Colony Starwood Homes' (SFR) CEO Frederick Tuomi on Q2 2016 Results - Earnings Call Transcript

| About: Colony Starwood (SFR)

Colony Starwood Homes (NYSE:SFR)

Q2 2016 Earnings Conference Call

August 9, 2016 11:00 am ET


John Christie - IR

Frederick C. Tuomi - CEO

Charles D. Young - COO

Arik Prawer - CFO


Ryan Tomasello - Keefe, Bruyette & Woods

Patrick Kealey - FBR Capital Markets

John Pawlowski - Green Street Advisors

Brock Vandervliet - Nomura


Greetings and welcome to the Colony Starwood Homes Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Christie, Director of Investor Relations. Please go ahead, sir.

John Christie

Good morning and thank you for joining us today. Last evening, we released financial results for the quarter ended June 30, 2016 and posted a supplemental report of financial and operating information on our Web-site. These documents are all available in the Investors section of our Web-site at

On our call today are Colony Starwood Homes' Chief Executive Officer, Fred Tuomi; Chief Operating Officer, Charles Young; and Chief Financial Officer, Arik Prawer. They will make some remarks on the Company's performance, and then we'll open the call to your questions.

Before we begin, we would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

We refer you to the Company's filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The filings are available on the SEC's Web-site or at The Company undertakes no duty to update any forward-looking statements that may be made during the course of this call, other than required by law.

Additionally, certain non-GAAP financial measures will be discussed on this conference call. This information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are available in the supplemental report, which can be accessed in the Investors section of our Web-site.

And with that, I'll now turn the call over to Fred Tuomi.

Frederick C. Tuomi

Thank you, John, and welcome to our second quarter 2016 earnings call. Last evening we released another quarter of strong results, driven by accelerating rent growth, continued high occupancy and solid operating margins. Our results reflect robust demand for our high quality single-family rental homes as well as the benefits we are enjoying from the absence of supply pressures along with our disciplined strategy of building market density in targeted high-growth markets. Our talented people and sophisticated systems continued to execute, meeting the demands of our customers and producing superior operating results.

Before Charles and Arik discuss the second quarter operating and financial results in detail, I'd like to provide a few key highlights. As anticipated, rent growth accelerated throughout the quarter. Blended rent growth in our second quarter quarterly same-store portfolio was up 5.5% from 3.9% in Q1. This reflects the growth potential of our markets, the quality of our resident base and the effectiveness of our unique marketing and revenue management systems. Our revenue management team prices each lease and renewal to optimize rents along with occupancy, which will maximize rental income over the long term.

Same-store occupancy held steady at 95.8% through the first half of the peak leasing season as demand continues to be strong. Here are a few examples of the demand we are currently experiencing. Our marketing call center in Scottsdale is answering over 40,000 inbound calls per month. Traffic to our Web-site continues to grow with 1.2 million page-views per month and over 60% of these are done through a mobile device. Our unique smart home technology accommodated 7,000 [self-showings] [ph] in the second quarter and have approximately 70,000 loyal social followers on Facebook, Instagram, Twitter and other social networks.

Finally, our dedicated field service teams are meeting the demands of the peak leasing season by delivering ready inventory as needed while continuing to shorten turn times and lower costs. In the second quarter, we handled over 25,000 service calls at our centralized service dispatch center that were requested, analyzed, prioritized and tracked in real-time through our high-tech mobile service platform. Of these requests, approximately 35% were completed by our in-house service technicians and 22% were resolved without dispatch through our expert troubleshooting and robust self-help video library.

So once again, we're very pleased with the results we are producing. For the second quarter, same-store revenue growth was 6.3%, NOI growth was 7.8% and our core NOI margin was 62.8%. Halfway through this year as of June 30, our same-store revenue growth is 6.3%, NOI growth is 10.9% and our core NOI margin is 64.1%. Another quarter of strong results supports our confidence in the future of the single-family rental business.

As we reflect back on the past four years, we recognize the unique opportunity created by the housing crisis and have acted upon it in a bold way. Our disciplined market and asset selection strategies created a concentrated portfolio of highly valuable assets with strong future growth prospects. We then renovated, leased and stabilized over 30,000 homes across our targeted market footprint improving homes, improving neighbourhoods and providing families with high quality housing options along the way.

