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American Homes 4 Rent Reports Second Quarter 2019 Financial and Operating Results

July 29, 2019

AGOURA HILLS, Calif., July 29, 2019 /PRNewswire/ -- American Homes 4 Rent (NYSE: AMH) (the "Company"), a leading provider of high quality single-family homes for rent, today announced its financial and operating results for the quarter ended June 30, 2019.

American Homes 4 Rent is a leader in the single-family home rental industry and "American Homes 4 Rent" is fast becoming a nationally recognized brand for rental homes, known for high quality, good value and tenant satisfaction. We are an internally managed Maryland real estate investment trust, or REIT, focused on acquiring, renovating, leasing, and operating attractive single-family homes as rental properties. As of March 31, 2014, we owned 25,505 single-family properties in selected submarkets in 22 states. Additional information about American Homes 4 Rent is available on our website at  www.americanhomes4rent.com . (PRNewsFoto/American Homes 4 Rent) (PRNewsfoto/American Homes 4 Rent)

Highlights

  • Total revenues increased 6.6% to $281.9 million for the second quarter of 2019 from $264.5 million for the second quarter of 2018.
  • Net income attributable to common shareholders totaled $22.5 million, or $0.08 per diluted share, for the second quarter of 2019, compared to a net loss attributable to common shareholders of $15.2 million, or a $0.05 loss per diluted share, for the second quarter of 2018.
  • Core Funds from Operations ("Core FFO") attributable to common share and unit holders for the second quarter of 2019 was $98.2 million, or $0.28 per FFO share and unit, compared to $91.9 million, or $0.26 per FFO share and unit, for the same period in 2018, which represents a 6.5% increase on a per share and unit basis.
  • Adjusted Funds from Operations attributable to common share and unit holders for the second quarter of 2019 was $86.8 million, or $0.25 per FFO share and unit, compared to $82.0 million, or $0.23 per FFO share and unit, for the second quarter of 2018.
  • Core Net Operating Income ("Core NOI") from Same-Home properties increased by 3.6% year-over year for the second quarter of 2019. Core NOI after capital expenditures from Same-Home properties increased by 2.6% year-over-year for the second quarter of 2019.
  • Same-Home portfolio Average Occupied Days Percentage increased to 95.7% for the second quarter of 2019, compared to 95.3% for the second quarter of 2018, while achieving a 3.7% growth in Average Monthly Realized Rent per property for the same comparable periods.

"American Homes 4 Rent had a strong second quarter with continued operational excellence driving a 7% year-over-year increase in Core FFO per share," stated David Singelyn, American Homes 4 Rent's Chief Executive Officer. "Our best-in-class platform and team once again demonstrated their ability to capture the strength of the spring leasing season, driving a 4.4% year-over-year growth in second quarter Same-Home core revenues. Further, we continue to enhance the quality of our portfolio as we strategically recycle capital from asset sales into the expansion of our industry leading built-for-rental program, which we believe has the long-term potential to revolutionize the single-family rental sector. With our flexible and conservative balance sheet that supports our growth strategy, we are confident in our ability to continue delivering consistent operating results and long term value creation for our shareholders."

Second Quarter 2019 Financial Results

On January 1, 2019, the Company adopted the new lease accounting standard, ASU No. 2016-02, which prospectively results in a larger portion of internal leasing costs being expensed that were previously capitalized. For purposes of comparability, applicable prior period non-GAAP financial metrics have been conformed to reflect the new lease accounting standard. Refer to Non-GAAP Financial Measures for further information.

Net income attributable to common shareholders totaled $22.5 million, or $0.08 per diluted share, for the second quarter of 2019, compared to a net loss attributable to common shareholders of $15.2 million, or a $0.05 loss per diluted share, for the second quarter of 2018. This improvement was primarily attributable to higher revenues resulting from a larger number of occupied properties and higher rental rates, an increase in gain on sale of single-family properties and other, net and a noncash charge related to the redemption of the Series C participating preferred shares through a conversion into Class A common shares during the second quarter of 2018.

