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Invitation Homes (INVH) to Acquire Around 500 Newly Built Homes

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Invitation Homes Inc. (INVH - Free Report) announced that it has reached an agreement with three top-tier homebuilders to acquire around 500 additional newly built homes for approximately $140 million. The homes will be located in Charlotte, Jacksonville, and Nashville, with deliveries anticipated to begin later in 2024.

Scott Eisen, chief investment officer of Invitation Homes, commented, “As lack of supply continues to be a primary culprit in the high cost of housing, we are proud to further broaden our strong homebuilder partnerships to create additional housing. At the same time, we believe our strategy of partnering with the largest and best homebuilders to grow our footprint across the country offers the best risk-adjusted returns to our stockholders.”

In 2023, the company received deliveries of 648 new homes and currently expects deliveries of nearly 1,000 new homes from its new product pipeline in 2024.

This real estate investment trust (REIT) is an owner and operator of single-family homes for lease and offers its residents high-quality homes in sought-after neighborhoods across the United States. INVH focuses on markets with strong demand drivers, high barriers to entry and high rent growth potential.

It mainly operates in the Western United States, Florida and the Southeast United States markets. As of Dec 31, 2023, the REIT had around 85,000 homes for lease in 16 core markets across the nation.

To enhance its overall portfolio quality, Invitation Homes has carried out several strategic acquisitions over the years. In 2023, the company acquired 3,221 homes for $1,168 million, including 2,877 wholly-owned homes for $1,054 million and 344 homes for $114 million in the company's joint ventures (JV). For 2024, management expects wholly-owned acquisitions to range between $600-$1,000 million. In the same period, it also expects JV acquisitions to be within $100-$300 million.

In 2023, total portfolio rental revenues and other property income totaled $2.42 billion, an increase of 8.6% year over year, driven by an increase in average monthly rent per occupied home, a 60 basis points increase in occupancy and a 793 home increase in the average number of homes owned.

Given INVH’s ability to offer updated homes with modern features and the proximity to jobs and access to good schools, it is likely to continue enjoying healthy rental demand. This will help drive occupancy rates at its properties and maintain decent rental rate growth.

However, the elevated supply of rental units in certain markets is likely to fuel competition and curb pricing power, thereby impeding the rent growth momentum to some extent. A high interest rate adds to its woes.

INVH’s upcoming release of its first-quarter 2024 results on May 6, 2024, will be a key event to watch for a comprehensive understanding of its financial health and prospects.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 3.4% against the industry’s downside of 4.2%.


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Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Innovative Industrial Properties (IIPR - Free Report) and Lamar Advertising (LAMR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for IIPR’s 2024 funds from operations (FFO) per share has been raised marginally northward over the past two months to $9.18.

The consensus estimate for LAMR’s current-year FFO per share has moved marginally northward over the past two months to $7.74.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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