What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-25 · 64 added, 128 removed, 322 unchanged (37% of the section changed)

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Our revenue and expenses are not directly correlated, and because a large percentage of our costs and expenses are fixed, we may not be able to adapt our cost structure to offset declines in our revenue.

Most of the expenses associated with our business, such as acquisition costs, repairs and maintenance costs, real estate taxes, HOA fees, insurance, utilities, personal and ad valorem taxes, employee wages and benefits and other general corporate expenses, are relatively inflexible and will not necessarily decrease with a reduction in revenue from our business.

Some components of our fixed

assets depreciate more rapidly and will require a significant amount of ongoing capital expenditures.

Most of the expenses associated with our business, such as repairs and maintenance costs, real estate taxes, HOA fees, insurance, utilities, personal and ad valorem taxes, employee wages and benefits and other general corporate expenses, are relatively inflexible and will not necessarily decrease with a reduction in revenue from our business.

Some components of our fixed assets depreciate more rapidly and will require a significant amount of ongoing capital expenditures.

Our expenses and ongoing capital expenditures also will be affected by inflationary increases, and certain of our cost increases may exceed the rate of inflation in any given period.

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High inflation could adversely affect our operating results.

Inflation has significantly increased since the start of 2021.

Inflation has significantly increased since the start of 2021 and continues to remain at elevated levels compared to recent years.

Inflationary pressures have increased our direct and indirect operating and development costs, including for labor at the corporate, property management and development levels, third-party contractors and vendors, building materials, insurance, transportation and taxes.

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Our residents may also be adversely impacted by higher cost of living expenses, including food, energy and transportation, which may increase our rate of tenant defaults and harm our operating results.

High inflation may also correspond with increased interest risk rate, which may increase our cost of capital and adversely affect our business.

For more information on interest rate risk, see Part II, “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk.”

We are dependent on our key management and staff and their departures could materially and adversely affect us.

We also face intense competition for hiring highly skilled managerial, investment, financial and operational personnel.

The loss of key management and staff could materially and adversely affect us.

We rely on our key management and staff to carry out our business and to execute on our strategic plan.

Any of our senior management, key staff or skilled employees may cease to provide services to us at any time.

We face intense competition for retaining and hiring skilled employees, particularly with respect to our development activities.

The loss of the services of key management and staff, or our inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.

In addition, we will continue to need to attract and retain additional qualified personnel but may not be able to do so on acceptable terms or at all.

Many of our operating markets are experiencing extremely tight labor markets, with job openings at record high levels.

We face intense competition for retaining and hiring skilled employees, particularly in light of the rapidly evolving conditions in the labor market and with respect to our development activities.

The recent entrance of large real estate investors into the single-family rental business and unprecedented workforce changes coinciding with the COVID-19 pandemic, have exacerbated labor conditions in our sector.

These competitive labor conditions have significantly increased compensation expectations for existing and prospective personnel.

The broader labor market is also experiencing a shortage of qualified workers which has further increased the competition we face for qualified employees.

If we are unable to hire and retain qualified personnel as required, our growth and operating results could be adversely affected.

Our investments are, and are expected to continue to be, concentrated in single-family properties and we have a significant number of properties in certain geographic markets, which exposes us to significant risks if there is economic distress in our largest markets or in the single-family home rental sector.

In addition, the costs of retaining skilled management and staff could reduce our profitability.

Our investments are, and are expected to continue to be, concentrated in single-family properties and we have a significant number of properties in certain geographic markets, which exposes us to significant risks if there are adverse conditions in our sector or our key markets.

Our investments are, and are expected to continue to be, concentrated in single-family properties.

In addition, our strategy is to concentrate our properties in select geographic markets that we believe favor future growth in rents and valuations.

For example, 59.3% of our properties are located in Atlanta, GA, Dallas-Fort Worth, TX, Charlotte, NC, Phoenix, AZ, Houston, TX, Nashville, TN, Indianapolis, IN, Tampa, FL, Jacksonville, FL and Raleigh, NC.

For example, 58.7% of our properties are located in Atlanta, GA, Dallas-Fort Worth, TX, Charlotte, NC, Phoenix, AZ, Nashville, TN, Indianapolis, IN, Houston, TX, Jacksonville, FL, Tampa, FL and Raleigh, NC.

