American Homes 4 Rent 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Overview We are a Maryland REIT focused on acquiring, developing, renovating, leasing and managing single-family homes as rental properties. The Operating Partnership is the entity through which we conduct substantially all of our business and own, directly or through subsidiaries, substantially all of our assets. We commenced operations in November 2012 and we have elected to be taxed as a REIT. As of March 31, 2024, we owned 59,343 single-family properties in select submarkets of metropolitan statistical areas (“MSAs”) in 21 states, including 728 properties held for sale, compared to 59,332 single-family properties in 21 states, including 862 properties held for sale, as of December 31, 2023 and 58,639 single-family properties in 21 states, including 903 properties held for sale, as of March 31, 2023. As of March 31, 2024, 56,362 of our total properties (excluding properties held for sale) were occupied, compared to 55,768 of our total properties (excluding properties held for sale) as of December 31, 2023 and 56,049 of our total properties (excluding properties held for sale) as of March 31, 2023. Also, as of March 31, 2024, the Company had an additional 3,004 properties held in unconsolidated joint ventures, compared to 2,978 properties held in unconsolidated joint ventures as of December 31, 2023 and 2,688 properties held in unconsolidated joint ventures as of March 31, 2023. Our portfolio of single-family properties, including those held in our unconsolidated joint ventures, is internally managed through our proprietary property management platform. Key Single-Family Property and Leasing Metrics The following table summarizes certain key single-family properties metrics as of March 31, 2024: Total Single-Family Properties (1) Market Number of Single-Family Properties % of Total Single-Family Properties Gross Book Value (millions) % of Gross Book Value Total Avg. Gross Book Value per Property Avg. Sq. Ft. Avg. Property Age (years) Avg. Year Purchased or Delivered Atlanta, GA 5,884 10.0 % $ 1,328.8 10.2 % $ 225,826 2,176 17.4 2016 Charlotte, NC 4,115 7.0 % 912.6 7.0 % 221,776 2,112 17.8 2015 Dallas-Fort Worth, TX 4,016 6.9 % 706.1 5.4 % 175,820 2,095 19.7 2014 Phoenix, AZ 3,351 5.7 % 720.3 5.5 % 214,956 1,841 19.4 2016 Nashville, TN 3,334 5.7 % 832.8 6.4 % 249,780 2,119 16.2 2016 Jacksonville, FL 3,138 5.4 % 690.9 5.3 % 220,172 1,927 14.4 2016 Tampa, FL 2,913 5.0 % 681.9 5.2 % 234,098 1,947 15.2 2016 Indianapolis, IN 2,840 4.8 % 495.0 3.8 % 174,289 1,927 21.1 2014 Houston, TX 2,376 4.1 % 424.1 3.3 % 178,485 2,083 18.3 2014 Las Vegas, NV 2,271 3.9 % 661.1 5.1 % 291,088 1,946 11.3 2017 Raleigh, NC 2,193 3.7 % 438.4 3.4 % 199,917 1,888 17.8 2015 Columbus, OH 2,151 3.7 % 422.3 3.2 % 196,305 1,881 21.3 2015 Cincinnati, OH 2,122 3.6 % 419.0 3.2 % 197,469 1,843 21.2 2014 Orlando, FL 2,015 3.4 % 448.1 3.4 % 222,387 1,912 18.1 2016 Salt Lake City, UT 1,902 3.2 % 581.2 4.5 % 305,553 2,245 17.4 2016 Charleston, SC 1,554 2.7 % 360.0 2.8 % 231,643 1,964 13.0 2017 Greater Chicago area, IL and IN 1,535 2.6 % 293.9 2.3 % 191,497 1,865 22.6 2013 San Antonio, TX 1,243 2.1 % 246.2 1.9 % 198,093 1,918 15.1 2015 Savannah/Hilton Head, SC 1,050 1.8 % 222.3 1.7 % 211,689 1,888 15.4 2016 Seattle, WA (2) 1,034 1.8 % 344.7 2.6 % 333,388 2,009 13.9 2017 All Other (3) 7,578 12.9 % 1,794.2 13.8 % 236,764 1,915 17.9 2016 Total/Average 58,615 100.0 % $ 13,023.9 100.0 % $ 222,194 1,993 17.6 2015 (1) Excludes 728 single-family properties held for sale as of March 31, 2024. (2) Reflects 139 properties reclassed from the Seattle, WA market to the Portland, OR market which is presented in the All Other grouping. (3) Represents 15 markets in 13 states. 29 The following table summarizes certain key leasing metrics as of March 31, 2024: Total Single-Family Properties (1) Market Avg. Occupied Days Percentage (2) Avg. Monthly Realized Rent per Property (3) Avg. Original Lease Term (months) (4) Avg. Remaining Lease Term (months) (4) Avg. Blended Change in Rent (5) Atlanta, GA 94.8 % $ 2,182 12.0 6.0 5.5 % Charlotte, NC 95.5 % 2,105 12.0 6.3 6.2 % Dallas-Fort Worth, TX 94.7 % 2,218 12.1 6.1 6.4 % Phoenix, AZ 94.3 % 2,081 12.0 6.5 5.1 % Nashville, TN 95.3 % 2,276 12.0 5.9 5.6 % Jacksonville, FL 94.2 % 2,115 12.0 6.2 5.4 % Tampa, FL 94.2 % 2,337 12.0 6.4 6.7 % Indianapolis, IN 97.8 % 1,809 12.1 5.8 5.9 % Houston, TX 96.6 % 1,989 12.0 6.4 5.3 % Las Vegas, NV 92.7 % 2,222 12.0 6.1 4.0 % Raleigh, NC 95.5 % 1,973 12.0 5.9 5.9 % Columbus, OH 96.6 % 2,110 12.0 6.1 6.0 % Cincinnati, OH 97.3 % 2,059 12.0 6.0 5.3 % Orlando, FL 95.5 % 2,279 12.0 5.9 7.1 % Salt Lake City, UT 96.7 % 2,380 12.0 5.7 3.8 % Charleston, SC 93.8 % 2,230 12.0 6.1 5.8 % Greater Chicago area, IL and IN 97.7 % 2,349 12.0 5.9 6.0 % San Antonio, TX 93.4 % 1,926 12.0 5.6 2.9 % Savannah/Hilton Head, SC 96.5 % 2,137 12.0 6.5 8.5 % Seattle, WA (6) 94.6 % 2,362 11.6 5.8 6.2 % All Other (7) 95.0 % 2,185 12.0 6.0 5.3 % Total/Average 95.3 % $ 2,156 12.0 6.1 5.7 % (1) Excludes 728 single-family properties held for sale as of March 31, 2024. (2) For the three months ended March 31, 2024, 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, 2024, 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, 2024, compared to the annual rent of the previously expired non-month-to-month comparable long-term lease for each property. (6) Reflects 139 properties reclassed from the Seattle, WA market to the Portland, OR market which is presented in the All Other grouping. (7) Represents 15 markets in 13 states. We believe these key single-family property and leasing metrics provide useful information to investors because they allow investors to understand the composition and performance of our properties on a market by market basis. Management also uses these metrics to understand the composition and performance of our properties at the market level. Factors That Affect Our Results of Operations and Financial Condition Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. Key factors that impact our results of operations and financial condition include the pace at which we identify and acquire suitable land and properties, the time and cost required to renovate the acquired properties, the pace and cost of our property developments, the time to lease newly acquired or developed properties at acceptable rental rates, occupancy levels, rates of tenant turnover, the length of vacancy in properties between tenant leases, our expense ratios, property taxes including changes in rates and valuation assessments of our properties, our ability to raise capital and our capital structure. Additionally, further supply chain disruptions, inflationary increases in labor and material costs and