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American Homes 4 Rent Reports Third Quarter 2020 Financial and Operating Results

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AGOURA HILLS, Calif., Nov. 5, 2020 /PRNewswire/ -- American Homes 4 Rent (NYSE: AMH) (the "Company"), a leading provider of high-quality single-family homes for rent, today announced its financial and operating results for the quarter ended September 30, 2020.

(PRNewsfoto/American Homes 4 Rent)
(PRNewsfoto/American Homes 4 Rent)

Highlights

  • Total revenues increased 4.2% to $310.8 million for the third quarter of 2020 from $298.3 million for the third quarter of 2019.

  • Net income attributable to common shareholders totaled $22.6 million, or $0.07 per diluted share, for the third quarter of 2020, compared to $23.5 million, or $0.08 per diluted share, for the third quarter of 2019.

  • Core Funds from Operations ("Core FFO") attributable to common share and unit holders increased 6.7% to $0.29 per FFO share and unit for the third quarter of 2020 from $0.28 per FFO share and unit for the third quarter of 2019 and Adjusted Funds from Operations ("Adjusted FFO") attributable to common share and unit holders increased 4.7% to $0.25 per FFO share and unit for the third quarter of 2020 from $0.24 per FFO share and unit for the third quarter of 2019.

  • Core Net Operating Income ("Core NOI") from Same-Home properties increased by 4.0% year-over-year for the third quarter of 2020.

  • Experienced record demand, driving Same-Home portfolio Average Occupied Days Percentage to 96.9% in the third quarter of 2020, while achieving 5.9% rental rate growth on new leases.

  • Strong leasing momentum continues into the fourth quarter of 2020, with Same-Home portfolio Average Occupied Days Percentage maintaining all-time high levels of 97.2% in October 2020.

  • Issued 14,950,000 Class A common shares in an oversubscribed and upsized common equity offering, raising net proceeds of $411.7 million to fund expanded external growth programs and for general corporate purposes.

"American Homes 4 Rent produced impressive third quarter results, driving a nearly 7% year-over-year growth in Core FFO per FFO share and unit," stated David Singelyn, American Homes 4 Rent's Chief Executive Officer. "The pandemic has fundamentally changed the residential landscape, driving a new wave of demand for single-family rentals. Additionally, as a result of our differentiated strategy, we are positioned in the right markets, with a best-in-class operating platform and dynamic external growth engine that will enable us to translate this new wave of demand into industry leading cash flow growth. And, when combined with our investment grade balance sheet, we believe we are positioned to produce outsized total shareholder returns for years to come."

COVID-19 Business Update

The Company has maintained continuity in business operations since the beginning of the COVID-19 pandemic and produced strong operating results in the third quarter of 2020 demonstrating the flexibility of its technology enabled operating platform and the resiliency of its high-quality, diversified portfolio. Comprehensive remote working policies remain in place for all corporate and field offices, and operational protocols have been tailored based on state and local mandates to ensure continuity of services, while protecting employees, residents and their families.

Driven by shifting housing preferences as households migrate away from city centers and apartments, the Company is experiencing record demand levels and reported its highest ever Same-Home portfolio Average Occupied Days Percentages in September and October 2020. A summary of the Company's Same-Home portfolio Average Occupied Days Percentages for the third quarter of 2020 and October 2019 and 2020 is as follows:


Jul 2020


Aug 2020


Sep 2020


Oct 2019


Oct 2020

Same-Home Average Occupied Days Percentage

96.4

%


97.0

%


97.2

%


95.2

%


97.2

%
















Additionally, as the Company entered the third quarter of 2020, it began a socially responsible return to normal operating practices, including the assessment of late fees in jurisdictions where allowable and modest renewal increases on expiring leases. A summary of the Company's leasing spread activity for the third quarter of 2020 and October 2019 and 2020 is as follows:


