Kelly Residential & Apartment Real Estate ETF
Q3 2018 Earnings Call Transcript

Published: 7 Nov 2018

[Operator:]

Good day, ladies and gentlemen. And welcome to the Front Yard Residential Corporation Third Quarter 2018 Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I'd now like to introduce your host for today's conference, Robin Lowe, Chief Financial Officer of Front Yard Residential Corporation. Sir, you may begin.

[Robin Lowe:]

Thank you, Ermani [ph]. Good morning, everyone and thank you for joining us today. My name is Robin Lowe and I am the Chief Financial Officer of Front Yard is this incredibly Residential Corporation. Before we begin, I’d like to remind you that a slide presentation is available to accompany our remarks. To access the slides please log on to our Web site at www.frontyardresidential.com. You’re talking about healthcare owrkers j these slides provide additional information that investors may find useful. As indicated on Slide 2, our presentation may contain certain forward-looking statements pursuant to the Safe Harbor provisions of the federal securities laws. These forward-looking statements may be identified by reference to a future period or by use of forward-looking terminology that may involve risks and uncertainties that could cause the company's actual results to differ materially from the results discussed in the forward-looking statements. For an elaboration of the factors that may cause such a difference, please refer to the risk disclosure statement in our earnings release as well as the Company's filings with the Securities and Exchange Commission, including our year-end December 31, 2017 Form 10-K, our first and second quarter 2018 Form 10-Q and our third quarter Form 10-Q that we filed today. If you would like to receive our news releases, SEC filings and other materials via e-mail, please register on the Investors page of our Web site using the e-mail alerts button. Joining me for today's presentation is George Ellison, Chief Executive Officer of Front Yard Residential. I will now turn the call over to George.

[George Ellison:]

Thanks, Robin. And good morning, everyone. It's been a very productive quarter at Front Yard Residential. Today’s most important update is the integration of HavenBrook is going extremely well and the movement of customers on to our internal platform is ahead of schedule and gaining momentum. The operating results although a bit noisy, overall quite good [indiscernible] where we undertook such a transformational acquisition. Rob will talk about the continued progress we are making on the funding front as we keep reducing interest rate risk. We also want to share with you how we see Front Yard Residential's performance once property management has been internalized for our homes and remaining cash has been deployed. If you please turn to Page 4, you can see the results of the quarter. Rental revenue increased 47% versus the third quarter of last year. Stabilized rental core NOI margin, which in this quarter is one of the noisiest numbers we are reporting came in at a solid 63%. Keep in mind, we are carrying three property managers. And they will be overlapped as we ramp up our internal operations, while the external charges decrease. This effect will continue into the fourth quarter and should be significantly reduced in Q1 of next year. Core FFO was $0.05 per share. Blended rent increases were strong at 4.3% for the third quarter. 94% of stabilized rentals released at quarter end. Turnover for the stabilized portfolio was 7.2%. Over 5,000 homes are now internally managed. 88% of funding was fixed or capped and at a weighted average maturity of over five years. The portfolio data in the lower right of the slide shows our acquisition of 3,200 homes, which brings us stabilized rental portfolio up to around 14,500 homes. We’ve identified 763 homes as noncore, those were up for sale and 72 homes were sold in the quarter. If you please turn to Page 5, we show some important company data over the last five quarters. We continues to be strong trends here. Our portfolio of rental homes is growing and our non-core REOs are falling away. Turnover continues to run very low, while blended rent increases are holding steady at the higher end of our 3.5% to 4.5% target. If you turn to Page 6, you see an update on the property management internalization that begin with our HavenBrook acquisition. Our stated goal was to move roughly 4,000 homes from ASPS on to our platform by year-end. I’m pleased to announce that we are ahead of schedule and should be finished moving these homes by the end of November or soon. This is tremendous progress. We thank Miles Dave -- Miles Adams and his team for their round the clock focus on this number one priority. Once this transition is complete, we will start to move the MSR portfolio of 8,000 homes onto our platform as well. We originally plan to have these families move to our platform by year-end 2019, but we work diligently to accomplish this sooner. Keeping a strong handle on operations is critical. And so far our new HavenBrook teammates have risen to this challenge. I will turn it back to Robe.

