What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-06 compared with 2021-05-07 · 233 added, 93 removed, 369 unchanged (47% of the section changed)

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We commenced operations in November 2012.

As of March 31, 2021, we owned 53,984 single-family properties in selected sub-markets of metropolitan statistical areas (“MSAs”) in 22 states, including 636 properties held for sale, compared to 53,584 single-family properties in 22 states, including 711 properties held for sale, as of December 31, 2020, and 52,776 single-family properties in 22 states, including 960 properties held for sale as of March 31, 2020.

As of March 31, 2021, 52,025, or 97.5%, of our total properties (excluding properties held for sale) were occupied, compared to 51,271, or 97.0%, of our total properties (excluding properties held for sale) as of December 31, 2020, and 49,029, or 94.6%, of our total properties (excluding properties held for sale) as of March 31, 2020.

Also, as of March 31, 2021, the Company had an additional 1,383 properties held in unconsolidated joint ventures, compared to 1,293 properties held in unconsolidated joint ventures as of December 31, 2020, and 876 properties held in unconsolidated joint ventures as of March 31, 2020.

As of June 30, 2021, we owned 54,785 single-family properties in selected sub-markets of metropolitan statistical areas (“MSAs”) in 22 states, including 589 properties held for sale, compared to 53,584 single-family properties in 22 states, including 711 properties held for sale, as of December 31, 2020, and 53,000 single-family properties in 22 states, including 948 properties held for sale as of June 30, 2020.

As of June 30, 2021, 52,645, or 97.1%, of our total properties (excluding properties held for sale) were occupied, compared to 51,271, or 97.0%, of our total properties (excluding properties held for sale) as of December 31, 2020, and 50,170, or 96.4%, of our total properties (excluding properties held for sale) as of June 30, 2020.

Also, as of June 30, 2021, the Company had an additional 1,530 properties held in unconsolidated joint ventures, compared to 1,293 properties held in unconsolidated joint ventures as of December 31, 2020, and 936 properties held in unconsolidated joint ventures as of June 30, 2020.

Our portfolio of single-family properties, including those held in our unconsolidated joint ventures, is internally managed through our proprietary property management platform.

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 first quarter of 2021 demonstrating the flexibility of its technology enabled operating platform and the resiliency of its high-quality, diversified portfolio.

The Company has maintained continuity in business operations since the beginning of the COVID-19 pandemic and produced strong operating results in the second quarter of 2021 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 most 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.

Collections have continued to remain resilient throughout the pandemic with the Company recognizing bad debt on 2.5% of its first quarter 2021 rental billings.

Additionally, collections of April 2021 rental billings continue to remain consistent with pandemic payment histories within the same time frame.

Collections have continued to remain resilient throughout the pandemic with the Company recognizing bad debt on 2.5% of its second quarter 2021 rental billings for its Same-Home portfolio.

Additionally, collections of July 2021 rental billings continue to remain consistent with pandemic payment histories within 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, new variants or strains, impact of government regulations, the speed and effectiveness of vaccine distribution, vaccine adoption rates and the direct and indirect economic effects of the pandemic and containment measures, among others.

These include the scope, severity and duration of the pandemic, including resurgences, new variants or strains, such as the Delta variant, the impact of government regulations, vaccine adoption rates, the effectiveness of vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.

For more information on risks related to COVID-19, see Part I, “Item 1A.

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Key Single-Family Property and Leasing Metrics

The following table summarizes certain key single-family properties metrics as of March 31, 2021:

The following table summarizes certain key single-family properties metrics as of June 30, 2021:

Market Number of Single-Family Properties (1)

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Total/Average 54,196 100.0 % $ 10,460.3 100.0 % $ 193,009 1,987 16.7 2015

(1) Excludes 636 single-family properties held for sale as of March 31, 2021.

(1) Excludes 589 single-family properties held for sale as of June 30, 2021.

(2) Represents 15 markets in 13 states.

The following table summarizes certain key leasing metrics as of March 31, 2021:

The following table summarizes certain key leasing metrics as of June 30, 2021:

Total Single-Family Properties (1)

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Total/Average 97.3 % $ 1,763 12.1 6.4 7.9 %

(1) Leasing information excludes 636 single-family properties held for sale as of March 31, 2021.

(2) For the three months ended March 31, 2021, 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 ended March 31, 2021, 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.

(1) Leasing information excludes 589 single-family properties held for sale as of June 30, 2021.

(2) For the three months ended June 30, 2021, 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 ended June 30, 2021, 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 ended March 31, 2021, compared to the annual rent of the previously expired non-month-to-month comparable long-term lease for each property.

(5) Represents the percentage change in rent on all non-month-to-month lease renewals and re-leases during the three months ended June 30, 2021, 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.

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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 and acquiring

newly constructed homes from third-party developers through our National Builder Program.

Opportunities from these new construction channels are impacted by the availability of vacant developed lots, development land assets and inventory of homes currently under construction or newly developed.