Jul 2020


Aug 2020


Sep 2020


Oct 2019


Oct 2020

Average Change in Rent for Renewals

%


1.4

%


2.8

%


4.6

%


3.5

%

Average Change in Rent for Re-Leases

5.4

%


6.0

%


7.7

%


2.1

%


7.0

%

Average Blended Change in Rent

2.0

%


3.0

%


4.4

%


3.6

%


4.9

%

Collections continue to remain resilient. The Company reported third quarter 2020 rental revenue equivalent to 98.0% of quarterly rental billings, comprised of: (i) one percentage point of second quarter 2020 rental billings received and recognized in the third quarter and (ii) 97.0% of revenue recognition on third quarter rental billings. On a cumulative basis through October 2020, we have now received 97.5% of second quarter rental billings and 96.3% of third quarter rental billings, which is consistent with second quarter payment history for the same time frame. Collections are reported without application of any existing resident security deposits or adjustment for deferred payment plans.

During October 2020, the Company has collected 93.7% of October rents, which represents 101% of second quarter 2020 payment history for the same time frame.

Although the Company has produced strong operating results to date during the COVID-19 pandemic, the extent to which the pandemic will ultimately impact us and our residents will depend on future developments which are highly uncertain. These include the scope, severity and duration of the pandemic, including resurgences, status of eviction moratoriums, the speed and effectiveness of vaccine and treatment developments and the direct and indirect economic effects of the pandemic and containment measures, among others.

Third Quarter 2020 Financial Results

Net income attributable to common shareholders totaled $22.6 million, or $0.07 per diluted share, for the third quarter of 2020, compared to $23.5 million, or $0.08 per diluted share, for the third quarter of 2019. This decrease was primarily attributable to increased uncollectible rents and tenant utility reimbursements related to the COVID-19 pandemic, partially offset by growth in the Company's portfolio and higher occupancy.

Total revenues increased 4.2% to $310.8 million for the third quarter of 2020, compared to $298.3 million for the third quarter of 2019. Revenue growth was driven by an increase in our average occupied portfolio which grew to 50,630 homes for the third quarter of 2020, compared to 48,990 homes for the third quarter of 2019, as well as higher rental rates, offset by an increase in uncollectible rents and tenant utility reimbursements related to the COVID-19 pandemic.

Core NOI from our total portfolio increased 6.2% to $160.2 million for the third quarter of 2020, compared to $150.9 million for the third quarter of 2019. This growth was driven by a 5.4% increase in core revenues resulting from a larger number of occupied properties and higher rental rates, partially offset by an increase in uncollectible rents related to the COVID-19 pandemic and a 4.2% increase in core property operating expenses.

For the Company's Same-Home portfolio, rents from single-family properties increased 4.4% to $219.9 million for the third quarter of 2020, compared to $210.6 million for the third quarter of 2019, which was driven by a 2.7% increase in Average Monthly Realized Rent per property and a 160 basis point increase in Average Occupied Days Percentage. This growth was (i) further benefited by 10 basis points of contribution from higher fees and (ii) partially offset by 90 basis points of drag from increased uncollectible rents related to the COVID-19 pandemic, which resulted in 3.6% growth in core revenues from Same-Home properties. Core property operating expenses from Same-Home properties increased 3.0% to $82.3 million for the third quarter of 2020, compared to $79.9 million for the third quarter of 2019. As a result, Core NOI from Same-Home properties increased 4.0% to $136.9 million for the third quarter of 2020, compared to $131.6 million for the third quarter of 2019.