We attracted some of the best talent in the real estate arena and developed unique and highly scalable leading-edge technologies that embrace our customers, enable our employees and help produce steadily improving and predictable results. Our recent merger demonstrated the effectiveness and scalability of our platform. We have now achieved 100% of the $50 million in merger synergies, as promised when we first announced the transaction, which was about a year ago.

So next phase is now upon us and that's of continuing operating refinance and that of portfolio growth. A tremendous frontier lies ahead, the consolidation of the highly fragmented single-family rental industry. The addressable market is in excess of 16 million rental homes, of which institutional owners currently control a very small fraction. Our advantages of cost of capital, operating scale, management expertise and technology platforms allow us to operate at higher margins while producing superior returns on equity over a large portfolio.

Our asset management and investment teams are armed with the experience and technologies that continue to find attractive yielding investments across multiple channels. So going forward, we plan to engage in a meaningful but disciplined strategy that will continue to strengthen our balance sheet and reward our shareholders well into the future.

With that, Charles will now provide more details on our second quarter results.

Charles D. Young

Thanks Fred. I'll provide some color on the drivers of our second quarter operating results and highlight conditions in our market. As of June 30, 2016, we owned 30,844 homes with an average market density of 2,760 homes in our top 10 markets. We continue to attract a high-caliber resident to our well-located homes and high demand markets. The average annual household income of our residents is $88,000, which equates to a rent coverage ratio of nearly 5x. Over 80% of our households have two adults in the home and over 61% have children.

Occupancy was 95.4% for our total portfolio, which does not include homes we have targeted for sale, and 95.8% for our Q2 same-store pool of 24,657 homes. Our total portfolio occupancy is up from 95% in Q1 and unchanged for the same-store pool. We expect higher turnover during the spring and summer months in a larger number of our households, particularly families planning their move-outs and move-ins. Turnover was 32.8% annualized for the Q2 same-store pool, up from 27.2% in Q1. We use our lease expiration management strategy to capitalize on the higher demand during Q2 and Q3.

One additional demand statistic, our call center handled approximately 233,000 leads in Q2, which includes both e-mail leads and the telephone leads Fred mentioned. On a per home basis, this translates to 52 leads per marketed home per month.

Our 6.3% year-over-year revenue increase on the same-store portfolio in Q2 was driven primarily by a 5.5% increase in blended rent growth, which is up from 3.8% in Q1. Blended rent growth included renewal rent growth of 5.3% and replacement rent growth of 5.9%. Renewal rent growth in Q2 ranged from 3.8% in Las Vegas to 9.2% in Denver. Replacement rent growth ranged from 2.8% in Houston to 12% in Phoenix.

We expect the strong demand/supply fundamentals to carry through the remaining summer months. In July, we achieved yearly same-store blended rent growth of 5.9%, which was composed of renewal rent growth of 5.8% and replacement rent growth of 6.1%. For upcoming renewals in August and September, we've quoted asking rent increases averaging 6% to 6.5% and expect to achieve 90% of that level.

On the expense side, we achieved a 14% year-over-year reduction in property management costs based on efficiencies we achieved, we continue to achieve from our operating platform and market densities. As a percentage of total revenue, property management costs accounted for 5.4% in Q2, within the 5% to 6% range we expected.

Property operating expenses increased 4% from Q2 2015 due to higher taxes and turnover. Taxes, insurance and HOA was up 8.4% year-over-year driven by higher property taxes. As assessments catch up with rising home values, we expect property taxes will continue to rise in future quarters but at a more moderate rate.

For the quarter, strong rental revenue produced a 62.8% core operating margin on our quarterly same-store homes. Among our markets, core operating margins ranged from 52% in Houston to 75% in Denver. All markets except Houston and the three Florida markets achieved core margins above 60% and four markets had margins at 70% or higher including Denver, Northern and Southern California and Charlotte.

As we discussed on our last earnings call, below average margins in our Florida markets are due in part to homes that are still seasoning given acquisition activity in these markets during 2015. We expect margins in these markets will improve by the end of the year.

