AMERICAN HOMES 4 RENT The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a Maryland REIT focused on acquiring, developing, renovating, leasing and operating single-family homes as rental properties.The Operating Partnership is the entity through which we conduct substantially all of our business and own, directly or through subsidiaries, substantially all of our assets. We commenced operations inNovember 2012 . As ofSeptember 30, 2022 , we owned 58,961 single-family properties in select submarkets of metropolitan statistical areas ("MSAs") in 21 states, including 1,057 properties held for sale, compared to 57,024 single-family properties in 22 states, including 659 properties held for sale, as ofDecember 31, 2021 , and 56,077 single-family properties in 22 states, including 604 properties held for sale as ofSeptember 30, 2021 . As ofSeptember 30, 2022 , 55,421 of our total properties (excluding properties held for sale) were occupied, compared to 53,637 of our total properties (excluding properties held for sale) as ofDecember 31, 2021 and 53,133 of our total properties (excluding properties held for sale) as ofSeptember 30, 2021 . Also, as ofSeptember 30, 2022 , the Company had an additional 2,271 properties held in unconsolidated joint ventures, compared to 1,942 properties held in unconsolidated joint ventures as ofDecember 31, 2021 , and 1,729 properties held in unconsolidated joint ventures as ofSeptember 30, 2021 . Our portfolio of single-family properties, including those held in our unconsolidated joint ventures, is internally managed through our proprietary property management platform.
Key Single-Family Property and Leasing Metrics
The following table summarizes certain key single-family properties metrics as ofSeptember 30, 2022 :Total Single-Family Properties (1) Number of % of Total Gross Book Avg. Gross Book Single-Family Single-Family Value % of Gross Book Value per Avg. Avg. Property Age Avg. Year Market Properties Properties (millions) Value Total Property Sq. Ft. (years) Purchased or DeliveredAtlanta, GA 5,786 10.0 %$ 1,241.9 10.2 %$ 214,637 2,166 17.1
2016
Dallas-Fort Worth, TX 4,286 7.4 % 744.1 6.1 % 173,609 2,111 18.3 2014Charlotte, NC 3,938 6.8 % 823.2 6.7 % 209,044 2,100 17.4 2015Phoenix, AZ 3,399 5.9 % 701.2 5.7 % 206,285 1,835 18.6 2015Nashville, TN 3,195 5.5 % 757.1 6.2 % 236,976 2,109 15.7 2016Indianapolis, IN 2,942 5.1 % 503.0 4.1 % 170,977 1,929 19.7 2014Houston, TX 2,770 4.8 % 485.5 4.0 % 175,281 2,098 16.7 2014Jacksonville, FL 2,835 4.9 % 584.1 4.8 % 206,040 1,933 14.5 2016Tampa, FL 2,713 4.7 % 595.6 4.9 % 219,548 1,937 15.4 2016Raleigh, NC 2,165 3.7 % 424.9 3.5 % 196,240 1,888 16.9 2015Columbus, OH 2,123 3.7 % 398.4 3.3 % 187,673 1,867 20.3 2015Cincinnati, OH 2,141 3.7 % 414.4 3.4 % 193,545 1,845 19.7 2014Orlando, FL 1,855 3.2 % 372.4 3.0 % 200,753 1,895 19.3 2015Salt Lake City, UT 1,910 3.3 % 573.6 4.7 % 300,327 2,241 16.1 2016Greater Chicago area, IL and IN 1,650 2.8 % 310.6 2.5 % 188,254 1,868 21.1 2013Las Vegas, NV 1,751 3.0 % 451.1 3.7 % 257,617 1,893 13.7 2016Charleston, SC 1,535 2.7 % 349.6 2.9 % 227,732 1,966 11.9 2017San Antonio, TX 1,338 2.3 % 259.3 2.1 % 193,786 1,934 14.0 2015Seattle, WA 1,136 2.0 % 366.8 3.0 % 322,898 1,994 12.8 2017 Savannah/Hilton Head, SC 1,042 1.8 % 215.6 1.8 % 206,947 1,887 14.0 2016 All Other (2) 7,394 12.7 % 1,643.0 13.4 % 222,210 1,901 16.9 2015 Total/Average 57,904 100.0 %$ 12,215.4 100.0 %$ 210,960 1,988 17.0 2015 (1)Excludes 1,057 single-family properties held for sale as ofSeptember 30, 2022 . (2)Represents 15 markets in 13 states. 31 -------------------------------------------------------------------------------- The following table summarizes certain key leasing metrics as ofSeptember 30, 2022 :Total Single-Family Properties (1) Avg. Monthly Avg. Original Avg. Remaining Avg. Blended Avg. Occupied Days Realized Rent per Lease Term Lease Term Change in Market Percentage (2) property (3) (months) (4) (months) (4) Rent (5) Atlanta, GA 96.0 %$ 1,973 12.0 6.4 11.0 % Dallas-Fort Worth, TX 96.7 % 2,036 12.1 6.5 8.5 % Charlotte, NC 96.8 % 1,892 12.2 6.9 8.8 % Phoenix, AZ 94.7 % 1,888 12.0 6.7 13.3 % Nashville, TN 96.5 % 2,062 12.0 6.7 10.7 % Indianapolis, IN 95.1 % 1,683 12.1 6.7 7.5 % Houston, TX 93.9 % 1,855 12.0 6.5 6.7 % Jacksonville, FL 96.5 % 1,944 12.0 6.6 10.4 % Tampa, FL 97.7 % 2,067 12.0 6.4 11.9 % Raleigh, NC 96.8 % 1,818 12.1 6.5 8.6 % Columbus, OH 96.3 % 1,930 12.0 6.6 7.6 % Cincinnati, OH 95.5 % 1,888 12.0 6.9 8.0 % Orlando, FL 97.5 % 2,010 12.0 6.8 11.6 % Salt Lake City, UT 95.4 % 2,195 12.0 6.4 9.7 % Greater Chicago area, IL and IN 95.3 % 2,169 12.2 6.9 8.5 % Las Vegas, NV 92.5 % 2,023 11.9 6.3 10.2 % Charleston, SC 95.1 % 2,026 12.0 6.9 7.6 % San Antonio, TX 95.0 % 1,833 12.0 6.6 6.6 % Seattle, WA 94.3 % 2,437 12.0 6.3 11.2 % Savannah/Hilton Head, SC 96.8 % 1,886 11.9 7.0 10.1 % All Other (6) 94.6 % 1,955 12.0 6.9 9.1 % Total/Average 95.7 %$ 1,963 12.0 6.7 9.5 % (1)Excludes 1,057 single-family properties held for sale as ofSeptember 30, 2022 . (2)For the three months endedSeptember 30, 2022 , Average Occupied Days Percentage represents the number of days a property is occupied in the period divided by the total number of days the property is owned during the same period after initially being placed in-service. (3)For the three months endedSeptember 30, 2022 , Average Monthly Realized Rent is calculated as the lease component of rents and other single-family property revenues (i.e., rents from single-family properties) divided by the product of (a) number of properties and (b) Average Occupied Days Percentage, divided by the number of months. For properties partially owned during the period, this is adjusted to reflect the number of days of ownership. (4)Average Original Lease Term and Average Remaining Lease Term are reflected as of period end. (5)Represents the percentage change in rent on all non-month-to-month lease renewals and re-leases during the three months endedSeptember 30, 2022 , compared to the annual rent of the previously expired non-month-to-month comparable long-term lease for each property. (6)Represents 15 markets in 13 states. We believe these key single-family property and leasing metrics provide useful information to investors because they allow investors to understand the composition and performance of our properties on a market by market basis. Management also uses these metrics to understand the composition and performance of our properties at the market level.
