadly on transaction as a portfolio, we know the MLS inventory is tight. I guess I'm more curious about the landscape opportunities to buy from mid-size private operators. I'm curious if you're getting more inbound, any sense that they might be more inclined to cash in here? And then more broadly, what percent of the portfolio, maybe the legacy portfolio, do you think you'd be open to selling, maybe upgrading via some trades here? Thank you.
David Singelyn
Yes, so the acquisition market, just talk maybe about two pieces of it. The acquisition market on one offs, you're 100% right. It is basically at a price point that for us is not acceptable and not tradable. We bought a total of eight homes in the third quarter. We underwrote between national home builders and all third-party opportunities over 22,000 homes. And we found eight that met our quality criteria as well as the economic criteria.
With respect to acquisitions of portfolios, I wouldn't say it's picked up, but there are some that are being talked about and shopped. And the first thing that we look at is what is the quality of those assets? Where are those assets? What is the age of the assets? And what are the characteristics? Are they detached homes? Are they three bedrooms or greater?
And the portfolios for the most part that we are seeing either don't meet those quality criteria, or, and this is true for both the portfolios as well as the one offs. The ones that we underwrote were typically in the high fours as a yield. And with very, very few in the fives, as I said, we only found eight that we could transact on that met our criteria.
Operator
Our next question is from Jamie Feldman with Wells Fargo. Please proceed.
James Feldman
Thank you for taking my question. So, this was the first quarter or even kind of the first last six weeks or so where you saw the multifamily companies, finally see some pain on supply. Sounds like, developers hitting, the tenure hitting 5% and developers panicking a little bit impacted business conditions. So I would think this would also be, the first time you might see some impact of either tenants staying, deciding to stay in multifamily for longer before moving to single family, or maybe using some of those types of properties as a pricing comp. Have you seen any change in business conditions since the tenure hit 5% or even as, there's been more concern about consumer credit, credit card balances growing and some of the other, signs we're seeing in the economy about the consumer over the last month or so?
David Singelyn
Yes, Jamie, it's Dave. When we talk about single family fundamentals, first, they are different than multifamily. The customer is going to be slightly different. The resident profile will be slightly different. And your statements are correct, but I also would add a few other statements. And that is, this country has a huge housing shortage. A million plus households don't have quality housing. And the one thing that is coming to, more into light is the affordability question. And today it's a 28% more affordable in our market to rent than it is to buy a home today.
And so residents are staying longer, that is true, but the demand remains very, very strong. And with respect to tenant health, we've been through this. We went through COVID where tenant health was of concern and our systems are set to monitor that and to communicate with residents as they have concerns. And we'll work out acceptable and mutually beneficial solutions. And there is significant demand behind them. So today, I see the market being where it was in prior quarters. It's still very strong, very solid demand out there.
James Feldman
Okay. Thank you for that. And then, our team has been thinking a lot about, the different performance among your development assets versus your acquisition or legacy assets. Are you able to give some color around, the different either CapEx profile, operating expense profile, even blended rent growth profile of your development assets versus the non-development assets in the portfolio?
Bryan Smith
Yes, Jamie, this is Bryan. That's a very good question. We're obviously tracking that as well. The AMH development homes are starting to come into the same home portfolio. And what we've noticed is it's really playing out as we expected. These homes are quicker to turn, lower cash to cash, quicker to get back up and release. So that part's playing out as expected.
On the CapEx side, the expectations are that CapEx would be really low on these new houses. They're built to be durable and they're new. And that's playing true almost across the board. So from a CapEx and expense profile perspective, it's playing out as we expected. And then on the turn, speed and occupancy side, we're seeing nice benefits there as well.
Operator
Our next question is from Michael Goldsmith with UBS. Please proceed.
Michael Goldsmith
Good afternoon. Thanks a lot for taking my question. The last three years have been anything but normal. But from here, do you see 2019 as a good benchmark for what normal looks like? Or have we seen changes in macro and demand factors that change the profile? And how does that impact how we should think about rent spreads as we move into the end of the year? Thanks.