Core FFO attributable to common share and unit holders was $106.2 million, or $0.29 per FFO share and unit, for the third quarter of 2020, compared to $97.4 million, or $0.28 per FFO share and unit, for the third quarter of 2019. Adjusted FFO attributable to common share and unit holders was $89.6 million, or $0.25 per FFO share and unit, for the third quarter of 2020, compared to $83.9 million, or $0.24 per FFO share and unit, for the third quarter of 2019. These improvements were primarily attributable to growth in the Company's portfolio and a larger number of occupied properties as well as higher rental rates, partially offset by $2.9 million of negative financial impacts associated with the COVID-19 pandemic including $2.2 million of increased uncollectible rents and $0.7 million of increased uncollectible tenant utility reimbursements. Additionally, due primarily to abnormally high home system usage during stay-at-home orders, we incurred approximately $2.1 million of incremental capital expenditures within Adjusted FFO attributable to common share and unit holders that primarily related to HVAC and home system replacements during the third quarter of 2020.

Year-to-Date 2020 Financial Results

Net income attributable to common shareholders totaled $58.2 million, or $0.19 per diluted share, for the nine-month period ended September 30, 2020, compared to $62.3 million, or $0.21 per diluted share, for the nine-month period ended September 30, 2019. This decrease was primarily attributable to increased uncollectible rents and tenant utility reimbursements related to the COVID-19 pandemic and a noncash write-down included in other expenses associated with the liquidation of legacy joint ventures, which were acquired as part of the American Residential Properties, Inc. merger in February 2016. This decrease was offset in part by growth in the Company's portfolio and higher occupancy.

Total revenues increased 2.8% to $883.5 million for the nine-month period ended September 30, 2020, compared to $859.4 million for the nine-month period ended September 30, 2019. Revenue growth was driven by an increase in our average occupied portfolio which grew to 49,764 homes for the nine-month period ended September 30, 2020, compared to 48,667 homes for the nine-month period ended September 30, 2019, as well as higher rental rates, offset by an increase in uncollectible rents and tenant utility reimbursements related to the COVID-19 pandemic.

Core NOI from our total portfolio increased 2.2% to $465.7 million for the nine-month period ended September 30, 2020, compared to $455.5 million for the nine-month period ended September 30, 2019. This growth was driven by a 3.2% increase in core revenues resulting from a larger number of occupied properties and higher rental rates, partially offset by an increase in uncollectible rents related to the COVID-19 pandemic and a 4.9% increase in core property operating expenses.

For the Company's Same-Home portfolio, rents from single-family properties increased 3.7% to $649.4 million for the nine-month period ended September 30, 2020, compared to $626.3 million for the nine-month period ended September 30, 2019, which was driven by a 3.1% increase in Average Monthly Realized Rent per property and a 50 basis point increase in Average Occupied Days Percentage. This growth was (i) further benefited by 10 basis points of contribution from higher fees and (ii) partially offset by 130 basis points of drag from increased uncollectible rents related to the COVID-19 pandemic, which resulted in 2.5% growth in core revenues from Same-Home properties. Core property operating expenses from Same-Home properties increased 4.3% to $239.6 million for the nine-month period ended September 30, 2020, compared to $229.7 million for the nine-month period ended September 30, 2019. As a result, Core NOI from Same-Home properties increased 1.5% to $406.0 million for the nine-month period ended September 30, 2020, compared to $399.9 million for the nine-month period ended September 30, 2019.

Core FFO attributable to common share and unit holders was $304.1 million, or $0.85 per FFO share and unit, for the nine-month period ended September 30, 2020, compared to $291.4 million, or $0.83 per FFO share and unit, for the nine-month period ended September 30, 2019. Adjusted FFO attributable to common share and unit holders for the nine-month period ended September 30, 2020 was $264.7 million, or $0.74 per FFO share and unit, compared to $257.5 million, or $0.73 per FFO share and unit, for the nine-month period ended September 30, 2019. These improvements were primarily attributable to growth in the Company's portfolio and a larger number of occupied properties as well as higher rental rates, partially offset by the negative financial impacts associated with the COVID-19 pandemic that relate to (i) the Company's socially responsible decisions between April and July 2020 to waive month-to-month lease premiums and offer zero percent increases on newly signed renewal leases, (ii) waived late fees between April and July 2020, and (iii) $12.3 million of other negative financial impacts associated with the COVID-19 pandemic including $9.2 million of increased uncollectible rents, $2.6 million of increased uncollectible tenant utility reimbursements and $0.5 million of increased costs associated with enhanced cleaning and safety protocols. Additionally, due primarily to abnormally high home system usage during stay-at-home orders, we incurred approximately $3.4 million of incremental capital expenditures within Adjusted FFO attributable to common share and unit holders that primarily related to HVAC and home system replacements during the nine-month period ended September 30, 2020.