Factors That Affect Our Results of Operations and Financial Condition
Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. Key factors that impact our results of operations and financial condition include the pace at which we identify and acquire suitable land and properties, the time and cost required to renovate the acquired properties, the pace and cost of our property developments, the time to lease newly acquired or developed properties at acceptable rental rates, occupancy levels, rates of tenant turnover, the length of vacancy in properties between tenant leases, our expense ratios, our ability to raise capital and our capital structure. Additionally, recent supply chain disruptions, inflationary increases in labor and material costs and labor shortages have impacted and may continue to impact certain aspects of our business, including our AMH Development Program, our renovation program associated with recently acquired properties and our maintenance program.
Property Acquisitions, Development and Dispositions
Since our formation, we have rapidly but systematically grown our portfolio of
single-family properties. Our ability to identify and acquire homes that meet
our investment criteria is impacted by home prices in our target markets, the
inventory of properties available-for-sale through traditional acquisition
channels, competition for our target assets and our available capital. We are
increasingly focused on developing "built-for-rental" homes through our internal
AMH Development Program. In addition, we also acquire newly constructed homes
from third-party developers through our National Builder Program. Opportunities
from these new
32
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construction channels are impacted by the availability of vacant developed lots,
development land assets and inventory of homes currently under construction or
newly developed. Our level of investment activity has fluctuated based on the
number of suitable opportunities and the level of capital available to invest.
Recently, we have strategically scaled back acquisitions through our National
Builder Program and traditional acquisition channel as the housing market
adjusts to the current macroeconomic environment. We anticipate beginning to
grow in these acquisition channels when the housing and capital markets
stabilize. During the three months ended September 30, 2022 , we developed or
acquired 410 homes, including 265 newly constructed homes delivered through our
AMH Development Program and 145 homes acquired through our National Builder
Program and traditional acquisition channel, partially offset by 164 homes sold
to third parties. During the three months ended September 30, 2022 , we also
developed an additional 236 newly constructed properties which were delivered to
our unconsolidated joint ventures, aggregating to 501 total program deliveries
through our AMH Development Program.
Our properties held for sale were identified based on submarket analysis, as
well as individual property-level operational review. As of September 30, 2022
and December 31, 2021 , there were 1,057 and 659 properties, respectively,
classified as held for sale. We will continue to evaluate our properties for
potential disposition going forward as a normal course of business.
Property Operations
Homes added to our portfolio through new construction channels include properties developed through our internal AMH Development Program and newly constructed properties acquired from third-party developers through our National Builder Program. Rental homes developed through our AMH Development Program involve substantial up-front costs, time to acquire and develop land, time to build the rental home, and time to lease the rental home before the home generates income. This process is dependent upon the nature of each lot acquired and the timeline varies primarily due to land development requirements. Once land development requirements have been met, historically it has taken approximately four to six months to complete the rental home vertical construction process. However, delivery of homes may be staggered to facilitate leasing absorption. Our internal construction program is managed by our team of development professionals that oversee the full rental home construction process including all land development and work performed by subcontractors. We typically incur costs between$250,000 and$450,000 to acquire and develop land and build a rental home. Homes added through our AMH Development Program are available for lease immediately upon or shortly after receipt of a certificate of occupancy. Rental homes acquired from third-party developers through our National Builder Program are dependent on the inventory of newly constructed homes and homes currently under construction. Homes added to our portfolio through traditional acquisition channels require expenditures in addition to payment of the purchase price, including property inspections, closing costs, liens, title insurance, transfer taxes, recording fees, broker commissions, property taxes and homeowner association ("HOA") fees, when applicable. In addition, we typically incur costs between$20,000 and$40,000 to renovate a home acquired through traditional acquisition channels to prepare it for rental. Renovation work varies, but may include paint, flooring, cabinetry, appliances, plumbing hardware and other items required to prepare the home for rental. The time and cost involved to prepare our homes for rental can impact our financial performance and varies among properties based on several factors, including the source of acquisition channel and age and condition of the property. Historically, it has taken approximately 20 to 90 days to complete the renovation process, which will fluctuate based on our overall acquisition volume as well as availability of construction labor and materials. Our operating results are also impacted by the amount of time it takes to market and lease a property, which can vary greatly among properties, and is impacted by local demand, our marketing techniques and the size of our available inventory. Typically, it takes approximately 10 to 30 days to lease a property after acquiring or developing a new property through our new construction channels and 20 to 40 days after completing the renovation process for a traditionally acquired property. Lastly, our operating results are impacted by the length of stay of our tenants and the amount of time it takes to prepare and re-lease a property after a tenant vacates. This process, which we refer to as "turnover," is impacted by numerous factors, including the condition of the home upon move-out of the previous tenant, and by local demand, our marketing techniques and the size of our available inventory at the time of the turnover. Typically, it takes approximately 20 to 50 days to complete the turnover process.
Revenues
Our revenues are derived primarily from rents collected from tenants for our single-family properties under lease agreements which typically have a term of one year. Our rental rates and occupancy levels are affected by macroeconomic factors and local and property-level factors, including market conditions, seasonality and tenant defaults, and the amount of time it takes to turn properties when tenants vacate. Additionally, our ability to collect revenues and related operating results are impacted by the credit worthiness and quality of our tenants. Typically, our incoming residents have household incomes ranging from$80,000 to$140,000 and primarily consist of families with approximately two adults and one or more children. 33 --------------------------------------------------------------------------------
Our rents and other single-family property revenues are comprised of rental revenue from single-family properties, fees from our single-family property rentals and "tenant charge-backs," which are primarily related to cost recoveries on utilities.
Our ability to maintain and grow revenues from our existing portfolio of homes will be dependent on our ability to retain tenants and increase rental rates. Based on our Same-Home population of properties (defined below), the year-over-year increase in Average Monthly Realized Rent per property was 8.1% for the three months endedSeptember 30, 2022 , and we experienced turnover rates of 8.3% and 8.8% during the three months endedSeptember 30, 2022 and 2021, respectively. Based on our Same-Home population of properties, the year-over-year increase in Average Monthly Realized Rent per property was 7.9% for the nine months endedSeptember 30, 2022 , and we experienced turnover rates of 21.8% and 23.8% during the nine months endedSeptember 30, 2022 and 2021, respectively. Expenses
We monitor the following categories of expenses that we believe most significantly affect our results of operations.
Property Operating Expenses
Once a property is available for lease for the first time, which we refer to as "rent-ready," we incur ongoing property-related expenses which may not be subject to our control. These include primarily property taxes, repairs and maintenance ("R&M"), turnover costs, HOA fees (when applicable) and insurance.
Property Management Expenses
As we internally manage our portfolio of single-family properties through our proprietary property management platform, we incur costs such as salary expenses for property management personnel, lease expenses and operating costs for property management offices and technology expenses for maintaining our property management platform. As part of developing our property management platform, we have made significant investments in our infrastructure, systems and technology. We believe that these investments will enable our property management platform to become more efficient over time, especially as our portfolio grows. Also included in property management expenses is noncash share-based compensation expense related to centralized and field property management employees.
Seasonality
We believe that our business and related operating results will be impacted by seasonal factors throughout the year. Historically, we have experienced higher levels of tenant move-outs and move-ins during the late spring and summer months, which impacts both our rental revenues and related turnover costs. Our property operating costs are seasonally impacted in certain markets for expenses such as HVAC repairs, turn costs and landscaping expenses during the summer season. Additionally, our single-family properties are at greater risk in certain markets for adverse weather conditions such as hurricanes in the late summer months and extreme cold weather in the winter months.