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 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.

During the three months ended March 31, 2021, we developed or acquired 580 homes, including 299 newly constructed properties delivered through our AMH Development Program and 281 homes acquired through our National Builder Program and traditional acquisition channel, partially offset by 180 homes sold.

During the three months ended June 30, 2021, we developed or acquired 898 homes, including 256 newly constructed properties delivered through our AMH Development Program and 642 homes acquired through our National Builder Program and traditional acquisition channel, partially offset by 97 homes sold.

Our properties held for sale were identified based on sub-market analysis, as well as individual property-level operational review.

As of March 31, 2021 and December 31, 2020, there were 636 and 711 properties, respectively, classified as held for sale.

As of June 30, 2021 and December 31, 2020, there were 589 and 711 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.

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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 3.3% for the three months ended March 31, 2021, and we experienced turnover rates of 7.0% and 8.1% during the three months ended March 31, 2021 and 2020, respectively.

Based on our Same-Home population of properties (defined below), the year-over-year increase in Average Monthly Realized Rent per property was 4.1% for the three months ended June 30, 2021, and we experienced turnover rates of 8.2% and 9.4% during the three months ended June 30, 2021 and 2020, respectively.

Based on our Same-Home population of

properties (defined below), the year-over-year increase in Average Monthly Realized Rent per property was 3.7% for the six months ended June 30, 2021, and we experienced turnover rates of 15.1% and 17.4% during the six months ended June 30, 2021 and 2020, respectively.

In response to the COVID-19 pandemic, we offered zero percent increases on newly signed renewals for leases expiring during the three months ended June 30, 2020.

We monitor the following categories of expenses that we believe most significantly affect our results of operations.

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Results of Operations

Net income totaled $48.9 million for the three months ended March 31, 2021, compared to net income of $37.5 million for the three months ended March 31, 2020.

Net income totaled $51.8 million for the three months ended June 30, 2021, compared to net income of $31.8 million for the three months ended June 30, 2020.

This increase was primarily attributable to growth in the Company’s portfolio, higher occupancy and higher rental rates.

Net income totaled $100.7 million for the six months ended June 30, 2021, compared to net income of $69.3 million for the six months ended June 30, 2020.

This increase was primarily attributable to growth in the Company’s portfolio, higher occupancy and higher rental rates, as well as an increase in gain on sale and impairment of single-family properties and other, net, partially offset by increased uncollectible rents related to the COVID-19 pandemic.

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The reclassification had no impact to net income, core revenues, core property operating expenses, Core NOI, Core FFO and Adjusted FFO attributable to common share and unit holders, Adjusted EBITDAre or Fully Adjusted EBITDAre.

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.

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 taken out of service as a result of 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.

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.

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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 in the United States of America (“GAAP”)).

Comparison of the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020

The following table presents a summary of Core NOI for our Same-Home properties, Non-Same-Home and Other properties, and total properties for the three months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended March 31, 2021

Comparison of the Three Months Ended June 30, 2021 to the Three Months Ended June 30, 2020

The following table presents a summary of Core NOI for our Same-Home properties, Non-Same-Home and Other properties, and total properties for the three months ended June 30, 2021 and 2020 (in thousands):

For the Three Months Ended June 30, 2021

Properties (1)

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Fees from single-family properties 4,646 880 5,526

(5,960) (757) (6,717)

Bad debt (6,141) (1,068) (7,209)

Core revenues 240,677 34,963 275,640

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Core NOI $ 153,666 63.8 % $ 21,593 61.8 % $ 175,259 63.6 %

For the Three Months Ended March 31, 2020

For the Three Months Ended June 30, 2020

Properties (1)

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(1) Includes 47,086 properties that have been stabilized longer than 90 days prior to January 1, 2020.

(2) Includes increased uncollectible rents related to the COVID-19 pandemic of $4.5 million and $4.2 million for the total portfolio and Same-Home portfolio, respectively, during the three months ended March 31, 2021.

(2) Presented net of tenant charge-backs.

(4) Includes increased uncollectible tenant reimbursements of $0.4 million and $0.4 million for the total portfolio and Same-Home portfolio, respectively, during the three months ended March 31, 2021.

(3) Presented net of tenant charge-backs and excludes noncash share-based compensation expense related to centralized and field property management employees.

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 ended March 31, 2021 and 2020 (amounts in thousands):

For the Three Months Ended

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Rents and Other Single-Family Property Revenues

Rents and other single-family property revenues increased 8.8% to $312.6 million for the three months ended March 31, 2021 from $287.3 million for the three months ended March 31, 2020.

Revenue growth was driven by an increase in our average occupied portfolio which grew to 51,648 homes for the three months ended March 31, 2021, compared to 48,898 homes for the three months ended March 31, 2020, as well as higher rental rates, partially offset by increased uncollectible rents related to the COVID-19 pandemic.