Portfolio

As of September 30, 2020, the Company had an occupancy percentage of 97.5%, compared to 96.4% as of June 30, 2020. The occupancy percentage on Same-Home properties was 97.8% as of September 30, 2020, compared to 96.9% as of June 30, 2020.

Investments

As of September 30, 2020, the Company's wholly-owned portfolio consisted of 53,229 homes, compared to 53,000 homes as of June 30, 2020, an increase of 229 homes during the third quarter of 2020, which included 400 newly constructed properties delivered through our AMH Development Program and 108 homes acquired through our National Builder Program and traditional acquisition channel, partially offset by 233 homes sold and 46 homes contributed to unconsolidated joint ventures. As of September 30, 2020, the Company had 813 properties held for sale, compared to 948 properties as of June 30, 2020. Also, as of September 30, 2020, the Company had an additional 1,131 properties held in unconsolidated joint ventures, representing a net increase of 195 properties, compared to 936 properties held in unconsolidated joint ventures as of June 30, 2020.

Capital Activities, Balance Sheet and Liquidity

During the third quarter of 2020, the Company issued 14,950,000 Class A common shares of beneficial interest, $0.01 par value per share, in an underwritten public offering, raising net proceeds of $411.7 million after deducting underwriting discounts and before offering costs of approximately $0.2 million.

As of September 30, 2020, the Company had cash and cash equivalents of $315.8 million and had total outstanding debt of $2.9 billion, excluding unamortized discounts and unamortized deferred financing costs, with a weighted-average interest rate of 4.4% and a weighted-average term to maturity of 12.3 years. The Company had no outstanding borrowings on its $800.0 million revolving credit facility at the end of the quarter. Additionally, the Company has no debt maturities, other than recurring principal amortization, until 2024. During the third quarter of 2020, the Company generated $71.2 million of Retained Cash Flow and sold 233 properties generating $56.2 million of net proceeds.

Additional Information

A copy of the Company's Third Quarter 2020 Earnings Release and Supplemental Information Package and this press release are available on our website at www.americanhomes4rent.com. This information has also been furnished to the SEC in a current report on Form 8-K.

Conference Call

A conference call is scheduled on Friday, November 6, 2020 at 11:00 a.m. Eastern Time to discuss the Company's financial results for the quarter ended September 30, 2020 and to provide an update on its business. The domestic dial-in number is (877) 451-6152 (U.S. and Canada) and the international dial-in number is (201) 389-0879 (passcode not required). A simultaneous audio webcast may be accessed by using the link at www.americanhomes4rent.com, under "For Investors." A replay of the conference call may be accessed through Friday, November 20, 2020 by calling (844) 512-2921 (U.S. and Canada) or (412) 317-6671 (international), replay passcode number 13711366#, or by using the link at www.americanhomes4rent.com, under "For Investors."

About American Homes 4 Rent

American Homes 4 Rent (NYSE: AMH) is a leader in the single-family home rental industry and "American Homes 4 Rent" is fast becoming a nationally recognized brand for rental homes, known for high-quality, good value and tenant satisfaction. We are an internally managed Maryland real estate investment trust, or REIT, focused on acquiring, developing, renovating, leasing, and operating attractive, single-family homes as rental properties. As of September 30, 2020, we owned 53,229 single-family properties in selected submarkets in 22 states.