A downturn or slowdown in the rental demand for single-family housing generally, or in our target markets specifically, caused by adverse economic, regulatory or environmental conditions, or other events, would have a greater impact on our operating results than if we had more diversified investments.

Similarly, given our geographic concentrations, a natural disaster, such as an earthquake, tornado, hurricane, flood or wildfire in one of our key markets could have a significant negative effect on our financial condition and results of operations.

We may not be able to effectively control the timing and costs relating to the renovation of properties, which may adversely affect our operating results and our ability to make distributions.

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We may acquire properties that we plan to renovate extensively.

We also may acquire properties that we expect to be in good condition only to discover unforeseen defects that require extensive renovation and capital expenditures.

may acquire properties that we expect to be in good condition only to discover unforeseen defects that require extensive renovation and capital expenditures.

To the extent properties are leased to existing tenants, renovations may be postponed until the tenant vacates the premises, and we will pay the costs of renovating.

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Our properties also have infrastructure and appliances of varying ages and conditions.

materials costs, delays by contractors, delays in receiving work permits, certificates of occupancy and poor workmanship.

We routinely retain independent contractors and trade professionals to perform repair work and are exposed to all risks inherent in property renovation and maintenance, including potential cost overruns, increases in labor and materials costs, delays by contractors, delays in receiving work permits, certificates of occupancy and poor workmanship.

The current supply chain issues and labor force issues in the U.S.

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As a result, the purchase price of potential acquisitions may be significantly elevated, or we may be unable to acquire properties on desirable terms or at all.

We face competition in the leasing market for quality tenants, which may limit our ability to rent our single-family homes on favorable terms or at all.

Our success depends on us attracting and retaining quality tenants.

We depend on rental income for substantially all of our revenues, and to succeed we must attract and retain qualified tenants.

We face competition for tenants from other lessors of single-family properties, apartment buildings and condominium units, and the continuing development of single-family properties, apartment buildings and condominium units in many of our markets increases the supply of housing and exacerbates competition for tenants.

We face competition for quality tenants from other lessors of single-family properties, apartment buildings and condominium units, and the continuing development of single-family properties, apartment buildings and condominium units in many of our markets increases the supply of housing and exacerbates competition for tenants.

Competing properties may be newer, better located and more attractive to tenants, or may be offered at more attractive rents.

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These competitive factors will impact our occupancy and the rents we can charge.

Our evaluation of acquisition properties and development land involves a number of assumptions that may prove inaccurate, which could result in us paying too much for properties or land we acquire or our properties failing to perform as we expect.

In determining whether a particular property, including land for development, meets our investment criteria, we make a number of assumptions, including assumptions related to estimated time of possession and estimated renovation and/or development costs and time frames, annual operating costs, market rental rates and potential rent amounts, time from purchase to leasing and tenant default rates.

These assumptions may prove inaccurate.

As a result, we may pay too much for properties we acquire or our properties may fail to perform as anticipated.

Bulk portfolio acquisitions may subject us to the risk of acquiring properties that do not fit our target investment criteria and may be costly or time consuming to divest, which may adversely affect our operating results.

If we are not effective at leasing our properties to quality tenants, a significant number of our tenants may fail to meet their lease obligations or fail to renew their leases.

Damage to our properties caused by tenants may delay re-leasing after eviction, necessitate expensive repairs or impair the rental income or value of the property resulting in a lower than expected rate of return.

In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord at that property and will incur costs in protecting our investment and re-leasing the property.

Bulk portfolio acquisitions subject us to the risk of acquiring properties that do not fit our target investment criteria and may be costly or time consuming to divest, which may adversely affect our operating results.

We have occasionally acquired and may continue to acquire properties purchased as portfolios in bulk from other owners of single-family homes.

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We have a significant development program that involves the acquisition of land and construction of homes.

We have a limited track record of building homes for rent and our strategy of developing a significant pipeline of single-family homes for rent is relatively new among public companies.

Rental home construction can involve substantial up-front costs to acquire land and to build a rental home or rental community before a home is available for rent and generates income.