Bryan Smith
Yes, Michael, this is Bryan. That's a great question. The last three years have been a little different, I would say. When we're talking about comparing how we've formed in 2023 to historical averages, we're looking at the 17, 18, 19 period. And the most interesting thing is that with return to seasonality that we're seeing now, the seasonal curve looks very similar to what it looked like before, except the bar has been raised. And the bar has been raised both from an occupancy perspective and from a rate growth perspective. I talked about those in my opening remarks. And I think that's a result of a number of different things.
First, I believe that the single family rental value proposition is finally being appreciated. There was an acceleration of that during the COVID period. And I think that's here to stay. The experience is very different than what you could find in that industry prior to the institutions coming in and providing real focus on the resident experience. So there's been a fundamental change there. Migration patterns have played very nicely into better performance in our portfolio. So there are a number of macro things that are helping us change the way we expect to perform relative to pre-pandemic.
Michael Goldsmith
I don't want to put words in your mouth, but it sounds like you believe that that is structural and not temporary, correct?
Bryan Smith
Yes, I believe that's the case. We've had improvements in execution and improvements in appreciation for that value proposition.
Michael Goldsmith
And as a follow-up question, have you seen any changes in consumer behavior? Are they pushing back on rent increases? Are you seeing more price sensitivity around signing new leases or more move-outs due to rent increases in the last several months?
Bryan Smith
Yes, I think the easiest way to look at it is the health of the applicants coming in. We've seen incomes, as an example, in Q3, 23 versus 22, increase more than the rents for the homes that they were applying for. So there's really good health there. The story is there's so much demand for our product that health is really, really continuing.
In terms of existing residents negotiating more than they have in the past, if you look at the improvements, I talked about the difference between today and pre-pandemic in terms of the movement of that bell curve. Keep in mind that our retention is way up from where it was pre-pandemic. So these existing residents are renewing at a higher rate, even though their rents have increased more than they had in the past.
Operator
Our next question is from Adam Kramer with Morgan Stanley. Please proceed.
Adam Kramer
Hey, guys. Thanks for the question and good morning out there. I wanted to ask on the disposition side. When you're selling homes, to the extent that you get a sense for it, who are the end buyers? Are you selling homes on the MLS to kind of end users? Obviously, that's a tight market, so it would seem like there'd be good opportunities there. Are you selling other institutions to maybe mom-and-pop who subsequently rent out the homes? We're just interested to kind of get an opinion on the housing market to hear about, learn about what's happening on the disposition side.
David Singelyn
Yes, Adam, it's Dave. Yes, I would agree with your premise. We're selling today entirely on the MLS to end users and selling the homes when they're vacant. Today, the demand from other operators, other managers is significantly less than we have seen in the past. But the demand for homes with the lack of supply on the MLS makes the demand very, very strong. We are selling homes that we identified through our asset management process. The time on market is short. We're selling at 99% of asking price, and we're selling them at prices that are yielding mid threes today. And so, very, very attractive source of capital, and it's a good recycling of the portfolio to keep expenses where we want them in the future.
Adam Kramer
Thanks, Dave. And then maybe just a follow up. I think it’s been kind a while that you reported that a peer of yours is looking into getting into third-party management of other people's assets. I know it's something that you guys have talked about in the past, although probably haven't heard about it from you guys in a few quarters at this point. Wondering if it's something that you would look at if you are looking at, or maybe kind of with developments and obviously running kind of the internal portfolio, maybe it's just something kind of not high on the list [Ph].
David Singelyn
Yes. Adam, we have looked at this. If you go back a couple of years, I think there was a little bit of talk on these calls about evaluating third-party that we talked about, that it was an evaluation mode. Initially, we thought the program was very, very compelling. It was going to be able to generate a lot of incremental income without committing much of our balance sheet to the program. So, we evaluated it for more than two years. We have tested it with a number of institutional relationships. And what we found was this. The margins that we were getting were a lot lower than what we were expecting going into the program. There was a significant amount of incremental cost to manage the owners, to produce the unique reporting that they desired. And all of the different owners had unique expectations. And that, in part, created distractions. Those distractions were of concern that they would impact the core business, which is really where we make our money. So with the limited synergies and the distractions, we made the decision. And at this time, this is not a platform that we are pursuing.