Forward-Looking Statements

This press release and the accompanying Supplemental Information Package contain "forward-looking statements." These forward-looking statements relate to beliefs, expectations or intentions and similar statements concerning matters that are not of historical fact and are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "intend," "potential," "plan," "goal," "outlook," "guidance" or other words that convey the uncertainty of future events or outcomes. Examples of forward-looking statements contained in this press release include, among others, our expectations with respect to the impacts of the COVID-19 pandemic, our belief that our acquisition and homebuilding programs will result in continued growth, and the estimated timing of our development deliveries set forth in the Supplemental Information Package. The Company has based these forward-looking statements on its current expectations and assumptions about future events. While the Company's management considers these expectations to be reasonable, they are inherently subject to risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond the Company's control and could cause actual results to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to update any forward-looking statements to conform to actual results or changes in its expectations, unless required by applicable law. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the potential adverse effect of the COVID-19 pandemic on the financial condition, operating results and cash flows of the Company, our tenants, the real estate market, the global economy and the financial markets. The extent to which the COVID-19 pandemic impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, including resurgences, status of eviction moratoriums, the speed and effectiveness of vaccine and treatment developments and the direct and indirect economic effects of the pandemic and containment measures, among others. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of the Company in general, see the "Risk Factors" disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, and in the Company's subsequent filings with the SEC.

American Homes 4 Rent

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share data)



September 30, 2020


December 31, 2019


(Unaudited)



Assets




Single-family properties:




Land

$

1,813,951



$

1,756,504


Buildings and improvements

8,022,817



7,691,877


Single-family properties in operation

9,836,768



9,448,381


Less: accumulated depreciation

(1,677,831)



(1,462,105)


Single-family properties in operation, net

8,158,937



7,986,276


Single-family properties under development and development land

449,867



355,427


Single-family properties held for sale, net

146,447



209,828


Total real estate assets, net

8,755,251



8,551,531


Cash and cash equivalents

315,808



37,575


Restricted cash

126,219



126,544


Rent and other receivables

46,908



29,618


Escrow deposits, prepaid expenses and other assets

135,251



140,961


Investments in unconsolidated joint ventures

74,981



67,935


Asset-backed securitization certificates

25,666



25,666


Goodwill

120,279



120,279


Total assets

$

9,600,363



$

9,100,109






Liabilities




Revolving credit facility

$



$


Asset-backed securitizations, net

1,931,725



1,945,044


Unsecured senior notes, net

889,467



888,453


Accounts payable and accrued expenses

324,732



243,193


Amounts payable to affiliates



4,629


Total liabilities

3,145,924



3,081,319






Commitments and contingencies








Equity




Shareholders' equity:




Class A common shares ($0.01 par value per share, 450,000,000 shares authorized, 315,628,067 and 300,107,599 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively)

3,156



3,001


Class B common shares ($0.01 par value per share, 50,000,000 shares authorized, 635,075 shares issued and outstanding at September 30, 2020 and December 31, 2019)

6



6


Preferred shares ($0.01 par value per share, 100,000,000 shares authorized, 35,350,000 shares issued and outstanding at September 30, 2020 and December 31, 2019)

354



354


Additional paid-in capital

6,214,149



5,790,775


Accumulated deficit

(454,697)



(465,368)


Accumulated other comprehensive income

6,041



6,658


Total shareholders' equity

5,769,009



5,335,426


Noncontrolling interest

685,430



683,364


Total equity

6,454,439



6,018,790






Total liabilities and equity

$

9,600,363



$

9,100,109


American Homes 4 Rent

Condensed Consolidated Statements of Operations

(Amounts in thousands, except share and per share data)

(Unaudited)



For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2020


2019


2020


2019

Revenues:








Rents and other single-family property revenues

$

307,932



$

293,064



$

875,963



$

850,672


Other

2,877



5,240



7,538



8,696


Total revenues

310,809



298,304



883,501



859,368










Expenses:








