Tricon Residential Inc

TSX:TCN

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Tricon Residential Third Quarter 2020 Analyst Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]I would now like to hand the conference over to your speaker today, Wojtek Nowak, Managing Director of Capital Markets. Thank you. Please go ahead.

[Wojtek Nowak, Managing Director of Capital Markets]

Thank you, Mariana. Good morning, everyone, and thank you for joining us to discuss Tricon's results for the 3 and 9 months ended September 30, 2020, which were shared in the news release distributed yesterday.I would like to remind you that our remarks and answers to your questions may contain forward-looking statements and information. This information is subject to risks and uncertainties that may cause actual events or results to differ materially. For more information, please refer to our most recent management discussion and analysis and annual information form, which are available on SEDAR and our company website.Our remarks also include references to non-GAAP financial measures, which are explained and reconciled in our MD&A. I would also like to remind everyone that all figures are being quoted in U.S. dollars, unless otherwise stated.Please note that this call is available by webcast at triconresidential.com, and a replay will be accessible there following the call.Lastly, please note that during this call, we will be referring to a supplementary conference call presentation posted on our website. If you haven't already accessed it, it will be a useful tool to help you follow along during the call. You can find the presentation in the Investor Information section of triconresidential.com under Events and Presentations.With that, I will turn the call over to Gary Berman, President and CEO of Tricon.

[Gary Berman, President, CEO & Director]

Thank you, Wojtek. Good morning, everyone. Hope you're all doing well and are healthy and safe. I wanted to start our presentation here on Page 2 and talk about some key takeaways from the quarter.The first is, I would say, we had a really strong quarter when you consider that Q3 is typically a weaker seasonal period for us and that we're in the middle of a pandemic, and that's underpinned by our people-centric culture where we prioritize our employees and our residents. And I'm really proud of our management team who have been able to keep our entire team, our broader team connected, make sure they're not immobilized by fear, keep them inspired and empowered so they can go that extra mile to take care of our residents. And we know that when our residents are happy, they stay with us longer. They treat our homes like their own. They're more likely to refer to other residents, and all of that is great news for our shareholders and investors.Second key takeaway is we've seen during this period that our middle-market Sun Belt-focused strategy is incredibly resilient. And our single-family rental business, in particular, has shown to be defensive and single-family industry has re-rated both in the debt and equity capital markets.Third is we know we're not back to normal times yet, but our acquisition program in single-family rental is back to normal. We restarted acquisitions midway through the quarter, acquiring nearly 400 homes, and we'll be going back to our pre-COVID pace of about 800 homes in Q4. And we're being able to grow while also strengthening our balance sheet and deleveraging. The big news in the quarter was the preferred stock issuance led by Blackstone. That reduced our debt to assets by about 500 basis points. And now with the syndication of our U.S. multifamily portfolio coming up, we believe we'll be able to reduce that by another 500 basis points and get to the lower end of our long-term target on leverage.Let's move over to Slide 3 and talk about our summary results. Core FFO per diluted share of $0.11 or CAD 0.15, that's up 38% year-over-year. This is a very clean FFO number. We have a full quarter inclusion from U.S. multifamily from 2019. We also have no inclusion of Canadian multifamily fair value in either period. And the way I like to think about the FFO is it's up about $7 million, all of that $7 million comes from single-family rental contribution. And everywhere else, we've been able to contain expenses with slightly higher shares. That leads -- led to the 38% year-over-year growth.Earnings per diluted share are $0.23, up 53% year-over-year. This is on the back of strong home price depreciation, 1.7% quarter-over-quarter. If you deduct capital expenditures, it's 1.3% or 5.2% annualized. We're going through a period of strong de-urbanization trends with historically low mortgage rates. And we're likely to see many quarters or periods now of strong or, what I would call, super home price appreciation, which obviously bodes really well for earnings per diluted share.On single-family rental, we recorded really strong performance with NOI of $50.2 million. That's up 14% year-over-year. The way I like to think about that is 6% comes from the same-home portfolio, about 4% comes from acquisitions growing our portfolio and the other 4% comes from the non-same-home portfolio where the joint venture homes are starting to contribute and add to NOI.All in all, an outstanding quarter for single-family rental. The business is firing on all cylinders. NOI growth -- same-home NOI growth up 6.3%. That's an industry-leading metric. And a number of our metrics are records for us, including our margin at 66.2%; occupancy, 97.5%; and re-leasing spreads.Multifamily rental in the U.S. is the one area where we're seeing some weakness. Our NOI is down about 12% year-over-year. I like to think of this as our revenues are down 5%. Our FFO was also down about 5%, and NOI for the first 3 quarters was also down about 5% or 6%. And where we're seeing weakness is that we have more exposure to Houston and Orlando, which have been impacted by the pandemic. That's about 30% of our portfolio. We've also accounted for the numbers quite conservatively. Bad debt is -- we take provisions for bad debt after 30 days. Also concessions are expensed, not amortized. And also, we have not yet internalized the portfolio.And we're confident as we move into Q4, that these numbers are starting to get better. We think these are trough fundamentals. The worse is behind us. And particularly, as we internalize the portfolio next year, we could see the metrics here, particularly if the economy holds, will get better and better.On the residential development side, we quietly distributed another $6 million from our for-sale housing funds, and we've distributed about $65 million for the full year. So we're using this cash, obviously, to de-lever and grow our rental housing business.Let's move on to Slide 4. We talked in the past about how some of the trends we saw before the pandemic are now accelerating into the pandemic, and migration is no exception. We talked in the past about how 40% of the U.S. population lives in the Sun Belt, and they're getting 60% of the growth going forward as Americans move from North to South in search of lower taxes, more friendly business environments and better weather. Well, now that we add the pandemic to that, they're also moving in search of a more healthy environment, and they perceive that -- safety and security of that in suburbs or in suburbia and in single-family rental homes. And when we poll our residents as to why -- or new residents as to why they're moving into our homes, the #1 reason is they're looking for more space. So those are de-densification trends taking hold. Second reason is relocation, de-urbanization trends as they move from denser areas to less dense or smaller cities.And at the same time, we've also talked about the untethering of the worker from the plant. And obviously, with the advent of new technology and government-mandated work from home, more and more people are comfortable working from home. And if workers can work anywhere and employers are more flexible, obviously, there's an opportunity to work in the Sun Belt where it's more affordable and the weather is better, and that reinforces these migration trends.If we flip over to the next page, Slide 5, you can see how strong the demand is for single-family rental and how resilient the business is in the midst of the pandemic, especially against the backdrop of relatively high unemployment. Unemployment in the U.S. is -- at the end of September, it was about 8%. This is double the pre-COVID level. In our markets, it's about 7%.But then take a look on the right-hand side of the re-leasing spreads, those are all double digits, or largely, double digits on average, 12.6%. Las Vegas is an intriguing market. This is a market that has been ravaged in the pandemic. The tourism industries, it's been very, very tough. Unemployment rates, 14.8%, but the re-leasing spreads are roughly the same. And I -- we would say that these re-leasing spreads largely represent loss to lease in our portfolio that's really now being driven by these de-urbanization trends.The other thing I would point out here is that if you look at our new move-ins over the last 12 months, the average household income is pushing $85,000. So in some ways, we are being insulated because you can see that the unemployment is largely concentrated in lower-income bands.Let's move to Slide 6 and talk about the big news in the quarter, which was the $300 million preferred equity financing that was led by Blackstone. And I wanted to give you a little bit of color on this. We were not seeking out this type of transaction. We've been approached several times by different investors or brokers over the last years to do a private placement, and the latest overture came this summer. And we decided to run a formal process where we thought it would be great if we could raise capital to delever, improve our liquidity position, take advantage of great fundamentals, but also find validation capital to support our story. And we ran a process, it was short and extremely competitive, and Blackstone emerged as the natural winner and as the best fit.Now Blackstone has the most experience in our business in rental housing, both single-family rental and U.S. multifamily. They have absolute conviction in what we're doing in terms of our rental housing strategy on both sides of the borders, lowest cost of capital, and are investing in their open-ended BREIT fund, which creates better alignment for us. And so we're really excited about this partnership. We've already seen a number of ways that Blackstone is going to be a great partner for us, and we're delighted to add Frank Cohen to our Board.Let's move on to Slide 7 and talk about an ESG update and our commitment to social causes. And I would say that ESG for us is not a check-the-box item. Our commitment to diversity is not one and done. This is a continuous program. It's a living, breathing program that we will continually improve and refine and learn from.And in this quarter, we hosted Founders' Day. And for the first time virtually, we had about 700 employees participate, and we used this opportunity to talk about our commitment and our approach to diversity, inclusion and equality. We also had a number of different organizations join us where we partnered to help combat anti-Black systemic racism or to help other disadvantaged groups.We had Wes Hall as our keynote speaker. Wes Hall started the Black North Initiative. We, along with a number of companies, have signed on to the Black North CEO Pledge, which commits us to certain diversity thresholds. We're very proud of our overall diversity within the company, but at the senior level, there's more work to be done. Wes talked to our team about what it was like to come from Jamaica to Canada as a young and poor boy. And he gave us a window into hidden racism. But I think most importantly, it was a very inspiring talk. He talked about what's possible through mentorship and community.And then we heard from Isis Miller, who's the founder of Black Girls CODE. They're doing terrific work, helping young Black girls in the U.S. learn about computer science, preparing them for future careers in the STEM fields. And we're delighted to partner with Black Girls CODE, and who knows, maybe one day we can even recruit from their alumni.And we also heard from Red Door Shelter. This is a Toronto-based emergency shelter that helps women and children from domestic abuse and other families at risk and refugees. And during this pandemic, we're seeing obviously the impact on mental health, obviously, big increases in domestic abuse and suicide and overdoses. And so these type of organizations are extremely important, and we're very happy and -- to be partnering -- and partnering with them to allow them to do all the great work they're doing.And lastly, we also heard from our founders, David and Jeff, who talked to us about their own personal experience with racism coming from apartheid South Africa, and that was extremely impactful on our team. We're going to show everyone, both our team and our investors, that we really do genuinely care about diversity, and we're going to do everything we can to make it better and use our platform to do good.And so with that, I'm going to pass it on to Wissam to talk about our key financial priorities.