Total revenues increased 6.6% to $281.9 million for the second quarter of 2019 from $264.5 million for the second quarter of 2018. Revenue growth was primarily driven by continued strong leasing activity, as our average occupied portfolio grew to 48,989 homes for the quarter ended June 30, 2019, compared to 47,427 homes for the quarter ended June 30, 2018, as well as higher rental rates.

Core NOI on our total portfolio increased 6.9% to $154.0 million for the second quarter of 2019, compared to $144.1 million for the second quarter of 2018. This increase was primarily due to growth in rental income resulting from a larger number of occupied properties and higher rental rates, partially offset by higher property tax expense.

Core revenues from Same-Home properties increased 4.4% to $190.1 million for the second quarter of 2019, compared to $182.1 million for the second quarter of 2018. This growth was primarily driven by a 3.7% increase in Average Monthly Realized Rent per property and an increase in Average Occupied Days Percentage to 95.7% from 95.3%. Core property operating expenses from Same-Home properties increased 5.8% from $65.7 million for the second quarter of 2018 to $69.5 million for the second quarter of 2019, with the largest driver being attributable to an outsized increase in property tax expense. As a result, Core NOI from Same-Home properties increased 3.6% to $120.6 million for the second quarter of 2019, compared to $116.4 million for the second quarter of 2018. After capital expenditures, Core NOI from Same-Home properties increased 2.6% to $112.2 million for the second quarter of 2019, compared to $109.4 million for the second quarter of 2018. For the second quarter of 2019, capital expenditures reflected above average increases from the planned expansion of our strategic preventative maintenance program and storm damages in certain markets related to windstorms and unusually high rainfall towards the end of the quarter.

Core Funds from Operations attributable to common share and unit holders ("Core FFO attributable to common share and unit holders") was $98.2 million, or $0.28 per FFO share and unit, for the second quarter of 2019, compared to $91.9 million, or $0.26 per FFO share and unit, for the second quarter of 2018. Adjusted Funds from Operations attributable to common share and unit holders ("Adjusted FFO attributable to common share and unit holders") for the second quarter of 2019 was $86.8 million, or $0.25 per FFO share and unit, compared to $82.0 million, or $0.23 per FFO share and unit, for the second quarter of 2018. This improvement was primarily attributable to increases in rental revenue driven by a larger number of occupied properties and higher rental rates, partially offset by higher property tax expense.

Year-to-Date 2019 Financial Results

On January 1, 2019, the Company adopted the new lease accounting standard, ASU No. 2016-02, which prospectively results in a larger portion of internal leasing costs being expensed that were previously capitalized. For purposes of comparability, applicable prior period non-GAAP financial metrics have been conformed to reflect the new lease accounting standard. Refer to Non-GAAP Financial Measures for further information.

Net income attributable to common shareholders was $38.8 million, or $0.13 per diluted share, for the six-month period ended June 30, 2019, compared to a net loss attributable to common shareholders of $9.3 million, or a $0.03 loss per diluted share, for the six-month period ended June 30, 2018. This improvement was primarily attributable to higher revenues resulting from a larger number of occupied properties and higher rental rates, an increase in gain on sale of single-family properties and other, net, and a noncash charge related to the redemption of the Series C participating preferred shares through a conversion into Class A common shares during the second quarter of 2018.

Total revenues increased 7.4% to $561.1 million for the six-month period ended June 30, 2019, from $522.5 million for the six-month period ended June 30, 2018. Revenue growth was primarily driven by continued strong leasing activity, as our average occupied portfolio grew to 48,600 homes as of June 30, 2019, compared to 47,156 homes as of June 30, 2018.

Core NOI on our total portfolio increased 9.0% to $304.6 million for the six-month period ended June 30, 2019, compared to $279.6 million for the six-month period ended June 30, 2018. This increase was primarily due to growth in rental income resulting from a larger number of occupied properties and higher rental rates, partially offset by higher property tax expense, higher HOA fees, net and higher property management expenses, net.