Building rental homes and rental communities also involves significant risks to our business, such as delays or cost increases due to changes in or failure to meet regulatory requirements, including permitting and zoning regulations, failure of lease rentals on newly-constructed properties to

achieve anticipated investment returns, inclement weather, adverse site selection, unforeseen site conditions or shortages of suitable land, construction materials and labor and other risks described below.

failure of lease rentals on newly-constructed properties to achieve anticipated investment returns, inclement weather, adverse site selection, unforeseen site conditions or shortages of suitable land, construction materials and labor and other risks described below.

We may be unable to achieve building new rental homes and rental communities that generate acceptable returns and, as a result, our growth and results of operations may be adversely impacted.

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Any of these circumstances could give rise to delays in the start or completion of, or could increase the cost of, constructing new rental homes.

We are subject to risks from natural disasters and severe weather, including hurricanes and floods.

Natural disasters and severe weather such as earthquakes, tornadoes, hurricanes, floods and wildfires may result in significant damage to our properties and significant delays to our development projects.

We have a concentration of homes in areas susceptible to hurricanes, including in Florida and other states in the Southeast.

When we have geographic concentration of exposures, a single catastrophe (such as an earthquake) or destructive weather event (such as a hurricane) affecting a region may have a significant negative effect on our financial condition and results of operations.

We depend on our tenants for substantially all of our revenues.

Poor tenant selection and defaults and nonrenewals by our tenants may adversely affect our reputation, financial performance and ability to make distributions.

We depend on rental income from tenants for substantially all of our revenues.

As a result, our success depends in large part upon our ability to attract and retain qualified tenants for our properties.

Our reputation, financial performance and ability to make distributions to our shareholders would be adversely affected if a significant number of our tenants fail to meet their lease obligations or fail to renew their leases.

Damage to our properties may delay re-leasing after eviction, necessitate expensive repairs or impair the rental income or value of the property resulting in a lower than expected rate of return.

Increases in unemployment levels and other adverse changes in the economic conditions in our markets could result in substantial tenant defaults.

In addition, we rely on information supplied by prospective residents in making tenant selections, which may in some cases be false.

Our short-term leases require us to re-lease our properties frequently, which we may be unable to do on attractive terms, on a timely basis or at all.

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However, many of the policies covering casualty losses may be subject to substantial deductibles and carveouts, and we will be self-insured up to the amount of the deductibles and carveouts.

There are also some losses, including losses from floods, windstorms, fires, earthquakes, acts of war, acts of terrorism or riots, that may not always be insured against or that are not generally fully insured against because it is not practical to do so.

There are also some losses, including losses from floods, windstorms, fires, earthquakes, hurricanes, acts of war, acts of terrorism or riots, that may not always be insured against or that are not generally fully insured against because it is not practical to do so.

In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses.

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Even though we believe we utilize appropriate duplication and back-up procedures, a significant outage in telecommunications, the Internet or at our third-party service providers could negatively impact our operations.

If our confidential information is compromised or corrupted, including as a result of a cybersecurity breach, our reputation and business relationships could be damaged, which could adversely affect our financial condition and operating results.

A cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data or steal confidential information, including information regarding our residents, prospective tenants, and employees.

If our confidential information is compromised or corrupted, including as a result of a cybersecurity breach, our business operations and reputation could be damaged, which could adversely affect our financial condition and operating results.

We have been and will in the future be subject to third party attempts to gain unauthorized access to our systems in order to disrupt operations, corrupt data or steal confidential information, including information regarding our residents, prospective tenants, and employees.

Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.

In the ordinary course of our business we acquire and store sensitive data, including intellectual property, our proprietary business information and personally identifiable information of our prospective and current tenants, our employees and third-party service providers in our branch offices and on our networks and

The secure processing and maintenance of this information is critical to our operations and business strategy.

Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.

Notwithstanding our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.

Despite system redundancy, the implementation of security measures, required employee awareness training and the existence of a disaster recovery plan for our internal information technology systems, our systems and systems maintained by third-party vendors with which we do business are vulnerable to damage from any number of sources.

We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachment to emails, phishing attempts or other scams, persons inside our organization or persons/vendors with access to our systems and other significant disruptions of our information technology networks and related systems.

We face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, ransomware and other forms of malware, computer viruses, attachment to emails, phishing attempts or other scams.