Rents and other single-family property revenues increased 11.7% to $313.7 million for the three months ended June 30, 2021 from $280.7 million for the three months ended June 30, 2020.

Revenue growth was driven by an increase in our average occupied portfolio which grew to 52,335 homes for the three months ended June 30, 2021, compared to 49,600 homes for the three months ended June 30, 2020, as well as higher rental rates, higher fees from single-family properties and lower uncollectible rents related to the COVID-19 pandemic.

Property Operating Expenses

Property operating expenses increased 10.4% to $118.7 million for the three months ended March 31, 2021 from $107.5 million for the three months ended March 31, 2020.

Property operating expenses increased 5.6% to $116.6 million for the three months ended June 30, 2021 from $110.4 million for the three months ended June 30, 2020.

This increase was primarily attributable to higher property tax expense and higher R&M and turnover costs as a result of growth in our portfolio.

Property Management Expenses

Property management expenses for the three months ended March 31, 2021 and 2020 were $23.7 million and $23.3 million, respectively, which included $1.0 million and $0.4 million, respectively, of noncash share-based compensation expense related to centralized and field property management employees.

The increase in property management expenses was primarily attributable to

higher noncash share-based compensation expense and higher personnel costs, partially offset by lower employee travel and office costs.

Property management expenses for the three months ended June 30, 2021 and 2020 were $22.4 million and $22.3 million, respectively, which included $0.6 million and $0.4 million, respectively, of noncash share-based compensation expense related to centralized and field property management employees.

The increase in property management expenses was primarily attributable to higher noncash share-based compensation expense.

Core Revenues from Same-Home Properties

Core revenues from Same-Home properties increased 4.0% to $236.0 million for the three months ended March 31, 2021 from $226.9 million for the three months ended March 31, 2020 primarily driven by a 3.3% increase in Average Monthly Realized Rent per property, which increased to $1,722 per month for the three months ended March 31, 2021 compared to $1,667 per month for the three months ended March 31, 2020, as well as a 2.1% increase in Average Occupied Days Percentage, partially offset by an increase in uncollectible rents related to the COVID-19 pandemic.

Core revenues from Same-Home properties increased 8.3% to $240.7 million for the three months ended June 30, 2021 from $222.1 million for the three months ended June 30, 2020 primarily driven by a 4.1% increase in Average Monthly Realized Rent per property, which increased to $1,752 per month for the three months ended June 30, 2021 compared to $1,683 per month for the three months ended June 30, 2020, a 2.4% increase in Average Occupied Days Percentage, higher fees from single-family properties and lower uncollectible rents related to the COVID-19 pandemic.

Core Property Operating Expenses from Same-Home Properties

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 4.0% to $83.3 million for the three months ended March 31, 2021 from $80.1 million for the three months ended March 31, 2020, primarily driven by annual growth in property tax expense and higher R&M and turnover costs, net.

Core property operating expenses from Same-Home properties increased 2.2% to $87.0 million for the three months ended June 30, 2021 from $85.2 million for the three months ended June 30, 2020 primarily driven by annual growth in property tax expense, partially offset by lower property management expenses, net.

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 ended March 31, 2021 and 2020 was $15.2 million and $11.3 million, respectively, which included $4.3 million and $1.4 million, respectively, of noncash share-based compensation expense related to corporate administrative employees.

The increase in general and administrative expense was primarily related to higher noncash share-based compensation expense driven by retirement provisions that resulted in accelerated expense recognition for retirement eligible employees during the three months ended March 31, 2021, as well as an increase in professional fees.

General and administrative expense for the three months ended June 30, 2021 and 2020 was $12.8 million and $11.5 million, respectively, which included $1.8 million and $1.6 million, respectively, of noncash share-based compensation expense related to corporate administrative employees.

The increase in general and administrative expense was primarily related to higher personnel costs and higher professional fees.

Interest Expense

Interest expense decreased 5.8% to $28.0 million for the three months ended March 31, 2021 from $29.7 million for the three months ended March 31, 2020.

This decrease was primarily related to additional capitalized interest during the three months ended March 31, 2021 related to an increase in our development activities under our AMH Development Program.

Interest expense decreased 6.9% to $27.5 million for the three months ended June 30, 2021 from $29.6 million for the three months ended June 30, 2020.

This decrease was primarily related to additional capitalized interest during the three months ended June 30, 2021 related to an increase in our development activities under our AMH Development Program.

Acquisition and Other Transaction Costs

Acquisition and other transaction costs consists 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 were $4.8 million and $2.1 million for the three months ended March 31, 2021 and 2020, respectively, which included $2.8 million of noncash share-based compensation expense related to employees in these functions during the three months ended March 31, 2021.

The increase in acquisition and other transaction costs was primarily related to higher noncash share-based compensation expense driven by retirement provisions that resulted in accelerated expense recognition for retirement eligible employees during the three months ended March 31, 2021.