[Wissam Francis, Executive VP & CFO]

Great. Thank you, Gary, and good morning, everyone. Let me start with Slide 8 and reiterate the 5 key priorities, which we introduced last year. This includes: growing our core FFO per share at a compounded annual rate of 10% over 3 years; raising approximately $1 billion of third-party capital over 3 years; growing book value per share by reinvesting our free cash flows into accretive growth opportunities; reducing our leverage; and also improving our reporting. You can see these priorities on Slide 9 in a graphical dashboard.Let's start off with our 3-year FFO target. Another strong quarter for us. We achieved $0.11 of FFO per share, which brings us to about $0.35 per share year-to-date. Assuming the current trend continues, we're confident that we could hit our FFO target of $0.52 to $0.57 per share by 2022.In terms of raising third-party capital, our plan is to raise another $1 billion of fee-bearing capital over the next couple of years. In Q3, we continued to advance the process of syndication of our U.S. multifamily portfolio with 2 investors, and we believe we are on track to syndicate 2/3 of this portfolio by early next year. Also, we're on track to complete the investment phase of our SFR joint venture in mid-2021. We aim to raise an additional third-party capital for a second joint venture as we continue our growth.Another one you'll notice as our key priority is reducing our leverage, and our target leverage is 50% to 55%. In Q3, with the proceeds from our preferred equity raise, we were able to lower consolidated net debt to assets to 57%. Looking forward, we believe the proceeds from the syndication of the U.S. multifamily portfolio can reduce this leverage by another 5%. Even though our near-term leverage is 50% to 55%, we will continue to work to bring this lower over the long term.Our last key priority was to improve our reporting, which was substantially completed with our transition from investment entity accounting to consolidated accounting as well as adopting REIT-like MD&A disclosures such as FFO per share and AFFO per share. We also issued a comprehensive ESG road plan at the beginning of this year, and we aim to publish an annual ESG report early next year.Now let's tell you how we did. Let's slide over to Slide 10 and discuss our key metrics. First, our net income grew 74% year-over-year to $58 million. This included $78 million of NOI from our rental properties, representing 16% growth year-over-year. We also had a $60 million fair value gain from these rental properties in Q3 compared to $25 million in the prior year, reflecting strong home price depreciation in Tricon's core markets.Second, our core FFO per share increased 38% to $0.11, delivering on our strategy of growing our predictable rental income streams.Third, we reported AFFO of $0.08 per share, which translates to approximately CAD 0.11 and provides us with ample cushion to support our quarterly dividends of CAD 0.07 per share, reflecting an AFFO payout ratio of 60%.Let's move to Slide 11, which highlights the drivers that contributed to our FFO per share growth for the quarter. To put it simply, the year-over-year growth of $0.03 per share was entirely driven by our single-family rental business. This business delivered 14% growth in Tricon's share of NOI, reflecting a 10% increase in the number of homes in the portfolio, strong blend rented -- blended rent growth of 5.1% and a record high occupancy of 97.3%.The other businesses, including multifamily rental, residential development and fees from our private funds and advisory business were consistent with last year in aggregate.For-sale housing residential development was a bright spot as demand for new homes have been exceptionally strong during the pandemic. This was offset by lower contribution from performance fees and multifamily rental income. And lastly, our lower corporate overhead expenses and interest costs were offset by higher current tax expenses.Turning to our debt profile on Slide 12. As mentioned earlier, we've significantly improved our leverage and liquidity profile with the recent preferred equity issuance. On this slide, we focus on recent initiatives to improve our maturity schedule and debt profile. First, we recently extended the maturity of our $111 million credit facility related to our U.S. multifamily portfolio from December 2020 to December 2021. This leaves us with virtually no debt maturing over the next 12 months.Second, I'm pleased to announce that we closed our 2020-2 single-family rental securitization transaction 2 days ago. This $441 million transaction had a term to maturity of 7 years and most of the proceeds went to repay back our 2016-1 securitization loan that was secured by our wholly owned SFR homes.With the financing now complete and taking into account the prior joint venture securitization we completed in July, our consolidated debt profile now stands at approximately 80% fixed rate debt with an average interest rate of 3.17% and average maturity of 4 years compared to 3 years at the end of June.Let's take a closer look at the details of the new securitization transaction by sliding to Slide 13. First, we're able to price at an attractive fixed rate of 1.83%, which replaced the 3.59% interest rate on 2016 securitization. This results in approximately $6 million of savings in interest expense, generally -- generating a core FFO benefit of approximately $0.02 per share going forward.Second, the deal attracted 38 investors, 20 new investors to Tricon, and was approximately 4.5x subscribed, underscoring strong demand for our product and confidence in our operating performance from institutional investors.And lastly, we received net proceeds of approximately $60 million from this transaction. To give you a sense of what this means, it's equivalent to funding our 1/3 commitment to buy another 2,500 homes with our joint venture partners, which would take us to the end of the investment phase of the current joint venture. We believe with the current trend of lower interest rates, Tricon is well positioned to take advantage of favorable financing environment. As you can see, our 2017-1 securitization is due in a couple of years, but will be eligible for refinancing towards the end of next year, which could lead to further gains on FFO if the current rate environment prevails.With that, let me pass the call over to Kevin Baldridge, Chief Operating Officer, to discuss our operating highlights for the quarter.