General and Administrative Expense
General and administrative expense primarily consists of corporate payroll and personnel costs, federal and state taxes, trustees' and officers' insurance expenses, audit and tax fees, trustee fees and other expenses associated with our corporate and administrative functions. Also included in general and administrative expense is noncash share-based compensation expense related to corporate administrative employees.
Results of Operations
Net income totaled$61.7 million for the three months endedSeptember 30, 2022 , compared to$48.5 million for the three months endedSeptember 30, 2021 . This increase was primarily due to a larger number of occupied properties associated with growth in the Company's portfolio, higher rental rates and lower uncollectible rents, as well as higher net gains on property sales, partially offset by$6.1 million of hurricane-related charges, net in the three months endedSeptember 30, 2022 . Net income totaled$206.2 million for the nine months endedSeptember 30, 2022 , compared to$149.2 million for the nine months endedSeptember 30, 2021 . This increase was primarily due to a larger number of occupied properties associated with growth in the Company's portfolio, higher rental rates and lower uncollectible rents, as well as higher net gains on property sales, partially offset by$6.1 million of hurricane-related charges, net in the nine months endedSeptember 30, 2022 . 34 -------------------------------------------------------------------------------- As we continue to grow our portfolio with a portion of our homes still recently developed, acquired and/or renovated, we distinguish our portfolio of homes between Same-Home properties and Non-Same-Home and Other properties in evaluating our operating performance. We classify a property as Same-Home if it has been stabilized longer than 90 days prior to the beginning of the earliest period presented under comparison and if it has not been classified as held for sale or experienced a casualty loss, which allows the performance of these properties to be compared between periods. Single-family properties that we acquire individually (i.e., not through a bulk purchase) are classified as either stabilized or non-stabilized. A property is classified as stabilized once it has been renovated by the Company or newly constructed and then initially leased or available for rent for a period greater than 90 days. Properties acquired through a bulk purchase are first considered non-stabilized, as an entire group, until (1) we have owned them for an adequate period of time to allow for complete on-boarding to our operating platform, and (2) a substantial portion of the properties have experienced tenant turnover at least once under our ownership, providing the opportunity for renovations and improvements to meet our property standards. After such time has passed, properties acquired through a bulk purchase are then evaluated on an individual property basis under our standard stabilization criteria. All other properties, including those classified as held for sale or taken out of service as a result of a casualty loss, are classified as Non-Same-Home and Other. One of the primary financial measures we use in evaluating the operating performance of our single-family properties is Core Net Operating Income ("Core NOI"), which we also present separately for our Same-Home portfolio. Core NOI is a supplemental non-GAAP financial measure that we define as core revenues, which is calculated as rents and other single-family property revenues, excluding expenses reimbursed by tenant charge-backs, less core property operating expenses, which is calculated as property operating and property management expenses, excluding noncash share-based compensation expense and expenses reimbursed by tenant charge-backs. Core NOI also excludes (1) gain or loss on early extinguishment of debt, (2) hurricane-related charges, net, which result in material charges to our single-family property portfolio, (3) gains and losses from sales or impairments of single-family properties and other, (4) depreciation and amortization, (5) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (6) noncash share-based compensation expense, (7) interest expense, (8) general and administrative expense, and (9) other income and expense, net. We believe Core NOI provides useful information to investors about the operating performance of our single-family properties without the impact of certain operating expenses that are reimbursed through tenant charge-backs. Core NOI and Same-Home Core NOI should be considered only as supplements to net income or loss as a measure of our performance and should not be used as measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. Additionally, these metrics should not be used as substitutes for net income or loss or net cash flows from operating activities (as computed in accordance with accounting principles generally accepted inthe United States of America ("GAAP")). 35 --------------------------------------------------------------------------------
Comparison of the Three Months Ended
The following tables present a summary of Core NOI for our Same-Home properties, Non-Same-Home and Other properties and total properties for the three months endedSeptember 30, 2022 and 2021 (amounts in thousands): For the Three Months Ended September 30, 2022 Non-Same- Same-Home % of Core Home and Other % of Core Total % of Core Properties (1) Revenue Properties Revenue Properties Revenue Rents from single-family properties$ 268,868 $ 57,621 $ 326,489 Fees from single-family properties 5,620 1,397 7,017 Bad debt (2,956) (937) (3,893) Core revenues 271,532 58,081 329,613 Property tax expense 43,908 16.1 % 8,994 15.4 % 52,902 16.0 % HOA fees, net (2) 5,086 1.9 % 1,320 2.3 % 6,406 1.9 % R&M and turnover costs, net (2) 23,287 8.6 % 5,564 9.6 % 28,851 8.8 % Insurance 2,958 1.1 % 621 1.1 % 3,579 1.1 % Property management expenses, net (3) 21,137 7.8 % 5,900 10.2 % 27,037 8.2 % Core property operating expenses 96,376 35.5 % 22,399 38.6 % 118,775 36.0 % Core NOI$ 175,156 64.5 %$ 35,682 61.4 %$ 210,838 64.0 % For the Three Months Ended September 30, 2021 Non-Same- Same-Home % of Core Home and Other % of Core Total % of Core Properties (1) Revenue Properties Revenue Properties Revenue Rents from single-family properties$ 249,758 $ 36,478 $ 286,236 Fees from single-family properties 5,001 955 5,956 Bad debt (3,662) (1,690) (5,352) Core revenues 251,097 35,743 286,840 Property tax expense 41,784 16.7 % 6,040 16.9 % 47,824 16.7 % HOA fees, net (2) 4,767 1.9 % 787 2.2 % 5,554 1.9 % R&M and turnover costs, net (2) 22,649 9.0 % 4,026 11.3 % 26,675 9.3 % Insurance 2,569 1.0 % 418 1.2 % 2,987 1.0 % Property management expenses, net (3) 19,047 7.6 % 3,766 10.5 % 22,813 8.0 % Core property operating expenses 90,816 36.2 % 15,037 42.1 % 105,853 36.9 % Core NOI$ 160,281 63.8 %$ 20,706 57.9 %$ 180,987 63.1 % (1)Includes 47,503 properties that have been stabilized longer than 90 days prior toJanuary 1, 2021 . (2)Presented net of tenant charge-backs. (3)Presented net of tenant charge-backs and excludes noncash share-based compensation expense related to centralized and field property management employees. 36 -------------------------------------------------------------------------------- The following are reconciliations of core revenues, Same-Home core revenues, core property operating expenses, Same-Home core property operating expenses, Core NOI and Same-Home Core NOI to their respective GAAP metrics for the three months endedSeptember 30, 2022 and 2021 (amounts in thousands): For the Three Months Ended September 30, 2022 2021 Core revenues and Same-Home core revenues Rents and other single-family property revenues$ 391,627 $ 339,563 Tenant charge-backs (62,014) (52,723) Core revenues 329,613 286,840 Less: Non-Same-Home core revenues 58,081 35,743 Same-Home core revenues$ 271,532 $ 251,097 Core property operating expenses and Same-Home core property operating expenses Property operating expenses$ 152,065 $ 134,694 Property management expenses 29,739 24,562 Noncash share-based compensation - property management (1,015) (680) Expenses reimbursed by tenant charge-backs (62,014) (52,723) Core property operating expenses 118,775 105,853 Less: Non-Same-Home core property operating expenses 22,399 15,037 Same-Home core property operating expenses$ 96,376
Core NOI and Same-Home Core NOI Net income $
61,665
Hurricane-related charges, net 6,133 -
Gain on sale and impairment of single-family properties and other, net
(24,197) (9,572)
Depreciation and amortization 109,319 94,494
Acquisition and other transaction costs 4,482 3,279
Noncash share-based compensation - property management 1,015 680
Interest expense 36,254 31,097
General and administrative expense 16,986 12,647
Other income and expense, net (819) (139)
Core NOI 210,838 180,987
Less: Non-Same-Home Core NOI 35,682 20,706
Same-Home Core NOI $
175,156
Rents and Other Single-Family Property Revenues
Rents and other single-family property revenues increased 15.3% to$391.6 million for the three months endedSeptember 30, 2022 from$339.6 million for the three months endedSeptember 30, 2021 . Revenue growth was driven by an increase in our average occupied portfolio which grew to 55,321 homes for the three months endedSeptember 30, 2022 , compared to 52,889 homes for the three months endedSeptember 30, 2021 , as well as higher rental rates and lower uncollectible rents.