Acquisition and other transaction costs were $3.0 million and $2.0 million for the three months ended June 30, 2021 and 2020, respectively, which included $0.7 million of noncash share-based compensation expense related to employees in these functions during the three months ended June 30, 2021.

The increase in acquisition and other transaction costs was primarily related to higher noncash share-based compensation expense.

Depreciation and Amortization

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Our intangible assets are amortized on a straight-line basis over the asset’s estimated economic useful life.

Depreciation and amortization expense increased 8.8% to $90.1 million for the three months ended March 31, 2021 from $82.8 million for the three months ended March 31, 2020 primarily due to growth in our average number of depreciable properties.

Depreciation and amortization expense increased 7.4% to $91.1 million for the three months ended June 30, 2021 from $84.8 million for the three months ended June 30, 2020 primarily due to growth in our average number of depreciable properties.

Gain on Sale and Impairment of Single-Family Properties and Other, net

Gain on sale and impairment of single-family properties and other, net was $16.1 million and $6.3 million for the three months ended March 31, 2021 and 2020, respectively, which included $0.1 million and $4.4 million of impairment charges, respectively, related to homes classified as held for sale during each period.

The increase was primarily related to higher net gains

from property sales as well as lower impairment charges.

During the three months ended March 31, 2020, a $3.5 million noncash write-down associated with the liquidation of legacy joint ventures, which were acquired as part of the American Residential Properties, Inc.

Gain on sale and impairment of single-family properties and other, net was $10.8 million and $10.0 million for the three months ended June 30, 2021 and 2020, respectively, which included $0.2 million and $0.7 million of impairment charges, respectively, related to homes classified as held for sale during each period.

The increase was primarily related to higher net gains from property sales as well as lower impairment charges.

Other Income and Expense, net

Other income and expense, net was $0.8 million and $1.7 million for the three months ended June 30, 2021 and 2020, respectively, which primarily related to interest income, fees from unconsolidated joint ventures, equity in earnings from unconsolidated joint ventures, partially offset by expenses related to unconsolidated joint ventures.

Comparison of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020

The following table presents a summary of Core NOI for our Same-Home properties, Non-Same-Home and Other properties, and total properties for the six months ended June 30, 2021 and 2020 (in thousands):

For the Six Months Ended June 30, 2021

Properties (1)

Revenue Non-Same-

Home and Other

Properties % of Core

Revenue Total

Properties % of Core

Rents from single-family properties $ 478,910 $ 66,734 $ 545,644

Fees from single-family properties 9,049 1,651 10,700

Bad debt (12,004) (1,922) (13,926)

Core revenues 475,955 66,463 542,418

Property tax expense 83,814 17.6 % 11,574 17.4 % 95,388 17.5 %

HOA fees, net (2)

8,948 1.9 % 1,321 2.0 % 10,269 1.9 %

R&M and turnover costs, net (2)

35,634 7.5 % 5,605 8.4 % 41,239 7.6 %

Insurance 4,882 1.0 % 848 1.3 % 5,730 1.1 %

Property management expenses, net (3)

36,707 7.7 % 6,647 10.0 % 43,354 8.0 %

Core property operating expenses 169,985 35.7 % 25,995 39.1 % 195,980 36.1 %

Core NOI $ 305,970 64.3 % $ 40,468 60.9 % $ 346,438 63.9 %

For the Six Months Ended June 30, 2020

Properties (1)

Revenue Non-Same-

Home and Other

Properties % of Core

Revenue Total

Properties % of Core

Rents from single-family properties $ 451,285 $ 44,809 $ 496,094

Fees from single-family properties 6,375 950 7,325

Bad debt (9,442) (1,388) (10,830)

Core revenues 448,218 44,371 492,589

Property tax expense 80,383 17.9 % 9,734 21.9 % 90,117 18.3 %

HOA fees, net (2)

8,310 1.9 % 1,189 2.7 % 9,499 1.9 %

R&M and turnover costs, net (2)

34,975 7.8 % 5,146 11.6 % 40,121 8.1 %

Insurance 4,172 0.9 % 561 1.3 % 4,733 1.0 %

Property management expenses, net (3)

37,141 8.3 % 5,536 12.5 % 42,677 8.7 %

Core property operating expenses 164,981 36.8 % 22,166 50.0 % 187,147 38.0 %

Core NOI $ 283,237 63.2 % $ 22,205 50.0 % $ 305,442 62.0 %

(1) Includes 47,086 properties that have been stabilized longer than 90 days prior to January 1, 2020.

(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.

