Front Yard Residential Corporation (NYSE:RESI) Q3 2018 Earnings Conference Call - Final Transcript

Nov 07, 2018 • 08:30 am ET


Front Yard Residential Corporation (NYSE:RESI) Q3 2018 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, and welcome to the Front Yard Residential Corporation Third Quarter 2018 Call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Robin Lowe, CFO of Front Yard Residential Corporation. Sir, you may begin.

Robin Lowe

Thank you, Armani. Good morning, everyone, and thank you for joining us today. My name is Robin Lowe, and I'm the CFO of Front Yard Residential Corporation.

Before we begin, I would like to remind you that a slide presentation is available to accompany our remarks. To access the slides, please log onto our website at These slides provide additional information investors may find useful.

(Forward-Looking Cautionary Statements)

Joining me for today's presentation is George Ellison, CEO of Front Yard Residential. I'll 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 that the integration of HavenBrook is going extremely well and the movement of customers onto our internal platform is ahead of schedule and gaining momentum.

The operating results, although a bit noisy, were all in all quite good for a quarter where we undertook such a transformational acquisition. Rob will talk about the continued progress we're 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 manager has been internalized for all homes and remaining cash has been deployed.

Will 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're reporting, came in at a solid 63%. Keep in mind, we're carrying three property managers. And there will be overlap 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 were leased 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 had 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 our stabilized rental portfolio up to around 14,500 homes. We've identified 763 homes as non-core. Those were up for sale and 72 homes were sold in the quarter.

Will you please turn to page 5, we show some important Company data over the last five quarters. It 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