These attacks may also originate from persons inside our organization and persons/vendors with access to our systems.

Our information technology networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations.

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We address potential breaches or disclosure of this confidential personally identifiable information by implementing a variety of security measures intended to protect the confidentiality and security of this information including, among others:

(a) engaging reputable, recognized firms to help us design and maintain our information technology and data security stems;

reputable, recognized firms to help us design and maintain our information technology and data security stems;

(b) conducting periodic testing and verification of information and data security systems, including performing ethical hacks of our systems to discover where any vulnerabilities may exist;

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Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, the loss of our residents, disruption to our operations and the services we provide to residents or damage our reputation, any of which could adversely affect our financial condition and operating results.

A significant number of our properties are part of HOAs, and we and our tenants are subject to the rules and regulations of such HOAs, which may be arbitrary or restrictive, and violations of such rules may subject us to additional fees and penalties and litigation with such HOAs that would be costly.

As of December 31, 2022, we have not had any material incidences involving cybersecurity attacks.

HOA rules and restrictions subject us to increased costs and restrict our business operations.

A significant number of our properties are part of HOAs, which are private entities that regulate the activities of, and levy assessments on properties in, a residential subdivision.

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Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third-party not involved, including the possibility that joint venture partners might become bankrupt or fail to fund their share of required capital contributions.

Joint venture partners may have economic or other business interests or goals that are inconsistent with our

business interests or goals and may be in a position to take actions contrary to our policies or objectives.

Joint venture partners may have economic or other business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives.

Such investments also may have the potential risk of impasses on decisions, such as a sale, because neither we nor our partners would have full control over the partnership or joint venture.

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For example, eviction proceedings by owners and operators of single-family homes for lease have recently been the focus of negative media attention.

While we intend to vigorously defend any non-meritorious action or challenge, we cannot assure you that we will not be subject to expenses and losses that may adversely affect our operating results.

Government investigations or legal proceedings brought by governmental authorities may result in significant costs and expenses and reputational harm and may divert resources from our operations and therefore could have a material adverse effect on our business, financial condition, operating results or cash flows.

we intend to vigorously defend any non-meritorious action or challenge, we cannot assure you that we will not be subject to expenses and losses that may adversely affect our operating results.

Government investigations or legal proceedings brought by governmental authorities may result in significant costs and expenses and reputational harm and may divert resources from our operations.

We are subject to new and changing legislation and regulations, including the Fair Housing Act, legislation and regulation relating to residential housing, and environmental regulations.

From time to time, we are subject to government inquiries and investigations and legal proceedings brought by governmental authorities.

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Any governmental legal proceeding, whether or not resolved adversely, could also negatively impact our reputation.

Recent significant increases in interest rates could adversely impact us and our tenants.

In response to high inflation the Federal Reserve significantly increased the benchmark federal funds rate during 2022 and has signaled its intention to continue with additional increases in 2023.

These actions have significantly increased interest rates.

These increases have significantly increased our cost of new debt or preferred capital, increased the borrowing costs under our credit facility, and have adversely impacted the relative attractiveness of the dividend yield on our common shares.

Increases in our cost of capital impact our assessment of the yields we consider appropriate to support pursuing property acquisition and development opportunities and thus can impact our external growth prospects.

The degree and pace of these changes have had and may continue to have adverse macroeconomic effects that have and may continue to have adverse impacts on our tenants, including as a result of economic recession, increased unemployment, and increased financing costs.

For more information on interest rate risk, see Part II, “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk.”

Our revolving credit facility, unsecured senior notes and securitizations contain financial and operating covenants that could restrict our business and investment activities.

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If we violate covenants in our financing arrangements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms or at all.

We are subject to risks from the global pandemic associated with COVID-19 and we may in the future be subject to risks from other public health crises.

Our business is subject to risks from the COVID-19 pandemic that is currently impacting our tenants, employees and suppliers.

The COVID-19 pandemic has spread rapidly, adversely affecting public health, economic activity and employment, and

recent resurgences due to variants or strains, such as the Delta and Omicron variants, have led to surges in cases and hospitalizations.

The risks to our business from the COVID-19 pandemic include:

• The COVID-19 pandemic and the measures taken to combat it resulted in, and may again result in, significant increases in unemployment .