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 six months ended June 30, 2021 and 2020 (amounts in thousands):

For the Six Months Ended

Core revenues and Same-Home core revenues

Rents and other single-family property revenues $ 626,227 $ 568,031

Tenant charge-backs (83,809) (75,442)

Core revenues 542,418 492,589

Non-Same-Home core revenues 66,463 44,371

Same-Home core revenues $ 475,955 $ 448,218

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

Property operating expenses $ 235,272 $ 217,933

Property management expenses 46,115 45,536

Noncash share-based compensation - property management (1,598) (880)

Expenses reimbursed by tenant charge-backs (83,809) (75,442)

Core property operating expenses 195,980 187,147

Non-Same-Home core property operating expenses 25,995 22,166

Same-Home core property operating expenses $ 169,985 $ 164,981

Core NOI and Same-Home Core NOI

Net income $ 100,735 $ 69,334

Gain on sale and impairment of single-family properties and other, net (26,829) (16,316)

Depreciation and amortization 181,188 167,657

Acquisition and other transaction costs 7,814 4,103

Noncash share-based compensation - property management 1,598 880

Interest expense 55,533 59,273

General and administrative expense 27,998 22,759

Other income and expense, net (1,599) (2,248)

Core NOI 346,438 305,442

Non-Same-Home Core NOI 40,468 22,205

Same-Home Core NOI $ 305,970 $ 283,237

Rents and Other Single-Family Property Revenues

Rents and other single-family property revenues increased 10.2% to $626.2 million for the six months ended June 30, 2021 from $568.0 million for the six months ended June 30, 2020.

Revenue growth was primarily driven by an increase in our average occupied portfolio which grew to 51,980 homes for the six months ended June 30, 2021, compared to 49,322 homes for the six months ended June 30, 2020, as well as higher rental rates and higher fees from single-family properties, partially offset by an increase in uncollectible rents related to the COVID-19 pandemic.

Property Operating Expenses

Property operating expenses increased 8.0% to $235.3 million for the six months ended June 30, 2021 from $217.9 million for the six months ended June 30, 2020.

This increase was primarily attributable to higher property tax expense and higher R&M and turnover costs as a result of growth in our portfolio.

Property Management Expenses

Property management expenses for the six months ended June 30, 2021 and 2020 were $46.1 million and $45.5 million, respectively, which included $1.6 million and $0.9 million, respectively, of noncash share-based compensation expense related to centralized and field property management employees.

The increase in property management expenses was primarily attributable to higher noncash share-based compensation expense and higher personnel costs, partially offset by lower employee travel and office costs and lower recoverable expenses for tenant utilities.

Core Revenues from Same-Home Properties

Core revenues from Same-Home properties increased 6.2% to $476.0 million for the six months ended June 30, 2021 from $448.2 million for the six months ended June 30, 2020 primarily driven by a 3.7% increase in Average Monthly Realized Rent per property, which increased to $1,737 per month for the six months ended June 30, 2021 compared to $1,675 per month for the six months ended June 30, 2020, a 2.2% increase in Average Occupied Days Percentage and higher fees from single-family properties, partially offset by an increase in uncollectible rents related to the COVID-19 pandemic.

Core Property Operating Expenses from Same-Home Properties

Core property operating expenses 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 3.0% to $170.0 million for the six months ended June 30, 2021 from $165.0 million for the six months ended June 30, 2020 primarily driven by annual growth in property tax expense.

General and Administrative Expense

General and administrative expense for the six months ended June 30, 2021 and 2020 was $28.0 million and $22.8 million, respectively, which included $6.2 million and $3.0 million, respectively, of noncash share-based compensation expense related to corporate administrative employees.

The increase in general and administrative expense was primarily related to higher noncash share-based compensation expense driven by retirement provisions that resulted in accelerated expense recognition for retirement eligible employees during the six months ended June 30, 2021, as well as higher personnel costs and higher professional fees.

Interest Expense

Interest expense decreased 6.3% to $55.5 million for the six months ended June 30, 2021 from $59.3 million for the six months ended June 30, 2020.

This decrease was primarily related to additional capitalized interest during the six months ended June 30, 2021 related to an increase in our development activities under our AMH Development Program.

Acquisition and Other Transaction Costs

Acquisition and other transaction costs were $7.8 million and $4.1 million for the six months ended June 30, 2021 and 2020, respectively, which included $3.5 million of noncash share-based compensation expense related to employees in these functions during the six months ended June 30, 2021.

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 8.1% to $181.2 million for the six months ended June 30, 2021 from $167.7 million for the six months ended June 30, 2020 primarily due to growth in our average number of depreciable properties.

Gain on Sale and Impairment of Single-Family Properties and Other, net

Gain on sale and impairment of single-family properties and other, net was $26.8 million and $16.3 million for the six months ended June 30, 2021 and 2020, respectively, which included $0.2 million and $5.1 million of impairment charges, respectively, related to homes classified as held for sale during each period.

The increase was primarily related to higher net gains from property sales and lower impairment charges.

During the six months ended June 30, 2020, a $3.5 million noncash write-down

associated with the liquidation of legacy joint ventures, which were acquired as part of the American Residential Properties, Inc.

merger in February 2016, was included in gain on sale and impairment of single-family properties and other, net.