Property operating expenses

126,174



119,791



344,107



331,066


Property management expenses

21,976



22,727



67,512



65,086


General and administrative expense

12,570



11,107



35,329



31,028


Interest expense

29,267



31,465



88,540



95,951


Acquisition and other transaction costs

1,616



651



5,719



2,455


Depreciation and amortization

86,996



82,073



254,653



246,074


Other

4,479



2,610



11,992



5,148


Total expenses

283,078



270,424



807,852



776,808










Gain on sale of single-family properties and other, net

12,422



13,521



33,838



32,895


Loss on early extinguishment of debt







(659)










Net income

40,153



41,401



109,487



114,796










Noncontrolling interest

3,819



4,099



9,976



11,129


Dividends on preferred shares

13,782



13,782



41,346



41,346










Net income attributable to common shareholders

$

22,552



$

23,520



$

58,165



$

62,321










Weighted-average common shares outstanding:








Basic

308,080,226



300,580,978



303,319,053



298,974,146


Diluted

308,541,502



301,032,855



303,775,556



299,479,234










Net income attributable to common shareholders per share:








Basic

$

0.07



$

0.08



$

0.19



$

0.21


Diluted

$

0.07



$

0.08



$

0.19



$

0.21



Defined Terms

Average Blended Change in Rent
The percentage change in rent on all non-month-to-month lease renewals and re-leases during the period, compared to the annual rent of the previous expired non-month-to-month comparable long-term lease for each individual property.

Average Change in Rent for Re-Leases
The percentage change in annual rent on properties re-leased during the period, compared to the annual rent of the comparable long-term previous expired lease for each individual property.

Average Change in Rent for Renewals
The percentage change in rent on non-month-to-month comparable long-term lease renewals during the period.

Average Monthly Realized Rent
For the related period, 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 calculation is adjusted to reflect the number of days of ownership.

Average Occupied Days Percentage
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. This calculation excludes properties classified as held for sale.

Occupied Property
A property is classified as occupied upon commencement (i.e., start date) of a lease agreement, which can occur contemporaneously with or subsequent to execution (i.e., signature).

Recurring Capital Expenditures
For our Same-Home portfolio, Recurring Capital Expenditures includes replacement costs and other capital expenditures recorded during the period that are necessary to help preserve the value and maintain functionality of our properties. For our total portfolio, we calculate Recurring Capital Expenditures 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.

Same-Home Property
A property is classified as Same-Home if it has been stabilized longer than 90 days prior to the beginning of the earliest period presented under comparison. A property is removed from Same-Home if it has been classified as held for sale or has been taken out of service as a result of a casualty loss.

Stabilized Property
A property acquired individually (i.e., not through a bulk purchase) 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.

Non-GAAP Financial Measures

This press release and the Third Quarter 2020 Earnings Release and Supplemental Information Package include Funds from Operations attributable to common share and unit holders ("FFO attributable to common share and unit holders"), Core FFO attributable to common share and unit holders, Adjusted FFO attributable to common share and unit holders, Retained Cash Flow, Core NOI, Same-Home Core NOI and Same-Home Core NOI After Capital Expenditures, which are non-GAAP financial measures. We believe these measures are helpful in understanding our financial performance and are widely used in the REIT industry. Because other REITs may not compute these financial measures in the same manner, they may not be comparable among REITs. In addition, these metrics are not substitutes for net income or loss or net cash flows from operating activities, as defined by GAAP, as measures of our operating performance, liquidity or ability to pay dividends. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release and in the Third Quarter 2020 Earnings Release and Supplemental Information Package.

