Greetings, and welcome to the American Homes 4 Rent Second Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Miss Stephanie Heim. Please go ahead.

Good morning. Thank you for joining us for our second quarter 2017 earnings conference call. I'm here today with Dave Singelyn, Chief Executive Officer; Jack Corrigan, Chief Operating Officer; Diana Laing, Chief Financial Officer; and Chris Lau, Executive Vice President, Finance of American Homes 4 Rent. At the outset, I need to advise you that this call may include forward-looking statements. All statements other than statements of historical facts included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. All forward-looking statements speak only as of today, August 4, 2017. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A reconciliation to GAAP of the non-GAAP financial measures we are providing on this call is included in our earnings press release and supplemental. You can find our press release, supplemental, SEC reports and the audio webcast replay of this conference call on our website at www.americanhomes4rent.com. With that, I will turn the call over to our CEO, David Singelyn.

Good morning, and thank you, Stephanie, and welcome to our second quarter 2017 earnings conference call. I will begin today's call with an update on our business and company outlook. Jack Corrigan, our Chief Operating Officer, will review our operating and leasing results, update you on our 2017 expectation and provide more details around our transaction activity. Diana Laing, our Chief Financial Officer, will provide further detail on our operating and financial results for the quarter, our recent capital markets activity and our balance sheet metrics. In addition, as Stephanie indicated, Chris Lau, our Executive Vice President, Finance, is here with us and available to answer your questions. And after our prepared remarks, we will open the call to your questions. Strong supply and demand fundamentals in our markets, along with our exceptional platform and personnel have produced second quarter operating results that continued to demonstrate the strong performance we have seen for a couple of years. Our Same-Home occupancy rate remains strong at over 95%, and our Same-Home property portfolio's core NOI after capital expenditures increased by 7.4% over the prior year. Our Same-Home operating margin was 64.3% in the second quarter, a 170 basis point improvement over the prior year. Our reported core FFO of $0.26 per share, a 4% increase over the same period in 2016 and our adjusted FFO or AFFO was $0.22 per share in the second quarter, up 5% over the prior year. Importantly, these results were achieved while the company significantly delevered its balance sheet. Jack and Diana will provide more details and outlook on our operations later on the call. As I sit here today, I'm extremely proud of what we have accomplished. With our platform in place and demonstrated access to a lower cost of capital, we are uniquely positioned to…

Thank you, Dave, and good morning, everyone. I will begin with our operations. For our Same-Home portfolio results, which reflect the performance of 36,790 homes, in the second quarter, we reported revenue growth of 3.6%, expense decreases of 1.1% and a capital expenditure decrease of 4.6%, resulting in a 6.5% NOI increase and a 7.4% increase in NOI after capital expenditures. During the quarter, we maintained -- on the leasing front, during the quarter, we maintained strong average occupancy levels of over 95% in our Same-Home pool, supported by modest improvements in quarterly turnover rate to 11.5% from 12.5% a year ago and quarterly turnover times to 48 days from 50 days a year ago. We continue to experience strong demand for our properties during the quarter with our call center receiving over 170,000 inbound leasing calls and our automated access technology facilitating approximately 83,000 prospective resident showings. This represented an average of 3.7 weekly showings per available home, an increase of 2% over last year. As a result of the strong demand in our markets, our data-driven pricing models were able to achieve portfolio-wide rental rate increases of 6.1% and 3.2% on new and renewal leases, respectively, which translated into an overall blended rental rate increase of 4.4%. We continue to see strong leasing demand indicators into the beginning of the third quarter. But remind you, that consistent with the seasonal trend in prior years, rental rate increases may taper towards the end of the quarter in our efforts to minimize vacant homes as we head into the slower winter leasing seasons. With respect to property taxes, during the second quarter, we received 2016 property tax bills for certain states that were lower than our prior estimates. As a result, our quarterly property tax expense for the Same-Home portfolio…