[Kevin Baldridge, Chief Operating Officer]

Thank you very much, Wissam, and hello, everyone. While we remain focused on our financial metrics, I want to step back and emphasize that what really drives our team and our long-term performance is how we treat our residents.On Slide 14, we highlight 3 important initiatives this quarter that helped our residents through difficult times. The first is our Resident Emergency Assistance Fund. This fund provides financial assistance to select residents and has helped numerous families weather difficulty over the course of the pandemic.The second is our recent efforts to assist families impacted by Hurricane Zeta in the U.S. Southeast. There were 4 families that were severely impacted by the hurricane. We provided them with temporary shelter in hotels and are helping them relocate to new rental homes.And lastly, for the -- for several years now, we've been self-governing on renewal rent growth and have further restricted rents to help our residents remain in their homes for longer and to ease some of the financial burden of the current economic downturn. We believe these actions not only help build goodwill with our residents, but also inspire our team and reinforce our service-oriented culture.Let's now turn to operational performance of our rental businesses. Starting with single-family rental on Slide 15, which represents about 70% of our proportionate balance sheet exposure. Our single-family rental business continues to benefit from robust demand trends that existed before COVID pandemic and have accelerated in recent months, as Gary alluded to earlier. These demand trends are apparent in our same-home NOI performance, which captures over 15,300 homes.During the third quarter, our same-home NOI growth was 6.3%, which is a tremendous achievement that even surpassed our Q2 rate of 5.1%, and during the pandemic, no less. Digging into the numbers, our same-home revenues grew by 4.7%, driven by an occupancy increase of 160 basis points as well as average in-place rents that grew by 3.8% higher. During the quarter, our lease trade-outs trended to 5.2 -- to a 5.2% increase, consisting of 2.4% growth in renewals and 12.6% growth on new leases for the same-home portfolio.On the expense side, we saw a modest expense growth of 1.8% compared to last year, largely driven by a 4.9% increase in property taxes as our homes appreciated in value, and to a lesser extent, by rising insurance premiums. This was offset by a 1.2% (sic) [ 1.6% ] reduction in controllable expenses, specifically lower turnover costs as the turnover rate decreased by 470 basis points compared to last year. The annualized turnover rate was 26.1%, which is very low for a typical summer quarter. Taken together, the strong revenue growth and expense control translated into same-home NOI margin of 66.2% in Q3, another record for our business.And as we stepped into Q4, you can see on Slide 16 that the positive trends continue to hold into October. Occupancy has continued to track over the historical average by about 1 percentage point. Meanwhile, rent growth on new move-ins has remained north of 11%, which represents the significant loss to lease embedded in the portfolio that is built up over time while turnover remains low. Rent growth on renewals is likely -- likewise starting to tick up as a strong demand for our homes and is allowing us to push that metric up a bit, while still being sensitive to a challenging economic environment impacting our residents. If we turn to Slide 17, we thought it would be helpful to provide some more insight into 2 aspects of our single-family rental business. The first is our operations. Since the pandemic began, in addition to being keenly focused on maintaining higher occupancy, we have been attentive to controlling expenses by prioritizing essential repair and maintenance, while, at the same time, carefully managing the scope of work and delegation of authority so that our spending closely matches our budgets. This operating discipline, which spans across the organization from the head office to field staff, is all enabled through a sophisticated technology platform. And the results are evident in the KPIs shown on Slide 17, which demonstrate how we've been able to reduce the number of days that a home sits vacant by making our operations more efficient. So for example, since last year, we've compressed the time from when a resident moves out to when a new resident moves in by 11 days. This represents an estimated NOI benefit of $2.3 million annually across the portfolio. Or in simple terms, removing 1 day of vacancy earns us approximately $200,000 of NOI per year. We accomplished this by turning the homes faster as well by pre-leasing a greater number of homes.Another example is new acquisitions, where we've reduced our time to renovate and occupy a home by 17 days. That's about $1.7 million of savings per year or approximately $100,000 per day, assuming an acquisition pace of 800 homes each quarter. I will caveat that some of these savings were achieved because our staff had more capacity during the time when we paused acquisitions. And so we may give back some of the savings as we resume our growth. However, I'm confident that we've made some permanent improvements here that should contribute to NOI going forward.And that leads us to the second aspect of our business I wanted to touch on, which is acquisitions on Slide 18. We resumed our acquisition program in Q3, buying 388 homes within our single-family rental JV. As you can see on the slide, the geographies where we are buying have very large and active resale markets. And so there is no shortage of buying opportunities at our target cap rate of 5.9%. In fact, we already have 660 homes contracted for purchase in Q4 as we ramp up our buying program to historical -- to the historical levels of 800 homes per quarter.Let's now turn to Slide 19 to discuss our U.S. multifamily rental business. The softness experienced in this business in Q2 carried over into Q3 with same-property NOI down 11.9% year-over-year. While the percentage change is quite large, the dollar change was only $2 million and underscores the fact that our portfolio is still relatively small with 23 properties and is not as diversified as some of our public peers. About 88% of the NOI variance can be attributed to market-wide weakness in Houston and Orlando as well as weakness at specific assets we own in Dallas, Atlanta and San Antonio.If we unpack the components of NOI in aggregate, revenues were down 5%, mainly as a result of lower occupancy by 240 basis points, but also due to higher leasing concessions and bad debt provisions relative to last year. I would note that our concessions accounting policy is conservative, whereby we expense all concessions in the current period. If we were to amortize concessions over the term of the lease, our year-on-year decline would have been closer to 8.8%.The multifamily portfolio also saw expenses grow by 5.3% year-over-year. This was partly driven by higher property taxes as compared to the prior year when we benefited from a tax recovery as well as significant industry-wide increases in insurance premiums. You will also note a significant increase in utilities and other expenses, which reflects new services being rolled out to our residents such as bundled media offerings and package delivery. These expenses were essentially offset by an increase in other fee revenue.The silver lining in these results is that even though the NOI dropped by $2 million year-on-year, the FFO contribution of the multifamily business declined by less than $400,000 as we benefited significantly from lower LIBOR rates, which positively impacted interest expense on roughly 1/3 of the portfolio's debt that is tied to floating rates.On Slide 20, we present the more recent operating trends for the U.S. multifamily portfolio. The key message we want to leave you with is that we think the metrics have troughed and are now moving in a positive direction. Our occupancy nudged up to 93.3% as an average for October, and the spot occupancy at the end of October moved up to 93.7%. Likewise, our renewal spreads are improving, which is resulting in stronger blended rent growth. Importantly, we're able to achieve these improvements while reducing the use of concessions, which has moved from $420 per unit in July to $192 in October. This should serve as a positive tailwind for our NOI.With that, I'll turn the call back over to Gary.

