Business Context and Reporting Period
Company: American Homes 4 Rent
Filing Type: Form 8-K (Current Report)
Date of Report: June 22, 2016
Event: Entry into a Material Definitive Agreement for the sale of preferred shares.
Key Financial Metrics
- Securities Issued: 8,000,000 6.35% Series E cumulative redeemable perpetual preferred shares of beneficial interest.
- Over-Allotment Option: Underwriters granted a 30-day option to purchase up to an additional 1,200,000 Series E Preferred Shares.
- Estimated Net Proceeds: Approximately $193.4 million (excluding over-allotment shares and after deducting underwriting discounts, commissions, and estimated offering expenses).
- Dividend Rate: 6.35% cumulative.
Material Changes and Use of Proceeds
The filing reports a material change in capital structure through the issuance of new preferred equity. The Company intends to contribute the net proceeds to its Operating Partnership in exchange for 6.35% Series E preferred partnership units. The Operating Partnership plans to utilize these funds for the following purposes:
- Repayment of indebtedness incurred or expected under its credit facility.
- Acquisition of single-family properties.
- General corporate purposes, including the repurchase of its securities.
Guidance, Risks, and Contingencies
Restrictions on Distributions: Upon issuance of the Series E Preferred Shares, the Company's ability to make distributions on, or redeem, purchase, or acquire any other shares ranking junior to or on a parity with the Series E Preferred Shares will be restricted if the Company fails to declare distributions on the Series E Preferred Shares during any distribution period.
Underwriter Relationships: The underwriters (Wells Fargo Securities, Merrill Lynch, Morgan Stanley, and Raymond James) have engaged in and may continue to engage in investment banking and commercial dealings with the Company, receiving customary fees and commissions.
Investor Verification Checklist
- Verify the final net proceeds after the potential exercise of the 1,200,000 share over-allotment option.
- Review the Articles Supplementary (Exhibit 3.1) for specific terms regarding redemption and liquidation preferences of the Series E Preferred Shares.
- Confirm the specific amount of credit facility debt to be repaid with the proceeds.
- Assess the impact of the 6.35% cumulative dividend obligation on future cash flow and distribution capacity for common shareholders.