[Robin Lowe:]

Thank you, George. This quarter's financial results include the impact of our acquisition and integration of the HavenBrook property manager, and the transition of homes away from external property management. GAAP loss for the quarter was $26.6 million, higher than last quarter due to one-time nonrecurring acquisition fees and costs of $25.2 million, including the $18 million exit fee payable to ASPS and higher initial operating and G&A expenses as we on-boarded the HavenBrook operating platform. Core NOI margin and core FFO for the quarter were also impacted at 62.8% and $0.05, respectively. Excluding the impact of the HavenBrook transaction and property transfers, we estimate that NOI margin would have been approximately flat to last quarter and core FFO would have been in the range of $0.07 to $0.08. The HavenBrook property manager is scheduled for a larger number of homes than it was managing at acquisition. This is good news and that we need to add less resources going forward as we transfer homes from third-party property managers, but its expense base has a negative impact this quarter. We expect that the fourth quarter numbers will also be impacted as we hire additional resources to operate properties in areas where HavenBrook was not previously present. Clearly, internal resources have to be in place before properties can be transferred and this creates costs duplication as we continue to pay external managers for managing properties until our internal platform is ready. We believe that once the transition is complete, we will have created a scalable internal property management platform that will enable us to reach the target set out on slide 7 by the fourth quarter of 2019. By the end of this month, we expect to complete the transfer of all properties away from ASPS. Initial results posted on boarding are very encouraging. We have seen strong leasing demand and our occupancy rate on the HavenBrook platform including the 2,245 homes already transferred was about 94% at the end of October. We expect this trend to continue and sets up to start 2019 in a very strong position. We’ve also made good progress on strengthening our balance sheet. As part of the HavenBrook transaction, we executed a $508.7 million loan from Freddie Mac with collateral of 2,79800 homes from HavenBrook and 2,015 existing homes mostly funded on warehouse lines. The loan is 10 year non-amortizing at a fixed rate of 4.65%. The advance rate was 68.5%. 431 HavenBrook homes were funded on Credit Suisse warehouse line as we expect to sell these homes that do not fit our long-term portfolio profile. This transaction resulted in a net reduction of approximately $42 million of more expensive warehouse line debt bringing down our weighted average interest costs from 4.82% last quarter to 4.73% this quarter. Additionally, on October 16, we capped the LIBOR rate on the home SFR2 and home SFR3 loan agreements for the duration of the loans at 2.3%, meaning that the maximum rate on these loans will be 4.4%, should credit spread narrow, we have an option to refinance these loans in November 2019, 2020, and 2021. In summary, approximately 88% of our debt is now fixed or capped with a weighted average maturity of 5.1 years. We believe this positions us extremely well, should further expected rate rises occur. I will now turn the call back over to George.

[George Ellison:]