Property Operating Expenses
Property operating expenses increased 12.9% to$152.1 million for the three months endedSeptember 30, 2022 from$134.7 million for the three months endedSeptember 30, 2021 . This increase was primarily attributable to inflationary increases in R&M and turnover costs, annual growth in property tax expense and growth in our portfolio.
Property Management Expenses
Property management expenses for the three months endedSeptember 30, 2022 and 2021 were$29.7 million and$24.6 million , respectively, which included$1.0 million and$0.7 million , respectively, of noncash share-based compensation expense in each period related to centralized and field property management employees. The increase in property management expenses was primarily attributable to higher personnel costs due to increased headcount to support growth in our portfolio. 37
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Core Revenues from
Core revenues from Same-Home properties increased 8.1% to$271.5 million for the three months endedSeptember 30, 2022 from$251.1 million for the three months endedSeptember 30, 2021 . This increase was primarily attributable to higher Average Monthly Realized Rent per property, which increased 8.1% to$1,943 per month for the three months endedSeptember 30, 2022 compared to$1,798 per month for the three months endedSeptember 30, 2021 , and lower uncollectible rents, partially offset by a decrease in Average Occupied Days Percentage, which was 97.1% for the three months endedSeptember 30, 2022 compared to 97.4% for the three months endedSeptember 30, 2021 .
Core Property Operating Expenses from
Core property operating expenses from Same-Home properties consist of direct property operating expenses, net of tenant charge-backs, and property management costs, net of tenant charge-backs, and excludes noncash share-based compensation expense. Core property operating expenses from Same-Home properties increased 6.1% to$96.4 million for the three months endedSeptember 30, 2022 from$90.8 million for the three months endedSeptember 30, 2021 primarily driven by annual growth in property tax expense, higher property management personnel costs due to increased headcount to support growth in our portfolio, and other inflationary increases.
General and Administrative Expense
General and administrative expense primarily consists of corporate payroll and personnel costs, federal and state taxes, trustees' and officers' insurance expense, audit and tax fees, trustee fees and other expenses associated with our corporate and administrative functions. General and administrative expense for the three months endedSeptember 30, 2022 and 2021 was$17.0 million and$12.6 million , respectively, which included$3.4 million and$1.6 million , respectively, of noncash share-based compensation expense in each period related to corporate administrative employees. The increase in general and administrative expense was primarily related to increased personnel and information technology costs to support growth in our business, as well as an increase in noncash share-based compensation expense driven by retirement provisions that resulted in accelerated expense recognition for retirement eligible employees during the three months endedSeptember 30, 2022 .
Interest Expense
Interest expense increased 16.6% to$36.3 million for the three months endedSeptember 30, 2022 from$31.1 million for the three months endedSeptember 30, 2021 . This increase was primarily due to additional interest from the issuances of the 2032 and 2052 unsecured senior notes inApril 2022 , partially offset by additional capitalized interest during the three months endedSeptember 30, 2022 related to an increase in development activities under ourAMH Development Program during the three months endedSeptember 30, 2022 .
Acquisition and Other Transaction Costs
Acquisition and other transaction costs consist primarily of costs associated with purchases of single-family properties, including newly constructed properties from third-party builders, the development of single-family properties, or the disposal of certain properties or portfolios of properties which do not qualify for capitalization. Acquisition and other transaction costs for the three months endedSeptember 30, 2022 and 2021 were$4.5 million and$3.3 million , respectively, which included$1.3 million and$0.8 million , respectively, of noncash share-based compensation expense in each period related to employees in these functions. The increase in acquisition and other transaction costs was primarily related to higher personnel costs associated with the growth of our portfolio and higher noncash share-based compensation expense.
Depreciation and Amortization
Depreciation and amortization expense consists primarily of depreciation of buildings and improvements. Depreciation of our assets is calculated over their useful lives on a straight-line basis over three to 30 years. Our intangible assets are amortized on a straight-line basis over the asset's estimated economic useful life. Depreciation and amortization expense increased 15.7% to$109.3 million for the three months endedSeptember 30, 2022 from$94.5 million for the three months endedSeptember 30, 2021 primarily due to growth in our average number of depreciable properties.
Hurricane-Related Charges, net
Hurricane Ian impacted certain properties primarily located inFlorida ,South Carolina andNorth Carolina , resulting in$6.1 million of hurricane-related charges, net during the three months endedSeptember 30, 2022 . The Company's property and casualty insurance 38 -------------------------------------------------------------------------------- policies provide coverage for wind and flood damage, as well as business interruption costs, during the period of remediation and repairs, subject to deductibles and limits. During the three months endedSeptember 30, 2022 , the Company recognized$8.4 million in gross charges primarily related to an estimated accrual for minor repair and remediation costs, partially offset by an estimated$2.3 million of related insurance claims that we believe is probable we will recover.
Gain on Sale and Impairment of
Gain on sale and impairment of single-family properties and other, net for the three months endedSeptember 30, 2022 and 2021 was$24.2 million and$9.6 million , respectively, which included$0.2 million and zero of impairment charges, respectively, related to homes classified as held for sale during each period. The increase was primarily related to an increase in properties sold as well as higher net gains from property sales.