Core revenues from Same-Home properties increased 4.3% to $377.2 million for the six-month period ended June 30, 2019, compared to $361.7 million for the six-month period ended June 30, 2018. This growth was primarily driven by a 3.5% increase in Average Monthly Realized Rent per property and an increase in Average Occupied Days Percentage to 95.6% from 95.1%. Core property operating expenses from Same-Home properties increased 4.0% from $130.7 million for the six-month period ended June 30, 2018 to $135.9 million for the six-month period ended June 30, 2019, which was primarily attributable to higher property tax expense and higher HOA fees, net. As a result, Core NOI from Same-Home properties increased 4.5% to $241.3 million for the six-month period ended June 30, 2019, compared to $231.0 million for the six-month period ended June 30, 2018. After capital expenditures, Core NOI from Same-Home properties increased 3.9% to $226.6 million for the six-month period ended June 30, 2019, compared to $218.1 million for the six-month period ended June 30, 2018. For the six-month period ended June 30, 2019, capital expenditures reflected above average increases from the planned expansion of our strategic preventative maintenance program.

Core FFO attributable to common share and unit holders was $194.0 million, or $0.55 per FFO share and unit, for the six-month period ended June 30, 2019, compared to $175.1 million, or $0.50 per FFO share and unit, for the six-month period ended June 30, 2018. Adjusted FFO attributable to common share and unit holders for the six-month period ended June 30, 2019 was $173.6 million, or $0.49 per FFO share and unit, compared to $156.8 million, or $0.45 per FFO share and unit, for the six-month period ended June 30, 2018. This improvement was primarily attributable to increases in rental revenue driven by a larger number of occupied properties and higher rental rates, partially offset by higher property tax expense, higher HOA fees, net and higher property management expenses, net.

Portfolio

As of June 30, 2019, the Company had an occupancy percentage of 96.4%, compared to 95.6% as of March 31, 2019. The occupancy percentage on Same-Home properties was 96.3% as of June 30, 2019, compared to 96.8% as of March 31, 2019.

Investments

As of June 30, 2019, the Company's total portfolio consisted of 52,634 homes, including 1,664 properties held for sale, compared to 52,923 homes as of March 31, 2019, including 1,793 properties held for sale, a decrease of 289 homes, which included 433 homes sold, offset by 8 properties acquired through traditional acquisition channels and 136 newly constructed properties delivered through our AMH Development and National Builder Programs.

Capital Activities and Balance Sheet

During the second quarter of 2019, the Company paid off the term loan facility for the remaining $100.0 million.

As of June 30, 2019, the Company had cash and cash equivalents of $119.2 million and had total outstanding debt of $2.9 billion, excluding unamortized discounts and unamortized deferred financing costs, with a weighted-average interest rate of 4.4% and a weighted-average term to maturity of 13.6 years. The Company had no outstanding borrowings on its $800.0 million revolving credit facility at the end of the quarter.

2019 Guidance

Guidance Summary

No changes have been made to previous Full Year 2019 guidance ranges.


Full Year 2019

Core FFO attributable to common share and unit holders

$1.06 - $1.14



Same-Home


Core revenues growth

3.2% - 4.2%

Core property operating expenses growth

3.5% - 4.5%

Core NOI growth

3.0% - 4.0%

Core NOI After Capital Expenditures growth

2.6% - 3.6%

Reconciliation of Core FFO attributable to common share and unit holders from 2018 to 2019 Guidance Midpoint


Per FFO Share
and Unit

2018 Core FFO attributable to common share and unit holders, as previously reported

$

1.06

Internal leasing costs (1)

(0.02)

2018 Core FFO attributable to common share and unit holders, as conformed for internal leasing costs

$

1.04



Same-Home Core NOI growth

0.05

Non-Same-Home Core NOI growth (2)

0.05

General and administrative expense growth

(0.01)

Interest expense and preferred dividends increase

(0.02)

Share count increase

(0.01)



2019 Core FFO attributable to common share and unit holders - Guidance Midpoint

$

1.10



(1)

Adjustment amount reflects the portion of leasing costs that were previously capitalized and treated as a reduction to Adjusted FFO attributable to common share and unit holders that would be expensed under the new lease accounting standard ASU 2016-02, adopted by the Company on January 1, 2019.