Thanks, Rob. Page 7 illustrates how we see the performance of the company once property management for our homes has been internalized and it assumes we need our investment goal of 16,000 homes by the fourth quarter of 2019. Let me walk you through the different components. Revenue growth assumes approximately 16,000 homes, with occupancy in the 95% to 96% range and 3% to 4% annual rent growth. I would also point out that the internalization of property management will give us access to additional revenue streams, such as late fees which previously we shared with the external managers. On the expense side, we expect savings as the direct expense for our internal property management staff will be lower than what we pay our external managers. There will be additional savings by self performing routine maintenance jobs and by not paying a markup when we engage third-party vendors. We targeted NOI margin of 66%, which with revenues in the $240 million to $250 million range translates into annual net operating income of around $160 million. Taking into account interest expenses, which Rob mentioned, are to a very large degree now fixed. Along with G&A, we expect annualized core FFO between $47 million and $54 million and annualized AFFO between $27 million and $34 million. On a quarterly basis, we are targeting core FFO between $0.22 and $0.25 and AFFO of between $0.13 and $0.16 per share. These are annualized run rates that we're talking to get by the end of next year. As you’re going to appreciate that a lot of variables are going to building these targets, especially given the fact that when the early stage of transitioning all the homes to our platform. However, our track record of reaching our stated goals should give confidence that we will do so again. [Indiscernible] on Slide 8 back in the first quarter this year, we wanted to show it again because it underscores the continuing excellent macro tailwind of our business model. Everything on this page is a positive for the single-family rental business, but even more pronounced for the working class housing, affordable housing strategy that’s at the heart of Front Yard Residential. As we predicted, inflation continues to rise, unemployment is plummeting, wage growth is up, interest rates continue to rise, rent growth continues, home price appreciation also continues at a solid pace. Housing starts, although volatile or down quarter-over-quarter and year-over-year. And finally and most important is the fact that U.S household formation growth continues. There's positive growth in household formation and the rate of that growth is increasing as well. This backdrop makes a strong case for our business model. The macro trends are all in our favor. Workforce housing is in alarmingly short supply. The families who live there are becoming financially stronger, but mortgage credit still remains out of reach. And this was made worse by the fact that rates continue to rise. Home building is not keeping up as the number of these families grow. The supply is not meeting the demand. And little to no affordable housing is being built. And this is where Front Yard comes in. We provide an important alternative, affordable rental properties that our residents are proud to call home. Combining these facts with the target financials from the previous page, you can clearly see why we are so optimistic about the future of Front Yard Residential. All in all, it was a solid quarter. We made tremendous progress on transitioning the ASPS homes to our internal platform. And the early indicators of how these homes will perform going forward are very encouraging. Some variability is to be expected in certain operating metrics as we digest this large acquisition. We expect further impact in Q4, but this noise should mostly be gone by the end of the year. 2019 will be a story of continued and significant improvement in NOI and FFO with the ultimate target of covering the dividend by year-end 2019. We have a proven track record of reaching our publicly stated goals and we are working diligently to hit these new goals as well. I will now turn it back to the operator and we can open-up for questions, please.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Douglas Harter with Credit Suisse. Your line is now open.

[Douglas Harter:]

Thanks. Just a little bit more detail around kind of the duplicative costs of kind of running the three platforms. Anyway you can size that and sort of help us think about how those start to kind of runoff and kind of when we will start to see the benefits of the internalization to achieve kind of that 66% NOI margin you kind of lay that on [indiscernible]?

[Robin Lowe:]

Yes. Thanks, Dough. So [indiscernible] is as I said in my prepared remarks, I think it's that those duplicative costs hadn't been this quarter excluding the transaction, the NOI would have been very similar to last quarter. And FFO would have been a couple of cents up instead of $0.01 down. So its -- I think that gives you a sense of the quantum if you like. The noise will continue into the fourth quarter as we continue to ramp up resources to take away the other 88,000 homes managed by our second property manager. But as I said in my remarks, we have to ramp up those resources at the same time explain the property manager we have to be ready before we can actually transfer the properties. So fourth quarter would definitely be noisy. That’s how we get to the first quarter, that should be a basing and our plan is to transfer the properties as quickly as we can as we get into the new year, certainly by midyear, we should be done, but we are shooting for early if that’s possible.

[Douglas Harter:]

Great. Thanks, Rob. And then just thinking about kind of getting to 16,000 homes, does that require additional capital or do you feel like you have the liquidity ability to get there today?

[Robin Lowe:]

Yes, we definitely have the liquidity to get there today. So a combination of recycling was left to the legacy assets, plus selling the 763 homes that George mentioned earlier. Some of those homes are much higher price points than sort of our average share price of the 145, so it's most suitable one for one thing to the 1.5, almost 2 for 1 thing in many cases. So I think there's 16,000 homes, that’s very achievable. We may actually slightly have to shoot that with the existing acquisition.

[Douglas Harter:]

Thanks.

[George Ellison:]

Thanks, Doug.

[Operator:]

Thank you. Our next question comes from Anthony Paolone with JPMorgan. Your line is now open.

[Anthony Paolone:]

Thank you and good morning. My first question is just on the integration and operation and bringing property management in-house. Anything changing in terms of strategy as it relates to things like setting price or occupancy or anything like that, that you need to adjust to with all of these three different platforms effectively coming together?