Thanks, Jack. In my comments, I'll briefly discuss our operating results for the second quarter, our recent capital markets activity and our balance sheet metrics. Our financial results, including GAAP and non-GAAP measures, are fully detailed in our earnings release and supplemental information package that are available from our website in the For Investors section. During the second quarter, we continued to produce growth in operating metrics. Our results include the impact of both reducing leverage and enhancing our capital structure by exchanging short-term variable rate debt for permanent fixed-rate capital. Our core FFO for the quarter was $0.26 per share, which represents a 4% increase from $0.25 per share for the second quarter of 2016. AFFO for the second quarter was $0.22 per share, up 5% from $0.21 per share for the second quarter of last year. Our second quarter capital markets activity included our issuance of permanent fixed cost capital in the form of perpetual preferred stock, generating gross proceeds of $155 million. We also issued common stock through our at-the-market program, generating gross proceeds of $5.1 million. Since we announced our achievement of investment grade ratings early in the second quarter, we finalized an amendment to our credit facility, unencumbering assets and reducing our borrowing costs as a result of our ratings. Our $1 billion facility is now priced using a standard pricing grid based on our ratings and it's completely unsecured. Since the end of the second quarter, in July, we issued perpetual preferred stock, generating gross proceeds of an additional $115 million. Pro forma for that transaction, we now have borrowing capacity of $800 million on our revolver. We have approximately $90 million of unrestricted cash and we expect to retain approximately $220 million per year in cash flow after distributions. Finally, on Page 15 of the supplemental, we provide some balance sheet and credit metrics. As of June 30, 2017, total debt represented 23% of our total market capitalization and preferred stock represented 11% of total market cap. Net debt to adjusted EBITDA was 4.8x, which compares with 7.3x a year earlier. Our fixed charge coverage was 2.9x, and 61.5% of our NOI is generated from unencumbered assets. We remain committed to maintaining a best-in-class balance sheet that provides us with multiple sources of capital and flexibility to support our growth objectives. And now we'll open the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Juan Sanabria with Bank of America.

I was just hoping you could just speak to the $1 billion pipeline you mentioned for 2018. In terms of the split, we should expect, between traditional acquisition, maybe any bulk portfolios in there? Any assumptions in the new build-for-rent products? What it would be for third parties? And what would be in-house?

I'll take that. Traditional channels, we expect it to be about 2/3 of that total. And then through the newbuild, either through partnerships with homebuilders or our own build, we expect it to be about 1/3. And I would say, probably split about half and half on the in-house versus the relationships with homebuilders.

And Juan, it doesn't exclude any potential bulk acquisitions that we may acquire. As we have mentioned, that's a lumpy process. It just takes a long time to cultivate those, and we continue to be in discussion with a number of parties. But whether they become reality or not, we will announce it when we have something to announce.

Okay. And then I was just hoping if you can give us an update on the move out to buy statistics. I know you kind of quoted a survey last quarter. So if you could just give us an update there. Just particularly, if you have anything to highlight in the Sunbelt where occupancies were down year-over-year.

Well, our surveys show about the same as last year, in the 35% to 40% of our move-outs are attributable to people going out to buy their own home. And we don't see it any higher in the Sunbelt than anywhere else.

And any sense of what's driving the lower occupancies across some of your Sunbelt markets?

End of quarter?

Yes. Overall, on the Same-Home portfolio, let's see. On the Sunbelt...

If I look at Dallas, Charlotte, Houston -- I mean, Houston, I could understand, Nashville, Austin, they were all down kind of 1% year-over-year. Any insights into what's driving those markdowns?

Not a lot of insight. I mean, we're pushing rates pretty heavily in most of those markets. We're also not in Dallas. But we're adding products, so that may have some impact on it. But overall, we're in excess of 95% leased. I would expect Dallas in those areas will catch up fairly quickly in comparison to last year. They just had -- they had pretty strong comparables to last year. That's probably the main reason.

Our next question comes from the line of John Pawlowski with Green Street Advisors.

Curious on the in-house homebuilding front. What needs to change on the G&A side or platform organizational side to carry an in-house development team across the full cycle?

We're adding some land acquisition guys, some purchase managers and some oversight. So there will be some, but I don't think it's going to be material to the income statement.

On the administrative side, it's very nominal. We've got an additional software component that's already in place. And with respect to the balance of what you need to, for the oversights piece, nominal. It's really going to be more in the field. And the key to the program is your land acquisition program.

Okay, I -- Jack, I think you referred to a 50 to 100 bps premium over traditional acquisition. Do you think that's a sizable enough spread to compensate you for the risk for on-house development -- or on-balance sheet development?