Our operating results depend significantly on the ability of our current and prospective tenants to pay their rent.

To the extent our current tenants or prospective tenants experience unemployment, deteriorating financial conditions, and declines in household income, they may be unwilling or unable to pay rent in full on a timely basis or renew or enter into new leases for our homes, and our revenues and operating results could be negatively affected.

• State, local, federal and industry-initiated efforts in response to the COVID-19 pandemic may continue to adversely affect our business.

Certain government actions have, and future government actions may, restrict our ability to collect rent or enforce remedies for failure to pay rent.

In addition, government restrictions on movement have and may in the future limit the ability of prospective tenants to visit our properties or new tenants to move into our properties.

These restrictions may continue to increase possible credit losses and may adversely affect our occupancy levels.

• Our acquisition and development activities have been slowed.

Due to market uncertainties regarding future asset values at the beginning of the COVID-19 pandemic, we temporarily suspended acquisitions through traditional channels and our National Builder Program but have since resumed acquisitions through these channels.

We have continued new home construction;

however, some states where we are constructing new homes temporarily prohibited residential construction during the early stages of the COVID-19 pandemic and may institute future prohibitions.

We have also experienced COVID-19 related construction delays, including government office slowdowns.

In addition, adverse impacts on the supply of construction materials and labor have and in the future may delay or halt or increase the costs of our construction activity.

• Our employees face COVID-19 health risks.

If a significant number of our employees, or if key personnel, are unable to work as a result of COVID-19, this would adversely impact our business and operating results.

In addition, since the start of the COVID-19 outbreak, substantially all of our employees have been working either remotely or on a hybrid schedule and depend on Internet and third-party communications vendors that may be unreliable, experience shut-downs or be subject to new cybersecurity risks, adversely impacting operations.

• COVID-19 may impact our ability to maintain our properties .

We believe that some tenants have been and may continue to be reluctant to request routine maintenance during the COVID-19 pandemic.

Deferring routine repairs and maintenance may impact the value and desirability of our rental homes.

It may also increase the expense and difficulty of completing these repairs in the future and may delay other needed repairs.

We believe that the degree to which COVID-19 continues to adversely impact our business, operating results, cash flows, ability to make distributions, ability to service our debt and/or financial condition will be driven primarily by the duration, spread and severity of the pandemic, including with respect to resurgences, new variants or strains, such as the Delta and Omicron variants, the impact of government regulations, vaccine adoption rates (including boosters), the effectiveness of vaccines against any future variants or strains, employee retention issues resulting from vaccine mandates, and the direct and indirect economic effects of the pandemic and containment measures, among others, all of which are uncertain and difficult to predict.

As a result, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

Future public health crises could have similar impacts.

Settlement provisions contained in the January 2022 Forward Sale Agreements could result in substantial dilution to our earnings per share or result in substantial cash payment obligations.

In January 2022, the Company completed an underwritten public offering for 23,000,000 of its Class A common shares of beneficial interest, $0.01 par value per share, of which 10,000,000 shares were issued directly by the Company, and 13,000,000 shares were offered on a forward basis at the request of the Company by the forward sellers.

In connection with this offering, the Company entered into forward sale agreements with the forward purchasers (the “January 2022 Forward Sale Agreements”) for these 13,000,000 shares.

The forward purchasers under the January 2022 Forward Sale Agreements will have the right to accelerate its forward sale agreement (with respect to all or any portion of the transaction under such forward sale agreement that such forward purchaser determines is affected by an event described below) and require us to settle on a date specified by such forward purchaser if:

• the forward purchaser is unable, after using commercially reasonable efforts, to, or would incur a materially increased cost to, acquire, establish, maintain or unwind its hedge position with respect to the relevant forward sale agreement, and we do not elect to pay an adjustment amount or amend the relevant forward sale agreement accordingly;

• the forward purchaser is unable, after using commercially reasonable efforts, to borrow (or maintain borrowing of) a number of our Class A common shares equal to the number of our Class A common shares underlying the relevant forward sale agreement or that, with respect to borrowing such number of our Class A common shares, it would incur a rate of borrowing that is greater than the borrow cost specified in the relevant forward sale agreement, subject to certain exceptions in the case of such a rate of borrowing that is greater than a borrow cost specified in such forward sale agreement, and we do not elect to pay an adjustment amount or amend the relevant forward sale agreement accordingly;