(2)

Reflects NOI from Non-Same-Home properties including contribution from 2018 and projected 2019 net acquisitions and dispositions. For 2019, we expect to add between $300.0 million and $500.0 million of properties to our portfolio, the timing of which is expected to be more heavily weighted towards the second half of the year.

Note: The Company does not provide guidance for the most comparable GAAP financial measures of net income or loss, total revenues and property operating expenses, or a reconciliation of the above-listed forward-looking non-GAAP financial measures to the comparable GAAP financial measures because we are unable to reasonably predict certain items contained in the GAAP measures, including non-recurring and infrequent items that are not indicative of the Company's ongoing operations. Such items include, but are not limited to, net gain or loss on sales and impairment of single-family properties, casualty loss, Non-Same-Home revenues and Non-Same-Home property operating expenses. These items are uncertain, depend on various factors and could have a material impact on our GAAP results for the guidance period.

Additional Information

A copy of the Company's Second Quarter 2019 Earnings Release and Supplemental Information Package and this press release are available on our website at www.americanhomes4rent.com. This information has also been furnished to the SEC in a current report on Form 8-K.

Conference Call

A conference call is scheduled on Tuesday, July 30, 2019, at 11:00 a.m. Eastern Time to discuss the Company's financial results for the quarter ended June 30, 2019, and to provide an update on its business. The domestic dial-in number is (877) 451-6152 (U.S. and Canada) and the international dial-in number is (201) 389-0879 (passcode not required). A simultaneous audio webcast may be accessed by using the link at www.americanhomes4rent.com, under "For Investors." A replay of the conference call may be accessed through Tuesday, August 13, 2019 by calling (844) 512-2921 (U.S. and Canada) or (412) 317-6671 (international), replay passcode number 13691742#, or by using the link at www.americanhomes4rent.com, under "For Investors."

About American Homes 4 Rent

American Homes 4 Rent (NYSE: AMH) is a leader in the single-family home rental industry and "American Homes 4 Rent" is fast becoming a nationally recognized brand for rental homes, known for high quality, good value and tenant satisfaction. We are an internally managed Maryland real estate investment trust, or REIT, focused on acquiring, developing, renovating, leasing, and operating attractive, single-family homes as rental properties. As of June 30, 2019, we owned 52,634 single-family properties in selected submarkets in 22 states.

Forward-Looking Statements

This press release contains "forward-looking statements." These forward-looking statements relate to beliefs, expectations or intentions and similar statements concerning matters that are not of historical fact and are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "intend," "potential," "plan," "goal," "outlook," "guidance" or other words that convey the uncertainty of future events or outcomes. Examples of forward-looking statements contained in this press release include, among others, our 2019 Guidance and our belief that there will be continued strong demand for single-family rentals and our ability to continue to expand our built-for-rental program and deliver consistent operating results. The Company has based these forward-looking statements on its current expectations and assumptions about future events. While the Company's management considers these expectations to be reasonable, they are inherently subject to risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond the Company's control and could cause actual results to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to update any forward-looking statements to conform to actual results or changes in its expectations, unless required by applicable law. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of the Company in general, see the "Risk Factors" disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, and in the Company's subsequent filings with the SEC.

