American Homes 4 Rent — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise stated. AMH is a single-family rental REIT operating through American Homes 4 Rent, L.P. At quarter-end, the company held 58,639 homes in 21 states, including 903 classified as held for sale; 56,049 homes outside the held-for-sale group were occupied.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Rental and other property revenue | $397.7 million | $356.1 million; up 11.7% |
| Net income | $137.7 million | $70.0 million |
| Net income attributable to AMH common shareholders | $117.5 million; $0.33 basic and $0.32 diluted per share | $55.9 million; $0.16 basic and diluted per share |
| Core NOI | $220.9 million; 64.5% of core revenue | $197.4 million; 65.0% of core revenue |
| Same-Home Core NOI | $194.5 million | $184.5 million; up 5.4% |
| Net cash from operating activities | $200.5 million | $158.7 million |
| Net cash used in investing activities | $72.9 million | $512.8 million |
| Cash, cash equivalents and restricted cash | $408.8 million | $207.0 million at March 31, 2022 |
| Debt | $4.445 billion principal; $4.382 billion net carrying value | $4.582 billion principal at December 31, 2022 |
At March 31, 2023, cash and cash equivalents were $255.6 million, with no borrowings outstanding on the $1.25 billion revolving credit facility and approximately $4.0 million committed to letters of credit. Total assets were $12.42 billion and total liabilities were $4.90 billion. The company paid down $130.0 million on its revolver during the quarter. Interest expense rose 30.2% year over year to $35.9 million, primarily reflecting notes issued in April 2022.
Material changes and operating trends
- Revenue growth reflected a larger average occupied portfolio and higher rents. Same-Home core revenue increased 7.7%; average monthly realized rent in that group rose 8.0% to $2,014, while occupied days eased to 97.2% from 97.4%.
- Property operating expense rose 10.0% to $147.1 million, driven chiefly by property taxes and inflation in repairs, maintenance and turnover costs. Property management expense increased to $30.8 million from $26.0 million.
- Net income growth was substantially affected by gains on property sales: gain on sale and impairment, net, was $84.7 million versus $22.0 million. The company sold 666 homes, compared with 169 in Q1 2022.
- Investing cash outflow fell sharply as the company scaled back traditional and third-party-builder acquisitions; development cash spending was $213.6 million. Net property-sale proceeds increased to $184.5 million from $51.4 million.
- The company issued and settled 8.0 million shares under a prior forward sale agreement in January, receiving $298.4 million net, used to repay revolver borrowings and for general corporate purposes. The common distribution was $0.22 per share, versus $0.18 a year earlier.
Outlook, risks and contingencies
The filing provides no specific numerical earnings or operating guidance. Management said acquisitions through traditional channels and the National Builder Program had been strategically reduced as the housing market adjusted to macroeconomic conditions, with growth in those channels anticipated when housing and capital markets stabilize. It continues to emphasize its built-for-rental development program. Management cited inflation, labor and material shortages, leasing and turnover costs, occupancy, capital availability and seasonality as factors affecting results.
- The filing identifies uncertainty in the banking industry as a risk that could disrupt liquidity markets, reduce access to capital or raise its cost, and affect residents.
- As of March 31, the company had $246.0 million of land purchase commitments for its development program, commitments for 42 homes totaling $9.7 million, and approximately $195.2 million in surety bonds related to development contracts.
- Sales in escrow covered approximately 249 homes and 38 land lots for aggregate selling prices of $83.4 million. From April 1–30, 2023, the company added 146 homes for approximately $52.8 million and sold 189 homes for approximately $55.9 million.
- The company was cooperating with the Georgia Attorney General’s Office in an investigation concerning customary landlord-tenant matters and discussing a possible negotiated resolution. Management stated that other proceedings were not expected to have a material adverse effect; outcomes remain uncertain.
- Customary non-recourse guarantees support loans of two unconsolidated joint ventures and could become liabilities in specified circumstances. The filing says they had not been invoked.
Most important facts for investors to verify
- How much reported earnings growth came from property-sale gains, and how recurring rental and NOI trends compare with GAAP net income.
- Whether rent growth and occupancy can offset rising property taxes, maintenance, staffing and interest costs.
- The pace and returns of development spending, home deliveries, acquisitions and dispositions as market conditions change.
- Debt maturities and refinancing needs, revolver availability, and the effect of interest rates on future borrowing costs.
- Developments in the Georgia AG matter, joint-venture guarantees, purchase commitments and other contingencies.