Over the last six months, our year-to-date operating results tell a compelling story. Through June 30, 2016, total same-store revenue was 6.3% and total property operating expenses were down 0.4%, producing NOI growth of 10.9% for the first half of the year. Our same-store core operating margin was 64.1% for the first half of this year, which is a 260 basis point increase from the same period last year.

Turning to investment activity, we increased our disposition activity in Q2 from the prior quarter, selling 608 homes which included 359 single-family rental homes and 249 REO homes. The single-family rental homes were sold for gross sales proceeds of $47.4 million and the REO homes were sold for gross sales proceeds of $33.6 million. We purchased 87 homes in Q2 for approximately $17 million, including estimated investment cost for renovation. This equates to about $196,000 per home. We continue to see attractive opportunities in our target markets and expect the acquisition totals to increase in the second half of the year.

To summarize, our operations team completed another tremendous quarter. I'd like to thank all of our employees for their outstanding work. We have the best single-family platform in the business and our teams are continuously working to improve and advance our capabilities and results. Going into the second half of the year, we are well-positioned for continued success given our high-quality portfolio, our technology platform and our dedicated and talented team members.

I will now turn the call over to Arik.

Arik Prawer

Thank you, Charles. Today I'll dig deeper into our Q2 financial results, provide an update on balance sheet activity for the quarter, update you on the progress of our strategic decision to exit the NPL business, describe some changes to reporting and discuss our updated guidance.

We were pleased with our Q2 results. For the three months ended June 30, 2016, the Company recorded revenue of $143.8 million. On a GAAP basis, we recorded a net loss of $15.7 million or $0.15 per share, which includes depreciation and amortization. Core FFO for the quarter, which re presents earnings from the single-family business only, was $41.9 million or $0.39 per share. As Charles previously described, these results were underpinned by solid operating performance.

As we indicated on our first quarter call, it is important to note that this is a seasonal business with additional turnover and maintenance expense during the peak leasing seasons in Q2 and Q3, usually leading to lower [indiscernible] margins in those quarters relative to Q1 and Q4.

Moving on to our balance sheet and financing activities, we continue to be focused on capital strategy to strengthen the Company's balance sheet by [lapping] [ph] maturities and increasing overall leverage. We intend to reduce our debt to total market capitalization over time primarily through organic debt paydowns in connection with non-core asset sales. We will continue to optimize our capital structure to support long-term and sustainable growth.

At June 30, 2016, the Company held a strong liquidity position with approximately $525 million of undrawn balance on its credit facilities and approximately $165 million of cash. We completed [indiscernible] securitization in May totaling $486 million, net of retained securities, at a weighted-average blended interest rate of LIBOR plus 222 basis points. Subsequent to this transaction, we entered into a $450 million interest rate swap contract effectively locking in an average interest rate of approximately 3.3% for five years. As a result of this transaction, the Company's fixed rate debt instruments now comprise over 60% of total debt outstanding.

Proceeds from the securitization were primarily used to refinance outstanding balances on the Company's credit facilities, thus [lapping] [ph] maturities and reducing overall interest expense. As of June 30, 2016, the Company had $700 million outstanding on its credit facilities. We plan to term out the majority of remaining fundings on our credit facilities over the course of 2016.

As previously disclosed, we are proceeding with the wind-down of the NPL business to become a pure-play single-family REIT, and in doing so we will further simplify our operations and financial disclosures. [Indiscernible] anticipate an NPL bulk sale by the end of this year and are now reporting the NPL segment as a discontinued operation in our financials.

To that end, in early July, we closed on the sale of our weak performing loan portfolio for $46 million, generating net proceeds of approximately $21 million. As of June 30, 2016, we expect these activities to generate $400 million to $450 million of incremental gross proceeds and $150 million to $200 million of net proceeds after associated debt paydown.

Now I'll touch on some enhancements to our reporting and disclosure in the current and future supplemental reporting periods. Further, in addition to providing same-store results based on the current quarter's home count, which will continue to grow throughout the year, we have extended our same-store disclosures to include quarter to date and year to date results based on the first quarter's same-store home count, which will remain consistent throughout the year.