[George Ellison:]

No. I mean, the basic fact that we're doing it now, so -- before a lot of those decisions we had outsourced as you know, and so as we talked about it in the last call, we wanted to be closer to the customer, closer to the families, because this is at the end of the day going to be driven by how well we do in customer service. And so when we can control the voice that goes to those folks in those homes, and we can be speaking to them about what they mean and responding to them, you don't want anybody between -- as you grow you don't want anybody between us and the families in our homes. So I will get the financials in a second. The customer service component of this is the guy who is going to win this is the guy who does the best at keeping these families happy for a fair price. That he is going to win. So that’s the human, the customer side of it. And so getting folks out of that dialogue between us and our families was something that we as a team wanted to do. We found the folks at HavenBrook, we like them, they have a great process, they have a very high touch with the families, we liked everything we saw. So that's -- so that we're going to use their platform, pull it as we said into ours and grow that. But they’ve a great process, and so they will really -- will drive it with our -- what we want obviously and what -- and some of the things they've learned. So when I get into the financials, obviously we wanted to do it because as I stated in my comments there is a lot of ways to cut costs, drop right to the bottom line. Again, when there's less hands reaching into the process to make their margin. So, no, I don't anticipate a ton of change, because ASPS is effectively gone as of next week. If I’m wrong on that into the month and so, so that process whatever they use, we obviously hire some people from there. But it will be more our process and HavenBrook's process. And MSR we'll soon -- we work with those guys to figure out an exit and again we will pull that into doing things our way with our -- with the way we want to do it.

[Anthony Paolone:]

Okay. Thanks. And then on the held for sale properties, can you give us a sense as to what current yield looks like on that bucket of assets versus maybe what the yield on redeploying the capital is like is that dilutive, accretive, [indiscernible]?

[Robin Lowe:]

Yes, it should be accretive, Tony, particularly some of the homes we bought from HavenBrook that’s about 400 or so. They’re are mostly in South Florida where the yield wasn’t that high, the price [indiscernible] is a little higher than our price point, one. And two, I guess, following that the yield that wasn’t so good. So by swapping these properties out for [indiscernible] at our price point, we believe that we can improve the yield there and so this should be accretive to yield.

[Anthony Paolone:]

Okay. And then can you talk about just on the financing side, I think you were contemplating refinancing of the MSR loan that’s open up, I think now in November?

[Robin Lowe:]

Yes, our first opportunity to refi that is November 9th and we can refinance it on the same day every month as we go forward. So we're looking very carefully at that, yes.

[Anthony Paolone:]

Okay. And then just last question on the G&A. You guys outlined the number there. That excludes the non-cash comp piece of overhead, is that fair?

[Robin Lowe:]

Yes, that's fair.

[Anthony Paolone:]

Okay. So fully loaded for that is that the non-cash piece still kind of in that $4 million, $5 million range?

[Robin Lowe:]

Yes, shared base comp this quarter was 1,200, so I guess that’s 48 for a year, yes.

[Anthony Paolone:]

Okay, great. Thank you.

[Robin Lowe:]

Thanks.

[George Ellison:]

Thanks, Tony.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Jade Rahmani with KBW. Your line is now open.

[Jade Rahmani:]

Thanks very much. I was wondering if you could give some color around the 66% target core NOI margin. For next year it's meaningfully above peers, I think for invitation homes including property management we estimate around 60% -- for AMH around 63% to 64%, their portfolio age is on average about 15 years and for Tricon around 62%. So wondering if it relates to the low turnover potentially real estate taxes, lack of HOA or if there is something else that gives you confidence in those margins?

[Robin Lowe:]

Yes, I would say all of -- it's all of those things, Jade, and we will say if you look at the history and the results we’ve achieved on our portfolio, last quarter we were at 64.5%. And as George outlined in his remarks, we believe there is upside here, there is a lot of expense savings, and then the markups and other things that we were paying to external -- excuse me, external property managers which we will get to keep now. So we -- frankly we would be very disappointed if we didn’t hit 66% NOI margin by the end of next year. We think that’s eminently achievable with our portfolio.

[Jade Rahmani:]

Okay. It just seems like an aggressive target considering that peers who have been doing this for several years are nowhere close to 66%.

[Robin Lowe:]

Yes, so like I said, we’ve achieved 64%, 65% historically with this portfolio already. And as I say that’s with what we consider less financially efficient external property managers. So I can only say that we think 66% is eminently achievable and in fact to our internal target or higher than that?