Other Income and Expense, net
Other income and expense, net for the three months endedSeptember 30, 2022 and 2021 was$0.8 million and$0.1 million , respectively, which primarily related to interest income, fees from unconsolidated joint ventures and equity in income (losses) from unconsolidated joint ventures, partially offset by expenses related to unconsolidated joint ventures and other nonrecurring expenses. 39 --------------------------------------------------------------------------------
Comparison of the Nine Months Ended
The following tables present a summary of Core NOI for our Same-Home properties,
Non-Same-Home and Other properties and total properties for the nine months
ended
For the Nine Months Ended September 30, 2022
Non-Same-
Same-Home % of Core Home and Other % of Core Total % of Core
Properties (1) Revenue Properties Revenue Properties Revenue
Rents from single-family
properties $ 790,567 $ 152,623 $ 943,190
Fees from single-family properties 15,895 4,113 20,008
Bad debt (7,875) (3,138) (11,013)
Core revenues 798,587 153,598 952,185
Property tax expense 131,612 16.5 % 25,679 16.6 % 157,291 16.5 %
HOA fees, net (2) 14,705 1.8 % 3,184 2.1 % 17,889 1.9 %
R&M and turnover costs, net (2) 61,641 7.7 % 14,695 9.6 % 76,336 8.0 %
Insurance 8,714 1.1 % 1,775 1.2 % 10,489 1.1 %
Property management expenses, net
(3) 60,676 7.6 % 16,269 10.6 % 76,945 8.1 %
Core property operating expenses 277,348 34.7 % 61,602 40.1 % 338,950 35.6 %
Core NOI $ 521,239 65.3 % $ 91,996 59.9 % $ 613,235 64.4 %
For the Nine Months Ended September 30, 2021
Non-Same-
Same-Home % of Core Home and Other % of Core Total % of Core
Properties (1) Revenue Properties Revenue Properties Revenue
Rents from single-family
properties $ 734,230 $ 97,650 $ 831,880
Fees from single-family properties 14,135 2,521 16,656
Bad debt (14,922) (4,356) (19,278)
Core revenues 733,443 95,815 829,258
Property tax expense 125,503 17.0 % 17,709 18.5 % 143,212 17.2 %
HOA fees, net (2) 13,707 1.9 % 2,116 2.2 % 15,823 1.9 %
R&M and turnover costs, net (2) 57,712 7.9 % 10,202 10.6 % 67,914 8.2 %
Insurance 7,583 1.0 % 1,134 1.2 % 8,717 1.1 %
Property management expenses, net
(3) 56,127 7.7 % 10,040 10.5 % 66,167 8.0 %
Core property operating expenses 260,632 35.5 % 41,201 43.0 % 301,833 36.4 %
Core NOI $ 472,811 64.5 % $ 54,614 57.0 % $ 527,425 63.6 %
(1)Includes 47,503 properties that have been stabilized longer than 90 days
prior to January 1, 2021 .
(2)Presented net of tenant charge-backs.
(3)Presented net of tenant charge-backs and excludes noncash share-based
compensation expense related to centralized and field property management
employees.
40
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The following are reconciliations of core revenues, Same-Home core revenues,
core property operating expenses, Same-Home core property operating expenses,
Core NOI and Same-Home Core NOI to their respective GAAP metrics for the nine
months ended September 30, 2022 and 2021 (amounts in thousands):
For the Nine Months
Ended
September 30,
2022 2021
Core revenues and Same-Home core revenues
Rents and other single-family property revenues $ 1,109,608 $ 965,790
Tenant charge-backs (157,423) (136,532)
Core revenues 952,185 829,258
Less: Non-Same-Home core revenues 153,598 95,815
Same-Home core revenues Core property operating expenses and Same-Home core property operating expenses Property operating expenses
$ 414,978 $ 369,966 Property management expenses 84,541 70,677 Noncash share-based compensation - property management (3,146) (2,278) Expenses reimbursed by tenant charge-backs (157,423) (136,532) Core property operating expenses 338,950 301,833 Less: Non-Same-Home core property operating expenses 61,602 41,201 Same-Home core property operating expenses
Core NOI and Same-Home Core NOI Net income
Hurricane-related charges, net 6,133 -
Gain on sale and impairment of single-family properties and other, net
(79,052) (36,401)
Depreciation and amortization 313,688 275,682
Acquisition and other transaction costs 18,114 11,093
Noncash share-based compensation - property management 3,146 2,278
Interest expense 98,622 86,630
General and administrative expense 53,115 40,645
Other income and expense, net (6,765) (1,738)
Core NOI 613,235 527,425
Less: Non-Same-Home Core NOI 91,996 54,614
Same-Home Core NOI $ 521,239 $ 472,811 Rents and Other Single-Family Property Revenues
Rents and other single-family property revenues increased 14.9% to$1.1 billion for the nine months endedSeptember 30, 2022 from$965.8 million for the nine months endedSeptember 30, 2021 . Revenue growth was driven by an increase in our average occupied portfolio which grew to 54,658 homes for the nine months endedSeptember 30, 2022 , compared to 52,269 homes for the nine months endedSeptember 30, 2021 , as well as higher rental rates and lower uncollectible rents.
Property Operating Expenses
Property operating expenses increased 12.2% to$415.0 million for the nine months endedSeptember 30, 2022 from$370.0 million for the nine months endedSeptember 30, 2021 . This increase was primarily attributable to inflationary increases in R&M and turnover costs, annual growth in property tax expense and growth in our portfolio.
Property Management Expenses
Property management expenses for the nine months endedSeptember 30, 2022 and 2021 were$84.5 million and$70.7 million , respectively, which included$3.1 million and$2.3 million , respectively, of noncash share-based compensation expense in each period related to centralized and field property management employees. The increase in property management expenses was primarily attributable to higher personnel costs from (i) the timing of increased compensation in the second half of 2021 as a result of the inflationary environment and (ii) increased headcount to support growth in our portfolio, as well as an increase in other miscellaneous property management expenses. 41 --------------------------------------------------------------------------------
Core Revenues from
Core revenues from Same-Home properties increased 8.9% to$798.6 million for the nine months endedSeptember 30, 2022 from$733.4 million for the nine months endedSeptember 30, 2021 . This increase was primarily attributable to higher Average Monthly Realized Rent per property, which increased 7.9% to$1,899 per month for the nine months endedSeptember 30, 2022 compared to$1,760 per month for the nine months endedSeptember 30, 2021 , and lower uncollectible rents, partially offset by a decrease in Average Occupied Days Percentage, which was 97.4% for the nine months endedSeptember 30, 2022 compared to 97.6% for the nine months endedSeptember 30, 2021 .
Core Property Operating Expenses from
Core property operating expenses from Same-Home properties consist of direct property operating expenses, net of tenant charge-backs, and property management costs, net of tenant charge-backs, and excludes noncash share-based compensation expense. Core property operating expenses from Same-Home properties increased 6.4% to$277.3 million for the nine months endedSeptember 30, 2022 from$260.6 million for the nine months endedSeptember 30, 2021 primarily driven by annual growth in property tax expense, higher property management personnel costs from (i) the timing of increased compensation in the second half of 2021 as a result of the inflationary environment and (ii) increased headcount to support growth in our portfolio, and other inflationary increases.
General and Administrative Expense
General and administrative expense primarily consists of corporate payroll and personnel costs, federal and state taxes, trustees' and officers' insurance expense, audit and tax fees, trustee fees and other expenses associated with our corporate and administrative functions. General and administrative expense for the nine months endedSeptember 30, 2022 and 2021 was$53.1 million and$40.6 million , respectively, which included$13.4 million and$7.7 million , respectively, of noncash share-based compensation expense in each period related to corporate administrative employees. The increase in general and administrative expense was primarily related to an increase in noncash share-based compensation expense, as well as the timing of increased personnel and information technology costs to support growth in our business.
Interest Expense
Interest expense increased 13.8% to$98.6 million for the nine months endedSeptember 30, 2022 from$86.6 million for the nine months endedSeptember 30, 2021 . This increase was primarily due to additional interest from the issuances of the 2031 and 2051 unsecured senior notes inJuly 2021 and the 2032 and 2052 unsecured senior notes inApril 2022 , partially offset by additional capitalized interest during the nine months endedSeptember 30, 2022 related to an increase in development activities under our AMH Development Program and an increase in acquired properties that underwent initial renovation during the nine months endedSeptember 30, 2022 .
Acquisition and Other Transaction Costs
Acquisition and other transaction costs consist primarily of costs associated with purchases of single-family properties, including newly constructed properties from third-party builders, the development of single-family properties, or the disposal of certain properties or portfolios of properties which do not qualify for capitalization. Acquisition and other transaction costs for the nine months endedSeptember 30, 2022 and 2021 were$18.1 million and$11.1 million , respectively, which included$7.2 million and$4.3 million , respectively, of noncash share-based compensation expense in each period related to employees in these functions. The increase in acquisition and other transaction costs was primarily related to higher personnel costs associated with the growth of our portfolio and higher noncash share-based compensation expense.