Adam Kramer
Thanks so much, Dave. I really appreciate it.
Operator
Our next question is from Alan Peterson with Green Street. Please proceed.
Alan Peterson
Thanks for the time. Chris, you mentioned controllables are benefiting 23 expenses, but can you give us a sense on the tax appeals that you guys filed over the course of the year and if you're seeing any benefit to expenses from those, or if you anticipate any benefit into next year from those tax appeals as well?
Chris Lau
Sure. Morning, Alan. The latest update is, as we were expecting, this has been a very heavy appeals volume year for us. At this point, we have filed something in the ballpark of over 23,000 individual appeals. We've heard back on a good number of those. Not all of them are back in hand yet, but at this point, the important piece that we've been watching closely is the Texas appeals process.
And at this point, we're now pretty much through appeals in Texas. And as we were expecting, we did see a higher post-appeal value than we were originally contemplating at the start of the year. We've talked about this in past quarters. And we expect that to likely be offset by this year's property tax relief rate reductions when those bills get officially released over the next couple of months or so, which continues just to be another component of our unchanged full-year property tax outlook of 9% at the midpoint.
And then I would just add, in Texas, even though this year is likely going to be a push, as we think about the benefit of the property tax relief rate reductions and the fact that those are going to be in place through next year, to the extent we continue to see moderation in home values translating into potentially values in Texas, we see that as being potentially a positive read through into next year just in terms of level of property tax growth.
Alan Peterson
Understood. I appreciate that. And maybe just shifting over to the top line and the performance that you guys are seeing in your markets, Southwest is a little bit weaker than the Southeast. Bryan, can you give us a sense for what's driving some of the underperformance in markets like Las Vegas or San Antonio, for example?
Bryan Smith
Yes thanks, Alan. I think the easiest way to look at it is there's been some increased supply in a few of the markets. San Antonio comes top of the list. We see this increase in supply, especially for our well located homes, to be kind of temporary in nature. Specifically in Las Vegas, we've seen a little bit of a pullback on rate growth, but occupancy has rebounded nicely in October. So we're already seeing a little bit of a reversal there. I would expect that with migration patterns out of California for Las Vegas to be very healthy for a really long time to come.
David Singelyn
Yes, Alan, it's Dave. Let me just add a couple of points. This is a short-term absorption issue on additional supply. This is not something that is new to 2023. We have seen this a couple of times already in Phoenix. We've seen it in Charlotte. And it's very short-term as homes come on. And as soon as they're absorbed, we have gone back to very, very strong fundamentals. The underlying fundamentals of both of those or all of those cities is still very, very strong, especially with respect to job growth and population growth and migration trends requiring housing. So what we are looking at, in my mind, is very short-term. We already, as Bryan mentioned, have seen that absorption pretty much get picked up in Las Vegas in October.
Alan Peterson
I appreciate that. Thanks for the time.
David Singelyn
Thanks, Alan.
Operator
Our next question is from Daniel Tricarico with Scotiabank. Please proceed.
Daniel Tricarico
Thanks, Dave. You mentioned capital as the governor to development pipeline growth. So I wanted to be a bit more specific on capital sources and uses. Next year, there's likely to be a funding gap between cash flow after dividend plus net dispositions to fund around another billion of development on top of the debt maturities next year. So is it fair to say you're comfortable staying patient, looking for a bit of a reprieve in rates to issue unsecured? Is it maybe a heavier concentration within your JVs or even slowing new starts? Any additional thoughts there? Thank you.
David Singelyn
Yes. So I agree with all of your things. One is we're not really setting any expectations today on decline in rates. If they occur, it's going to be a tailwind for us. The use of JVs, as you have seen in 2023, is a very, very important part of the capital program for us. It allows us to allocate properties that are much better in a JV structure than maybe on our balance sheet. And so we have the ability to bifurcate them.
As we go into next year, I would expect it to look a little bit like 2023 from a capital standpoint. And the majority of the reliance will be on recycled capital and retained capital. Maybe a little bit of incremental debt, but that's not going to be the reliance of creating the program unless the capital costs significantly change. And if they do, we have the ability to ramp up.