Next, we will now provide information by market on the original cost basis of our homes, and in addition, we are providing market level home price appreciation data from John Burns, showing HPA from the weighted average acquisition date of our homes through the end of the current quarter. We believe these home price appreciation figures along with our historical cost basis and other disclosures and our supplemental will be useful for investors to develop their own estimates of the Company's net asset value going forward.

Now turning to 2016 guidance, given our positive results through the six months ended June 30, we have tightened our full-year guidance for 2016 now projecting full-year core FFO in the range of $1.60 to $1.65 per share, compared to previous guidance of $1.55 to $1.65 per share. Additionally, we have narrowed underlying 2016 operating guidance as well, rent growth of 4.5% to 5%, stabilized occupancy of 95% and core NOI margin guidance remaining at 62% to 64%.

We continue to execute well on our business plan for this year, which is translating into strong financial results. We have a high-quality asset base concentrated in strong long-term rental markets, a leading IT platform and a dedicated and hard-working field and corporate team. Our platform is highly scalable and we are excited to grow the business to new levels. We look forward to continuing to deliver solid results for investors.

And with that, I'll turn it over to the operator for questions.

Question-and-Answer Session


[Operator Instructions] Our first question comes from Jade Rahmani with KBW. Please proceed.

Ryan Tomasello

This is actually Ryan Tomasello on for Jade. First, can you give an estimate of what AFFO was for the quarter? I realize you give stabilized CapEx on the same home portfolio, but I would assume there are differences as it relates to CapEx on the overall portfolio, and does management intend to provide AFFO going forward?

Arik Prawer

[Indiscernible] AFFO purposes, that would be our suggestion to you and we provided you with the ingredients to perform the math.

Ryan Tomasello

I'm not sure if the line was cut out, but I think I missed the first half of the answer to that question, unless that might have just been on my line. Would you mind…?

Arik Prawer

Sure. We're having some speaker phone issues here, but I don't know where you cut off, but I was saying that we've enhanced the disclosures over the past two quarters and we continue to improve and enhance those disclosures. AFFO is on our roadmap but in the meantime we provide data on CapEx for our same-store portfolio, and as you'll note, that's seasonal. So from our perspective, we look at it over longer-term period and we think the cost to maintain a home is $2,600 to $2,800 per year, and of that, approximately [$1,200 million] [ph] for recurring CapEx. So those would be the ingredients.

Frederick C. Tuomi

Ryan, this is Fred Tuomi. I wouldn't model any distinctive difference between the CapEx run rate on our large same-store portfolio versus the overall portfolio, maybe on the margin the rest of the portfolio might be a little bit less as we've been buying newer homes, but I would just model it being consistent.

Ryan Tomasello

Okay, yes, that's helpful. We'll look for that disclosure in the future. And then just moving on to the M&A environment, given the strong movements in stock price year to date, not just for you but for the overall sector, has that accelerated any volume of conversations around larger scale M&A?

Frederick C. Tuomi

The M&A outlook is still very favorable in this space, and we've got a lot of runway, lot of white space in the industry, as I mentioned in my opening remarks. So I mean there's just a massive amount of single-family rental homes out there in the hands of many disparate highly fragmented private investors. And just like we saw in the multi-family business years ago, that's a tremendous opportunity for the institutionalization of the segment, of the industry, not the entire [indiscernible] industry but certainly a meaningful segment. So we're just getting started on that.

All the companies that you follow are doing a great job establishing the business model, improving performance, improving disclosure. So we think we're ready now to start to onboarding other homes and start this consolidation process. That will be one at a time, small groups, large groups, private, regional, public to public, all of those. So we will definitely intend to be in the mix on that. We have been in the mix in a big way, as represented by the recent merger between Colony American and SWAY, and we intend to remain very active.

Our pipeline for acquisitions started off very slow this year because Q4-Q1, in anticipation of merger, we purposefully shut off the acquisitions as we were focusing on the merger and the continued stabilization. We are ramping that up in Q2 a little bit as you saw, but the Q3 pipeline is filling nicely, and as we look forward there is plenty of opportunity for growth. The pipeline that we have right now either under LOI or contract is about $100 million. So we've got some velocity building, and then we have some very exciting opportunities that we're working on to perhaps bring some more growth going forward. So stay tuned for that.