I do. And one of the key benefits to doing it is building it with a resilient flooring. And we've, really, in the decks that we've put in are the plex decks. So you're not putting in wood and fiberglass railings. So I think the long-term maintenance of this is -- it will probably add to the 50 to 100 basis points over time. But I really think this is going to be -- and it appears to have a very strong demand. Of the 8 that we finished, 5 of them leased before they were finished, built -- being built and 2 leased in a couple of days. And the only reason the other one was sitting out there a little longer is we had an approved applicant we thought was going to move in, and they canceled it the last minute. So they all leased really fast, the product is really nice.

And John, another way to look at it, I mean, when you mention 0.5% to 1%, it doesn't sound significant. If you look at the cost of the asset, it's going to be a 10% to 20% cheaper product for the exact -- or cost for the same product and increasing yield from mid to high 5s to mid 6s to mid 7s. So it really is a significant benefit to the organization.

Sorry, the 50 to 100 bps, that does or does not contemplate a cheaper acquisition price?

That's where it's really coming from. That's total investment. It's -- so...

Sorry, I got cut off there. The 50 to 100 bps premium, does that contemplate the cheaper acquisition price?

That's correct. I mean, you're -- it's the same product in the same markets. It's just that we're being able to develop it with a better product and a little bit cheaper price, investment cost.

All right. Last one for me. At current pricing, how would you rank your -- the attractiveness of your sources of capital?

Want to take that?

I'd say, as we look to raise additional capital when we need it, we'll be -- we will assess the cost of the different sorts of capital at that time. I think you'll see a blend of common and leverage that will maintain our current credit metrics since we're conscious of our investment grade ratings and the desire to keep those ratings or even improve them. So capital markets, at the time that we need the capital, will really be a driver of the decision of what sort of capital to raise.

But under today's pricing, on both the equity and debt markets, you would fund -- if you had to fund 10,000 homes tomorrow, you'd fund it with a split of common equity and unsecured?

Yes, I mean, John, you're going to have to balance the leverage component with the common component with respect to maintaining your rating. The ratings are important to continue to drive the entire cost of capital down. And when you look at the different components of leverage, you have different benefits, long-term permanent capital, which reduces -- significantly reduces future risk. And then shorter term, which enhances shorter-term returns. So we take all that into account.

Our next question comes from the line of Steve Sakwa with Evercore ISI.

Just wanted to, I guess, touch on the expense side of things. I mean, I know that overall property expenses were down about 1% in the second quarter. They're running down about 2% on a kind of first 6-month basis. I'm just curious kind of what your outlook is for maybe the back half of the year. And then as it relates to top line growth, you basically put up about a little over 3.5% growth in both the quarter and 6 months and rent growth has been a little bit stronger. There's been little bit of occupancy weakness. Do you see anything materially changing as it relates to top line growth in the back half of the year? Are the comps kind of easier or more difficult as you look over the next 6 months?

Well, I'm not sure that 95.2% occupancy is weak. But to answer your other question, I think the rate growth will -- we've given guidance of 3.5% to 4.5%. It's probably 3.5% to 4% is more -- after we've gotten into the year, 6 months into it. On the expense front, we've talked about property taxes being in the 3% to 5% growth. And I would say the remainder of expenses will likely be slightly down or flat.

Our next question comes from the line of David Corak with FBR Capital Markets.

Thinking about your -- the efficiency of the in-house, I mean, its platform. Can you just update us on some of your metrics you've given in the past on kind of a per tech basis? And I'm just curious, what's your average response time or time to a resolution for a maintenance issue? Or whatever kind of metric there makes sense to you? And how has that changed over time?

As far as our in-house, it hasn't improved that much in the -- throughout the summer because we've repurposed our technicians to only work on HVAC, which is our highest cost maintenance item. So you don't have quite as much efficiency in the driving and because they're -- before they were going to anything in their area. And so we've had -- made some efficiencies, but I think it was 4.6% -- or 4.6 work orders a day. I think we're at 4.8 in July, which given what we've repurposed them to do, I think, is pretty good. And the other question was, sorry, I'm getting old and I don't remember all the questions.

Just kind of your average response time or time to a resolution of a maintenance issue, [indiscernible] look at it.