American Homes 4 Rent

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share data)



June 30, 2019


December 31, 2018


(Unaudited)



Assets




Single-family properties:




Land

$

1,727,940



$

1,713,496


Buildings and improvements

7,566,498



7,483,600


Single-family properties in operation

9,294,438



9,197,096


Less: accumulated depreciation

(1,316,920)



(1,176,499)


Single-family properties in operation, net

7,977,518



8,020,597


Single-family properties under development and development land

235,508



153,651


Single-family properties held for sale, net

276,581



318,327


Total real estate assets, net

8,489,607



8,492,575


Cash and cash equivalents

119,176



30,284


Restricted cash

165,734



144,930


Rent and other receivables, net

31,988



29,027


Escrow deposits, prepaid expenses and other assets

181,187



146,034


Deferred costs and other intangibles, net

8,986



12,686


Asset-backed securitization certificates

25,666



25,666


Goodwill

120,279



120,279


Total assets

$

9,142,623



$

9,001,481






Liabilities




Revolving credit facility

$



$

250,000


Term loan facility, net



99,232


Asset-backed securitizations, net

1,953,280



1,961,511


Unsecured senior notes, net

887,777



492,800


Accounts payable and accrued expenses

301,219



219,229


Amounts payable to affiliates

4,824



4,967


Total liabilities

3,147,100



3,027,739






Commitments and contingencies








Equity




Shareholders' equity:




Class A common shares ($0.01 par value per share, 450,000,000 shares authorized, 299,827,789 and
296,014,546 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively)

2,998



2,960


Class B common shares ($0.01 par value per share, 50,000,000 shares authorized, 635,075 shares issued
and outstanding at June 30, 2019 and December 31, 2018)

6



6


Preferred shares ($0.01 par value per share, 100,000,000 shares authorized, 35,350,000 shares issued and
outstanding at June 30, 2019 and December 31, 2018)

354



354


Additional paid-in capital

5,784,398



5,732,466


Accumulated deficit

(482,354)



(491,214)


Accumulated other comprehensive income

7,062



7,393


Total shareholders' equity

5,312,464



5,251,965


Noncontrolling interest

683,059



721,777


Total equity

5,995,523



5,973,742






Total liabilities and equity

$

9,142,623



$

9,001,481


 

American Homes 4 Rent

Condensed Consolidated Statements of Operations

(Amounts in thousands, except share and per share data)

(Unaudited)



For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2019


2018


2019


2018

Revenues:








Rents and other single-family property revenues

$

279,914



$

262,882



$

557,608



$

519,545


Other

1,946



1,601



3,456



2,942


Total revenues

281,860



264,483



561,064



522,487










Expenses:








Property operating expenses

104,591



98,843



211,275



199,830


Property management expenses

21,650



18,616



42,359



37,603


General and administrative expense

10,486



9,677



19,921



18,908


Interest expense

32,571



31,978



64,486



61,279


Acquisition fees and costs expensed

970



1,321



1,804



2,632


Depreciation and amortization

82,840



78,319



164,001



157,622


Other

1,514



1,624



2,538



2,451


Total expenses

254,622



240,378



506,384



480,325










Gain on sale of single-family properties and other, net

13,725



3,240



19,374



5,496


Loss on early extinguishment of debt

(659)



(1,447)



(659)



(1,447)


Remeasurement of participating preferred shares







1,212










Net income

40,304



25,898



73,395



47,423










Noncontrolling interest

4,004



(3,150)



7,030



(2,036)


Dividends on preferred shares

13,782



11,984



27,564



26,581


Redemption of participating preferred shares



32,215





32,215










Net income (loss) attributable to common shareholders

$

22,518



$

(15,151)



$

38,801



$

(9,337)










Weighted-average shares outstanding:








Basic

299,466,526



295,462,572



298,157,413



290,848,633


Diluted

299,991,084



295,462,572



298,676,788



290,848,633










Net income (loss) attributable to common shareholders per share:








Basic

$

0.08



$

(0.05)



$

0.13



$

(0.03)


Diluted

$

0.08



$

(0.05)



$

0.13



$

(0.03)


