Business context and reporting period
American Homes 4 Rent (AMH), a REIT, and its operating partnership filed a combined unaudited Form 10-Q for the quarter ended June 30, 2021. The company acquires, develops, renovates, leases and operates single-family rental homes. At quarter-end it held 54,785 homes in 22 states, including 589 classified as held for sale; 97.1% of homes not held for sale were occupied.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $313.7 million | $280.7 million | $626.2 million | $568.0 million |
| Net income | $51.8 million | $31.8 million | $100.7 million | $69.3 million |
| Net income attributable to common shareholders | $20.1 million | $15.4 million | $50.3 million | $35.6 million |
| Diluted earnings per share | $0.06 | $0.05 | $0.16 | $0.12 |
| Core NOI, total properties (non-GAAP) | $175.3 million; 63.6% margin | $148.4 million; 60.5% margin | $346.4 million; 63.9% margin | $305.4 million; 62.0% margin |
| Operating cash flow | Not separately reported | Not separately reported | $331.8 million | $279.2 million |
For same-home properties, quarterly Core NOI rose to $153.7 million from $137.0 million, with margin of 63.8% versus 61.7%. Same-home realized rent increased 4.1% year over year in Q2 and 3.7% for the first half.
At June 30, total assets were $10.0 billion and total liabilities $3.8 billion. Principal debt was $3.46 billion: $1.94 billion in asset-backed securitizations, $900 million in senior notes and $620 million drawn on the revolving facility. The facility’s total capacity was $1.25 billion. Cash and cash equivalents were $40.6 million; restricted cash was $143.0 million. Six-month investing cash outflow was $585.2 million, primarily reflecting property acquisitions and development. Cash, cash equivalents and restricted cash together declined $81.5 million in the period.
Changes versus the prior comparable period
- Q2 revenue increased 11.7%; management attributed growth to a larger occupied portfolio, higher rents and fees, and lower uncollectible rent than the prior-year quarter. Net income increased to $51.8 million from $31.8 million.
- Six-month revenue rose 10.2%; net income increased to $100.7 million from $69.3 million. Operating cash flow grew 18.8% to $331.8 million.
- Portfolio occupancy excluding held-for-sale homes increased to 97.1% from 96.4% at June 30, 2020. The average occupied portfolio in Q2 grew to 52,335 homes from 49,600.
- Investing cash outflow increased to $585.2 million from $322.5 million, reflecting greater acquisition and development spending and lower property-sale proceeds. The company also drew more on its revolver.
- Property operating costs and depreciation rose with portfolio growth. Interest expense declined, primarily because more interest was capitalized into development activity.
Outlook, risks and unusual items
- Management reported resilient collections and strong Q2 operations, but anticipated COVID-19 could negatively affect results in Q3 and likely beyond. It cited pandemic duration, variants, vaccination and government actions as uncertainties; Q2 Same-Home bad debt was 2.5% of rental billings.
- No numerical earnings or operating guidance is provided in the supplied filing text.
- In April, AMH amended its revolving credit facility, expanding capacity from $800 million to $1.25 billion and adding pricing incentives tied to third-party sustainability measures.
- In May, it issued 5.5 million shares for net proceeds of $194.0 million and entered forward sale agreements covering 13.245 million additional shares. Expected net proceeds from future settlement were approximately $467.3 million, subject to settlement terms and market factors.
- In June, the company redeemed all Series D and Series E preferred shares for a combined $498.8 million. The redemptions resulted in a $15.9 million allocation to preferred holders, reducing income attributable to common shareholders.
- After quarter-end, it issued $450 million of 2.375% notes due 2031 and $300 million of 3.375% notes due 2051, receiving $731.6 million net proceeds, primarily to repay revolver borrowings. Revolver borrowings stood at $20 million on July 31.
- Commitments at quarter-end included $183.0 million to acquire 626 homes and $197.6 million for land purchases related to development. A customary non-recourse guarantee applies to a joint-venture loan with $139.7 million outstanding; specified events could trigger liability. The company was cooperating with a Georgia Attorney General inquiry concerning customary landlord-tenant matters.
- A $4.0 million treasury-lock settlement loss was recorded in other comprehensive loss and is to be recognized as additional interest expense over the term of the 2031 notes.
Important facts for investors to verify
- Terms, expected timing and final proceeds of the forward sale agreements, including potential dilution, cash settlement obligations or early termination.
- Whether rent collections, occupancy and bad debt remain resilient as pandemic-related risks and government measures evolve.
- Funding needs and returns on the expanded acquisition and development program, including the disclosed purchase commitments.
- Post-quarter debt levels, use of note proceeds, available revolver capacity and exposure to floating interest rates.
- Effect of the preferred-share redemptions and their one-time income allocation when assessing common earnings and distributions.
- Potential exposure from the joint-venture guarantee, legal inquiry and other disclosed contingencies.