Funds from Operations attributable to common share and unit holders and Retained Cash Flow

The following is a reconciliation of net income or loss attributable to common shareholders to FFO attributable to common share and unit holders, Core FFO attributable to common share and unit holders, Adjusted FFO attributable to common share and unit holders and Retained Cash Flow for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands, except share data):


For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2020


2019


2020


2019


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Net income attributable to common shareholders

$

22,552



$

23,520



$

58,165



$

62,321


Adjustments:








Noncontrolling interests in the Operating Partnership

3,819



4,099



9,976



11,129


Net (gain) on sale / impairment of single-family properties and other

(11,994)



(11,871)



(27,901)



(29,812)


Adjustments for unconsolidated joint ventures

393



(325)



1,019



976


Depreciation and amortization

86,996



82,073



254,653



246,074


Less: depreciation and amortization of non-real estate assets

(2,296)



(1,991)



(6,552)



(5,902)


FFO attributable to common share and unit holders

$

99,470



$

95,505



$

289,360



$

284,786


Adjustments:








Acquisition, other transaction costs and other (1)

4,541



651



8,644



2,455


Noncash share-based compensation - general and administrative

1,723



938



4,741



2,520


Noncash share-based compensation - property management

447



350



1,327



989


Loss on early extinguishment of debt







659


Core FFO attributable to common share and unit holders (2)

$

106,181



$

97,444



$

304,072



$

291,409


Recurring Capital Expenditures

(15,397)



(12,475)



(36,292)



(30,665)


Leasing costs

(1,157)



(1,115)



(3,059)



(3,244)


Adjusted FFO attributable to common share and unit holders (2)

$

89,627



$

83,854



$

264,721



$

257,500


Common distributions

(18,416)



(17,660)



(53,805)



(52,953)


Retained Cash Flow

$

71,211



$

66,194



$

210,916



$

204,547










Per FFO share and unit:








FFO attributable to common share and unit holders

$

0.28



$

0.27



$

0.81



$

0.81


Core FFO attributable to common share and unit holders (2)

$

0.29



$

0.28



$

0.85



$

0.83


Adjusted FFO attributable to common share and unit holders (2)

$

0.25



$

0.24



$

0.74



$

0.73










Weighted-average FFO shares and units:








Common shares outstanding

308,080,226



300,580,978



303,319,053



298,974,146


Share-based compensation plan (3)

695,681



611,476



691,964



660,267


Operating partnership units

52,026,980



52,133,502



52,026,980



53,388,074


Total weighted-average FFO shares and units

360,802,887



353,325,956



356,037,997



353,022,487



(1)

Included in acquisition, other transaction costs and other is a net $2.9 million nonrecurring expense related to a legal matter involving a former employee during the three months ended September 30, 2020.

(2)

Core FFO and Adjusted FFO attributable to common share and unit holders include negative financial impacts associated with the COVID-19 pandemic that relate to (i) the Company's socially responsible decisions between April and July 2020 to waive month-to-month lease premiums and offer zero percent increases on newly signed renewal leases, (ii) waived late fees between April and July 2020, and (iii) $2.9 million and $12.3 million of other negative financial impacts from the COVID-19 pandemic including $2.2 million and $9.2 million of increased uncollectible rents and $0.7 million and $2.6 million of increased uncollectible tenant utility reimbursements during the three and nine months ended September 30, 2020, respectively. Also included is $0.5 million of increased costs associated with enhanced cleaning and safety protocols during the nine months ended September 30, 2020. Additionally, due primarily to abnormally high home system usage during stay-at-home orders, we incurred approximately $2.1 million and $3.4 million of incremental capital expenditures within Adjusted FFO attributable to common share and unit holders that primarily related to HVAC and home system replacements during the three and nine months ended September 30, 2020, respectively.

(3)

Reflects the effect of potentially dilutive securities issuable upon the assumed vesting/exercise of restricted stock units and stock options.

FFO attributable to common share and unit holders is a non-GAAP financial measure that we calculate in accordance with the definition approved by the National Association of Real Estate Investment Trusts, 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 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 the impacted single-family properties, and (4) gain or loss on early extinguishment of debt.

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 estimate Recurring 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, as well as on a per FFO share and unit basis, 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, as well as on a per FFO share and unit basis, 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 shares and units include weighted-average common shares and operating partnership units outstanding, as well as potentially dilutive securities.