Non-GAAP Financial Measures

This press release and the Second Quarter 2019 Earnings Release and Supplemental Information Package include Funds from Operations attributable to common share and unit holders ("FFO attributable to common share and unit holders"), Core FFO attributable to common share and unit holders, Adjusted FFO attributable to common share and unit holders, Core NOI, Same-Home Core NOI and Same-Home Core NOI After Capital Expenditures, which are non-GAAP financial measures. We believe these measures are helpful in understanding our financial performance and are widely used in the REIT industry. Because other REITs may not compute these financial measures in the same manner, they may not be comparable among REITs. In addition, these metrics are not substitutes for net income or loss or net cash flows from operating activities, as defined by GAAP, as measures of our operating performance, liquidity or ability to pay dividends. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release and in the Second Quarter 2019 Earnings Release and Supplemental Information Package.

Funds from Operations attributable to common share and unit holders

The following is a reconciliation of net income or loss attributable to common shareholders to FFO attributable to common share and unit holders, Core FFO attributable to common share and unit holders and Adjusted FFO attributable to common share and unit holders for the three and six months ended June 30, 2019 and 2018 (amounts in thousands, except share data):


For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2019


2018


2019


2018


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Net income (loss) attributable to common shareholders

$

22,518



$

(15,151)



$

38,801



$

(9,337)


Adjustments:








Noncontrolling interests in the Operating Partnership

4,004



(2,902)



7,030



(1,777)


Net (gain) on sale / impairment of single-family properties and other

(12,796)



(1,704)



(17,941)



(3,260)


Adjustments for unconsolidated joint ventures

747





1,301




Depreciation and amortization

82,840



78,319



164,001



157,622


Less: depreciation and amortization of non-real estate assets

(1,971)



(1,787)



(3,911)



(3,617)


FFO attributable to common share and unit holders

$

95,342



$

56,775



$

189,281



$

139,631


Adjustments:








Internal leasing costs (1)



(1,773)





(3,362)


Acquisition fees and costs expensed

970



1,321



1,804



2,632


Noncash share-based compensation - general and administrative

923



520



1,582



1,118


Noncash share-based compensation - property management

346



423



639



800


Noncash interest expense related to acquired debt



937





1,837


Loss on early extinguishment of debt

659



1,447



659



1,447


Remeasurement of participating preferred shares







(1,212)


Redemption of participating preferred shares



32,215





32,215


Core FFO attributable to common share and unit holders

$

98,240



$

91,865



$

193,965



$

175,106


Recurring capital expenditures (2)

(10,330)



(8,489)



(18,190)



(15,875)


Leasing costs

(1,130)



(3,111)



(2,129)



(5,834)


Internal leasing costs (1)



1,773





3,362


Adjusted FFO attributable to common share and unit holders

$

86,780



$

82,038



$

173,646



$

156,759










Per FFO share and unit:








FFO attributable to common share and unit holders

$

0.27



$

0.16



$

0.54



$

0.40


Core FFO attributable to common share and unit holders

$

0.28



$

0.26



$

0.55



$

0.50


Adjusted FFO attributable to common share and unit holders

$

0.25



$

0.23



$

0.49



$

0.45










Weighted-average FFO shares and units:








Common shares outstanding

299,466,526



295,462,572



298,157,413



290,848,633


Share-based compensation plan (3)

619,398



587,270



647,895



584,330


Operating partnership units

52,897,228



55,350,153



54,025,758



55,350,153


Total weighted-average FFO shares and units

352,983,152



351,399,995



352,831,066



346,783,116




(1)

Adjustment amount reflects the portion of leasing costs that were previously capitalized and treated as a reduction to Adjusted FFO attributable to common share and unit holders that would be expensed under the new lease accounting standard ASU 2016-02, adopted by the Company on January 1, 2019.

(2)

As a portion of our homes are recently developed, acquired and / or renovated, we estimate recurring capital expenditures for our entire portfolio by multiplying (a) current period actual recurring capital expenditures per Same-Home Property by (b) our total number of properties, excluding newly acquired non-stabilized properties and properties classified as held for sale.

