American Homes 4 Rent — 2021 Form 10-K
Business context and reporting period. This annual report covers the year ended December 31, 2021; it is not a standalone fourth-quarter report. American Homes 4 Rent is a REIT focused on acquiring, developing, renovating, leasing and operating single-family rental homes. The company held 57,024 properties in 22 states at year-end, including 659 held for sale; 95.2% of properties excluding those held for sale were occupied. The Operating Partnership owns and operates substantially all of the business.
Financial and operating results
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Rental and other single-family property revenue | $1.304 billion | $1.173 billion | +11.2% |
| Net income | $210.6 million | $154.8 million | +36.0% |
| Net income attributable to common shareholders | $135.3 million | $85.2 million | +58.7% |
| Diluted earnings per common share | $0.41 | $0.28 | Up $0.13 |
| Core NOI, non-GAAP | $719.8 million | $634.1 million | +13.5% |
| Same-Home Core NOI margin | 64.4% | 63.6% | +0.8 percentage points |
| Net cash from operating activities | $595.2 million | $474.1 million | +25.5% |
| Net cash used in investing activities | $1.733 billion | $642.9 million | Use increased $1.091 billion |
| Net cash from financing activities | $1.065 billion | $269.8 million | Increase of $795.2 million |
Revenue growth reflected a larger average occupied portfolio and higher rents and fees. Same-Home realized monthly rent rose 5.3% to $1,773, and Same-Home occupied days increased to 97.6% from 96.3%. Year-end occupancy excluding held-for-sale homes was lower, however, at 95.2% versus 97.0% in 2020. Total Core NOI margin was 64.0%, compared with 62.7%.
Operating expenses rose with portfolio growth and inflation: property operating expenses increased 8.9% to $490.2 million, while general and administrative expense increased to $56.4 million from $48.5 million. Interest expense declined 1.8% to $114.9 million, partly reflecting higher capitalized interest. Adjusted FFO attributable to common share and unit holders, a non-GAAP measure, was $459.1 million versus $367.5 million.
Balance sheet, debt and distributions
- Cash and cash equivalents were $48.2 million at year-end, down from $137.1 million; restricted cash was $143.6 million. The company reported $350 million drawn on a $1.25 billion revolving facility, with $1.6 million committed to letters of credit.
- Debt principal was $3.924 billion: $1.924 billion in asset-backed securitizations, $1.650 billion in unsecured senior notes and $350 million under the revolving facility. Balance-sheet debt, net of discounts and financing costs, was $3.880 billion. Debt carrying value increased from $2.817 billion in 2020.
- Fixed-rate debt was approximately $3.6 billion; variable-rate revolving debt was $350 million. Management estimated a 100-basis-point increase in LIBOR would add about $3.5 million to annual interest expense, assuming the variable balance stayed unchanged.
- Operating cash flow increased, but investment spending rose sharply with acquisitions and development. Cash paid for property acquisitions was $850.1 million and development activity was $824.2 million in 2021.
- Common-share distributions were $0.40 per share in 2021, versus $0.20 in 2020. In February 2022, the board approved a first-quarter 2022 dividend of $0.18 per share.
Material changes, outlook and risks
- The company developed or acquired 3,921 homes for its consolidated portfolio in 2021 and sold 481; it also delivered 686 newly constructed homes to unconsolidated joint ventures. Year-end properties increased from 53,584 to 57,024, while year-end occupancy declined as the portfolio expanded.
- In 2021, the company issued $750 million of senior notes, including 2031 and 2051 maturities, and amended its revolving credit facility to a $1.25 billion commitment maturing in 2025, with extension options. It issued common shares, including forward-settled shares, and redeemed all Series D and E preferred shares for $498.8 million in total.
- Management said rental income, net of operating expenses and recurring capital expenditures, is generally expected to fund operations and distributions, with additional capital available from borrowing, equity issuance, asset-backed securitizations, property sales and joint ventures. The filing provides no specific 2022 earnings or operating guidance.
- Inflation, labor shortages, supply-chain disruptions and construction-cost increases may pressure operating margins and slow development. Other highlighted risks include tenant defaults and turnover, competition for homes and tenants, market concentration, natural disasters, insurance exposure, interest rates, regulation and potential future COVID-19 effects.
- For January 2022, the company reported a 23 million-share offering: 10 million shares issued directly for net proceeds of $375.8 million and 13 million shares offered forward, with estimated net proceeds of about $488.6 million upon settlement. Forward agreements can create dilution or cash obligations in specified circumstances. The filing also reported $409 million of land purchase commitments and $160.4 million of commitments for 482 homes at year-end.
- Net income included $49.7 million of gains on property sales and impairment-related items, versus $38.8 million in 2020. The company reclassified certain expense and impairment presentation items; it said the reclassification did not affect net income or specified non-GAAP measures. No significant impairment of operating properties was recorded in 2021.
Important facts for investors to verify
- Reconcile reported net income growth with property-sale gains, preferred-share redemption allocations and the company’s non-GAAP Core NOI, FFO and Adjusted FFO definitions.
- Assess whether rent growth can continue to offset inflation in property taxes, maintenance, insurance, labor and development costs, and monitor occupancy and bad debt.
- Review debt maturities, covenants and securitization repayment dates, including the 2024 securitization maturities and anticipated 2025 repayments of two longer-dated securitizations.
- Track development execution, committed land purchases and the funding required for the company’s elevated investment program.
- Review the 2022 forward-sale agreements and dividend decision for potential dilution, settlement payments and effects on capital availability.