• certain ownership thresholds applicable to the forward purchaser and its affiliates are exceeded;

• we declare a dividend or distribution on our Class A common shares with a cash value in excess of a specified amount, or with an ex-dividend date that occurs earlier than a specified date, or we declare certain non-cash dividends;

• an announcement occurs of an event or transaction that, if consummated, would result in a merger event, tender offer, nationalization, delisting or change in law (as determined pursuant to the terms of the applicable forward sale agreement);

• certain other events of default, termination events or other specified events occur, including, among other things, any material misrepresentation made by us in connection with entering into the relevant forward sale agreement or a market disruption event during a specified period that lasts for more than eight scheduled trading days (in each case, as determined pursuant to the terms of the applicable forward sale agreement).

Each forward purchaser’s decision to exercise its right to accelerate the applicable forward sale agreement and require us to settle the relevant forward sale agreement will be made irrespective of our interests, including our need for capital.

In such cases, we could be required to issue and deliver our Class A common shares under the physical settlement provisions or, if we so elect and the relevant forward purchaser so permits our election in its good faith and in its reasonable discretion, net share settlement provisions of the relevant forward sale agreement (and in the event that such net share settlement requires issuance and delivery of our Class A common shares) irrespective of our capital needs, which would result in dilution to our earnings per share.

We expect that the applicable forward sale agreement will be physically settled by delivery of our Class A common shares, unless we elect cash settlement or net share settlement, subject to the satisfaction of certain conditions.

Upon physical settlement or, if we so elect, net share settlement of any January 2022 Forward Sale Agreement, delivery of our Class A common shares in connection with such physical settlement or, to the extent we are obligated to deliver our Class A common shares, net share settlement will result in dilution to our earnings per share.

If we elect cash settlement or net share settlement with respect to all or a portion of our Class A common shares underlying the applicable forward sale agreement, we expect the applicable forward purchaser (or an affiliate thereof) to purchase a number of our Class A common shares in secondary market transactions over an unwind period to (i) return our Class A common shares to securities lenders in order to unwind the applicable forward purchaser’s hedge (after taking into consideration any Class A common shares to be delivered by us to the applicable forward purchaser, in the case of net share settlement);

and (ii) if applicable, in the case of net share settlement, deliver our Class A common shares to us to the extent required in settlement of such forward sale agreement.

In addition, the purchase of our Class A common shares in connection with a forward purchaser or its affiliate unwinding its hedge positions could cause the price of our Class A common shares to increase over such time (or reduce the amount of decrease over such time), thereby increasing the amount of cash we would owe to such forward purchaser (or decreasing the amount of cash such forward purchaser would owe us) upon a cash settlement of the applicable forward sale agreement or the number of our Class A common shares we would deliver to such forward purchaser (or decreasing the number of our Class A common shares such forward purchaser would deliver to us) upon net share settlement of such forward sale agreement.

The forward sale price we expect to receive upon physical settlement of any January 2022 Forward Sale Agreement will be subject to adjustment on a daily basis based on a floating interest rate factor equal to the overnight bank funding rate less a spread to be mutually agreed by us and the applicable forward purchaser, and will be decreased on certain dates based on amounts related to expected dividends on our Class A common shares during the term of such forward sale agreement.

If the overnight bank funding rate is less than the spread under such forward sale agreement on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price.

As of January 19, 2022, the overnight bank funding rate was less than the spread, reducing the proceeds that we would receive upon settlement of the January 2022 Forward Sale Agreements.

If the prevailing market price of our Class A common shares during the relevant valuation period under any forward sale agreement is above the relevant forward sale price, in the case of cash settlement, we would pay the relevant forward purchaser an amount in cash equal to the difference or, in the case of net

share settlement, we would deliver to the relevant forward purchaser a number of our Class A common shares having a value equal to the difference, and, in each case, such difference would include a commission to such forward purchaser.

Thus, we could be responsible for a potentially substantial cash or stock payment.

In case of our bankruptcy or insolvency, the January 2022 Forward Sale Agreements will automatically terminate, and we would not receive the expected proceeds from the forward sale of our Class A common shares.