Yes, that's -- I mean, we try to get it done within 24 hours if we have the parts and the ability to do it. If we have to hire it out to outside vendors, we're probably in the 72 hours on average. And how that's improved -- well, it's improved in a number of ways. Our ability to handle the volume of calls through our call center has gotten a lot more efficient. And in our vendor relationships, we have a better scoring system to keep the good vendors and not keep the ones that aren't serving our tenants and us properly. So that's come way down. Depends on what year you're measuring it against, but the -- it's probably been cut in half over the last 12 to 18 months.

Well, okay. And then I want to talk about the floor that you guys are putting it in, and I think you said on the second story on some of these houses. Obviously, it picks up your cost to maintain initiative. But how do you think about the economics of that over time? Maybe on a yield basis, something along those lines? And then are there other items like that, that we could expect to see where you're realizing that you could get a decent yield on these things? I'm not asking you to give away any secret sauce or trade secrets, but any kind of color on that would be helpful.

There's lots of items. I think flooring is probably the biggest. If we ever have to change out decks, which we've put in the more expensive plex decks with fiberglass railing that lasts forever. Trees, removing trees instead of trimming them every year is one thing that we focus on. Fences, a lot of builders put in fairly cheap fences and don't support them with the beams, the metal beams or metal posts. And so when those get damaged, we're doing it a little nicer and more sturdy and less likely to blow down. We have a lot of fence issues in Texas and a lot of deck issues in Georgia. So those are items that we look at. But I would say, flooring is probably most significant. And these floors are easy to repair. They are -- they can last 20 years. So they're very durable. I -- it's -- they're about twice as expensive. So one turn of the carpet and you've made your money.

Okay, that's helpful. And then could you share the re-leasing trends for the individual months in the quarter and maybe for July, if you have them?

The re-leasing? You mean, what are the...

Yes, if the growth rate has to with growth spreads?

Yes, it's slightly less than what the second quarter is. I think it's in the high 5s.

Okay. And did it trend up over the course of the quarter? April to May to June?

I don't know.

Well, April to May to June and then it starts trending down in the third quarter. I would expect August to be lower than July and September to be lower than August.

Our next question comes from the line of Jade Rahmani with KBW.

I was wondering if you could give some thoughts on why your all-in costs, the $1,900 or so per home for maintenance, turn costs and CapEx, why they seem to be consistently below some of the other major players in the space.

Well, if I knew exactly what they did, I could probably tell you that there's probably some aspect of it that is age related. I think we probably have the youngest vintage of homes. But I think that our in-house service is a big part of it. And then we're very conscious about when we turn a house that we don't overspend on the turn.

I will add one other thing. In addition to just having in-house technicians that service a lot of the work for us, we also handle 100% of the order intake and can triage that order intake more efficiently with our own people than using third parties. Jack and Bryan and their teams have also hired a number of subject matter experts over a number of areas, whether it's roofing, HVAC, flooring, plumbing are the ones that comes to mind. And any large ticket items in any of those specialized areas goes through a subject matter expert to ensure that we are doing what we should be doing at the appropriate cost. And so I think the infrastructure around maintenance is a little more robust.

If you look at 2 years ago, we were up where they were. So we've made the improvements and brought the cost down.

In terms of the capital spending, are you looking at any revenue enhancing CapEx options in consultation with customers in order to promote a longer stay?

Well, we do revenue -- enhancing our expense, decreasing capital expenditures like the flooring and the fencing and all that. But we don't break it out as a separate line item.

On the M&A environment, would you look at anything outside the typical single-family rental bulk portfolio or even some of the larger portfolios and expand into other products such as potentially attached homes, townhomes, even homebuilding, maybe some material land acquisitions or perhaps a different demographic?

Well, I think to date, that's a step-by-step process. We're focusing on our -- we focused on our core operations on day 1. We are starting that branching out, if you want to call it that, into the homebuilding aspect of the residential vertical. So today, we are not only partnering with the homebuilders and having relationships with them and buying some of their inventory. We're also building, as we've discussed earlier, a homebuilding component to our operation. As we move forward, whether we should be in other verticals of the residential area, such as senior living or student housing or multifamily, that's a decision for the future.

And just lastly, wanted to see if you could provide your updated thoughts on the common stock dividend, if you would like to increase that potentially.