Depreciation and Amortization
Depreciation and amortization expense consists primarily of depreciation of buildings and improvements. Depreciation of our assets is calculated over their useful lives on a straight-line basis over three to 30 years. Our intangible assets are amortized on a straight-line basis over the asset's estimated economic useful life. Depreciation and amortization expense increased 13.8% to$313.7 million for the nine months endedSeptember 30, 2022 from$275.7 million for the nine months endedSeptember 30, 2021 primarily due to growth in our average number of depreciable properties.
Hurricane-Related Charges, net
Hurricane Ian impacted certain properties primarily located in
42
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policies provide coverage for wind and flood damage, as well as business
interruption costs, during the period of remediation and repairs, subject to
deductibles and limits. During the nine months ended September 30, 2022 , the
Company recognized $8.4 million in gross charges primarily related to an
estimated accrual for minor repair and remediation costs, partially offset by an
estimated $2.3 million of related insurance claims that we believe is probable
we will recover.
Gain on Sale and Impairment of
Gain on sale and impairment of single-family properties and other, net for the nine months endedSeptember 30, 2022 and 2021 was$79.1 million and$36.4 million , respectively, which included$1.3 million and$0.2 million of impairment charges, respectively, related to homes classified as held for sale during each period. The increase was primarily related to an increase in properties sold as well as higher net gains from property sales, partially offset by higher impairment charges.
Other Income and Expense, net
Other income and expense, net for the nine months endedSeptember 30, 2022 and 2021 was$6.8 million and$1.7 million , respectively, which primarily related to interest income, fees from unconsolidated joint ventures and equity in income (losses) from unconsolidated joint ventures, partially offset by expenses related to unconsolidated joint ventures and other nonrecurring expenses.
Critical Accounting Estimates
Our critical accounting estimates are included in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the 2021 Annual Report. There have been no material changes to these estimates during the nine months endedSeptember 30, 2022 .
Recent Accounting Pronouncements
See Note 2. Significant Accounting Policies to our condensed consolidated financial statements in this report for a discussion of the adoption and potential impact of recently issued accounting standards, if any.
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, make distributions to our shareholders and OP unitholders, including AH4R, and meet other general requirements of our business. Our liquidity, to a certain extent, is subject to general economic, financial, competitive and other factors beyond our control.
Sources of Capital
We expect to satisfy our cash requirements through cash provided by operations, long-term secured and unsecured borrowings, issuances of debt and equity securities (including OP units), property dispositions and joint venture transactions. We expect to meet our operating liquidity requirements and our dividend distributions generally through cash on hand and cash provided by operations. For our acquisition and development expenditures, we expect to supplement these sources through the issuance of equity securities, including under our At-the-Market Program described below, borrowings under our credit facilities, issuances of unsecured senior notes, and proceeds from sales of single-family properties. However, our real estate assets are illiquid in nature. A timely liquidation of assets might not be a viable source of short-term liquidity should a cash flow shortfall arise, and we may need to source liquidity from other financing alternatives including drawing on our revolving credit facility. Our liquidity and capital resources as ofSeptember 30, 2022 included cash and cash equivalents of$97.2 million . Additionally, as ofSeptember 30, 2022 , we had no outstanding borrowings under our revolving credit facility, which provides for maximum borrowings of up to$1.25 billion , of which$2.7 million was committed to outstanding letters of credit. As described below, we also have estimated net proceeds of$297.1 million available from future settlement of theJanuary 2022 Forward Sale Agreements. We maintain an investment grade credit rating which provides for greater availability of and lower cost of debt financing.
Uses of Capital
Our expected material cash requirements over the next twelve months consist of
(i) contractually obligated expenditures, including payments of principal and
interest, (ii) other essential expenditures, including property operating
expenses, HOA fees (as applicable), real estate taxes, maintenance capital
expenditures, general and administrative expenses and dividends on our equity
securities
43
--------------------------------------------------------------------------------including those paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including to pay for the acquisition, development and renovation of our properties and repurchases of our securities.
With respect to our contractually obligated expenditures, our cash requirements within the next twelve months include accounts payable and accrued expenses, interest payments on debt obligations, principal amortization on our asset-backed securitizations, operating lease obligations and purchase commitments to acquire single-family properties and land for ourAMH Development Program. Except as described in Note 8. Debt, Note 9. Accounts Payable and Accrued Expenses, Note 15. Commitments and Contingencies and Note 16. Subsequent Events to our condensed consolidated financial statements in this report, there have been no other material changes outside the ordinary course of business to our other known contractual obligations described in "Liquidity and Capital Resources" in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Annual Report.
Cash Flows
The following table summarizes the Company's and theOperating Partnership's cash flows for the nine months endedSeptember 30, 2022 and 2021 (amounts in thousands): For the Nine Months Ended September 30, 2022 2021 Change
Net cash provided by operating activities
(1,267,654) (1,191,461) (76,193)
Net cash provided by financing activities 736,819 630,185 106,634
Net increase (decrease) in cash, cash equivalents
and restricted cash $ 65,953 $ (63,083) $ 129,036
Operating Activities
Our cash flows provided by operating activities, which is our principal source
of cash flows, depend on numerous factors, including the occupancy level of our
properties, the rental rates achieved on our leases, the collection of rent from
our tenants and the level of property operating expenses, property management
expenses and general and administrative expenses. Net cash provided by operating
activities increased $98.6 million , or 19.8%, from $498.2 million for the nine
months ended September 30, 2021 to $596.8 million for the nine months ended
September 30, 2022 , primarily as a result of increased cash flows generated from
a larger number of occupied properties, higher rental rates and lower
uncollectible rents, partially offset by higher cash outflows for property
related expenses as a result of inflationary increases and growth in our
portfolio.