[Gary Berman, President, CEO & Director]

Thank you, Kevin. I'd like to conclude with an overview of upcoming catalysts that our team is working on. First, we've talked about the syndication of the U.S. multifamily portfolio. We're planning to syndicate a 2/3 interest. We made significant progress this quarter, largely advanced the documentation. Our potential partners have also completed their physical due diligence. And now we're waiting on lender consent, which is a gating item, and we continue to believe that this will close in Q1 of next year. And that will raise about $350 million for us, which can reduce our leverage by about 500 basis points. We know leverage is a big issue for investors, and this makes us more investable.In addition to the syndication of the U.S. multifamily portfolio, we're also working on other capital raises across this strategy and others, including raising a dry powder vehicle to allow us to buy onesie-twosie or even a portfolio of garden-style multifamily properties in the U.S. Sun Belt. North of the border, we're in advance stages of working with a sovereign wealth fund to take advantage of development opportunities and even delocation in Toronto.On the single-family rental side, we're currently working on raising our capital pool or fund, which we call homebuilder direct, which will allow us to buy homes from homebuilders -- new homes from homebuilders, including completed or stabilized build-to-rent communities. And our joint venture 1, which is now 2/3 complete, should be fully invested by Q2, which will position us to raise a second joint venture within a large buy box in Q3 of next year. And so if we put all of this together, we believe that our longer-term goal of raising about $1 billion of equity capital by 2022 can actually be achieved next year or possibly within the next 9 months.And in terms of the single-family rental portfolio, we restarted acquisitions at 800 per quarter. But with these new potential investment pools or funds, it's possible that we could go from buying 800 homes per quarter to 1,000 or 1,200 or even 1,500 homes per quarter. So look for us to increase the acquisition program later next year.In terms of our legacy for-sale housing assets, this is now a very small part of our business, about 2.5% of the balance sheet, but it is quietly generating significant cash, as I talked about before, and we do expect another $320 million of cash over the next 5 to 10 years, which can be used for deleveraging and to reallocate to our rental housing business.And lastly, north of the border in Toronto, we continue to construct, develop and stabilize our Canadian multifamily development properties. We've got nearly 4,000 properties apart from the Selby, under various stages of development and construction. And we believe that when those properties are stabilized over the next 3 to 4 years and then we apply today's cap rates, we will be able to generate another $1 per share of value for our shareholders in addition to the existing IFRS NAV. So significant value upside there, and we're again quietly incubating a very valuable portfolio.So with that, that concludes our prepared remarks. I'll pass the call back to Mariana and take questions. And Wissam, Kevin and I will also be joined by Jon Ellenzweig, Andy Carmody and Andrew Joyner to answer questions.

[Operator]

[Operator Instructions] Your first question comes from Matt Logan with RBC Capital Markets.

[Matt Logan, Analyst]

Gary, in terms of your syndication of the multifamily portfolio with that transaction pending lender consent, would it be fair to say that you've ironed out other details such as price? And if so, has there been any change to your expectations?

[Gary Berman, President, CEO & Director]

No, nothing's changed. I mean this process takes longer than the public markets would expect. It just is when you're raising large pools of private capital, it takes many, many quarters. But there's been no change in the terms. And I think we mentioned previously in the last quarter that we expect the price to be in line -- roughly in line with our carry value.

[Matt Logan, Analyst]

Excellent. And in terms of the fund you mentioned to acquire one-off and two-off homes, is there a target for that AUM? Or would this just kind of be on a one-off basis each year?

[Gary Berman, President, CEO & Director]

We're looking to raise roughly $300 million of equity, which would probably give us buying power of $1 billion plus. And again, the strategy would be very similar to our existing portfolio of value-add, core-plus and allow us to go and buy one property a time in the Sun Belt or even a portfolio of properties. And so we've largely agreed to the buy box with our partners, and this is also something that we expect to announce in Q1 of next year.

[Matt Logan, Analyst]

I appreciate the color. And turning to your potential second SFR JV. When we think about the quantum of that transaction and the strategy, could you provide any color with respect to how that might be similar or different than the JV 1?