(3)

Reflects the effect of potentially dilutive securities issuable upon the assumed vesting / exercise of restricted stock units and stock options.

FFO attributable to common share and unit holders is a non-GAAP financial measure that we calculate in accordance with the definition approved by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss calculated in accordance with GAAP, excluding gains and losses from sales or impairment of real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

Core FFO attributable to common share and unit holders is a non-GAAP financial measure that we use as a supplemental measure of our performance. We compute this metric by adjusting FFO attributable to common share and unit holders for (1) acquisition fees and costs expensed incurred with business combinations and the acquisition of properties, (2) noncash share-based compensation expense, (3) noncash interest expense related to acquired debt, (4) hurricane-related charges, net, which result in material charges to the impacted single-family properties, (5) gain or loss on early extinguishment of debt, (6) noncash fair value adjustments associated with remeasuring our participating preferred shares derivative liability to fair value, and (7) the allocation of income to our participating preferred shares in connection with their redemption.

Adjusted FFO attributable to common share and unit holders is a non-GAAP financial measure that we use as a supplemental measure of our performance. We compute this metric by adjusting Core FFO attributable to common share and unit holders for (1) recurring capital expenditures that are necessary to help preserve the value and maintain functionality of our properties and (2) capitalized leasing costs incurred during the period. As a portion of our homes are recently developed, acquired and/or renovated, we estimate recurring capital expenditures for our entire portfolio by multiplying (a) current period actual recurring capital expenditures per Same-Home Property by (b) our total number of properties, excluding newly acquired non-stabilized properties and properties classified as held for sale.

We present FFO attributable to common share and unit holders, as well as on a per FFO share and unit basis, because we consider this metric to be an important measure of the performance of real estate companies, as do many investors and analysts in evaluating the Company. We believe that FFO attributable to common share and unit holders provides useful information to investors because this metric excludes depreciation, which is included in computing net income and assumes the value of real estate diminishes predictably over time. We believe that real estate values fluctuate due to market conditions and in response to inflation. We also believe that Core FFO and Adjusted FFO attributable to common share and unit holders, as well as on a per FFO share and unit basis, provide useful information to investors because they allow investors to compare our operating performance to prior reporting periods without the effect of certain items that, by nature, are not comparable from period to period.

FFO, Core FFO and Adjusted FFO attributable to common share and unit holders are not a substitute for net income or net cash provided by operating activities, each as determined in accordance with GAAP, as a measure of our operating performance, liquidity or ability to pay dividends. These metrics also are not necessarily indicative of cash available to fund future cash needs. Because other REITs may not compute these measures in the same manner, they may not be comparable among REITs.

Core Net Operating Income

Core NOI, which we also present separately for our Same-Home portfolio, is a supplemental non-GAAP financial measure that we define as core revenues, which is calculated as total revenues, excluding expenses reimbursed by tenant charge-backs and other revenues, less core property operating expenses, which is calculated as property operating and property management expenses, excluding noncash share-based compensation expense and expenses reimbursed by tenant charge-backs. Our Same-Home portfolio consists of our single-family properties that have been stabilized longer than 90 days prior to the beginning of the earliest period presented, and that have not been classified as held for sale, identified for future sale or taken out of service as a result of a casualty loss.

Core NOI also excludes (1) noncash fair value adjustments associated with remeasuring our participating preferred shares derivative liability to fair value, (2) noncash gain or loss on conversion of shares or units, (3) gain or loss on early extinguishment of debt, (4) hurricane-related charges, net, which result in material charges to the impacted single-family properties, (5) gain or loss on sales of single-family properties and other, (6) depreciation and amortization, (7) acquisition fees and costs expensed incurred with business combinations and the acquisition of properties, (8) noncash share-based compensation expense, (9) interest expense, (10) general and administrative expense, (11) other expenses and (12) other revenues. We believe Core NOI provides useful information to investors about the operating performance of our single-family properties without the impact of certain operating expenses that are reimbursed through tenant charge-backs. We further adjust Core NOI for our Same-Home portfolio by subtracting recurring capital expenditures to calculate Same-Home Core NOI After Capital Expenditures, which we believe provides useful information to investors because it more fully reflects our operating performance after the impact of all property-level expenditures, regardless of whether they are capitalized or expensed.