labor shortages may have the potential to impact certain aspects of our business, including our AMH Development Program, our renovation program associated with acquired properties and our maintenance program. Property Acquisitions, Development and Dispositions Since our formation, we have rapidly but systematically grown our portfolio of single-family properties. Our ability to identify and acquire homes that meet our investment criteria is impacted by home prices in our target markets, the inventory of properties available-for-sale through traditional acquisition channels, competition for our target assets and our available capital. We are also focused on developing “built-for-rental” homes through our internal AMH Development Program. In addition, we acquire newly 30 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. We have strategically scaled back acquisitions of single-family properties through our National Builder Program and traditional acquisition channel as the housing market adjusts to the current macroeconomic environment. We anticipate beginning to grow in these acquisition channels when the housing and capital markets stabilize. During the three months ended March 31, 2024, we developed or acquired 482 homes, including 441 newly constructed homes delivered to our operating portfolio through our AMH Development Program, 22 newly constructed homes to be disposed and 19 homes acquired through our National Builder Program, partially offset by 471 homes sold to third parties. During the three months ended March 31, 2024, we also developed an additional 28 newly constructed homes which were delivered to our unconsolidated joint ventures, aggregating to 469 total program deliveries through our AMH Development Program. Our properties and land held for sale were identified based on submarket analysis, as well as individual asset-level review. As of March 31, 2024 and December 31, 2023, there were 728 and 862 properties, respectively, as well as certain land lots classified as held for sale. We will continue to evaluate our properties and land for potential disposition going forward as a normal course of business. Property Operations Homes added to our portfolio through new construction channels include properties developed through our internal AMH Development Program and newly constructed properties acquired from third-party developers through our National Builder Program. Rental homes developed through our AMH Development Program involve substantial up-front costs, time to acquire and develop land, time to build the rental home, and time to lease the rental home before the home generates income. This process is dependent upon the nature of each lot acquired and the timeline varies primarily due to land development requirements. Once land development requirements have been met, historically it has taken approximately four to six months to complete the rental home vertical construction process. However, delivery of homes may be staggered to facilitate leasing absorption. Our internal construction program is managed by our team of development professionals that oversee the full rental home construction process including all land development and work performed by subcontractors. We typically incur costs between $250,000 and $450,000 to acquire and develop land and build a rental home. Homes added through our AMH Development Program are available for lease immediately upon or shortly after receipt of a certificate of occupancy. Rental homes acquired from third-party developers through our National Builder Program are dependent on the inventory of newly constructed homes and homes currently under construction. Homes added to our portfolio through traditional acquisition channels require expenditures in addition to payment of the purchase price, including property inspections, closing costs, liens, title insurance, transfer taxes, recording fees, broker commissions, property taxes and homeowner association (“HOA”) fees, when applicable. In addition, we typically incur costs between $20,000 and $40,000 to renovate a home acquired through traditional acquisition channels to prepare it for rental. Renovation work varies, but may include paint, flooring, cabinetry, appliances, plumbing hardware and other items required to prepare the home for rental. The time and cost involved to prepare our homes for rental can impact our financial performance and varies among properties based on several factors, including the source of acquisition channel and age and condition of the property. Historically, it has taken approximately 20 to 90 days to complete the renovation process, which will fluctuate based on our overall acquisition volume as well as availability of construction labor and materials. Our operating results are also impacted by the amount of time it takes to market and lease a property, which can vary greatly among properties, and is impacted by local demand, our marketing techniques and the size of our available inventory. Typically, it takes approximately 10 to 50 days to lease a property after acquiring or developing a new property through our new construction channels and 20 to 40 days after completing the renovation process for a traditionally acquired property. Lastly, our operating results are impacted by the length of stay of our tenants and the amount of time it takes to prepare and re-lease a property after a tenant vacates. This process, which we refer to as “turnover,” is impacted by numerous factors, including the condition of the home upon move-out of the previous tenant, and by local demand, our marketing techniques and the size of our available inventory at the time of the turnover. Typically, it takes approximately 20 to 50 days to complete the turnover process. Revenues Our revenues are derived primarily from rents collected from tenants for our single-family properties under lease agreements which typically have a term of one year. Our rental rates and occupancy levels are affected by macroeconomic factors and local and property-level factors, including market conditions, seasonality and tenant defaults, and the amount of time it takes to turn properties when tenants vacate. Additionally, our ability to collect revenues and related operating results are impacted by the credit worthiness and quality of our tenants. Typically, our incoming residents have household incomes ranging from $80,000 to $140,000 and primarily consist of families with approximately two adults and one or more children. 