Daniel Tricarico
Great. Thank you for that. And then, could you comment on the opportunity set for portfolio deals in the market? Have you guys been underwriting any and how you would view that trade-off if an opportunity were to rise in relation to the development pipeline?
David Singelyn
Yes. We've seen a few portfolios. We've underwritten a few portfolios. I think we're aware of the larger ones that have traded. And as I indicated earlier, it first needs to start with the quality and location of the assets. And quality is a number of things. It's the age of the property. It's the characteristics of the property. But we also want to be in the better located areas. That's the real benefit of our development program is that we have the ability to build in the parts of the market where the home builders are actually building to sell. These are the better located properties. So, we have a focus through our asset management of having a building a higher quality portfolio long-term. And the portfolios that we have seen really haven't fit well into that plan.
Operator
Our next question is from Austin Wurschmidt with KeyBanc Capital Markets. Please proceed.
Austin Wurschmidt
Great. Thank you. With your loss release really holding strong late into the leasing season, I guess the potential for that to improve really early next year as you move into the peak leasing season. I guess, should you be able to continue drive lease rate growth above historical trends in 2024 and absent any broad macro slowdown, what would change the pricing power you have right now?
David Singelyn
Thanks, Austin. Our plan is pretty simple. We plan on finishing this year strong and being fully prepared for the spring leasing season. Generally, we see a really nice uptick in demand around mid-January. That starts to translate into real strength into February and March. There are a number of factors that give us a lot of confidence on rate going into next year. I talked about the affordability gap between renting and buying in our markets being 28% at this point, plus the loss to lease, plus the fact that we don't see any major supply changes into next year. I give us a lot of confidence that we should be able to continue to do better than historical averages.
Austin Wurschmidt
So, it seems fair to think that you could be back into the 5% to 6% loss to lease early next year as things start to ramp. Any comments on that? I also wanted to revisit, Bryan, I think it was your comment about the strong retention you've had relative to pre-pandemic, even though I know turnover is up slightly year-over-year. But one, what are the biggest move-outs more recently?
And then two, do you think you can drive down turnover further from current levels? Are there targets you have internally that you could get to over time that maybe you could share? Thanks.
Bryan Smith
Yes, sure, Austin. I think it's a little early to tell on exactly where rates are going to land next year. We'll have better color for you, I think, on the next call. Retention, the comments I made were comparison between what's happened in 2023 and prepandemic. We've seen really nice improvement.
When you compare it to last year, if you remember, there were differences with delinquency resolution and there's a little bit of noise from the COVID period. But operationally, improved retention is one of our major focal points. It's a major point of the Resident 360 investment. And our teams are constantly looking for ways to improve retention by improving the resident experience. So I'm optimistic that there's room there.
Operator
Our next question is from Jesse Lederman with Zelman & Associates. Please proceed.
Jesse Lederman
Hi, thanks for taking my questions and congrats on the strong quarter. Your disposition pace this year has been your highest ever. Of course, it's an attractive source of capital. Can you just talk about how comfortably high you feel with that going given different friction costs associated with dispositions? And maybe talk a little bit about the puts and takes of what those costs are.
David Singelyn
Yes. So Jesse, its Dave. On dispositions, you're 100% right. This year is our highest year in our history as we're going -- we're at 1,300 [Ph] at the end of the third quarter. About 225 of those would be in the third quarter itself. October continues to be strong.
As we go into future years, we will continue to use our analysis and our data to look at other properties that meet our long-term criteria, and those that don't will go into the disposition category. And whether it is existing properties or land, it should be noted that we look at all of that. We are -- we've actually been a net seller of land in this year. So we rightsize all of our program.
I will -- I want to add one thing, as we go into 2024, but maybe more importantly for 2025, one of the benefits of our securitization is getting refinanced as those homes will get unencumbered. And there will be some homes in the securitizations that today are not practical to sell that will probably screen as disposition candidates in 2025 after they're unencumbered late 2024.