Other Income and Expense, net

Other income and expense, net was $0.8 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively, which primarily related to interest income, fees from unconsolidated joint ventures, equity in earnings from unconsolidated joint ventures, partially offset by expenses related to unconsolidated joint ventures.

Other income and expense, net was $1.6 million and $2.2 million for the six months ended June 30, 2021 and 2020, respectively, which primarily related to interest income, fees from unconsolidated joint ventures, equity in earnings from unconsolidated joint ventures, partially offset by expenses related to unconsolidated joint ventures.

Critical Accounting Policies and Estimates

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Annual Report.

There have been no changes to these policies during the three months ended March 31, 2021.

There have been no changes to these policies during the six months ended June 30, 2021.

AH4R has elected to be taxed as a REIT for U.S.

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The measurement of a tax benefit for an uncertain tax position that meets the more likely than not threshold is based on a cumulative probability model under which the largest amount of tax benefit recognized is the amount with a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority having full knowledge of all the relevant information.

As of March 31, 2021, there were no deferred tax assets and liabilities or unrecognized tax benefits recorded by the Company.

As of June 30, 2021, there were no deferred tax assets and liabilities or unrecognized tax benefits recorded by the Company.

We do not anticipate a significant change in unrecognized tax benefits within the next 12 months.

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The Operating Partnership funds the payment of distributions.

As of December 31,

2020, AH4R had a net operating loss (“NOL”) for U.S.

As of December 31, 2020, AH4R had a net operating loss (“NOL”) for U.S.

federal income tax purposes of an estimated $60.2 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.

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.

Recent Accounting Pronouncements

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Liquidity and Capital Resources

Our liquidity and capital resources as of March 31, 2021 included cash and cash equivalents of $75.2 million.

Additionally, as of March 31, 2021, we had $80.0 million of outstanding borrowings under our revolving credit facility, which provides for maximum borrowings of up to $800.0 million, of which $1.5 million was committed to outstanding letters of credit.

As further described in Note 16.

Subsequent Events, the Company closed a $1.25 billion revolving credit facility on April 15, 2021, amending its existing $800 million revolving credit facility.

We have no debt maturities, other than recurring principal amortization and our revolving credit facility which was amended subsequent to quarter end, until 2024.

Our liquidity and capital resources as of June 30, 2021 included cash and cash equivalents of $40.6 million.

Additionally, as of June 30, 2021, we had $620.0 million of outstanding borrowings under our revolving credit facility, which provides for maximum borrowings of up to $1.25 billion, of which $1.2 million was committed to outstanding letters of credit.

As described in Note 16.

Subsequent Events to our condensed consolidated financial statements in this report, in July 2021, the Company issued $450.0 million of 2.375% unsecured senior notes due 2031 and $300.0 million of 3.375% unsecured senior notes due 2051 raising net proceeds of $731.6 million and as described below, we also have estimated net proceeds of $467.3 million available from future settlement of the May 2021 Forward Sale Agreements.

We have no debt maturities, other than recurring principal amortization, until 2024.

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.

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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.

As discussed above under “COVID-19 Business Update,” the COVID-19 pandemic has had an adverse impact on the economy and our operating cash flows.

As discussed above under “COVID-19 Business Update,” the COVID-19 pandemic could adversely impact our future operating cash flows.

Since we do not know the ultimate severity and length of the COVID-19 pandemic, and thus cannot predict the impact it will have on our tenants and on the debt and equity capital markets, we cannot estimate the ultimate impact it will have on our liquidity and capital resources.

The following table summarizes the Company’s and the Operating Partnership’s cash flows for the three months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended

The following table summarizes the Company’s and the Operating Partnership’s cash flows for the six months ended June 30, 2021 and 2020 (in thousands):

For the Six Months Ended

2021 2020 Change

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Net cash provided by

operating activities increased $25.5 million, or 20.2%, from $126.5 million for the three months ended March 31, 2020 to $152.0 million for the three months ended March 31, 2021, primarily as a result of increased cash flows generated from a larger number of occupied properties and increases in rental rates on lease renewals and re-leasing of our single-family properties, partially offset by a decrease in collections on rent associated with the COVID-19 pandemic.

operating activities increased $52.6 million, or 18.8%, from $279.2 million for the six months ended June 30, 2020 to $331.8 million for the six months ended June 30, 2021 primarily as a result of increased cash flows generated from a larger number of occupied properties and increases in rental rates on lease renewals and re-leasing of our single-family properties, partially offset by a decrease in collections on rent associated with the COVID-19 pandemic.

Investing Activities

Net cash used for investing activities increased $29.0 million, or 16.2%, from $179.2 million for the three months ended March 31, 2020 to $208.2 million for the three months ended March 31, 2021, primarily driven by a decrease in net proceeds received from sales of single-family properties and other.

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 acquiring newly built properties through our National Builder Program.

Net cash used for investing activities increased $262.7 million, or 81.5%, from $322.5 million for the six months ended June 30, 2020 to $585.2 million for the six months ended June 30, 2021.