Well, today, we are in a growth mode. We've talked about the opportunities that are out there and the ability to acquire additional investments accretively. And I believe one of the cheapest ways of doing that is through retained cash flow. And today, we talked about having $220 million of retained cash flow. We have a distribution. We do monitor it quarter-to-quarter. And we discuss the best use of our capital. And right now, I believe it to be in the reinvestment into the company. It's a lot more tax efficient and capital raising efficient means to fund your operations.

Our next question comes from the line of Haendel St. Juste with Mizuho.

A couple of quick ones from me, please. Jack, I was hoping maybe, and as a follow-up to an earlier question on the in-house maintenance program. It's been about a year since you rolled out the program. I'm curious of your assessment of the program or perhaps the progress report on the program and its impact so far. Is it on track, meeting your expectations? And I would also love any incremental thoughts that you might have now on your expected benefit of the program going forward, given your experiences here over the past year.

Yes. I think that the program is operating very nicely. One of the goals in operating the program was customer service. Our customer service surveys that we get after in-house is 92% favorable versus when we send the vendors, it's in the 60s. So I think that the customer service aspect is there. Long term, we'll see, I think, big benefits in maintenance. But because they go and they -- when they're at the house, they change the air conditioning filters, they check under the sink and make sure there's no leaks that are damaging, that can produce large repairs and maintenance, and molds and those kind of things. So they're doing stuff and they're asking the tenants when they're there, "Is there anything else I can do for you while I'm here?" You can't really have a vendor do that, or your costs are going to go up pretty high. So from that perspective, I think we'd like to expand it and I think we're getting ready to expand it and hopefully take more off of the vendors' work list. And they're just a more -- they're a more reliable source for work. It just -- so what was the other part of the question?

I was just trying to get a sense as to if you had any updated thoughts on the expected benefit going forward given the experience over the past year? I'm just trying to get a sense of [indiscernible] any closer to quantifying the [indiscernible]

I don't know that I could quantify it. But every discipline that we've rolled out, we've gotten better and better. And I would expect that we'd get better and better at the in-house maintenance also.

This program has been out for just around a year now. And everything that you do, you learn as you go. And you have the ability to refine that process and reemphasize -- or emphasize certain areas over other areas and how you look at work. I think there's still tremendous opportunities in this -- in the in-house maintenance. In scheduling work during on non-peak times, et cetera, we can get better at that. But we've seen significant benefits. Our air-conditioning, HVAC work, not only are we doing it more proactively, faster, we have less customer concerns. But we're also doing it more efficiently from a cost standpoint. And I think we can -- that, that will be able to be in other verticals. We're already seeing it in some of the verticals like fencing and things like that, where we're more proactive in deck work.

Appreciate the color. So a question on the balance sheet, Diana, I guess, for you. Current debt to EBITDA, 4.8%, I believe, certainly the lowest in your peer group by a mile and amongst the lowest in the REIT sector. Curious if that's a level we should expect going forward, at least in the near term? Or maybe could we see -- incrementally lever up to perhaps fund the acquisitions of some sort?

Well, I don't expect our overall leverage to increase dramatically. I mean, there may be some temporary increases if they are -- depending on the pace of acquisitions. I think generally, we would expect to see modest improvements in debt to EBITDA. But because we are acquiring and renovating and/or building homes, there are times when the dollars are put out in advance of actually seeing any EBITDA from the property. So I would caution you about looking for major improvements there on the short run.

Got it, okay. Dave, one last one for you. The obligatory portfolio opportunities question. Curious how do you characterize any available opportunities out there today? Do you see anything incremental come across your desk over the past quarter? Have you underwritten any lately beyond perhaps the GI portfolio that SFR acquired?

I mean, well, I think we've underwritten 5 or 6. Some of them are still active in the marketplace. A number of the portfolios that we -- we actually, I think, have underwritten a couple more than that. There's a number of portfolios that we've actually underwritten 5 or 6 times the same portfolio and it still hasn't traded. It's just the nature of how that consolidation process works. I would envision almost every large acquisition has taken a significant amount of time and -- to be completed. Yes, there are some out there right now. We are in discussions on a few of them. And maybe they occur, maybe the sellers decide to wait for the future and it doesn't trade at all to anybody. So yes, there are a number of them out there right now.