Investing Activities
Net cash used for investing activities increased$76.2 million , or 6.4%, from$1.2 billion for the nine months endedSeptember 30, 2021 to$1.3 billion for the nine months endedSeptember 30, 2022 . Our investing activities are most significantly impacted by the strategic expansion of our portfolio through traditional acquisition channels, the development of "built-for-rental" homes through our AMH Development Program and the acquisition of newly built properties through our National Builder Program. Cash outflows for the addition of single-family properties to our portfolio through these channels increased$96.2 million during the nine months endedSeptember 30, 2022 . Homes acquired through our traditional acquisition channel require additional expenditures to prepare them for rental, and cash outflows for renovations to single-family properties increased$52.4 million primarily as a result of an increased volume of properties that underwent initial or property-enhancing renovations during the nine months endedSeptember 30, 2022 . Recurring and other capital expenditures for single-family properties increased$8.4 million primarily due to growth in our portfolio. The development of "built-for-rental" homes and our property-enhancing capital expenditures may reduce recurring and other capital expenditures on an average per-home basis in the future. We use cash generated from operating and financing activities and by recycling capital through the sale of single-family properties to invest in the strategic expansion of our single-family property portfolio. Net proceeds received from the sale of single-family properties and other increased$61.9 million as a result of an increased volume of properties sold and a higher average realized sales price per property during the nine months endedSeptember 30, 2022 , and we collected$34.0 million during the nine months endedSeptember 30, 2022 from notes receivables related to property sales. Net cash inflows from unconsolidated joint ventures increased$14.7 million during the nine months endedSeptember 30, 2022 due to the timing of contributions and distributions to and from our unconsolidated joint ventures. Cash outflows for other investing activities increased$19.1 million primarily due to investments in venture capital funds focused on proptech and decarbonization in the real estate industry during the nine months endedSeptember 30, 2022 and a year-over-year increase in cash outflows for information technology projects. Cash outflows for deposits on land option contracts increased$10.7 million as a result of deposits made during the nine months endedSeptember 30, 2022 . 44 --------------------------------------------------------------------------------
Financing Activities
Net cash provided by financing activities increased$106.6 million , from$630.2 million for the nine months endedSeptember 30, 2021 to$736.8 million for the nine months endedSeptember 30, 2022 primarily due to (i) a$343.8 million reduction in cash paid for the redemptions of perpetual preferred shares as well as an$18.6 million reduction in distributions to preferred shareholders as a result of the redemptions of our Series F perpetual preferred shares during the nine months endedSeptember 30, 2022 and Series D and Series E perpetual preferred shares during the nine months endedSeptember 30, 2021 , (ii) a$139.6 million year-over-year increase in proceeds from unsecured senior notes, net of discount, (iii)$60.2 million of proceeds from liabilities related to consolidated land not owned during the nine months endedSeptember 30, 2022 , and (iv) a$9.8 million year-over-year decrease in financing costs paid. This increase was partially offset by (i) activity under our revolving credit facility, which resulted in$350.0 million of net cash outflows during the nine months endedSeptember 30, 2022 compared to zero net activity during the nine months endedSeptember 30, 2021 , (ii) an$86.0 million increase in distributions paid to common share and unit holders resulting from an 80% increase in distributions paid per common share and unit, and (iii) a$31.6 million year-over-year decrease in proceeds from the issuance of Class A common shares, net of offering costs. Unsecured Senior Notes During the second quarter of 2022, theOperating Partnership issued$600.0 million of 3.625% unsecured senior notes with a maturity date ofApril 15, 2032 (the "2032 Notes") and$300.0 million of 4.300% unsecured senior notes with a maturity date ofApril 15, 2052 (the "2052 Notes" and, together with the 2032 Notes, the "Notes"). Interest on the Notes is payable semi-annually in arrears onApril 15 andOctober 15 of each year, commencing onOctober 15, 2022 .The Operating Partnership received aggregate net proceeds of$870.3 million from these issuances, after underwriting fees of approximately$6.5 million and a$23.2 million discount, and before offering costs of approximately$1.7 million .The Operating Partnership used net proceeds from this offering to repay amounts outstanding on its revolving credit facility, for the redemption of its Series F perpetual preferred shares and for general corporate purposes. The Notes are theOperating Partnership's unsecured and unsubordinated obligations and rank equally in right of payment with all of theOperating Partnership's existing and future unsecured and unsubordinated indebtedness. The indentures require that we maintain certain financial covenants.The Operating Partnership may redeem the Notes in whole at any time or in part from time to time at the applicable redemption price specified in the indentures with respect to the Notes. If the 2032 Notes are redeemed on or afterJanuary 15, 2032 (three months prior to the maturity date), the redemption price will be equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date. If the 2052 Notes are redeemed on or afterOctober 15, 2051 (six months prior to the maturity date), the redemption price will be equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date.
Class A Common Share Offering
During the first quarter of 2022, the Company completed an underwritten public offering for 23,000,000 of its Class A common shares of beneficial interest,$0.01 par value per share, of which 10,000,000 shares were issued directly by the Company and 13,000,000 shares were offered on a forward basis at the request of the Company by the forward sellers. In connection with this offering, the Company entered into forward sale agreements with the forward purchasers (the "January 2022 Forward Sale Agreements") for these 13,000,000 shares which are accounted for in equity. The Company received net proceeds of$375.8 million from the 10,000,000 Class A common shares issued directly by the Company after deducting underwriting fees and before offering costs of approximately$0.2 million . The Company did not initially receive proceeds from the sale of the Class A common shares offered on a forward basis. InSeptember 2022 , the Company issued and physically settled 5,000,000 Class A common shares under theJanuary 2022 Forward Sale Agreements, receiving net proceeds of$185.6 million . The Company used these net proceeds to repay indebtedness under its revolving credit facility and for general corporate purposes. As ofSeptember 30, 2022 , 8,000,000 Class A common shares remained available for future settlement under theJanuary 2022 Forward Sale Agreements. The Company expects to physically settle the remaining shares byJanuary 20, 2023 through the delivery of the Class A common shares and expects that net proceeds will be approximately$297.1 million . The Company expects to use these net proceeds (i) to repay indebtedness it has incurred or expects to incur under its revolving credit facility, (ii) to develop new single-family properties and communities, (iii) to acquire and renovate single-family properties and for related activities in accordance with its business strategy and (iv) for general corporate purposes. Although the Company expects to physically settle, theJanuary 2022 Forward Sale Agreements allow the Company to cash or net-share settle all or a portion of its obligations. If the Company elects to cash or net share settle theJanuary 2022 Forward Sale Agreements, the Company may not receive any proceeds, and may owe cash or Class A common shares to the forward purchasers in certain circumstances. TheJanuary 2022 Forward Sale Agreements are subject to early termination or settlement under certain circumstances. 45 -------------------------------------------------------------------------------- When the Company issues common shares, theOperating Partnership issues an equivalent number of units of partnership interest of a corresponding class to AH4R, with theOperating Partnership receiving the net proceeds from the share issuances.
At-the-Market Common Share Offering Program
The Company maintains an at-the-market common share offering program under which it can issue Class A common shares from time to time through various sales agents up to an aggregate gross sales offering price of$500.0 million (the "At-the-Market Program"). The At-the-Market Program also provides that we may enter into forward contracts for our Class A common shares with forward sellers and forward purchasers. The Company intends to use any net proceeds from the At-the-Market Program (i) to repay indebtedness the Company has incurred or expects to incur under its revolving credit facility, (ii) to develop new single-family properties and communities, (iii) to acquire and renovate single-family properties and for related activities in accordance with its business strategy and (iv) for working capital and general corporate purposes, including repurchases of the Company's securities, acquisitions of additional properties, capital expenditures and the expansion, redevelopment and/or improvement of properties in the Company's portfolio. The At-the-Market Program may be suspended or terminated by the Company at any time. During the nine months endedSeptember 30, 2022 and 2021, no shares were issued under the At-the-Market Program. As ofSeptember 30, 2022 , 1,835,416 shares have been issued under the At-the-Market Program and$425.2 million remained available for future share issuances. Share Repurchase Program The Company's board of trustees authorized the establishment of our share repurchase program for the repurchase of up to$300.0 million of our outstanding Class A common shares and up to$250.0 million of our outstanding preferred shares from time to time in the open market or in privately negotiated transactions. The program does not have an expiration date, but may be suspended or discontinued at any time without notice. All repurchased shares are constructively retired and returned to an authorized and unissued status.The Operating Partnership funds the repurchases and constructively retires an equivalent number of corresponding Class A units. During the nine months endedSeptember 30, 2022 and 2021, we did not repurchase and retire any of our Class A common shares or preferred shares. As ofSeptember 30, 2022 , we had a remaining repurchase authorization of up to$265.1 million of our outstanding Class A common shares and up to$250.0 million of our outstanding preferred shares under the program.