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 $192.8 million during the six months ended June 30, 2021.

We use cash generated from operating and financing activities and by recycling capital through the sale of single-family properties to invest in this strategic expansion.

Net cash used for investing activities also increased due to higher recurring and other capital expenditures for single-family properties and renovations to single-family properties as a result of investments in properties to increase future revenues or reduce maintenance expenditures.

Net proceeds received from sales of single-family properties and other decreased $54.4 million during the six months ended June 30, 2021 driven by a decrease in homes sold as our held for sale portfolio has declined.

Net cash used for investing activities also includes recurring and other capital expenditures for single-family properties and renovations to single-family properties, which increased $15.4 million during the six months ended June 30, 2021 as a result of investments in properties to increase future revenues or reduce maintenance expenditures.

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.

These increased cash outflows were partially offset by additional distributions from unconsolidated joint ventures in respect of contributions of land and in-process development projects.

Net cash used for investing activities also increased as a result of a $4.1 million increase in purchases of other productive assets during the six months ended June 30, 2021 and nonrecurring proceeds of $3.7 million from hurricane-related insurance claims during the six months ended June 30, 2020.

These increases in net cash used for investing activities were partially offset by a $7.7 million increase in distributions, net of investments, from our unconsolidated joint ventures.

Financing Activities

Net cash provided by financing activities decreased $47.0 million from $50.3 million for the three months ended March 31, 2020 to $3.3 million for the three months ended March 31, 2021, primarily driven by $20.0 million of increased distributions to share and unit holders and $25.0 million less in borrowings on our revolving credit facility.

The Company distributed $69.1 million on a cash basis to share and unit holders during the three months ended March 31, 2021 compared to $49.1 million during the three months ended March 31, 2020.

The Company borrowed $80.0 million on its revolving credit facility during the three months ended March 31, 2021 compared to $105.0 million during the three months ended March 31, 2020.

Net cash provided by financing activities increased $131.4 million from $40.4 million for the six months ended June 30, 2020 to $171.8 million for the six months ended June 30, 2021 primarily driven by $193.8 million in net proceeds from the issuance of Class A common shares and a $490.0 million increase in net borrowings on our revolving credit facility during the six months ended June 30, 2021.

These increases in cash inflows were partially offset by the $498.8 million of cash outflows for the redemption of our Series D and E perpetual preferred shares primarily funded by the draws on our revolving credit facility, $38.6 million of increased distributions to share and unit holders and $11.2 million of deferred financing costs paid for the amendment of our revolving credit facility during the six months ended June 30, 2021.

Revolving Credit Facility

In April 2021, the Company closed a $1.25 billion revolving credit facility, amending its existing $800 million revolving credit facility.

The amended revolving credit facility provides for expanded borrowing capacity, reflects a more favorable pricing grid based on current market conditions, and includes a sustainability component based upon third-party performance measures through which overall pricing can further improve if the Company meets certain targets.

The interest rate on the amended revolving credit facility is at either LIBOR plus a margin ranging from 0.725% to 1.45% or a base rate (determined according to the greater of a prime rate, federal funds rate plus 0.5% or daily LIBOR rate plus 1.0%) plus a margin ranging from 0.00% to 0.45%.

In each case the actual margin is determined based on the Company’s credit ratings in effect from time to time.

The amended revolving credit facility matures on April 15, 2025, with two six-month extension options at the Company’s election if certain conditions are met.

Class A Common Share / Unit Offering

In May 2021, the Company completed an underwritten public offering for 18,745,000 of its Class A common shares of beneficial interest, $0.01 par value per share, of which 5,500,000 shares were issued directly by the Company, and 13,245,000 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 “May 2021 Forward Sale Agreements”) for these 13,245,000 shares which are accounted for in equity.

The Company expects to physically settle the May 2021 Forward Sale Agreements by the delivery of the Class A common shares and receive proceeds by May 21, 2022, although the Company has the right to elect settlement prior to that time subject to certain conditions.

Although the Company expects to physically settle, the May 2021 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 the May 2021 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.

The May 2021 Forward Sale Agreements are subject to early termination or settlement under certain circumstances.

The Company received net proceeds of $194.0 million from the 5,500,000 Class A common shares issued directly by the Company after deducting underwriting discounts and before offering costs of approximately $0.2 million.

The Operating Partnership issued an equivalent number of corresponding Class A units to AH4R in exchange for the net proceeds from the issuance.

The Company used the net proceeds to repay indebtedness under its revolving credit facility, to partially fund the redemption of its Series D and Series E perpetual preferred shares discussed below and for general corporate purposes.

The Company did not initially receive proceeds from the sale of the Class A common shares offered on a forward basis but estimates that net proceeds will be approximately $467.3 million after deducting underwriting discounts.

The Company expects to use these net proceeds for general corporate purposes including, without limitation, property acquisitions and developments.