You mentioned the share price. Yes, everybody is happy with the share price. That certainly changed the tone of the conversations I would say when we are thinking about using equity for growth, but again, it's too early to make any commitment on that. We are closer to the zone, but that's going to have to be a decision made very carefully and strategically along with our Board of Trustees to do it at the right time for the right purposes, and that's all we can say on that.

Ryan Tomasello

That's helpful. And then on the equity issuance front and as it relates to capital structure, would management potentially contemplate equity issuance outside of a particular M&A opportunity, just given the stock price?

Frederick C. Tuomi

Yes, that's what I meant when I said, it depends on the purpose. We wouldn't do it just because. We have to have a very specific strategic reason to do it, and most likely that would be a meaningful M&A, either a pipeline of best positioned targets or a single opportunity. So again, we're not going to issue equity just to issue equity because we like the price, it's going to have to be carefully considered and be accretive and be beneficial to all current shareholders, and that's something we'll be very careful in studying.

Arik Prawer

And I'd also just add that we have considerable sources of internally generated cash flow. So, we started the year with a program of about $900 million of capital recycling between the NPL/REO as well as portfolio optimization through Q2. That number is now approximately $750 million still on that program and underlying that is about 50% debt paydown associated with that, but the incremental proceeds could be used to grow the business and recycle. So as we think about our capital allocation, we also have to factor in both internal and external sources.

Ryan Tomasello

Okay, that's helpful. And then just one last one if I can on the NPL portfolio, can you provide some color on the potential bulk sale that you referenced for the back half of the year, maybe the size of it? Specifically one peer public NPL player recently mentioned tough market conditions in the NPL market in 2Q given supply. So just wondering if you can give color on your outlook for the market for the back half of the year and when we can ultimately expect the remaining NPLs and REOs to be entirely liquidated?

Arik Prawer

Sure. The REOs, just to be clear, that's about $114 million on our balance sheet, that's going to be sold on the run. So there is no bulk sale of the REOs. Those will come in over time as we liquidate those or wind down those homes. In terms of the NPL, we're putting it all in a pool and marketing it, and the way that those trades go down, they are in M&A process. So I can just tell you that we think there is a receptive market, a liquid market out there, a lot of capital for that asset class, and we'll have more to come on that but those are really trades and the next time you will hear from us is in the aftermath of that trade.

Ryan Tomasello

And that sale wouldn't potentially include the entire remaining portion of the NPL book?

Arik Prawer

That's correct, substantially all the NPLs.

Ryan Tomasello

Okay, great. Thank you.


Our next question comes from Patrick Kealey with FBR Capital Markets. Please proceed.

Patrick Kealey

Just kind of wanted to touch on your comments about kind of getting back on the acquisition mindset and with the $100 million you have in the pipeline. So I know in the past you had highlighted the desire to grow in a couple of your subscale markets, Nashville, parts of North Carolina. So when we're thinking about those acquisitions, can you maybe talk about what you're seeing in those markets, do you still see opportunities? Obviously with your disclosures, the core margins are very strong, and given kind of some other markets where you already have scale but strong margins, do you see opportunities to also kind of increase your scale and footprint within existing scale markets?

Frederick C. Tuomi

Number one priority on our kind of on-the-run daily acquisition machine, which primarily works on single assets or small portfolios on a local basis, that process continues to run every day and we are focusing our efforts on our core markets that we love, that are giving us good growth, good margins but are subscale, so that's number one priority, and that would primarily be North Carolina and Tennessee. In those markets we're seeing very good operating results.

Then the second priority would be filling in our densities in our other core markets with great growth potential that we already have substantial portfolio. Example of that would be Phoenix, Arizona. Phoenix has given us excellent kind of chart-leading growth prospects right now and NOI margin is close to 70% as a contribution to the Company, [indiscernible] year-to-date of 64%. So we still like Phoenix. I think there's plenty of room still for rapid growth. We love the HPA, we love the rent growth, we love the supply/demand dynamics, and Phoenix has a lot of good economic growth prospects in the future. So that's an example of a stabilized market, one that we already have a high density in and that we continue to infield adding to our density by buying great homes in between two great homes that we already own.