Redemption of Perpetual Preferred Shares
During the second quarter of 2022, the Company redeemed all 6,200,000 shares of the outstanding 5.875% Series F perpetual preferred shares,$0.01 par value per share, for cash at the liquidation preference of$25.00 per share plus any accrued and unpaid dividends in accordance with the terms of such shares.The Operating Partnership also redeemed its corresponding Series F perpetual preferred units. As a result of the redemption, the Company recorded a$5.3 million allocation of income to the Series F perpetual preferred shareholders within the condensed consolidated statements of operations during the nine months endedSeptember 30, 2022 , which represents the initial liquidation value of the Series F perpetual preferred shares in excess of its carrying value as of the redemption date.
Distributions
As a REIT, we generally are required to distribute annually to our shareholders at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and any net capital gains) and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our REIT taxable income (determined without regard to the deduction for dividends paid and including any net capital gains).The Operating Partnership funds the payment of distributions. As ofDecember 31, 2021 , AH4R had a net operating loss ("NOL") forU.S. federal income tax purposes of$25.4 million . We intend to use our NOL (to the extent available) to reduce our REIT taxable income to the extent that REIT taxable income is not reduced by our deduction for dividends paid. During the nine months endedSeptember 30, 2022 and 2021, the Company distributed an aggregate$229.9 million and$162.5 million , respectively, to common shareholders, preferred shareholders and noncontrolling interests on a cash basis.
Additional Non-GAAP Measures
Funds from Operations ("FFO") / Core FFO / Adjusted FFO attributable to common share and unit holders
FFO attributable to common share and unit holders is a non-GAAP financial measure that we calculate in accordance with the definition approved by theNational Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss calculated in accordance with GAAP, excluding gains and losses from sales or impairment of real estate, plus real estate-related 46 --------------------------------------------------------------------------------
depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.
Core FFO attributable to common share and unit holders is a non-GAAP financial measure that we use as a supplemental measure of our performance. We compute this metric by adjusting FFO attributable to common share and unit holders for (1) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (2) noncash share-based compensation expense, (3) hurricane-related charges, net, which result in material charges to our single-family property portfolio, (4) gain or loss on early extinguishment of debt and (5) the allocation of income to our perpetual preferred shares in connection with their redemption. Adjusted FFO attributable to common share and unit holders is a non-GAAP financial measure that we use as a supplemental measure of our performance. We compute this metric by adjusting Core FFO attributable to common share and unit holders for (1) Recurring Capital Expenditures that are necessary to help preserve the value and maintain functionality of our properties and (2) capitalized leasing costs incurred during the period. As a portion of our homes are recently developed, acquired and/or renovated, we estimateRecurring Capital Expenditures for our entire portfolio by multiplying (a) current period actual Recurring Capital Expenditures per Same-Home Property by (b) our total number of properties, excluding newly acquired non-stabilized properties and properties classified as held for sale. We present FFO attributable to common share and unit holders because we consider this metric to be an important measure of the performance of real estate companies, as do many investors and analysts in evaluating the Company. We believe that FFO attributable to common share and unit holders provides useful information to investors because this metric excludes depreciation, which is included in computing net income and assumes the value of real estate diminishes predictably over time. We believe that real estate values fluctuate due to market conditions and in response to inflation. We also believe that Core FFO and Adjusted FFO attributable to common share and unit holders provide useful information to investors because they allow investors to compare our operating performance to prior reporting periods without the effect of certain items that, by nature, are not comparable from period to period. FFO, Core FFO and Adjusted FFO attributable to common share and unit holders are not a substitute for net income or net cash provided by operating activities, each as determined in accordance with GAAP, as a measure of our operating performance, liquidity or ability to pay dividends. These metrics also are not necessarily indicative of cash available to fund future cash needs. Because other REITs may not compute these measures in the same manner, they may not be comparable among REITs. The following is a reconciliation of the Company's net income attributable to common shareholders, determined in accordance with GAAP, to FFO attributable to common share and unit holders, Core FFO attributable to common share and unit holders and Adjusted FFO attributable to common share and unit holders for the three and nine months endedSeptember 30, 2022 and 2021 (amounts in thousands): For the Three Months Ended For the Nine Months Ended September 30, September 30, 2022 2021 2022 2021
Net income attributable to common shareholders
7,464 5,869 24,119 14,012
Gain on sale and impairment of single-family
properties and other, net (24,197) (9,572) (79,052) (36,401)
Adjustments for unconsolidated joint ventures 448 723 (122) 1,554
Depreciation and amortization 109,319 94,494 313,688 275,682
Less: depreciation and amortization of non-real estate assets
(3,543) (2,894) (9,648) (8,287)
FFO attributable to common share and unit holders
4,482 3,279 18,114 11,093
Noncash share-based compensation - general and
administrative 3,390 1,557 13,352 7,722
Noncash share-based compensation - property management 1,015
680 3,146 2,278
Hurricane-related charges, net 6,133 - 6,133 -
Redemption of perpetual preferred shares - - 5,276 15,879
Core FFO attributable to common share and unit holders
(22,479) (16,921) (49,616) (39,789)
Leasing costs (689) (792) (1,868) (2,672)
Adjusted FFO attributable to common share and unit
holders $ 132,058 $ 113,292 $ 406,766 $ 328,256
47--------------------------------------------------------------------------------
EBITDA / EBITDAre / Adjusted EBITDAre / Fully Adjusted EBITDAre
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure and is used by us and others as a supplemental measure of performance. EBITDAre is a supplemental non-GAAP financial measure, which we calculate in accordance with the definition approved by NAREIT by adjusting EBITDA for gains and losses from sales or impairments of single-family properties and adjusting for unconsolidated partnerships and joint ventures on the same basis. Adjusted EBITDAre is a supplemental non-GAAP financial measure calculated by adjusting EBITDAre for (1) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (2) noncash share-based compensation expense, (3) hurricane-related charges, net, which result in material charges to our single-family property portfolio, and (4) gain or loss on early extinguishment of debt. Fully Adjusted EBITDAre is a supplemental non-GAAP financial measure calculated by adjusting Adjusted EBITDAre for (1) Recurring Capital Expenditures and (2) leasing costs. As a portion of our homes are recently developed, acquired and/or renovated, we estimate Recurring Capital Expenditures for our entire portfolio by multiplying (a) current period actualRecurring Capital Expenditures per Same-Home Property by (b) our total number of properties, excluding newly acquired non-stabilized properties and properties classified as held for sale. We believe these metrics provide useful information to investors because they exclude the impact of various income and expense items that are not indicative of operating performance. The following is a reconciliation of net income, as determined in accordance with GAAP, to EBITDA, EBITDAre, Adjusted EBITDAre and Fully Adjusted EBITDAre for the three and nine months endedSeptember 30, 2022 and 2021 (amounts in thousands): For the Three Months Ended For the Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net income$ 61,665 $ 48,501 $ 206,234 $ 149,236 Interest expense 36,254 31,097 98,622 86,630 Depreciation and amortization 109,319 94,494 313,688 275,682 EBITDA$ 207,238 $
174,092
Gain on sale and impairment of single-family properties and other, net (24,197) (9,572) (79,052) (36,401) Adjustments for unconsolidated joint ventures 448 723 (122) 1,554 EBITDAre$ 183,489 $
165,243
Noncash share-based compensation - general and administrative 3,390 1,557 13,352 7,722 Noncash share-based compensation - property management 1,015 680 3,146 2,278 Acquisition, other transaction costs and other 4,482 3,279 18,114 11,093 Hurricane-related charges, net 6,133 - 6,133 - Adjusted EBITDAre$ 198,509 $
170,759
Recurring Capital Expenditures (22,479) (16,921) (49,616) (39,789) Leasing costs (689) (792) (1,868) (2,672) Fully Adjusted EBITDAre$ 175,341 $
153,046
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