Have you noticed any change in the required return? Sounds like obviously these conversations, as you point out, can take some time. Expectations can change from one conversation to the next. But just curious if you're noticing anything different in perhaps the tone or pricing expectation.

I would say it's very, very difficult to really articulate that. I'll give you an example. There's one portfolio we've looked at, I think, 3 times. And we actually bid what they were asking. And then they said, "Well, we want to take another look," and they pulled it off the market. So it's hard to determine who is shopping and who is trying to just price their portfolio.

Our next question comes from the line of Douglas Harter with Crédit Suisse.

I was hoping if you could just talk about -- what do you think that the biggest changes have been that's leading you to accelerate your growth in homes?

I think it's just part of the natural life cycle we -- in our early days, it was a land rush to attain the necessary scale to have the capability of building your own in-house platform on an efficient basis. We slowed down a little bit to enable that process, to stabilize and to have proof of concept through the next -- we saw prices go up. But capital costs are still expensive, and we're able to bring our capital costs down. And today, we are not only well positioned from a platform standpoint but also a capital standpoint to take advantage of the opportunities out there, to do it in a responsible way that we can bring it in and the platform is very, very well positioned to absorb significant growth. And I think we've got our capital stack over the last year in place to do it in a very accretive way for investors. And so I think it's just getting the building blocks in place to take advantage of it.

Our next question comes from the line of Buck Horne with Raymond James.

I kind of want to go back and maybe rephrase the question Jade posed earlier. But just thinking about the build-for-rent side of the equation going forward, just thinking about the math here. So you're spending $0.3333 billion on build-for-rent next year and half of that going to your in-house homebuilding component. That kind of puts you in the range, if I'm not mistaken, probably in the range of 800 houses a year give or take, puts you in the range of being a top 50 U.S. homebuilder. I guess, number one, how do you think about land sourcing in terms of acquiring the lots for that kind of pipeline? Are you thinking about doing any land development on your own? And would it not make some sense to even think about buying another homebuilder with a decent land pipeline in front of them?

Want to take it or...

Yes, I'll take it. Yes, and I recognize that it makes us a pretty good sized builder. We were fortunate in our acquisition. People, we have some senior guys that we hired as acquisition guys that were homebuilders. And as you know, in 2011 and 2012, there wasn't much for them to do so they came to work for us, and now we've repurposed them out of acquisitions to do the homebuilding and they seem to be doing a pretty good job. We've also hired some land acquisition guys who are experienced land acquisition guys for homebuilders. And they're out, they know what we want and in the markets that we want. And one of the advantages to the homebuilding is with the increased yields, it allows us to grow it back into markets that we have been priced out of due to yields and build there. So we're really excited about that. We've considered buying a homebuilder. I'm not sure. That's just a consideration. We haven't really put any level of effort into it.

Okay, all right. And maybe just another quick one for G&A guidance for the rest of the year. Is there any items or something you need to be aware of in terms of G&A or stock comp or anything at the overhead level to be aware of this year and next?

Nothing that comes to mind.

I feel like we're at a pretty decent run rate [ for second ] quarter.

Our next question comes from the line of Anthony Paolone with JPMorgan.

As you look at the pipeline and the $1 billion, you said, it puts you back in growth mode for sure. Does it -- what kind of impact should we expect in terms of the portfolio footprint? Do you think you can narrow it as part of this growth? And if so, can you highlight any geographies you think some of this capital might be skewed toward?

We'll continue to grow in some of our general target markets in the Southeast, North Carolina, Florida, South Carolina. But we'll be able to hopefully find some stuff in some of our markets where we're a little smaller in, Seattle, Boise, those kind of -- Salt Lake City, where we're a little smaller and we can grow and really not add a lot of personnel. So I'm excited about that aspect of it.

Okay. But it doesn't sound like you'll focus at all to just 10 markets. And some of these other smaller markets that get bucketed into other will just eventually kind of go away. That sounds like you'll actually spread the $1 billion or so around and kind of keep things or actually perhaps make it a little more evenly dispersed. Is that fair?

Yes, I mean, in order to have in-house in a market, you probably need a minimum of 500 to 600 homes. And I'd like to -- if we can take some of the markets where we have 300 or 400 homes and get them up to 600, that would be preferable but not necessary. And we're operating pretty efficiently in those markets. So -- but there is some consideration to growing in markets where we're not as big.