31 Our rents and other single-family property revenues are comprised of rental revenue from single-family properties, fees from our single-family property rentals and “tenant charge-backs,” which are primarily related to cost recoveries on utilities. Our ability to maintain and grow revenues from our existing portfolio of homes will be dependent on our ability to retain tenants and increase rental rates. Based on our Same-Home population of properties (defined below), the year-over-year increase in Average Monthly Realized Rent per property was 5.9% for the three months ended March 31, 2024, and we experienced turnover rates, which represents the number of tenant move-outs during the period divided by the total number of properties, of 6.6% and 6.4% during the three months ended March 31, 2024 and 2023, respectively. Expenses We monitor the following categories of expenses that we believe most significantly affect our results of operations. Property Operating Expenses Once a property is available for lease for the first time, which we refer to as “rent-ready,” we incur ongoing property-related expenses which may not be subject to our control. These include primarily property taxes, repairs and maintenance (“R&M”), turnover costs, HOA fees (when applicable) and insurance. Property Management Expenses As we internally manage our portfolio of single-family properties through our proprietary property management platform, we incur costs such as salary expenses for property management personnel, lease expenses and operating costs for property management offices and technology expenses for maintaining as well as enhancing our property management platform. As part of developing our property management platform, we continue to make significant investments in our personnel, infrastructure, systems and technology that will impact expenses based on investment programs during the year. We believe that these investments will enable our property management platform to become more efficient over time, especially as our portfolio grows. Also included in property management expenses is noncash share-based compensation expense related to centralized and field property management employees. Seasonality We believe that our business and related operating results will be impacted by seasonal factors throughout the year. Historically, we have experienced higher levels of tenant move-outs and move-ins during the late spring and summer months, which impacts both our rental revenues and related turnover costs. Our property operating costs are seasonally impacted in certain markets for expenses such as HVAC repairs, turn costs and landscaping expenses during the summer season. Additionally, our single-family properties are at greater risk in certain markets for adverse weather conditions such as hurricanes in the late summer months and extreme cold weather in the winter months. General and Administrative Expense General and administrative expense primarily consists of corporate payroll and personnel costs, federal and state taxes, trustees’ and officers’ insurance expenses, audit and tax fees, trustee fees and other expenses associated with our corporate and administrative functions. In addition, we continue to make corporate level investments to support certain initiatives which will impact expenses based on given investment programs during the year. Also included in general and administrative expense is noncash share-based compensation expense related to corporate administrative employees. Results of Operations Net income totaled $128.1 million for the three months ended March 31, 2024, compared to $137.7 million for the three months ended March 31, 2023. The decrease was primarily due to lower net gains on property sales, partially offset by higher rental rates. As we continue to grow our portfolio with a portion of our homes still recently developed, acquired and/or renovated, we distinguish our portfolio of homes between Same-Home properties and Non-Same-Home and Other properties in evaluating our operating performance. We classify a property as Same-Home if it has been stabilized longer than 90 days prior to the beginning of the earliest period presented under comparison and if it has not been classified as held for sale or experienced a casualty loss, which allows the performance of these properties to be compared between periods. Single-family properties that we acquire individually (i.e., not through a bulk purchase) are classified as either stabilized or non-stabilized. A property is classified as stabilized once it has been renovated by the Company or newly constructed and then initially leased or available for rent for a period greater than 90 days. Properties acquired through a bulk purchase are first considered non-stabilized, as an entire group, until (1) we have owned them for 32 an adequate period of time to allow for complete on-boarding to our operating platform, and (2) a substantial portion of the properties have experienced tenant turnover at least once under our ownership, providing the opportunity for renovations and improvements to meet our property standards. After such time has passed, properties acquired through a bulk purchase are then evaluated on an individual property basis under our standard stabilization criteria. All other properties, including those classified as held for sale or taken out of service as a result of a casualty loss, are classified as Non-Same-Home and Other. One of the primary financial measures we use in evaluating the operating performance of our single-family properties is Core Net Operating Income (“Core NOI”), which we also present separately for our Same-Home portfolio. Core NOI is a supplemental non-GAAP financial measure that we define as core revenues, which is calculated as rents and other single-family property revenues, excluding expenses reimbursed by tenant charge-backs, less core property operating expenses, which is calculated as property operating and property management expenses, excluding noncash share-based compensation expense and expenses reimbursed by tenant charge-backs. Core NOI also excludes (1) gain or loss on early extinguishment of debt, (2) hurricane-related charges, net, which result in material charges to our single-family property portfolio, (3) gains and losses from sales or impairments of single-family properties and other, (4) depreciation and amortization, (5) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (6) noncash share-based compensation expense, (7) interest expense, (8) general and administrative expense, and (9) other income and expense, net. We believe Core NOI provides useful information to investors about the operating performance of our single-family properties without the impact of certain operating expenses that are reimbursed through tenant charge-backs. Core NOI and Same-Home Core NOI should be considered only as supplements to net income or loss as a measure of our performance and should not be used as measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. Additionally, these metrics should not be used as substitutes for net income or loss or net cash flows from operating activities (as computed in accordance with accounting principles generally accepted in the United States of America (“GAAP”)). 