[Jade Rahmani:]

Okay. In terms of the CapEx, your AFFO guidance also implies, I think only $650 of recurring CapEx per property. I think that for most of the company's we're estimating about a 1,000 per property, per year?

[Robin Lowe:]

Yes, that’s what we have in that slide, we’re assuming $1,000 of CapEx.

[Jade Rahmani:]

Okay, $1,000 of CapEx?

[Robin Lowe:]

Yes.

[Jade Rahmani:]

Okay. In terms of NAV, in the past you’ve said it's in the $18 to $19 range. Is that still an accurate ballpark?

[Robin Lowe:]

Yes, that’s an accurate ballpark. And as -- I will say a few things on that. First, as we said last quarter, we did hire a valuation company Duff & Phelps to validate that for us, and they came out with a range of 20 -- the cap rate at use somewhere at mid 16s to 20. And so that’s the range they came out with using a cash flow basis. We think it was somewhere in the middle of that. We provided on that slide 7 of expected NOI, so I think that gives people enough information to slow their own cap rates and calculate it for themselves. What we’ve also done this quarter is provided a history of purchases by quarter and a history of HPI indexes by MSA. So, I think everybody can now calculate NAV just based on BPO regardless of the cash flows and regardless of cap rate which we can all debate. And I think, if you run through that calculations only using the numbers that we've given, you guess it about 17.5% per share. But again, everybody's will do their own calculation, I’m sure.

[Jade Rahmani:]

So as you think about the earnings implications of the 2019 target that you put in place and covering the dividend by year-end, that's on $0.60 of earnings on this NAV number, it's only about a 3% return and yet stock price is meaningfully below NAV. So, how do you think about the best path to maximizing shareholder value since RESI is trading at 936 and you say that NAV is 1750, so it's at 53% of NAV.

[George Ellison:]

Well, I mean, the -- we watch the stock price obviously every day. We can, as you know, we can imagine in counter [ph] effect of the stock price our day-to-day particularly, in a small cap company that’s -- has a limited amount of flow. It can be a very technical stock. So we can only run the business based on what you see in the screen every day. But what you can't do is make the right long-term decisions and as you know we’ve -- we were very clear about what we wanted to do in '15. We stated at the beginning of this year, we went over those goals and we hit them all. We established a new list of goals for the next year or two or about halfway through that list, property management was on that list. And so [indiscernible] as an example. It's an incredibly strategic acquisition, changes the whole dynamic of the company, pulls a whole function that we didn’t have into the company and it's going to drive numbers that are pretty attractive. So today we're showing you our first look at what we think it will look like. I think people wanted to know what -- what’s the new company going to look like. People who believe the stock or didn’t and so what we’re showing you today is we're confident that we can hit these numbers. I think that drive the answer to your question. Some people couldn’t believe that or not. I’m not sure I agree with your NOI comment, I’m not sure -- what we can talk about offline sort of what I think I saw other companies hitting, I was pretty sure most of the industry was pushing for 65%, or 66%. And I think actually we should push at the 67%. I thought that was a pretty common dialogue but I could be wrong. I know that’s we’re pushing it for. And again, this is -- we show you 66%, you can only imagine what Miles Adams has been given for his budget. So it's not 66%, trust me, it's higher. So, I think those things like that, people can say that’s aggressive or not, we think we can hit these numbers and so what we’re saying to you is that we think we can hit it on an annualized basis -- $0.60 on an annual basis per share. And past '19 that continues to go up. So it bags the question, it's not a $9 and whatever $0.36 stock, it's not. And so the only way you can get people to believe that is to be transparent, which we try very hard to do when we can see things. And now we are starting to see how this looks and so we're showing it to you. So we want to have that dialogue with people and have them process on our assumptions. We are happy to talk about all of them. And we think we're going to hit these numbers. And so I actually agree with you. It's not a $9.36 stock. It's much, much higher. And -- but the only way you can prove that to people is to show earnings and we're showing you that we can hit those targets.

