Kelly Residential & Apartment Real Estate ETF

For Q2 2020, Front Yard reported rental revenue of $55.1 million, up 6.9% year over year, stabilized rental NOI of $33 million, up 9% year over year, and stabilized rental core NOI margin of 61.5% versus 60% last quarter. Core FFO was $0.18 per share, up $0.13 from Q2 2019, and GAAP net income was $4 million, including the $25 million payment from Amherst. Same-home core NOI margin was 61.6%, same-home NOI grew 8.7% year over year, and same-home operating expenses declined 0.5%. Management did not provide formal next-quarter or full-year financial guidance, but said July trends remained strong, with stabilized lease percentage at 98.7%, average occupied days at 97.2%, and blended rent growth at 4.7%.

George Ellison framed the quarter as exceptionally strong and said performance improved significantly even versus the company’s record first quarter. He emphasized that the pandemic has accelerated demand for suburban single-family rentals and said the business appears more defensive than previously understood. His tone was upbeat but cautious: he said operations are still improving, but the company remains mindful of ongoing COVID uncertainty and is proceeding carefully on capital allocation and dividends.

Robin Lowe highlighted the financial benefits of stronger operations and lower interest rates. She said Q2 rental revenue was $55.1 million, stabilized rental NOI was $33 million, and core FFO was $0.18 per share, with the quarter helped by a $1.4 million reduction in interest expense versus Q1, lower ordinary-course G&A, and an interest rate on debt of 3.46%. She also noted $109 million of unrestricted cash, plus access to $20 million of revolving unsecured credit, and said the company extended its Credit Suisse line to June 29, 2021 while the weighted average time to maturity was 4.4 years.

Analysts focused on the gap between rent growth/occupancy and same-store revenue growth, and management pointed to roughly 125 basis points of lost revenue from waived late fees plus about 60 basis points of higher bad debt. On collections, Miles Adams said April through July collections were around 92% at day 30, just shy of 96% at day 60, and about 97.5% at day 90 for April, while George Ellison said bad debt was about 2.5% of revenue and still looked better than feared. Questions also covered the dividend, liquidity deployment, and the Amherst/RESI/AAMC situation; management said it was probably prudent to hold off on the dividend, keep all capital allocation options open, and continue evaluating internalization/asset management issues.