33 Comparison of the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023 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, 2024 and 2023 (amounts in thousands): For the Three Months Ended March 31, 2024 2023 Core revenues and Same-Home core revenues Rents and other single-family property revenues $ 423,555 $ 397,703 Tenant charge-backs (57,337) (55,395) Core revenues 366,218 342,308 Less: Non-Same-Home core revenues (32,119) (24,903) Same-Home core revenues $ 334,099 $ 317,405 Core property operating expenses and Same-Home core property operating expenses Property operating expenses $ 155,927 $ 147,068 Property management expenses 31,402 30,800 Noncash share-based compensation - property management (1,444) (1,066) Expenses reimbursed by tenant charge-backs (57,337) (55,395) Core property operating expenses 128,548 121,407 Less: Non-Same-Home core property operating expenses (13,793) (13,016) Same-Home core property operating expenses $ 114,755 $ 108,391 Core NOI and Same-Home Core NOI Net income $ 128,095 $ 137,699 Loss on early extinguishment of debt 954 — Gain on sale and impairment of single-family properties and other, net (68,901) (84,659) Depreciation and amortization 115,726 112,717 Acquisition and other transaction costs 3,324 5,076 Noncash share-based compensation - property management 1,444 1,066 Interest expense 38,577 35,882 General and administrative expense 21,885 17,855 Other income and expense, net (3,434) (4,735) Core NOI 237,670 220,901 Less: Non-Same-Home Core NOI (18,326) (11,887) Same-Home Core NOI $ 219,344 $ 209,014 34 The following tables present a summary of Core NOI for our Same-Home properties, Non-Same-Home and Other properties and total properties for the three months ended March 31, 2024 and 2023 (amounts in thousands): For the Three Months Ended March 31, 2024 Same-Home Properties (1) % of Core Revenue Non-Same- Home and Other Properties % of Core Revenue Total Properties % of Core Revenue Rents from single-family properties $ 330,000 $ 32,049 $ 362,049 Fees from single-family properties 7,214 787 8,001 Bad debt (3,115) (717) (3,832) Core revenues 334,099 32,119 366,218 Property tax expense 58,417 17.5 % 6,171 19.2 % 64,588 17.6 % HOA fees, net (2) 5,781 1.7 % 533 1.7 % 6,314 1.7 % R&M and turnover costs, net (2) 21,858 6.5 % 2,988 9.3 % 24,846 6.8 % Insurance 4,265 1.3 % 512 1.6 % 4,777 1.3 % Property management expenses, net (3) 24,434 7.3 % 3,589 11.1 % 28,023 7.7 % Core property operating expenses 114,755 34.3 % 13,793 42.9 % 128,548 35.1 % Core NOI $ 219,344 65.7 % $ 18,326 57.1 % $ 237,670 64.9 % For the Three Months Ended March 31, 2023 Same-Home Properties (1) % of Core Revenue Non-Same- Home and Other Properties % of Core Revenue Total Properties % of Core Revenue Rents from single-family properties $ 314,786 $ 25,428 $ 340,214 Fees from single-family properties 6,671 769 7,440 Bad debt (4,052) (1,294) (5,346) Core revenues 317,405 24,903 342,308 Property tax expense 54,221 17.1 % 5,664 22.7 % 59,885 17.6 % HOA fees, net (2) 5,476 1.7 % 505 2.0 % 5,981 1.7 % R&M and turnover costs, net (2) 20,456 6.4 % 3,160 12.7 % 23,616 6.9 % Insurance 3,589 1.1 % 342 1.4 % 3,931 1.1 % Property management expenses, net (3) 24,649 7.8 % 3,345 13.5 % 27,994 8.2 % Core property operating expenses 108,391 34.1 % 13,016 52.3 % 121,407 35.5 % Core NOI $ 209,014 65.9 % $ 11,887 47.7 % $ 220,901 64.5 % (1) Includes 53,250 properties that have been stabilized longer than 90 days prior to January 1, 2023. (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. Rents and Other Single-Family Property Revenues Rents and other single-family property revenues increased 6.5% to $423.6 million for the three months ended March 31, 2024 from $397.7 million for the three months ended March 31, 2023. Revenue growth was primarily driven by higher rental rates. Property Operating Expenses Property operating expenses increased 6.0% to $155.9 million for the three months ended March 31, 2024 from $147.1 million for the three months ended March 31, 2023. This increase was primarily attributable to increased property tax expense from anticipated 2024 property tax assessments and inflationary increases in R&M and turnover costs and insurance costs. Property Management Expenses Property management expenses for the three months ended March 31, 2024 and 2023 were $31.4 million and $30.8 million, respectively, which included $1.4 million and $1.1 million, respectively, of noncash share-based compensation expense in each period 35 related to centralized and field property management employees. The increase in property management expenses was primarily attributable to an increase in noncash share-based compensation expense and other inflationary increases. Core Revenues from Same-Home Properties Core revenues from Same-Home properties increased 5.3% to $334.1 million for the three months ended March 31, 2024 from $317.4 million for the three months ended March 31, 2023. This increase was primarily attributable to higher Average Monthly Realized Rent per property, which increased 5.9% to $2,147 per month for the three months ended March 31, 2024 compared to $2,027 per month for the three months ended March 31, 2023, partially offset by a decrease in Average Occupied Days Percentage, which was 96.2% for the three months ended March 31, 2024 compared to 97.2% for the three months ended March 31, 2023. 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 5.9% to $114.8 million for the three months ended March 31, 2024 from $108.4 million for the three months ended March 31, 2023 primarily driven by increased property tax expense from anticipated 2024 property tax assessments and inflationary increases in R&M and turnover costs, net and insurance costs. 