Core NOI and Same-Home Core NOI After Capital Expenditures should be considered only as supplements to net income or loss as a measure of our performance and should not be used as measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. Additionally, these metrics should not be used as substitutes for net income or loss or net cash flows from operating activities (as computed in accordance with GAAP).

The following are reconciliations of core revenues, Same-Home core revenues, core property operating expenses, Same-Home core property operating expenses, Core NOI, Same-Home Core NOI and Same-Home Core NOI After Capital Expenditures to their respective GAAP metrics for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):


For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2019


2018


2019


2018


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Core revenues and Same-Home core revenues








Total revenues

$

281,860



$

264,483



$

561,064



$

522,487


Tenant charge-backs

(35,303)



(32,917)



(75,255)



(68,724)


Other revenues

(1,946)



(1,601)



(3,456)



(2,942)


Bad debt expense



(1,616)





(3,616)


Core revenues

244,611



228,349



482,353



447,205


Less: Non-Same-Home core revenues

54,514



46,221



105,153



85,485


Same-Home core revenues

$

190,097



$

182,128



$

377,200



$

361,720







Core property operating expenses and Same-Home core property operating expenses





Property operating expenses

$

104,591



$

98,843



$

211,275



$

199,830


Property management expenses

21,650



18,616



42,359



37,603


Noncash share-based compensation - property management

(346)



(423)



(639)



(800)


Expenses reimbursed by tenant charge-backs

(35,303)



(32,917)



(75,255)



(68,724)


Bad debt expense



(1,616)





(3,616)


Internal leasing costs (1)



1,773





3,362


Core property operating expenses

90,592



84,276



177,740



167,655


Less: Non-Same-Home core property operating expenses

21,063



18,533



41,835



36,934


Same-Home core property operating expenses

$

69,529



$

65,743



$

135,905



$

130,721







Core NOI, Same-Home Core NOI and Same-Home Core NOI After Capital Expenditures





Net income

$

40,304



$

25,898



$

73,395



$

47,423


Remeasurement of participating preferred shares







(1,212)


Loss on early extinguishment of debt

659



1,447



659



1,447


Gain on sale of single-family properties and other, net

(13,725)



(3,240)



(19,374)



(5,496)


Depreciation and amortization

82,840



78,319



164,001



157,622


Acquisition fees and costs expensed

970



1,321



1,804



2,632


Noncash share-based compensation - property management

346



423



639



800


Interest expense

32,571



31,978



64,486



61,279


General and administrative expense

10,486



9,677



19,921



18,908


Other expenses

1,514



1,624



2,538



2,451


Other revenues

(1,946)



(1,601)



(3,456)



(2,942)


Internal leasing costs (1)



(1,773)





(3,362)


Core NOI

154,019



144,073



304,613



279,550


Less: Non-Same-Home Core NOI

33,451



27,688



63,318



48,551


Same-Home Core NOI

120,568



116,385



241,295



230,999


Less: Same-Home recurring capital expenditures

8,330



7,024



14,647



12,927


Same-Home Core NOI After Capital Expenditures

$

112,238



$

109,361



$

226,648



$

218,072




(1)

Adjustment amount reflects the portion of leasing costs that were previously capitalized, that would be expensed under the new lease accounting standard ASU 2016-02, adopted by the Company on January 1, 2019.

Contact:
American Homes 4 Rent
Investor Relations
Phone: (855) 794-2447
Email: investors@ah4r.com

 

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SOURCE American Homes 4 Rent

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