If we file for or a regulatory authority with jurisdiction over us institutes, or we consent to a proceeding seeking a judgment in bankruptcy or insolvency or any other similar relief under any other related laws, or we or a regulatory authority with jurisdiction over us presents a petition for our winding-up or liquidation, and we consent to such a petition, any forward sale agreement then in effect will automatically terminate.

If the January 2022 Forward Sale Agreements so terminate, we would not be obligated to deliver to the relevant Forward Purchaser any Class A common shares not previously delivered, and such Forward Purchaser would be discharged from its obligation to pay the relevant forward sale price per share in respect of any Class A common shares not previously settled under the applicable forward sale agreement.

Therefore, to the extent that there are any Class A common shares with respect to which a forward sale agreement has not been settled at the time of the commencement of any such bankruptcy or insolvency proceedings, we would not receive the relevant forward sale price per share in respect of those Class A common shares.

A pandemic, including the ongoing COVID-19 pandemic, and measures intended to prevent its spread, could have a material adverse effect on our business, results of operations, cash flows, and financial condition.

A pandemic, such as the ongoing COVID-19 pandemic, and emergence of new variants could negatively impact the global economy, disrupt financial markets and international trade, and result in varying unemployment levels, all of which could negatively impact our business, results of operations, cash flows, and financial condition.

Pandemic outbreaks could lead (and the current outbreak of COVID-19 has led) governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to mitigate its spread, including restrictions on freedom of movement and business operations such as issuing guidelines, travel bans, border closings, business closures, quarantine orders, and orders not allowing the collection of rents, rent increases, or eviction of non-paying tenants.

Risks Related to the Real Estate Industry

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To the extent that we do not comply with state or local laws, we may be subjected to civil litigation filed by individuals, in class actions or by state or local law enforcement.

We may be required to pay our adversaries’ litigation fees and

expenses if judgment is entered against us in such litigation, or if we settle such litigation.

We may be required to pay our adversaries’ litigation fees and expenses if judgment is entered against us in such litigation, or if we settle such litigation.

Furthermore, rent control laws or other regulations that may limit our ability to increase rental rates may affect our rental income.

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Additionally, these organizations may lobby local county and municipal attorneys or state attorneys general to pursue enforcement or litigation against us, may lobby state and local legislatures to pass new laws and regulations to constrain our business operations or may generate unfavorable publicity for our business.

If they are successful in any such endeavors, they could directly limit and constrain our operations, adversely impact our business and may impose on us significant litigation expenses, including settlements to avoid continued litigation or judgments for damages or injunctions.

If they are successful in any such endeavors, they could

directly limit and constrain our operations, adversely impact our business and may impose on us significant litigation expenses, including settlements to avoid continued litigation or judgments for damages or injunctions.

The direct and indirect impacts of climate change may adversely affect our business.

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The increases in property damage due to these events have also contributed to the increases in costs we have faced in property insurance.

The ongoing transition to non-carbon based energy also presents certain risks for us and our tenants, including macroeconomic risks related to high energy costs and energy shortages, among other things.

In addition, changes in federal, state and local legislation and regulation based on concerns about climate change could result in delays and increased costs to complete our development projects and increased capital expenditures on our existing properties (for example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding increase in revenue, and, as a result, adversely impact our financial results and operations.

We also face investor-related climate risks.

Investors are increasingly taking into account environmental, social, and governance factors, including climate risks, in determining whether to invest in companies.

Our reputation and investor relationships could be damaged as a result of our involvement with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.

It would be difficult for us to quickly generate cash from sales of our properties.

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Risks Related to Our Ownership, Organization and Structure

AH4R’s fiduciary duties as the general partner of the Operating Partnership could create conflicts of interest, which may impede business decisions that could benefit our shareholders.

As the sole general partner of the Operating Partnership, AH4R has a fiduciary duty to the other limited partners in the Operating Partnership, which may conflict with the interests of the Company’s shareholders.

The limited partners of the Operating Partnership have agreed that, in the event of a conflict in the fiduciary duties owed by AH4R to the Company’s shareholders and in AH4R’s capacity as the general partner of the Operating Partnership to such limited partner, AH4R is under no obligation to give priority to the interests of such limited partner.