Redemptions of Perpetual Preferred Shares

In June 2021, the Company redeemed all 10,750,000 shares of the outstanding 6.500% Series D perpetual preferred shares, $0.01 par value per share, for cash at a 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 D perpetual preferred units.

As a result of the redemption, the Company recorded an $8.5 million allocation of income to the Series D perpetual preferred shareholders within the condensed consolidated statements of operations in the second quarter of 2021, which represents the initial liquidation value of the Series D perpetual preferred shares in excess of its carrying value as of the redemption date.

In June 2021, the Company redeemed all 9,200,000 shares of the outstanding 6.350% Series E perpetual preferred shares, $0.01 par value per share, for cash at a liquidation preference of $25.00 per share plus accrued and unpaid dividends in accordance with the terms of such shares.

The Operating Partnership also redeemed its corresponding Series E perpetual preferred units.

As a result of the redemption, the Company recorded a $7.4 million allocation of income to the Series E perpetual preferred shareholders within the condensed consolidated statements of operations in the second quarter of 2021, which represents the initial liquidation value of the Series E perpetual preferred shares in excess of its carrying value as of the redemption date.

At-the-Market Common Share Offering Program

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The At-the-Market Program may be suspended or terminated by the Company at any time.

During the three months ended March 31, 2021, no shares were issued under the At-the-Market Program.

As of March 31, 2021, 86,130 shares have been issued under the At-the-Market Program and $497.6 million remained available for future share issuances.

During the six months ended June 30, 2021 and 2020, no shares were issued under the At-the-Market Program.

As of June 30, 2021, 86,130 shares have been issued under the At-the-Market Program and $497.6 million remained available for future share issuances.

Share Repurchase Program

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The Operating Partnership funds the repurchases and constructively retires an equivalent number of corresponding Class A units.

During the three months ended March 31, 2021 and 2020, we did not repurchase and retire any of our shares.

As of March 31, 2021, 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.

During the six months ended June 30, 2021 and 2020, we did not repurchase and retire any of our shares.

As of June 30, 2021, 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.

Distributions

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The Operating Partnership funds the payment of distributions.

As of December 31,

2020, AH4R had an NOL for U.S.

As of December 31, 2020, AH4R had an NOL for U.S.

federal income tax purposes of an estimated $60.2 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.

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

Off-Balance Sheet Arrangements

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The loan agreement provides for three one-year extension options that include additional fees and interest.

As of March 31, 2021, the joint venture’s loan had a $116.7 million outstanding principal balance.

As of June 30, 2021, the joint venture’s loan had a $139.7 million outstanding principal balance.

The Company has provided a customary non-recourse guarantee that may become a liability for us upon a voluntary bankruptcy filing by the joint venture or occurrence of other actions such as fraud or a material misrepresentation by us or the joint venture.

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As further described in Note 16.

Subsequent Events, the Company closed a $1.25 billion revolving credit facility on April 15, 2021, amending its existing $800 million revolving credit facility.

Except as described in Note 15.

Commitments and Contingencies to our condensed consolidated financial statements in this report, as of March 31, 2021, there have been no other material changes outside of the ordinary course of business to our other known contractual obligations, which are set forth in the table included in Part II, “Item 7.

Commitments and Contingencies to our condensed consolidated financial statements in this report, as of June 30, 2021, there have been no other material changes outside of the ordinary course of business to our other known contractual obligations, which are set forth in the table included in Part II, “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report.

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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.

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, (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.

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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.

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.

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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 months ended March 31, 2021 and 2020 (in thousands):

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 six months ended June 30, 2021 and 2020 (in thousands):

For the Three Months Ended

June 30, For the Six Months Ended

2021 2020 2021 2020

Net income attributable to common shareholders $ 20,102 $ 15,369 $ 50,316 $ 35,613

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Noncash share-based compensation - property management 599 441 1,598 880

Redemption of perpetual preferred shares 15,879 — 15,879 —

Core FFO attributable to common share and unit holders $ 122,790 $ 94,810 $ 239,712 $ 197,891

$ 116,922 $ 103,081

Recurring Capital Expenditures (13,217) (12,184) (22,868) (20,895)

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Adjusted FFO attributable to common share and unit holders $ 108,668 $ 81,634 $ 214,964 $ 175,094

$ 106,296 $ 93,460

(1) Core FFO and Adjusted FFO attributable to common share and unit holders include $4.5 million of increased uncollectible rents and $0.4 million of increased uncollectible tenant reimbursements during the first quarter of 2021 as a result of the COVID-19 pandemic.

EBITDA / EBITDAre / Adjusted EBITDAre / Fully Adjusted EBITDAre

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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 months ended March 31, 2021 and 2020 (in thousands):

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 six months ended June 30, 2021 and 2020 (in thousands):

For the Three Months Ended

June 30, For the Six Months Ended

2021 2020 2021 2020

Net income $ 51,814 $ 31,807 $ 100,735 $ 69,334

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis