American Homes 4 Rent — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. American Homes 4 Rent is a REIT operating through American Homes 4 Rent, L.P.; together they own, develop, lease and manage single-family rental homes. The portfolio included 53,229 homes in 22 states, 813 classified as held for sale.
Financial and operating results
| Metric | Q3 2020 | Q3 2019 | First nine months 2020 | First nine months 2019 |
|---|---|---|---|---|
| Total revenue | $310.8 million | $298.3 million | $883.5 million | $859.4 million |
| Net income | $40.2 million | $41.4 million | $109.5 million | $114.8 million |
| Net income attributable to common shareholders | $22.6 million; $0.07/share | $23.5 million; $0.08/share | $58.2 million; $0.19/share | $62.3 million; $0.21/share |
| Operating cash flow | Not presented by quarter | $427.4 million | $420.4 million | |
| Core NOI margin | 62.1% | 61.7% | 62.0% | 62.6% |
| Same-Home Core NOI | $136.9 million | $131.6 million | $406.0 million | $399.9 million |
Q3 revenue increased 4.2%, while net income fell 3.0%; year-to-date revenue rose 2.8% and net income declined 4.6%. Management attributed revenue growth to a larger occupied portfolio and higher rents, partly offset by pandemic-related uncollectible rents and tenant utility reimbursements. Q3 average occupied homes rose to 50,630 from 48,990. Same-Home realized rent increased 2.7% in Q3 and 3.1% year to date; overall occupancy at September 30 was 97.5%, and Q3 average occupied days were 96.9%.
Operating cash flow was $427.4 million year to date. Investing used $437.1 million, principally for development and acquisitions, versus $224.1 million used in 2019. Financing provided $287.6 million, including $413.5 million net proceeds from a common-share offering. Cash, cash equivalents and restricted cash increased $277.9 million to $442.0 million; unrestricted cash was $315.8 million.
Balance sheet, debt and liquidity
- Total assets were $9.60 billion and total equity was $6.45 billion at September 30, 2020.
- Debt principal totaled $2.854 billion; carrying value was $2.821 billion. This included $1.954 billion of asset-backed securitizations and $900 million of unsecured senior notes. There were no outstanding revolver borrowings and no variable-rate debt at quarter-end.
- The revolving credit facility provides up to $800 million, with approximately $1.5 million committed to letters of credit. Management reported no debt maturities other than scheduled amortization until 2024.
- Common distributions remained $0.05 per share per quarter; preferred distributions were also maintained. Cash distributions to shareholders and unitholders were $112.8 million year to date.
Material developments, outlook and risks
- The company issued 14.95 million common shares in Q3, raising approximately $411.7 million net of underwriting discounts, and used proceeds to repay revolver borrowings. The issuance increased shares outstanding. A separate $500 million at-the-market program had $497.6 million remaining at quarter-end.
- Development and acquisition activity expanded: $420.5 million of cash was spent on development year to date, compared with $236.4 million in 2019. The company reported 396 property acquisition commitments totaling $99.8 million and $65.5 million in development-related purchase commitments.
- Management reported resilient collections: Q3 rental revenue equaled 98.0% of quarterly rental billings, including prior-quarter collections; through October, 96.3% of Q3 billings had been collected. Management cited record demand and 97.2% Same-Home occupied-days metrics in September and October.
- Management expected COVID-19 to negatively affect Q4 results and likely beyond, but stated the ultimate effect on operations, liquidity and capital resources could not be estimated. Risks include tenant payment difficulties, eviction restrictions, construction delays and increased costs, maintenance deferrals, and tighter or more expensive capital markets.
- Unusual items included a $2.9 million net expense for a former-employee legal matter, a $4.9 million noncash write-down associated with liquidation of legacy joint ventures year to date, and a $1.5 million opening-equity adjustment for expected credit losses on notes receivable. The company also disclosed a Georgia Attorney General information request concerning customary landlord-tenant matters; it is cooperating.
- No quantified earnings or full-year operating guidance was provided. The filing includes forward-looking statements subject to significant uncertainties, including COVID-19.
Investor verification priorities
- Track rent collection, bad debt, deferred payment plans and eviction restrictions as pandemic conditions and policies change.
- Assess whether rent growth and occupancy can offset property-tax, repair, turnover and utility-collection cost pressures.
- Monitor development spending, committed acquisitions, construction execution and cash requirements against operating cash generation.
- Review the impact of equity issuance and any future at-the-market sales on per-share performance and capital structure.
- Verify debt maturities, refinancing access, covenant headroom and the future replacement of LIBOR-linked terms.
- Follow developments in the Georgia inquiry and former-employee legal matter, including any changes to recorded contingencies.
Core NOI and related operating measures are non-GAAP metrics and should not be treated as substitutes for GAAP earnings or operating cash flow.