AMH’s fiduciary duties as the general partner of the Operating Partnership could create conflicts of interest, which may impede business decisions that could benefit our shareholders.

As the sole general partner of the Operating Partnership, AMH has a fiduciary duty to the other limited partners in the Operating Partnership, which may conflict with the interests of the Company’s shareholders.

The limited partners of the Operating Partnership have agreed that, in the event of a conflict in the fiduciary duties owed by AMH to the Company’s shareholders and in AMH’s capacity as the general partner of the Operating Partnership to such limited partner, AMH is under no obligation to give priority to the interests of such limited partner.

In addition, the limited partners have the right to vote on certain amendments to the Agreement of Limited Partnership of the Operating Partnership and to approve certain amendments that would adversely affect their rights.

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Our senior management, trustees and their affiliates may have significant voting influence due to their stock ownership.

Members of the Company’s senior management, trustees and their affiliates collectively hold significant amounts of the Company’s Class A common shares, entitled to one vote each, and Class B common shares, entitled to 50 votes each and which convert into Class A common shares on a one for one basis for every 49 partnership units converted, and Class A units in the

Operating Partnership, which are nonvoting.

This structure was put in place when the Company was organized to provide voting rights to holders of units in the Operating Partnership corresponding with their equity ownership.

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Even a technical or inadvertent violation could jeopardize our REIT qualification.

Our qualification as a REIT depends upon our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis.

Our qualification as a REIT depends upon our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other

requirements on a continuing basis.

New legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT.

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We may be subject to the prohibited transactions tax equal to 100% of net gain upon a disposition of real property that we hold.

Although a safe harbor is available, for which certain sales of property by a REIT are not subject to the 100% prohibited transaction

tax, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

Although a safe harbor is available, for which certain sales of property by a REIT are not subject to the 100% prohibited transaction tax, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

Consequently, we may choose not to engage in certain sales of our properties or we may conduct such sales through our TRS, which would be subject to U.S.

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For example, if circumstances make it not profitable or otherwise uneconomical for us to remain in certain states or geographical markets, the 100% tax could delay our ability to exit those states or markets by selling our assets in those states or markets other than through a TRS, which could harm our operating profits and the trading price of our shares.

In addition, in order to avoid the prohibited transactions tax, we may be required to limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.

In addition, in order to avoid the prohibited transactions

tax, we may be required to limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

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This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

In addition, losses in our TRS will generally not provide any tax benefit, except for being carried back or forward against past or future taxable income in the TRS, provided, however, losses in our TRS arising in taxable years beginning after December 31, 2021, may only be carried forward and may only be deducted against 80% of future taxable income in the TRS.

In addition, losses in our TRS may only be carried forward and may only be deducted against 80% of future taxable income in the TRS.

Our ownership of our TRS is subject to limitations and our transactions with our TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

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The Company’s board of trustees may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of the applicable ownership limit would result in our failing to qualify as a REIT.

These restrictions on ownership and transfer will not apply, however, if the Company’s board of trustees determines that it is no longer in our best interest to continue to qualify as

These restrictions on ownership and transfer will not apply, however, if the Company’s board of trustees determines that it is no longer in our best interest to continue to qualify as a REIT.

The share ownership restrictions of the Code for REITs and the ownership and transfer restrictions in our declaration of trust may inhibit market activity in our equity shares and restrict our business combination opportunities.

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In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

In order to satisfy these distribution requirements to maintain our REIT status and avoid the payment of income and excise taxes, we may need to take certain actions to raise funds if we have insufficient cash flow, such as borrowing funds, raising additional equity capital, selling a portion of our assets or finding another alternative to make distributions to our stockholders.

In order to satisfy these distribution requirements to maintain our REIT status and avoid the payment of income and excise taxes, we may need to take certain actions to raise funds if we have

insufficient cash flow, such as borrowing funds, raising additional equity capital, selling a portion of our assets or finding another alternative to make distributions to our stockholders.

We may be forced to take those actions even if the then-prevailing market conditions are not favorable for those actions.

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UNRESOLVED STAFF COMMENTS

Not applicable.

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-K

Item 1A. Risk Factors