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, 2024 and 2023 was $21.9 million and $17.9 million, respectively, which included $6.8 million and $3.7 million, respectively, of noncash share-based compensation expense in each period related to corporate administrative employees. The increase in general and administrative expense was primarily related to an increase in noncash share-based compensation expense as well as an increase in personnel related expenses. Interest Expense Interest expense increased 7.5% to $38.6 million for the three months ended March 31, 2024 from $35.9 million for the three months ended March 31, 2023. The increase was primarily due to additional interest from the issuance of the 2034 Notes (defined below), partially offset by lower interest expense resulting from the payoff of the AMH 2014-SFR2 securitization in February 2024 and additional capitalized interest from development activities under our AMH Development Program during the three months ended March 31, 2024. Acquisition and Other Transaction Costs Acquisition and other transaction costs consist primarily of personnel and platform costs associated with purchases of single-family properties, including newly constructed properties from third-party builders, or the disposal of certain properties or portfolios of properties which do not qualify for capitalization. Acquisition and other transaction costs for the three months ended March 31, 2024 and 2023 were $3.3 million and $5.1 million, respectively, which included $1.6 million and $1.0 million, respectively, of noncash share-based compensation expense related to employees in these functions. The decrease in acquisition and other transaction costs was primarily due to a decrease in personnel costs as a result of fewer planned transactions through our traditional acquisition channel during the three months ended March 31, 2024. 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 2.7% to $115.7 million for the three months ended March 31, 2024 from $112.7 million for the three months ended March 31, 2023 primarily due to growth in the average number and cost of depreciable properties as well as ongoing capital investments into existing 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 for the three months ended March 31, 2024 and 2023 was $68.9 million and $84.7 million, respectively, which included $0.9 million and $0.4 million, respectively, of impairment charges related to 36 homes classified as held for sale during each period. The decrease was primarily related to lower net gains on property sales resulting from fewer properties sold. Loss on Early Extinguishment of Debt Loss on early extinguishment of debt for the three months ended March 31, 2024 was $1.0 million as a result of the payoff of the AMH 2014-SFR2 securitization in February 2024, compared to zero for the three months ended March 31, 2023. Other Income and Expense, net Other income and expense, net for the three months ended March 31, 2024 and 2023 was $3.4 million and $4.7 million, respectively, which primarily related to interest income, fees from unconsolidated joint ventures and equity in income (losses) from unconsolidated joint ventures, partially offset by expenses related to unconsolidated joint ventures and other nonrecurring expenses. Critical Accounting Estimates Our critical accounting estimates are included in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Annual Report. There have been no material changes to these estimates during the three months ended March 31, 2024. Recent Accounting Pronouncements See Note 2. Significant Accounting Policies to our condensed consolidated financial statements in this report for a discussion of the adoption and potential impact of recently issued accounting standards, if any. Liquidity and Capital Resources Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, make distributions to our shareholders and OP unitholders, including AMH, and meet other general requirements of our business. Our liquidity, to a certain extent, is subject to general economic, financial, competitive and other factors beyond our control. Sources of Capital We expect to satisfy our cash requirements through cash provided by operations, long-term secured and unsecured borrowings, issuances of debt and equity securities (including OP units), property dispositions and joint venture transactions. We expect to meet our operating liquidity requirements and our dividend distributions generally through cash on hand and cash provided by operations. For our acquisition and development expenditures, we expect to supplement these sources through the issuance of equity securities, including under our 2023 At-the-Market Program described below, borrowings under our credit facility, issuances of unsecured senior notes, and proceeds from sales of single-family properties. However, our real estate assets are illiquid in nature. A timely liquidation of assets might not be a viable source of short-term liquidity should a cash flow shortfall arise, and we may need to source liquidity from other financing alternatives including drawing on our revolving credit facility. Our liquidity and capital resources as of March 31, 2024 included cash and cash equivalents of $124.8 million. Additionally, as of March 31, 2024, we had no outstanding borrowings and $2.7 million committed to outstanding letters of credit under our $1.25 billion revolving credit facility, leaving $1.25 billion of remaining borrowing capacity. During the three months ended March 31, 2024, the Company issued $600.0 million of 5.500% unsecured senior notes due 2034 (the “2034 Notes”), raising net proceeds of $595.5 million, and issued additional shares under its 2023 At-the-Market Program, raising $33.7 million in gross proceeds with $864.3 million remaining available for future share issuances as of March 31, 2024. As of March 31, 2024, the Company also had estimated net proceeds of $108.6 million available from future settlement of the March 2024 Forward Sale Agreement under its 2023 At-the-Market Program (described below). We maintain an investment grade credit rating which provides for greater availability of and lower cost of debt financing. Uses of Capital Our expected material cash requirements over the next twelve months consist of (i) contractually obligated expenditures, including payments of principal and interest, (ii) other essential expenditures, including property operating expenses, HOA fees (as applicable), real estate taxes, maintenance capital expenditures, general and administrative expenses and dividends on our equity securities 37 including those paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including to pay for the acquisition, development and renovation of our properties and repurchases of our securities. With respect to our contractually obligated expenditures, our cash requirements within the next twelve months include accounts payable and accrued expenses, interest payments on debt obligations, principal amortization on our asset-backed securitizations, the repayment of our AMH 2014-SFR3 asset-backed securitization, operating lease obligations and purchase commitments to acquire single-family properties and land for our AMH Development Program. During the three months ended March 31, 2024, the Company repaid all amounts due under the AMH 2014-SFR2 securitization. Except as described in Note 8. Debt, Note 9. Accounts Payable and Accrued Expenses, Note 15. Commitments and Contingencies and Note 16. Subsequent Events to our condensed consolidated financial statements in this report, there have been no other material changes outside the ordinary course of business to our other known contractual obligations described in “Liquidity and Capital Resources” in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Annual Report. Cash Flows The following table summarizes the Company’s and the Operating Partnership’s cash flows for the three months ended March 31, 2024 and 2023 (amounts in thousands): For the Three Months Ended March 31, 2024 2023 Change Net cash provided by operating activities $ 201,780 $ 200,467 $ 1,313 Net cash used for investing activities (68,146) (72,912) 4,766 Net cash (used for) provided by financing activities (72,204) 63,300 (135,504) Net increase in cash, cash equivalents and restricted cash $ 61,430 $ 190,855 $ (129,425) Operating Activities Our cash flows provided by operating activities, which is our principal source of cash flows, depend on numerous factors, including the occupancy level of our properties, the rental rates achieved on our leases, the collection of rent from our tenants and the level of property operating expenses, property management expenses and general and administrative expenses. Net cash provided by operating activities increased $1.3 million, or 0.7%, from $200.5 million for the three months ended March 31, 2023 to $201.8 million for the three months ended March 31, 2024 as a result of increased cash inflows generated from higher rental rates, partially offset by higher cash outflows for property related expenses as a result of inflationary increases as well as changes in working capital primarily related to the timing of payments for prepaid expenses and other assets. Investing Activities Our investing activities are most significantly impacted by the level of investment activity 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. We use cash generated from operating and financing activities and by recycling capital through the sale of single-family properties to invest in the strategic expansion of our single-family property portfolio. We have strategically scaled back acquisitions of single-family properties through our National Builder Program and traditional acquisition channel as the housing market adjusts to the current macroeconomic environment. We anticipate beginning to grow in these acquisition channels when the housing and capital markets stabilize. 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. Net cash used for investing activities decreased $4.8 million, or 6.5%, from $72.9 million for the three months ended March 31, 2023 to $68.1 million for the three months ended March 31, 2024. Cash outflows for the addition of single-family properties to our portfolio, primarily for our AMH Development Program, decreased $7.3 million during the three months ended March 31, 2024 as a result of the timing of development-related payments and certain cash outflows to a land banking entity being recognized as a financing activity during the three months ended March 31, 2024. In addition, (i) we received $25.7 million in cash proceeds for our AMH 2014-SFR2 Class F asset-backed securitization certificates, (ii) cash outflows for recurring and other capital expenditures for single-family properties decreased $7.9 million and (iii) cash outflows for other investing activities decreased $6.3 million primarily due to a nonrecurring investment in a residential-focused proptech company during the three months ended March 31, 2023. These changes were partially offset by (i) a decrease of $28.4 million in net proceeds received from the sale of single-family properties and other as a result of a decreased volume of properties sold during the three months ended March 31, 2024, (ii) an $11.9 million net reduction in net cash inflows from unconsolidated joint ventures due to the timing of contributions and distributions to and from our unconsolidated joint ventures and (iii) a $2.1 million increase in cash outflows for renovations to single-family properties. 38 Financing Activities Net cash used for financing activities was $72.2 million for the three months ended March 31, 2024 compared to net cash provided by financing activities of $63.3 million for the three months ended March 31, 2023. This $135.5 million change in financing activities was primarily due to (i) a $459.4 million increase in payments on asset-backed securitization resulting from the payoff of the AMH 2014-SFR2 securitization during the three months ended March 31, 2024, (ii) a $265.2 million reduction in proceeds from the issuance of Class A common shares, net of offering costs, (iii) $24.2 million of payments to a land banking entity related to liabilities to repurchase consolidated land not owned for our AMH Development Program during the three months ended March 31, 2024 and (iv) an $18.2 million increase in distributions paid to common share and unit holders resulting from an 18% increase in distributions paid per common share and unit. These changes were partially offset by (i) a $594.1 million increase in proceeds from unsecured senior notes, net of discount and deferred financing costs paid, from the issuance of the 2034 Notes during the three months ended March 31, 2024 and (ii) a $40.0 million reduction in net cash outflows to pay down our revolving credit facility. Early Extinguishment of Debt During the first quarter of 2024, the Operating Partnership paid off the $460.6 million outstanding principal on the AMH 2014-SFR2 securitization, which resulted in $1.0 million of charges related to the write-off of unamortized deferred financing costs and related legal fees and included in loss on early extinguishment of debt within the condensed consolidated statements of operations. The payoff of the AMH 2014-SFR2 securitization also resulted in the release of the 4,516 homes pledged as collateral and $10.3 million of cash restricted for lender requirements. The Company received $25.7 million from the payoff for its investment in the AMH 2014-SFR2 Class F asset-backed securitization certificates that were issued by the Operating Partnership and acquired by the Company in 2014 as part of the AMH 2014-SFR2 securitization debt offering. The Class F certificates were recorded as an asset-backed securitization certificates receivable by the Company and as an amount due from affiliates by the Operating Partnership prior to the payoff. Unsecured Senior Notes During the first quarter of 2024, the Operating Partnership issued the 2034 Notes, which carry a green bond designation and were issued under the Company’s green finance framework. Interest on the 2034 Notes is payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2024. The Operating Partnership received aggregate net proceeds of $595.5 million from this offering, after underwriting fees of $3.9 million and a $0.6 million discount, and before offering costs of $1.3 million. Pending full allocation of an amount equal to the net proceeds to finance new or existing projects meeting the eligibility criteria described in the prospectus supplement related to the offering, the Operating Partnership used the net proceeds primarily to repay outstanding indebtedness, including the payoff of the AMH 2014-SFR2 securitization. The 2034 Notes are the Operating Partnership’s unsecured and unsubordinated obligations and rank equally in right of payment with all of the Operating Partnership’s existing and future unsecured and unsubordinated indebtedness. The indenture requires that we maintain certain financial covenants. The Operating Partnership may redeem the 2034 Notes in whole at any time or in part from time to time at the applicable redemption price specified in the indenture. If the 2034 Notes are redeemed on or after November 1, 2033 (three months prior to the maturity date), the redemption price will be equal to 100% of the principal amount of the 2034 Notes being redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date. At-the-Market Common Share Offering Program During the second quarter of 2023, the Company entered into a new at-the-market common share offering program, replacing the previously expiring program, under which it can issue Class A common shares from time to time through various sales agents up to an aggregate gross sales offering price of $1.0 billion (the “2023 At-the-Market Program”). The 2023 At-the-Market Program also provides that we may enter into forward contracts for our Class A common shares with forward sellers and forward purchasers. The Company intends to use any net proceeds from the 2023 At-the-Market Program (i) to repay indebtedness the Company has incurred or expects to incur under its revolving credit facility or other debt obligations under its securitizations, (ii) to develop new single-family properties and communities, (iii) to acquire and renovate single-family properties and for related activities in accordance with the Company’s business strategy and (iv) for working capital and general corporate purposes, including repurchases of the Company’s securities, acquisitions of additional properties, capital expenditures and the expansion, redevelopment and/or improvement of properties in the Company’s portfolio. The 2023 At-the-Market Program may be suspended or terminated by the Company at any time. During the three months ended March 31, 2024, the Company issued 932,746 Class A common shares under its 2023 At-the-Market Program, raising $33.7 million in gross proceeds before commissions and other expenses of approximately $0.5 million. As of March 31, 2024, 3,732,429 shares have been issued under the 2023 At-the-Market Program and $864.3 million remained available for future share issuances. 39 During the first quarter of 2024, the Company entered into a forward sale agreement with the forward purchaser (the “March 2024 Forward Sale Agreement”), which is accounted for in equity, to offer 2,987,024 Class A common shares on a forward basis under its 2023 At-the-Market Program at the request of the Company by the forward seller. The Company expects to physically settle the March 2024 Forward Sale Agreement by the delivery of the Class A common shares and receive proceeds by February 28, 2025, 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 March 2024 Forward Sale Agreement allows 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 March 2024 Forward Sale Agreement, the Company may not receive any proceeds, and may owe cash or Class A common shares to the forward purchaser in certain circumstances. The March 2024 Forward Sale Agreement is subject to early termination or settlement under certain circumstances. As of March 31, 2024, the Company has estimated net proceeds of approximately $108.6 million available from future settlement under the March 2024 Forward Sale Agreement, subject to adjustment in accordance with the forward sale transaction. When the Company issues common shares, the Operating Partnership issues an equivalent number of units of partnership interest of a corresponding class to AMH, with the Operating Partnership receiving the net proceeds from the share issuances. Share Repurchase Program The Company’s board of trustees authorized the establishment of our share repurchase program for the repurchase of up to $300.0 million of our outstanding Class A common shares and up to $250.0 million of our outstanding preferred shares from time to time in the open market or in privately negotiated transactions. The program does not have an expiration date, but may be suspended or discontinued at any time without notice. All repurchased shares are constructively retired and returned to an authorized and unissued status. The Operating Partnership funds the repurchases and constructively retires an equivalent number of corresponding Class A units. During the three months ended March 31, 2024 and 2023, we did not repurchase and retire any of our Class A common shares or preferred shares. As of March 31, 2024, 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 As a REIT, we generally are required to distribute annually to our shareholders at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and any net capital gains) and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our REIT taxable income (determined without regard to the deduction for dividends paid and including any net capital gains). The Operating Partnership funds the payment of distributions. We historically used our net operating loss (“NOL”) for U.S. federal income tax purposes to reduce our REIT taxable income and have substantially utilized our NOL as of December 31, 2023. During the three months ended March 31, 2024 and 2023, the Company distributed an aggregate $112.7 million and $94.6 million, respectively, to common shareholders, preferred shareholders and noncontrolling interests on a cash basis. Additional Non-GAAP Measures Funds from Operations (“FFO”) / Core FFO / Adjusted FFO attributable to common share and unit holders FFO attributable to common share and unit holders is a non-GAAP financial measure that we calculate in accordance with the definition approved by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income or loss calculated in accordance with GAAP, excluding gains and losses from sales or impairment of real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis. Core FFO attributable to common share and unit holders is a non-GAAP financial measure that we use as a supplemental measure of our performance. We compute this metric by adjusting FFO attributable to common share and unit holders for (1) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (2) noncash share-based compensation expense, (3) hurricane-related charges, net, which result in material charges to our single-family property portfolio, (4) gain or loss on early extinguishment of debt and (5) the allocation of income to our perpetual preferred shares in connection with their redemption. Adjusted FFO attributable to common share and unit holders is a non-GAAP financial measure that we use as a supplemental measure of our performance. We compute this metric by adjusting Core FFO attributable to common share and unit holders for (1) Recurring Capital Expenditures that are necessary to help preserve the value and maintain functionality of our properties and (2) capitalized leasing costs incurred during the period. As a portion of our homes are recently developed, acquired and/or renovated, we estimate 40 Recurring Capital Expenditures for our entire portfolio by multiplying (a) current period actual Recurring Capital Expenditures per Same-Home Property by (b) our total number of properties, excluding newly acquired non-stabilized properties and properties classified as held for sale. We present FFO attributable to common share and unit holders because we consider this metric to be an important measure of the performance of real estate companies, as do many investors and analysts in evaluating the Company. We believe that FFO attributable to common share and unit holders provides useful information to investors because this metric excludes depreciation, which is included in computing net income and assumes the value of real estate diminishes predictably over time. We believe that real estate values fluctuate due to market conditions and in response to inflation. We also believe that Core FFO and Adjusted FFO attributable to common share and unit holders provide useful information to investors because they allow investors to compare our operating performance to prior reporting periods without the effect of certain items that, by nature, are not comparable from period to period. FFO, Core FFO and Adjusted FFO attributable to common share and unit holders are not a substitute for net income or net cash provided by operating activities, each as determined in accordance with GAAP, as a measure of our operating performance, liquidity or ability to pay dividends. These metrics also are not necessarily indicative of cash available to fund future cash needs. Because other REITs may not compute these measures in the same manner, they may not be comparable among REITs. The following is a reconciliation of the Company’s net income attributable to common shareholders, determined in accordance with GAAP, to FFO attributable to common share and unit holders, Core FFO attributable to common share and unit holders and Adjusted FFO attributable to common share and unit holders for the three months ended March 31, 2024 and 2023 (amounts in thousands): For the Three Months Ended March 31, 2024 2023 Net income attributable to common shareholders $ 109,289 $ 117,465 Adjustments: Noncontrolling interests in the Operating Partnership 15,320 16,748 Gain on sale and impairment of single-family properties and other, net (68,901) (84,659) Adjustments for unconsolidated joint ventures 1,597 510 Depreciation and amortization 115,726 112,717 Less: depreciation and amortization of non-real estate assets (4,655) (4,177) FFO attributable to common share and unit holders (1) $ 168,376 $ 158,604 Adjustments: Acquisition, other transaction costs and other 3,324 5,076 Noncash share-based compensation - general and administrative 6,839 3,743 Noncash share-based compensation - property management 1,444 1,066 Loss on early extinguishment of debt 954 — Core FFO attributable to common share and unit holders (1) $ 180,937 $ 168,489 Recurring Capital Expenditures (14,124) (14,193) Leasing costs (795) (808) Adjusted FFO attributable to common share and unit holders (1) $ 166,018 $ 153,488 (1) Unit holders include former AH LLC members and other non-affiliates that own Class A units in the Operating Partnership and their OP units are reflected as noncontrolling interests in the Company’s condensed consolidated financial statements. See Note 10. Shareholders’ Equity / Partners’ Capital to our condensed consolidated financial statements included in this report. EBITDA / EBITDAre / Adjusted EBITDAre / Fully Adjusted EBITDAre EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure and is used by us and others as a supplemental measure of performance. EBITDAre is a supplemental non-GAAP financial measure, which we calculate in accordance with the definition approved by NAREIT by adjusting EBITDA for gains and losses from sales or impairments of single-family properties and adjusting for unconsolidated partnerships and joint ventures on the same basis. Adjusted EBITDAre is a supplemental non-GAAP financial measure calculated by adjusting EBITDAre for (1) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (2) noncash share-based compensation expense, (3) hurricane-related charges, net, which result in material charges to our single-family property portfolio , and (4) gain or loss on early extinguishment of debt. Fully Adjusted EBITDAre is a supplemental non-GAAP financial measure calculated by adjusting Adjusted EBITDAre for (1) Recurring Capital Expenditures and (2) leasing costs. As a portion of our homes are recently developed, acquired and/or renovated, we estimate Recurring Capital Expenditures for our entire portfolio by multiplying (a) current period actual Recurring Capital Expenditures per Same-Home Property by (b) our total number of properties, excluding newly acquired non-stabilized properties and properties classified as held for sale. We 41 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, 2024 and 2023 (amounts in thousands): For the Three Months Ended March 31, 2024 2023 Net income $ 128,095 $ 137,699 Interest expense 38,577 35,882 Depreciation and amortization 115,726 112,717 EBITDA $ 282,398 $ 286,298 Gain on sale and impairment of single-family properties and other, net (68,901) (84,659) Adjustments for unconsolidated joint ventures 1,597 510 EBITDAre $ 215,094 $ 202,149 Noncash share-based compensation - general and administrative 6,839 3,743 Noncash share-based compensation - property management 1,444 1,066 Acquisition, other transaction costs and other 3,324 5,076 Loss on early extinguishment of debt 954 — Adjusted EBITDAre $ 227,655 $ 212,034 Recurring Capital Expenditures (14,124) (14,193) Leasing costs (795) (808) Fully Adjusted EBITDAre $ 212,736 $ 197,033