[Gary Berman, President, CEO & Director]

Sure. Well, JV 1, just as a reminder, is a $750 million equity commitment and $2 billion of buying power. The contributions, we're roughly 1/3, and then we've got 1/3 from 2 other major investors. At this point in time, it looks like that -- those allocations will continue at 1/3 each. But I would say it's likely that we'll have a slightly expanded buy box, which could allow us to maybe buy in a few other markets and also maybe at a slightly lower cap rate. Right now, we're buying at a blended cap rate of 5.9%. I think there'll be an opportunity to lower that slightly, which will allow us to increase our acquisitions. And as a result of that, I would also expect the overall pool or capital commitment to be higher, but that has not been agreed on yet.

[Matt Logan, Analyst]

In terms of funding that capital commitment, your stock's had a good run here over the past couple of months and is now trading largely in line with your IFRS NAV. Would you consider issuing equity to fund your share of that commitment?

[Gary Berman, President, CEO & Director]

We really don't need to. And if I talk about all of the commitments that are required for the various third-party capital strategies, including ongoing or outstanding commitments, when we look forward all the way to the end of next year, we really don't need to raise any capital. I mean, at this point, our credit facility has been paid down, and we expect that balance to be roughly 0 at the end of the year. So we've got lots of dry powder to take advantage of all these opportunities.

[Matt Logan, Analyst]

And in terms of potential investors, have you had any discussion with Blackstone given their investment in the preferred equity of the company?

[Gary Berman, President, CEO & Director]

Yes. I mean we have in Blackstone -- one of the reasons they're also a great fit is they also represent significant pools of private capital. And so they're another potential investor we can talk to on any strategy. But what I would say is that all of the potential fundraises I've discussed, they do not involve Blackstone. They are all kind of ongoing programs we've been talking to with existing investors and other investors. So we are really enlarging our pool of potential investors. Right now, we manage money for about 10 of the largest institutions in the world. And now to that, we can add Blackstone. So we've got a lot of different options going forward.

[Matt Logan, Analyst]

That's great. And maybe one last question for me. In terms of your acquisition cap rates, I believe it was mentioned that, that was around 5.9% earlier on the call. Has there been any change to that? And how should we think about the net impact of increases in rents versus increases in home prices?

[Gary Berman, President, CEO & Director]

There really hasn't. If you look at the 400 or just under 400 homes we acquired in a quarter, they were roughly at 5.9%. We talked about having 600 homes or so under contract this quarter, they're also in line with that. Remember that our buy box with our existing joint venture partners is very prescriptive. And so we do have to hit the targets. But essentially, we've had no issue hitting the volumes, the higher volumes in Q4. And what we're seeing is that the higher home price appreciation is being offset by higher rent. And so if your home price appreciation, your rents move up in lockstep, your cap rates essentially don't change. And so that's the environment we're operating in.

[Operator]

Your next question comes from Lorne Kalmar with TD Securities.

[Lorne Kalmar, Associate]

On the U.S. multifamily management internalization, when do you guys expect that to proceed? And what sort of cost savings do you expect to generate from that?

[Gary Berman, President, CEO & Director]

Well, we're planning to roll it out in Q2 of next year all the way through the end of the year. And I think that initially, there won't be a lot of cost savings. I mean remember, we've got to do a huge amount of hiring. We probably have to hire upwards of 200 personnel. And obviously, the vast majority are those at the property level, but there's a lot of hiring that needs to be done at the property level and in corporate to oversee the property management.So we don't expect any savings in the short term there in terms of overhead, but we do expect by being able to internalize the portfolio that we'll be able to drive much stronger operations. And as Jon Ellenzweig has said to me before, he said, look, we've got 5 people managing our U.S. multifamily portfolio and we've got over 500 managing our single-family rent portfolio, and that -- a lot of that is the difference, right? So we believe that when we can take this over, and obviously, drive our own culture, it will make a big difference, and it will lead to much better property level metrics.

[Lorne Kalmar, Associate]

Okay. Sort of synergies through culture.

[Gary Berman, President, CEO & Director]

Yes. But I would say over time, though, I mean, property management is a scale business. And so as we add on the dry powder vehicle and we enjoy synergies by combining single-family and multifamily rental, we do think that, that will drive the property management and overhead synergies in the future, but it's not something that will happen in the very short term given the amount of overhead we need to take on, personnel we need to take on to internalize the portfolio. It's more of a longer-term opportunity.

[Lorne Kalmar, Associate]

Okay. And then just on the SFR occupancy, it ticked down about 20 basis points in September and October. Is that seasonal? Or are you guys seeing kind of a flattening of demand for the product?

[Gary Berman, President, CEO & Director]

Well, I'm going to pass that over to Kevin to talk about what kind of demand we're seeing. Kevin, over to you.

[Kevin Baldridge, Chief Operating Officer]

Sure. Thank you. Yes, we have not seen a falloff in demand actually. We look at -- the number of homes that we have available to rent is down a lot, vastly from where it was a year ago, 2 years ago. And so we look at what kind of demand we have per available home or rent-ready home.So our leads -- compared to last year, our leads to rent-ready homes are up 38%. Our leasing for rent-ready homes are up -- is up 39%. Applications are up 61%. And we're pre-leasing anywhere from -- in September, October, we were pre-leasing 25% to 35% of the homes before they were even rent-ready. So I mean, we're constantly playing with kind of the demand or our rent versus occupancy. And we have a group of people that -- I mean, that's what they do every day is, we're pricing our homes, depending -- by market, by month, depending on the demand. And so occupancy will move up and down a little bit, but we're squarely in the zone we want to be.The same-home occupancy is still really strong. Our availability is at 4%, which bodes well for the next couple of months. I think what you're seeing possibly is also in the total portfolio, as we're buying more homes, those homes are taking a little bit long -- they're taking some time to fix before they're occupied. So our stabilized portfolio, which is the total portfolio, that's already been leased, it's at 97.2% or so. It's really more of the total portfolio that takes into account the new acquisitions, so it's come down a little bit. So we're -- to answer your question, we're not feeling any weakness in demand.

[Lorne Kalmar, Associate]

I had a feeling the answer would be something along those lines. With -- so you guys mentioned you think multifamily fundamentals have kind of troughed for you. Where -- when do you guys see positive NOI growth resuming?

[Gary Berman, President, CEO & Director]

Jon, I'm going to pass that over to you.

[Jonathan Ellenzweig, Chief Investment Officer]

Sure. Yes, I think as we mentioned earlier on the call, we saw things trough really in July or August. So occupancy has been trending upward. Our use of concessions has been reduced meaningfully. Expenses seem to be relatively stabilized. So we're seeing things point in a positive direction. On a year-over-year basis, it depends on what the comp was for the prior period, but we're starting to see sequentially improvements, which we think bodes well for Q4 and the future.

[Gary Berman, President, CEO & Director]

Yes. And Lorne, I would add that if we're talking about kind of year-over-year performance, it's probably going to be Q2 or Q3 until we see year-over-year improvement, right? Obviously, we've got tough comps coming in out of the -- coming from a pre-COVID era into this environment. And so we do expect Q4 and Q1 to be relatively stronger compared to this quarter, but on a year-over-year basis, will probably still be negative.

[Lorne Kalmar, Associate]

Okay. And then just lastly for me. With the syndication in November now completed, is that expected to drive any additional fair value gains? Or were those already recognized in the third quarter?

[Wissam Francis, Executive VP & CFO]

Yes. So we -- the securitization transaction will allow us to look at a few more fair value gains that will occur in Q4. Remember, what we do is we do BPOs and HPI. In Q3, most of the portfolio growth was driven by HPI. So those BPOs that we did for the securitization deal will actually come through in Q4. So yes, do expect some growth in fair value in Q4 and a meaningful number of that.

[Operator]

Your next question comes from Cihan Tuncay with Stifel.

[Cihan Tuncay, Director]

Just a couple of quick questions for me. With respect to the -- within the SFR business, at the Investor Day, which seems like a long time ago now, but you highlighted several initiatives to boost margins. On top of that, you've had solid rent growth on new leases in the post-COVID world. So I'm just wondering -- and you talked about a couple of puts and takes earlier on the call as well. I'm just wondering how much more blood is there, if you will, to extract from the stone in terms of NOI -- potential NOI margin improvement in that business, all things considered, going forward? It's been running pretty strong, so...

[Gary Berman, President, CEO & Director]

Well, a great question. Look, I think we can continue to grow the margin. And the reason for that is, obviously, you have to look at the interplay between your ability to drive revenue versus continuing expenses. And I think on the revenue side, we are seeing such strong demand, de-urbanization trends, de-densification trends. We talked about the re-leasing spreads, and essentially, the loss to lease in the portfolio. That is going to take us many quarters or periods or years to take advantage of that loss to lease.So given the demand we're seeing, Kevin just talked about some of the leasing demand metrics, which are the strongest we've ever seen. This is a business where you should be able to drive your revenues higher than inflation. And obviously, we're doing that in a sensitive fashion. We're trying to protect our residents and be sensitive to their situation as much as we can during this pandemic. Otherwise, I could tell you, our blended rent growth or rent growth would be significantly higher. We're definitely holding back, we're self-governing on renewals.But even with that, this is a business where we can -- over a long period of time, we believe we can drive revenue growth above inflation. And then on the expense side, it's just a question of whether we can contain them. And some of that's out of our control, like property taxes and insurance. But on the controllable expense side, we just keep on getting better. We keep on improving. R&M again this year is lower. And I think that really bodes well.And I think the last thing I would say, Cihan, is that on the ancillary revenue side, this is an area where we talked about some of the things we're undertaking in the Investor Day. This is an area where there's still lots of upside. We're still probably just scraping the tip of the iceberg.On smart home technology, we've only rolled out that to about 25% of the homes as one example. So as we get to that over the next couple of years, that's going to be another revenue driver in terms of ancillary income. So hope that helps. I can't give you any clear prediction on where the margin can go to. But let's just say this, when we bought Silver Bay, the margin on that portfolio and overall was about 57%. Today, it's 66% plus. We never thought we would get to 66%. But now we think over time, we can drive that higher as well.

[Cihan Tuncay, Director]

Appreciate the color there, Gary. And what's the -- on the theme of the de-urbanization trend, and as you look at potential new investment opportunities and syndication opportunities in the multifamily sector and considering the experience you've had with the current multifamily portfolio, how do you look at -- how do you choose where or what kind of product in the multifamily business you want to target for new investment opportunities going forward? Like what kind of metrics, what kind of geographies are you looking at versus the existing multifamily portfolio that you manage?

[Gary Berman, President, CEO & Director]

Well, look, garden-style multifamily or Sun Belt multifamily in the U.S. -- that suburban is benefiting from de-urbanization and de-densification trends, just not to the same extent as single-family rental. I mean if you look at some of our larger peers, their metrics are quite good, certainly compared to the gateway markets.The issue for us is we have a relatively small portfolio and we have a high allocation to Houston, Orlando, which are 2 markets that have been heavily hit by the pandemic. We really view the pandemic as an event. It's kind of a not long-term structural issue. So I think as we find herd immunity, or hopefully, get a vaccine, a market like Orlando will come back, right? Tourism will come back, and Orlando will recover.And so I think if we were looking to grow the portfolio, we'd be looking to add exposure to markets where we don't have -- so for example, Phoenix, we only have one property; Denver, one property. There's lots of other markets where we need to add scale. So the first course of action would be to try to add scale in markets where we have less scale. But we would continue to, I think, take a similar strategy to the existing portfolio, which is value-add or core-plus, right? Properties at roughly 10-year vintage, maybe we'd go a little higher to 20-year vintage, but largely newer properties where we could add some value.

[Cihan Tuncay, Director]

And just one last question from me. On the ESG front, you put out your report at the beginning of the year around the Investor Day. Just wondering if there's any progress on the -- on any -- in terms of getting any formal ESG rating or from the various rating agencies that do that? Any updates on the ESG front would be appreciated.

[Wissam Francis, Executive VP & CFO]

Thanks, Cihan. On the ESG front, there is a few, obviously, rating agencies out there. They typically work with public available information, and we try to reach out to them as often as we can as well. When we're thinking of putting out our first report, which will be early in 2021, we will be addressing all their issues, and we'll have also all of their metrics that they look for directly in our report. So it's an easy transition for them.In addition to that, we've also been discussing with them how some of our metrics tie and -- to make sure that they're fully educated when that report comes out. So you'll also notice that our ESG rating has actually been ticking up over the past couple of quarters because we continue to educate them over what we do. So look forward to next year on that report coming out, and hopefully, that will continue to improve our metrics.

[Operator]

Your next question comes from Mario Saric with Deutsche Bank.

[Mario Saric, Analyst]

Maybe just sticking to SFR, the same-home SFR NOI is up 5.7% year-to-date during probably the worst year economically that all of us have lived through. It seems like you're seeing positive momentum on the rent side in terms of further expense reduction potential, I guess, time will tell. But when we look out to next year, is it reasonable to think that you can achieve similar, if not better, same-home NOI growth in 2020?

[Gary Berman, President, CEO & Director]

Well, we would never -- look, it's -- we're very fortunate to be in this position, Mario, given what a difficult time this is. We don't provide, I think, any kind of formal guidance. But I think it's fair to say that if we looked out a year, yes, we can continue to print similar numbers. Our longer-term FFO targets assume NOI growth in that kind of 4%, 4.5% range. We're not assuming 5% or 6%. I think if we can deliver 5% or 6%, that's kind of beyond our own expectations, but it is possible, it is possible. Because, again, we talked about the re-leasing spreads. There's significant loss to lease in the portfolio. That's not going away.And then on renewal spreads, which is -- obviously, the revenue is the biggest driver of NOI. On the renewal side, that is starting to tick up a little bit, right? If you look at the October metrics, those are 3%. During Q2 and part of Q3, we were providing renewals that were flat, in many cases, or very limited increases to our residents. So as the economy starts to get better, and obviously, hopefully, if we have a vaccine, that obviously gives us the green light to start being a little bit more aggressive on renewals. And if that's the case, you should see stronger rent growth.

[Wissam Francis, Executive VP & CFO]

And Mario, if I can add to that, really quickly is we've also -- we're still ramping up on a number of maintenance service requests we do in-house. So we were at 61% at the beginning of the year, meaning the work orders that we were responding to were at 61% with in-house maintenance. And when we do that, we're doing it less expensive than vending out. When the pandemic hit, to keep everybody safe, we ramped that back down. We got to about 44% to 47%, we dropped doing in-house. We're back up to 57% now. We hope to end the year at 61%. And then next year, we still -- our goal is to be at 65%, and then eventually, 70% being done in-house. That's probably 2022 by the time we get there.We're entering in -- we're going to start next year with a preventative maintenance program so that we become more proactive and we can better plan our capacity with vendors and our own people. So I see continued expense savings and cost controls by doing a lot more in-house than we had in the past. So that's going to give us additional NOI improvement in addition to the ancillary services that Gary was talking about before.

[Mario Saric, Analyst]

Got it. And Gary, you kind of referenced the 2022 target, the $0.52 to $0.57, I think, FFO, reflects, call it, 4% to 4.5% kind of longer-term same-home NOI growth. So I was curious whether the target also reflects some of the interest expense savings that you've been able to achieve via recent securitization?

[Gary Berman, President, CEO & Director]

Yes, it does. It does. But the longer-term target did not anticipate aggressive deleveraging. So it is -- the FFO target is a function of how much we delever. I think if we delever more, we're probably at the lower end of the target. If we delever a little bit less, we're at the upper end of the target. But we still, I think, feel confident with that overall target. We're not getting the contribution right now from U.S. multifamily. But obviously, it's not a huge part of our business, but hopefully, that picks up. And then we continue to get the benefit of these interest savings as you saw with the last securitization, obviously, which is going to add about $0.02 per diluted share next year.

[Mario Saric, Analyst]

Got it. Okay. And then in terms of future fundraising on the SFR side, it sounds as if the plan is to essentially repeat the last fund, maybe a little bit bigger but same participants, maybe with a lower cap rate. Is that a fair comment? And I'm just curious whether the homebuilder direct fund that you're referring to, would that be part on that fund? Or is that a separate fund? And if so, what's the quantum of that?

[Gary Berman, President, CEO & Director]

No. That would be -- your commentary is correct. So I can confirm that on what we are going to call JV 2, likely same participants, likely larger, likely at a slightly expanded buy box and slightly lower cap rate, which should mean faster acquisition pace. And then homebuilder direct is a separate program, which will likely contain maybe different investors. And that program will specifically target new homes or new build-to-rent communities that are stabilized.Remember, we have a program right now with Arizona State, where we're developing build-to-rent communities. That's also a separate program. This program, what we call homebuilder direct, is buying existing but really brand-new homes or build-to-rent communities that are stabilized. So it really allows us to have 3 different buckets. And we talked about that one of the best ways to expand the amount of fee-bearing capital we have is to create these different vehicles or strategies within single-family rental, and that's essentially what we're trying to do.

[Mario Saric, Analyst]

Got it. And is it too early to try to quantify the capital potential within that fund?

[Gary Berman, President, CEO & Director]

Are you talking about homebuilder direct?

[Mario Saric, Analyst]

Yes.

[Gary Berman, President, CEO & Director]

Yes. We're looking probably at a fairly modest raise of about $300 million, that's equity, right, which again would give us buying power of nearly $1 billion. I think we could probably raise a lot more than that if we wanted to, but it's a new vehicle. It's a new -- essentially new business, and we'd probably rather raise a little bit less than more and make sure that we can find the opportunity. So I would say it's fair to say that we'll probably start at $300 million of equity and then go from there.

[Mario Saric, Analyst]

Got it. And then to be clear, that's different from the $300 million of equity that's expected on the U.S. multifamily side?

[Gary Berman, President, CEO & Director]

Correct. It's different.

[Mario Saric, Analyst]

Got it. Okay. And then I think you made a comment with respect to the Blackstone relationship as validation capital. Do you make that comment with reference to the public markets? Or do you also see that Blackstone relationship immensely helping on the private market side going forward?

[Gary Berman, President, CEO & Director]

Across the board. I mean Blackstone has got such a tremendous reputation in both the public and private markets. They've proven to be, I think, great partners. So it really is -- it's tremendous validation for our business. And we've seen that spill over into the public markets. Obviously, the stock market response to that deal was significant. And obviously, we'd like our stock to be a lot higher than where it is, but it's improving. On a relative basis, it is certainly better.But then, I mean, we're also seeing the spillover into the debt capital markets. Our latest securitizations, I mean, we're literally doubling the amount of investors that are coming in. And part of that, I think, is that the industry gaining more acceptance in our own performance, but I think some of it obviously has to do with Blackstone being there. And I think that if we ever wanted to longer-term explore dual listing, for example, having Blackstone there is also very, very helpful.

[Mario Saric, Analyst]

Got it. And in terms of the private market fundraising, would you have done -- like would the next 2 to 3 years look any differently if Blackstone wasn't there?