Retained Cash Flow is a non-GAAP financial measure that we believe is helpful as a supplemental measure in assessing the Company's liquidity. This metric is computed by reducing Adjusted FFO attributable to common share and unit holders by common distributions.

FFO, Core FFO and Adjusted FFO attributable to common share and unit holders and Retained Cash Flow are not substitutes 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.

Core Net Operating Income

Core NOI, which we also present separately for our Same-Home portfolio, is a supplemental non-GAAP financial measure that we define as core revenues, which is calculated as total revenues, excluding expenses reimbursed by tenant charge-backs and other revenues, 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 the impacted single-family properties, (3) gain or loss on sales 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, (9) other expenses and (10) other revenues. 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. We further adjust Core NOI for our Same-Home portfolio by subtracting Recurring Capital Expenditures to calculate Same-Home Core NOI After Capital Expenditures, which we believe provides useful information to investors because it more fully reflects our operating performance after the impact of all property-level expenditures, regardless of whether they are capitalized or expensed.

Core NOI and Same-Home Core NOI After Capital Expenditures 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 GAAP).

The following are reconciliations of core revenues, Same-Home core revenues, core property operating expenses, Same-Home core property operating expenses, Core NOI, Same-Home Core NOI and Same-Home Core NOI After Capital Expenditures to their respective GAAP metrics for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):


For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2020


2019


2020


2019


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Core revenues and Same-Home core revenues








Total revenues

$

310,809



$

298,304



$

883,501



$

859,368


Tenant charge-backs

(49,935)



(48,306)



(125,377)



(123,561)


Other revenues

(2,877)



(5,240)



(7,538)



(8,696)


Core revenues

257,997



244,758



750,586



727,111


Less: Non-Same-Home core revenues

38,871



33,301



104,999



97,527


Same-Home core revenues

$

219,126



$

211,457



$

645,587



$

629,584







Core property operating expenses and Same-Home core property operating expenses





Property operating expenses

$

126,174



$

119,791



$

344,107



$

331,066


Property management expenses

21,976



22,727



67,512



65,086


Noncash share-based compensation - property management

(447)



(350)



(1,327)



(989)


Expenses reimbursed by tenant charge-backs

(49,935)



(48,306)



(125,377)



(123,561)


Core property operating expenses

97,768



93,862



284,915



271,602


Less: Non-Same-Home core property operating expenses

15,504



13,989



45,282



41,918


Same-Home core property operating expenses

$

82,264



$

79,873



$

239,633



$

229,684







Core NOI, Same-Home Core NOI and Same-Home Core NOI After Capital Expenditures





Net income

$

40,153



$

41,401



$

109,487



$

114,796


Loss on early extinguishment of debt







659


Gain on sale of single-family properties and other, net

(12,422)



(13,521)



(33,838)



(32,895)


Depreciation and amortization

86,996



82,073



254,653



246,074


Acquisition and other transaction costs

1,616



651



5,719



2,455


Noncash share-based compensation - property management

447



350



1,327



989


Interest expense

29,267



31,465



88,540



95,951


General and administrative expense

12,570



11,107



35,329



31,028


Other expenses

4,479



2,610



11,992



5,148


Other revenues

(2,877)



(5,240)



(7,538)



(8,696)


Core NOI

160,229



150,896



465,671



455,509


Less: Non-Same-Home Core NOI

23,367



19,312



59,717



55,609


Same-Home Core NOI

136,862



131,584



405,954



399,900


Less: Same-Home Recurring Capital Expenditures

13,354



10,938



31,754



26,793


Same-Home Core NOI After Capital Expenditures

$

123,508



$

120,646



$

374,200



$

373,107


Contact:
American Homes 4 Rent
Investor Relations
Phone: (855) 794-2447
Email: investors@ah4r.com

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SOURCE American Homes 4 Rent