[Jade Rahmani:]

Okay. Just looking at the comps and where everyone is trading, you’ve got Invitation Homes and American Homes to rent at about 17.5x -- 17x to 17.5x FFO. And you’ve got the apartment REITs on 2019 at about 18.5x. So if you just use 18x, the $0.60 that’s $10.80, still about 60% of NAV. So I'm just curious how would you think is ultimately the catalyst to unlock shareholder value? Is it going to be some kind of M&A transaction to add additional scale beyond what you've done with HavenBrook? Is it some kind of restructuring of the AAMC agreement removing that overhang? What do you think is the path to maximizing NAV?

[George Ellison:]

Well, I think the -- it's a lot of things as you know and as you alluded to. But I think the most important thing is long-term growth and earnings. That’s what -- that’s what people care about. And so, the first three years was a lot of changing the model and getting rid of assets. At the beginning of this year, we announced that was over. And as you see, there is a lot less -- and obviously this quarter is different, because of the acquisition, but all of those noisy things have gone away. We made an acquisition that we think strategically positioned us to do the two things I’ve said over and over. We want to touch the customers. We want to be much, much closer to them because there's enormous amount of customer service that I think we can distinguish ourselves with in the affordable housing space. And I think we can control the bottom-line better. So I think the most important thing is earnings. You have to show people you can make money. So what’s the first thing you can do? Cover the dividend. So what do we just discussed? Here is the way you and others have said you have to show it to me. So the first step is to do it and now we're communicating that to our Board, to the public, to shareholders. Now we're going to hit that number, but that’s at the end of '19. We think even with 16,000 homes that $0.60 will keep on going up. We [indiscernible] homes. And so that’s the first dialogue we need to have. These guys are going to print money now, when before a year or two ago, we couldn’t say that. So that’s an incredibly powerful statement. The other things you mentioned are always we didn’t know until we’re buying a 3,200 homes that we’re going to [indiscernible] buy the property manager. You don’t do these things when you have to, you do then when you can, that was a great opportunity. Miles and the team were impressive immediately. And so we’ve said let's do that right now. So that [indiscernible] more strategic thing. You ask other -- any other ones, obviously we can't talk about other ones, but I think what we’re trying to say to you is we’ve always been open to all ideas we try to be as transparent and as willing to listen to all people and all ideas, I hope people feel that way. You said in the question, you mentioned AMA, you can't really pick up the AMA in the middle of an acquisition when Rob and his team did an enormous amount of modeling with Eruzione [indiscernible] as to what we were buying. Now you buy it, you got to get under the [indiscernible] which you bought and make sure that that what you modeled is exactly what you thought it was. So you only have to do the whole thing all over again. That’s not the time you sit down with the two companies and start talking about fees and expenses and people and who is where, but now it is the time. And just as I stated earlier about our goals, we put on our goal [indiscernible] at the beginning of the year to revisit the AMA. I hope people believe that we don’t say things unless we’re going to go after them and we really don’t say things unless we know we’re going to do them. We try to underpromise and overdeliver. We said we’re going to go out in the AMA to be perfectly blunt the acquisition came first, that’s now starting to Miles and the team are starting to get that where we wanted. Now it's time to bring up the AMA, both Boards are committed to it. We talked to both of them about in the last meetings. We will talk to them about it again. It will be very high, the management agreement will be very high on the agenda items when we sit down with both Boards in the next cycle.

[Jade Rahmani:]

I think that's really refreshing to hear, because I would urge you to act quickly on it because when stocks trade at this level of discount to NAV, we see a lot of shareholder activism and outcry for change. One company that is affiliated with a firm I covered NorthStar Realty Europe just announced the termination of its management agreement with Colony Capital for about $70 million, which is around 4x the management fees they were receiving, on what RESI is paying AAMC that would be a value of about $56 million or so. This is a transaction just announced today. So I definitely think it's refreshing that you commented about revisiting the management agreement.

[George Ellison:]

I appreciate that and I will look at that transaction. We can speak about it later. Thank you.

[Jade Rahmani:]

Thank you.

[George Ellison:]

Thanks, Jade.

[Operator:]

Thank you. Our next question comes from Mike Grondahl with Northland Securities. Your line is now open.

[Mike Grondahl:]

Yes. Thanks, guys. To go from about 14,500 to 16,000, how do you thought of see that playing out? Do you think you can do that in the first half of the year next year, kind of what is the pipeline look like?

[George Ellison:]

Yes, it's -- I mean, that’s the [indiscernible] when we -- as you can appreciate, Mike, putting that page together, page 7, took an enormous amount of work and it's a tough thing to do. But we felt it was important to put this dividend conversation front in center. It took an enormous amount of modeling and work by both the capital markets teams, Rob's team, Miles team. So there's assumptions behind that page, dozens of assumptions. One of the things that affects that is 16,000 homes when, which is what you’re asking. So, Rob, would like me to have those bought later this afternoon. So the sooner we can get those done, the better. There's an enormous amount of liquidity, which you cover this face and all of you on the phone talk to everybody, there's an enormous amount of liquidity. I listen to both of the other two calls, the other AMH and IVH, people are buying and selling and I think [indiscernible] talked about a sale they got off. So there's enormous amount of liquidity. And then those guys did a great trading, got great execution. So we’re looking at pools all the time of 500 to 2,500. So we’ve to get to the right price. The market is [indiscernible] who handles all of our buying is a tough guy and he doesn't buy things too rich. So we trust him to put the right price on things. So we see a lot, but until he sees the price he likes, I’m not going to be able to appease Rob and Alicia [ph]. But I would say, my hope is not a strategy, but my hope is that we get something done in the first half, I think that's possible. I wanted to do by year-end, that's running out of time. We might be able to get a handshake or letter of intent in the next month or so, but then [indiscernible] going to have to go do due diligence for two months and Michael and Steven are to pay for it. And so, that kind of puts you in the first half of the year. So we will keep you posted o that. But I will conservatively say by year-end, but I’m telling you our internal goal is to get it done by first half of the year.

[Mike Grondahl:]

Got it. And then, we are in a really strong economy. Your [indiscernible] lower end homes, turnover, what’s the number one or number two reason that you see for turnover?

[Robin Lowe:]

For us, Mike, I mean, what are the statistics, we always like to call for you is number of people in our homes who move out because of -- they’re getting a mortgage. And so, George speak about our competitor [indiscernible], I’m not sure what numbers they closed it. But traditionally, I think that’s sort of in the 30% of that move out, so because people are getting mortgages. Our number year-to-date is under 12. So, I think one important thing to note its -- generally people in our properties are not moving out to buy homes, they’re not getting mortgages. And so there are plenty of other reasons why people move out of course, but I can call turnover percentage has go to with.2 or something like that.

[George Ellison:]

I mean, it's always [indiscernible] There is always credit issues, everybody else, so it’s the credit issues aside, because it's very hard to track that because people were in the business of keeping people in home. So you’ve heard people talk about [indiscernible] and -- but a huge percent -- over 50% of [indiscernible] notices don’t try to eviction. So that’s the whole separate conversation of that credit and credit worthiness and underwriting. So after you get through that, it's -- we’ve a lot of military in our homes. Military deployment has been a big issue. People get transferred. As Rob brings up, mortgage is one of our highest, but vis-à-vis are the people, it's incredibly low. So it's --- the good thing about being in workforce housing is incredibly sticky. And so unless people are getting transferred you’re talking about healthcare workers. First, responder is teachers, it is not as mobile as you know, some other carriers, maybe more technology or whatever, pharmaceuticals all over the world. So it's a very, very they find a home, they find a community, they find a school system. They can't afford a house, Mike. So this is their home. And we're seeing these turnover numbers are starting to approach people Stay in these houses for years, not quite there yet. But it's getting the four years. I think other people have probably between two and three. I think it's going to get longer. And with rates going up, I think it's going to -- as I said on that page, all these things are good for us. They’re not building [indiscernible] housing. When you can read that every day and every city in this country, affordable housing is incredibly, as I said alarmingly short supply. We are the solution.

[Mike Grondahl:]

Good. Okay. Hey, thanks for both for this.

[George Ellison:]

All right, Mike. Thank you.

[Operator:]

Thank you. This concludes today’s Q&A session. I would now like to turn the call back over to the company for closing remarks.

[Robin Lowe:]

Thank you everyone and have a great day. Thank you.

[George Ellison:]

Thanks to everyone.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a great day.