Then Denver would be another example of that. We like Denver, so we are continuing to pick out homes in Denver. Denver is another top leader. Its margins are the best in our Company. Right now it's 75% operating margin on the couple of thousand homes that we own in Denver, so we'd like to add more.

And then that's subject to yields and pricing, but the interesting part right now is we're still able to get 5.5% net yields in those markets and then really closer to 6%, a little bit north of 6% in those subscale markets, which is North Carolina and Tennessee. So that's our strategy on the acquisitions. We'll consider anything, we're constantly looking everywhere, but those aren't priorities.

And then with respect to portfolio, we've seen a number of really interesting compelling portfolios here recently, I'd say medium-sized, medium to large depending on your perspective, and we look at those but a lot of times we're not as excited about those because of some of the markets that might come along with it. So we are going to be very cautious on those. We want to look at the market overlap, the footprint, the synergies that we can get, because I'm cautious about opening up a new market, but it would have to be in context of a very large transaction.

Patrick Kealey

Okay, great. It's very helpful. And actually just sticking with kind of the theme of the higher end core operating margins you're seeing out of Denver and then obviously some of the subscale markets, when we are thinking about where those could ultimately go, obviously for a Denver this is a smaller portion of your portfolio than say some of the top two or three markets, to the extent that you can obviously grow within those markets, start to see even more benefits of regional scale, do you think those opportunities for that 75% or that near 70% in Phoenix to the extent you can grow your footprint there that there is potential for margin expansion, or do you feel kind of that low to mid 70% range is fair given kind of what you're seeing in the market?

Frederick C. Tuomi

Great question, how high can we go on the margins? I think when you cross the barrier into 70%, I mean that's a local sweet spot, and we've got several markets doing it, we've got Southern California, we've got North Carolina, we've got Northern California, we got Denver, all above 70%. So that's very encouraging to me as I look to the future of this business that we can actually cross that threshold, because that's actually above the most recent core margins on average of the multi-family space. So that's been one of our goals within the industry as to match up our metrics to multi-family or getting, we're there basically.

So can we grow them from there? I think over time, margins can, on the margins so to speak, continue to improve through our continued efficiencies, continued refinements, getting smarter and more creative on the margin, on our technology and on our operations. Charles Young, our COO, continues to find ways to improve the efficiency of the property management group and the control of the expenses. And then we have rent growth. I mean that's the biggest lever right now, is continued rent growth.

And again, when you look forward on this business, it's hard not to be optimistic. The demographic on the macro basis is just a massive supply and demand coming our way. The [indiscernible] continues to get [indiscernible] whether they like it or not, and they are becoming more mature whether they like it or not, and they are forming families and they are coming our way into single-family as they need more space and different neighborhoods. So we see that is going to help us over the long term.

And these markets we are talking about are great economic centers of this nation, Southern California, Northern California, Carolina, Denver, Phoenix, suburban Atlanta, we like all these markets for those macro long-term basis, and then in the moment, we'll just continue to refine our operations, keep our nose to the grindstone and squeeze out every penny of efficiency we can.

So, yes, I am optimistic that we can continue movement. We've made some big moves. I mean not too long ago, we were in the low 50s, mid-50s, hit 60, now we are approaching low to mid-60s with many of our markets well above 70, So we've got a ways to go and we are excited about it.

Patrick Kealey

Okay, great. Thank you for the time.


Our next question comes from John Pawlowski with Green Street Advisors. Please proceed.

John Pawlowski

Fred, could you remind us the process and specific criteria you are looking at to drive your disposition plans?

Frederick C. Tuomi

As we mentioned when we did the merger that we looked, even before we closed the merger, we had our two asset management teams or the two organizations get together and go through a detailed market by market, submarket by submarket, home by home analysis of the two portfolios as we put them together. And the result was we identified two tranches of dispositions. One were homes that were currently vacant, that we did not intend to market and lease and we wanted to just sell them post-haste.

So we did that and that was maybe about $100 million to $125 million in that tranche. And that's our first priority, those homes are vacant, they are not producing revenue and we wanted to get those liquidated as soon as possible. And we've been doing that. We're making excellent progress on that front. Through year to date, we've already sold about 450 of those homes, which was maybe about $85 million to $90 million. So we're making good progress on that. And this is the selling season, so that's amplifying and accelerating as we speak.