[Gary Berman, President, CEO & Director]

No. Because all the capital raises that I outlined on the call, the new joint venture that we're working on to take advantage of dislocation or opportunities in Toronto with a sovereign wealth fund, the recapitalization of the U.S. multifamily portfolio and accompanying dry powder vehicle, the 2 new single-family rental ventures we're working on, all of those were in the works prior to Blackstone. So look, it's great.Blackstone just provides more validation to those investors and helps them like probably feel even more confident about what they're doing. So that's all real positive. But those were all in the works pre-Blackstone. But I think Blackstone can definitely help take us to the next level and help us grow our business, and they've been very clear that's what they want to do with us.And obviously, having Frank Cohen on the Board, Frank, is the CEO of BREIT, which is the largest -- I mean, it's a $30 billion public core fund, and they're raising roughly $500 million a month. So there's a lot of dry powder there, too, if there's other opportunities we wanted to pursue together. So we feel great about the relationship, but the existing capital raises were in the works pre-Blackstone.

[Mario Saric, Analyst]

Got it. Okay. My last question relates to the likely Biden Presidency. I know it's early days, but any notable puts and takes from your perspective as far as the company is involved under essentially new presidency? And have you started to shift anything internally to address how they may look over the next 4 years?

[Gary Berman, President, CEO & Director]

Well, what I would say is that a President that could lower the temperature in the U.S. or on the world stage and be a little bit less combative, I think, has got to be helpful. So I think we certainly view that as a positive. What we're watching closely is obviously the Senate runoff, the races in Georgia and whether that would have any change. But I would say at this point, if Congress is split, then it's really status quo, and there's no change at all. And I think the markets certainly reflect that.If there was a blue wave and the Senate -- and we don't expect this, by the way. But if the Senate were to go Democrat as well, our feeling is that would lead to significantly more stimulus. So that would help our residents, but it would probably come with some other cost or legislation maybe on the landlord, tenant side that could be detrimental. So we kind of see -- I would view that as puts and takes. Nothing is for free. So again, we don't expect that to happen. But if there were a blue wave, I could see that unfolding.But I think more -- I'd say more broadly, I think my personal view is that the red states will continue to be red and the blue states will continue to be blue. And nothing changes that much depending on who's in power or what the executive branch looks like. And the U.S. has a more fragmented, more decentralized federal government compared to other countries. And so what's happening at the state level is often more important. And the red states tend to be more pro growth, pro business, lower taxes, and we think that's going to continue, and that's why we're continuing to invest largely in the red states.And then the last thing I would say is that in a blue state, in California, both Proposition 15 and Proposition 21 were voted down by the electorate, which was a great victory for the real estate industry and makes me feel better just overall about any kind of potential legislation that would make our industry more difficult. So I think that was really good news coming out of California.

[Operator]

[Operator Instructions] Your next question comes from Tal Woolley with National Bank Financial.

[Tal Woolley, Research Analyst]

So I want to talk about these series of JVs you're effectively creating within the single-family rental business. I'm just wondering like if we were looking at something outside you were pitching, I had a zillion dollars and you were pitching me as an investor, like what's the return profile kind of difference between getting involved in something like the Arizona State JV versus this homebuilder direct fund versus acquiring sort of the stabilized assets?

[Gary Berman, President, CEO & Director]

Yes. So Jon, do you want to give Tal an overview of kind of the way we see gross returns maybe in -- or gross IRRs amongst these various strategies or vehicles?

[Jonathan Ellenzweig, Chief Investment Officer]

Sure. Not a problem. So if you look at the vehicles, Tal, that you mentioned, starting with the Arizona State joint venture, that vehicle is really focused on the development of communities. So it's taking on modestly more risk because we're actually funding development. And for those development of build-to-rent communities, we're really looking at high teens, low 20s development IRRs. So that's really the IRR from when you acquire the land to when you have a stabilized communities -- community. So call that high teens, low 20s.And then when you turn to the other 2 vehicles, both homebuilder direct and JV 1 or the sequel of JV 2, in both of those instances, you're really buying finished homes. So you're not taking on development risk. And you're just seeing slightly different risks across those 2 vehicles, but you're getting to similar returns, which are essentially mid-teens type returns. So in buying new homes, you may be buying them at a slightly lower nominal cap rate, but when you factor in the lower CapEx, especially over the first 10 years of ownership, you get to a similar economic cap rate as you would from buying the used homes, where, again, you might have a higher nominal cap rate but more CapEx. So really homebuilder direct and JV 1 or JV 2 have similar returns. And then the ASRS vehicle has slightly higher returns because of the risk you're taking on with development, which, by the way, we think is very modest, and it's something we've been doing as a firm for over 30 years. So does that help answer your question?

[Tal Woolley, Research Analyst]

Yes. No, that's perfect. And I guess just my last question. In the single-family rental business, like it seems you've had this tremendous institutional interest over the last decade in the asset class. And yet, we're sort of looking at things a decade later plus, and one thing I don't hear you guys kind of talking about a lot on the call is competitive actions or facing competition from some of these other players that are out there. It seems like you guys have thus far kind of stayed out of each other's way. Do you think that continues? Or as you see more capital kind of getting into the class that it might get a little more competitive going forward?

[Gary Berman, President, CEO & Director]

Well, look, I think -- I would say, at this point, we welcome additional capital. Obviously, Brookfield has come into the business. So there's other big players that are coming in. And I would say we welcome that type of competition and capital because it further helps institutionalize this business. And I would say it's really only been institutionalized over the last 2 or 3 years. It's not 10 years. And I think there's actually still some that are even skeptical about the business, which is hard to believe given how strong the demand fundamentals are. But it's just starting to institutionalize.And it feels like where maybe U.S. multifamily was in the kind of maybe not early '90s when it started, but mid to late '90s, right? I mean there's still -- I think this industry is still in the very early innings of what it's going to become and how much market share it's going to have. And so -- and I think that helps answer the rest of the question, which is that if you look at the industry, we and our peers own roughly maybe 2% of the entire universe.Like depending on how you count it, there's about 16 million single -- households renting single-family homes. And maybe collectively, we own 2%. And if you look at U.S. multifamily, institutions probably own 10% plus. So it's still very, very small. And at this point in time, we're essentially able to sit on the dock together and fish, and nobody gets in anybody's way. And it's a very collaborative industry. And there's just -- if you think about it, we're just trying to acquire 3,000 or maybe more 4,000 homes, but there's 6 million homes trading a year. So just -- it just puts in a perspective how small we are relative to the broader investment set, and that goes for our peers, too. So there's lots of opportunity to go around. And the institutional competition is not impacting our ability to acquire homes at all, but it is impacting the cost of capital, and it is bringing those -- that cost of capital down to our advantage, both on the equity and the debt side.

[Operator]

I'm showing no further questions at this time. I will now turn the call back over to the presenters.

[Gary Berman, President, CEO & Director]

Thank you, Mariana. I'd like to thank all of you on the call for your participation. We look forward to speaking to you in early March when we discuss our Q4 and full year 2020 results.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.