Jesse Lederman
That's very helpful. Thank you. My next question is on occupancy. And I understand your occupancy is still above pre-COVID averages. And you made some comments saying you think that occupancy and rent growth kind of a new normal a bit higher than pre-COVID levels. But can you talk about how you think about the puts and takes of occupancy versus rent growth? So now you're at 96.2% for October. Are you looking to keep that above 96%? Are you okay with it trending down closer to pre-COVID levels? Just trying to understand how you view the trade-off between occupancy and rent growth. Thanks again.
Bryan Smith
Yes. Thanks, Jesse. This is Bryan. We're focused on optimizing the entire revenue line. And the interplay there obviously is occupancy and rate. We've made really good improvements in revenue management over the last 5 or 6 years and I think are benefiting us today.
As I said before, my expectation -- our expectation is that there is going to be a new norm on occupancy. The demand backdrop is fantastic. We'll be in a good position going into next year. Single-family sector and value proposition is as strong as it's ever been. So we have good expectations on continued strong rent growth.
Operator
Our final question is from Keegan Carl with Wolfe Research. Please proceed.
Keegan Carl
Yes thanks for the time guys. So one of your peers, given what they've recently done with hires, I think it's clear that your build-to-rent platform is validated. Just kind of curious, I know you touched a little bit earlier on returns, but just can you guide what the returns look like on the homes that have been delivered over the last several years and how they've been trending relative to your expectations? And then how much additional yield you typically would get on developments versus what you'd buy in the MLS on a stabilized basis?
David Singelyn
Well, this is Dave. Let me take the second part, and that is the difference in yields. And while I think that's important and it is significantly different, as I said today, we're seeing acquisition opportunities in the 4s and having very difficult time finding any opportunities there that meet any of the buy opportunity. Our development program is approaching the 6s. So you've got 100 basis points plus between the 2, and we have seen it historically.
But I think the benefit of the development program, in my mind, is much greater than just that one piece. It is the locations of the properties that we are building. It is the quality of the properties that we're building because we don't build them like a national homebuilder because we are going to own it long-term. It's not a criticism of the homebuilders. It's a different objective long-term.
So we're building with higher-quality materials. It's all about the durability of the assets. And so I like -- I think the development program has significant benefits. It is how you execute the development program that is very important. It has to be a program that you control the design and the execution and the site selection in the process.
And so I don't necessarily comment on others, but I do believe it is a very successful program. I believe that it's been acknowledged a number of times. We saw a number of years ago people attempting to get into build to rent as a standalone without having an operating platform, and you really need the synergies of the two to make it successful. So I think other people acknowledge the quality and the benefits of a development program.
Keegan Carl
And then big picture, we're heading into an election year, and I think it's fair to assume that SFR is going to have some noise around it. I'm just curious, can you walk us through how you work with local governments to communicate value proposition of SFR and then how your development platform differentiates you?
David Singelyn
Yes. I'd say it's a true ground game on the government affairs. And we are the -- I think maybe the only one. I'm not 100% sure of that. But we have a dedicated team that's experienced in government affairs. And it's all about education and talking about the benefits of single-family rentals, the desire that the tenants have. There is misconceptions that are being put forth by various politicians. And at the local level is where all the decisions are made. So it's truly, truly a ground game.
And we can talk about a lot of different instances, but it's having a team to get in there, give you the ability to get your permits. And at the end of the day, what we are doing is we are building more housing in this country. And isn't that where the real problem is in affordability, etcetera? It's in the fact that we don't have enough high-quality housing and we have this housing shortage.
So if we can solve the housing shortage and we can get the building permits that are necessary to provide the housing, I think a lot of the concerns that are being talked about resolve themselves. But they won't resolve themselves unless we provide adequate housing.
Operator
We have reached the end of our question-and-answer session. I would like to turn the call over to management for closing comments.
David Singelyn
Yes. Thank you, operator. And to all of you, thank you for your time today. We will talk to you again, I guess, next year on our next earnings call. So have a good day. Have a good weekend.
Operator
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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American Homes 4 Rent (AMH) Q3 2023 Earnings Call Transcript