The second tranche of dispositions on the single-family rental piece of it are those homes that are currently good homes, they are in decent shape, they are occupied, but they are just in a geographic situation, either an outlier in terms of distance, so it's counter to our density strategy, or maybe it's in a neighborhood that we don't like the growth prospects, or there's something else about that home that we just don't quite not that into it long-term.

So those, we've identified that tranche and that was maybe another $300 million total that we plan on selling in a very disciplined basis. In fact, we [indiscernible] check that decision as we are coming up on lease expiration and our asset managers look at it and say, okay, do we still want to sell it, and if the answer is yes, then we'll market that home and that closes. So that tranche will probably take us another 18 to 24 months to continue that liquidation.

John Pawlowski

Okay, thank you. And then Arik, a follow-up question on your comments on capital sources and uses for the remainder of the year, just want to make sure I'm interpreting properly, $750 million remaining in capital sources from a combination of NPLs and other dispositions, 50% of that will be directed towards debt paydown?

Arik Prawer

Correct, approximately. It's just the associated debt with those assets.

John Pawlowski

Okay. So you're expecting roughly $400 million in acquisitions for the back half of the year?

Arik Prawer

This is the total program, John. So the NPL trade will take place by year-end, but the ongoing pruning of the portfolio, that's over time. So this is not by year-end, that's in total of the program, so a couple of years overall.

John Pawlowski

Okay, understood. Thank you.


Our next question comes from Brock Vandervliet with Nomura. Please proceed.

Brock Vandervliet

With the numbers just as strong as they are, I guess there would be some incremental risk in just adding more homes to it. Fred, as you look to the next phase, as you mentioned, how many homes in a quarter or in a year would you be comfortable adding to the platform?

Frederick C. Tuomi

There's not really a magic number. Our normalized run rate that you can expect from this point forward would be about $20 million per month of acquisitions, and that's in our targeted markets, as I discussed, and normal way acquisitions which would be couple of different channels, MLS, foreclosures and maybe some small local portfolios, maybe some new home build-to-rent projects. So, for the medium-term you can consider that our kind of normal run rate.

Then what comes on top of that would be the more special situations, and that would be an interesting portfolio of scale, couple of hundred homes or more, 200, 500, 1,000 homes, that would come in more of a lumpy fashion kind of as sellers begin to decide to sell, and I think you'll see more and more of that activity over the next couple of years.

There's been a large number of medium and large-scale well-capitalized local entrepreneurs, regional private investors that have amassed portfolios of 500 to 1,000 to 2,000 homes and they are certainly not building platforms to run them long-term and that's not their investment thesis. So as those kind of realize that it's time to pay their investors, they're going to be looking for disposition strategies and companies like ours are going to be great counterparties to those opportunities.

So those will come as they come and we're not really looking at a target like we have to grow to this number and we're not looking at a constraint where we can't grow above that number. Our platform is highly scalable, we could take on other very large M&A with extreme confidence and digest it and integrate it very quickly. We have proven that and we are ready for it, but we have to be cautious and wait for the right opportunity and it has to fit and it has to perform so that it's going to be accretive very soon if not day one for our shareholders.

Brock Vandervliet

Okay, thank you. And just a quick follow-up for Arik regarding disclosure, are you going to continue to offer an NAV value going forward or is some of this disclosure meant to allow us to define one in the future?

Arik Prawer

Yes, great question. The short answer is that this disclosure is intended to allow the consumer of the information to perform their own math, and really what we've done is we've included the historic basis on both portfolios back to weighted average acquisition date and then the Burns curves from the weighted average acquisition date. So, between that and then overlaying our other assets and liabilities from the balance sheet, we think that those are tools that should be helpful for folks to derive their own NAVs.

Brock Vandervliet

Great. Thanks for taking my questions.


There are no further questions. I would like to turn the floor back over to Fred Tuomi for closing comments.

Frederick C. Tuomi

Thank you, everybody, and I look forward to continuing this next quarter. Appreciate it, appreciate your interest.


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

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