Okay. And then on the same-store results, if I look at property management expenses and just the ability to have those come down, how much of that's just improved chargebacks versus just -- or just allocation, same-store versus nonsame-store versus just the overall entity level property management function?

Yes, there's really no chargebacks in there. I mean, our chargebacks relate to utilities and maintenance. There's -- the only -- and it's so immaterial that there's a few dollars and it's probably in the $10,000, $20,000 range that relates to eviction costs that are in there that get charged back, but it's almost nothing. The real difference that you are seeing in the property management costs, and it's not the allocations, we've allocated it evenly across each property, is the efficiencies that we continue to drive from our platform. We focus on that. No different than we focus on the -- creating a more efficient maintenance program. And so it's all -- it's not about a single line item. It's not about just the top line, not about just one single expense line. It's about all the lines in the capital -- or in the income statement that we focus on. And we have become more efficient over the past year. We have, if you were at our Investor Day, the -- our systems continued to grow and be built and be refined and enhanced. And you're seeing the benefit of that both -- mainly in your property management cost.

Okay. And then there's always talk about fee and other income in this business. Do you see much opportunity on that front? Or is it down a little bit year-over-year?

The other income from properties, I'm not sure I...

Well, there's a number of small fees, application fees, late fees, which we're happy when those go down. I would expect that the decrease is related to late fees. We auto generate now the letters that go out and we're better at reminding people that in a day, they're going to start owing late fees and then they pay. We have some ways of letting them pay right away with -- through -- going into convenience stores and making payments. So we're getting better at getting collections done earlier, and that's going to bring down the late fees.

Okay, but it sounds like...

We don't really have anything in the pipeline to generate additional sources of income at this point.

Okay. And then just last question, just maybe for Diana, just small detail on the P&L. You guys had about $2.5 million of gains, then you took $900,000 out to get to [ half ], what was the rest of that gain from?

Yes, hold on one sec. The -- oh, it's actually -- we take out -- you're right on the gain number. The adjustment to FFO is removal of gain net of impairments taken in the quarter, which go into the other expense line item.

Our next question comes from the line of John Pawlowski with Green Street Advisors.

Jack, thanks for providing the July re-lease growth rates. Can you round it out and provide renewals and occupancy trends as well?

We had net absorption in July. I haven't seen what the -- it's only a couple of days ago and I have been preparing for board meetings and this. So I haven't really seen what the occupancy level was for Same-Home at this point for the month. But I know we had net absorption on overall, so more move-ins than move-outs. And both the -- on renewals, we're pretty committed to being reasonable on -- with our existing tenants, and I think you're always going to see us in the 3% to 4% range.

Okay. One last one for me. You mentioned there's not much left in the hopper on other income. The expense control initiatives have been impressive. But what specific revenue growth initiatives are you working on? And what type of impact will that have in '18?

Well, I mean, we're always looking to maximize our rents on re-leasing. So we're always doing that. As far as additional revenue, we're really looking at growth in the portfolio, and that should allocate some of our fixed costs over more houses and grow our income. So...

Yes. I think the best growth vehicle you can have is to be accretively acquiring additional properties and leveraging your systems a little bit better.

Okay. I'll add one more, bear with me. Jack, correct me if I misheard this. But original guidance was for 3.5% to 4.5% revenue growth in -- for full year '17. Now it's 3.5% to 4%. What specifically drove the downside?

Well, you're given the guidance at the beginning of the year. And you're -- we are adding more product to certain markets. And the more choices people have, the more competitive it is, even with yourself. So I think that's part of it. But the other part of it is we entered April this year with a little more inventory than I expected. And last year, we've entered April with almost no inventory and I really cranked up rates. In April, we got 9.2% re-leasing growth last year. But we also suffered about a $241 million net negative absorption last April and I couldn't really afford to do that this year, at least I didn't think I could. And so we just kept the re-leasing rates about what we ended up, moving them down to -- in May and June last year.

Ladies and gentlemen, we have come to the end of our time for questions. I'll turn the floor back to Mr. Singelyn for any closing comments.

Thank you, Melissa. We thank you for joining us today, and we look forward to speaking with you next quarter. Have a good day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.