AMERICAN HOMES 4 RENT The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those set forth under Part I, "Item 1A. Risk Factors" in this report. This section of this Form 10-K generally discusses the years endedDecember 31, 2022 and 2021. A discussion of the year endedDecember 31, 2020 is available at Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Overview We are a Maryland REIT focused on acquiring, developing, renovating, leasing and managing single-family homes as rental properties.The Operating Partnership is the entity through which we conduct substantially all of our business and own, directly or through subsidiaries, substantially all of our assets. We commenced operations inNovember 2012 and we have elected to be taxed as a REIT. As ofDecember 31, 2022 , we owned 58,993 single-family properties in select submarkets of metropolitan statistical areas ("MSAs") in 21 states, including 1,115 properties held for sale, compared to 57,024 single-family properties in 22 states, including 659 properties held for sale, as ofDecember 31, 2021 . As ofDecember 31, 2022 , 55,605 of our total properties (excluding properties held for sale) were occupied, compared to 53,637 of our total properties (excluding properties held for sale) as ofDecember 31, 2021 . Also, as ofDecember 31, 2022 , the Company had an additional 2,540 properties held in unconsolidated joint ventures, compared to 1,942 properties held in unconsolidated joint ventures as ofDecember 31, 2021 . Our portfolio of single-family properties, including those held in our unconsolidated joint ventures, is internally managed through our proprietary property management platform.
Key Single-Family Property and Leasing Metrics
The following table summarizes certain key single-family properties metrics as ofDecember 31, 2022 :Total Single-Family Properties (1) Number of % of Total Gross Book Avg. Gross Book Single-Family Single-Family Value % of Gross Book Value per Avg. Avg. Property Age Avg. Year Market Properties Properties (millions) Value Total Property Sq. Ft. (years) Purchased or DeliveredAtlanta, GA 5,805 10.0 %$ 1,256.1 10.2 %$ 216,381 2,167 17.1 2016Dallas-Fort Worth, TX 4,224 7.3 % 735.7 6.0 % 174,165 2,108 18.5 2014Charlotte, NC 3,962 6.8 % 837.2 6.8 % 211,311 2,105 17.5 2015Phoenix, AZ 3,405 5.9 % 711.9 5.8 % 209,085 1,838 18.6 2015Nashville, TN 3,238 5.6 % 775.8 6.3 % 239,592 2,110 15.7 2016Indianapolis, IN 2,910 5.0 % 499.4 4.1 % 171,612 1,930 19.9 2014Houston, TX 2,642 4.6 % 465.1 3.8 % 176,023 2,095 17.0 2014Jacksonville, FL 2,891 5.0 % 602.9 4.9 % 208,527 1,931 14.5 2016Tampa, FL 2,729 4.7 % 602.7 4.9 % 220,833 1,939 15.5 2016Raleigh, NC 2,177 3.8 % 429.2 3.5 % 197,136 1,889 16.9 2015Columbus, OH 2,110 3.6 % 397.3 3.2 % 188,290 1,869 20.6 2015Cincinnati, OH 2,131 3.7 % 414.1 3.4 % 194,337 1,844 20.0 2014Orlando, FL 1,867 3.2 % 379.1 3.1 % 203,033 1,897 19.3 2015Salt Lake City, UT 1,908 3.3 % 575.9 4.7 % 301,837 2,242 16.3 2016Greater Chicago area, IL and IN 1,611 2.8 % 304.3 2.5 % 188,859 1,869 21.3 2013Las Vegas, NV 1,854 3.2 % 493.2 4.0 % 266,016 1,908 13.0 2016Charleston, SC 1,524 2.6 % 345.7 2.8 % 226,808 1,963 12.1 2017San Antonio, TX 1,325 2.3 % 258.1 2.1 % 194,760 1,933 14.2 2015Seattle, WA 1,141 2.0 % 369.9 3.0 % 324,227 1,996 13.0 2017 Savannah/Hilton Head, SC 1,042 1.8 % 216.6 1.8 % 207,830 1,889 14.2 2016 All Other (2) 7,382 12.8 % 1,654.9 13.1 % 224,184 1,902 17.1 2015 Total/Average 57,878 100.0 %$ 12,325.1 100.0 %$ 212,950 1,989 17.1 2015
(1)Excludes 1,115 single-family properties held for sale as of
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The following table summarizes certain key leasing metrics as of December 31,
2022 :
Total Single-Family Properties (1)
Avg. Occupied Avg. Monthly Avg. Original Avg. Remaining Avg. Blended
Days Percentage Realized Rent Lease Term Lease Term Change in Rent
Market (2) per property (3) (months) (4) (months) (4) (5)
Atlanta, GA 96.0 % $ 2,014 12.0 6.1 9.7 %
Dallas-Fort Worth, TX 96.7 % 2,069 12.0 6.2 7.4 %
Charlotte, NC 96.6 % 1,930 12.2 6.3 8.3 %
Phoenix, AZ 94.9 % 1,938 12.0 6.1 9.6 %
Nashville, TN 95.8 % 2,104 12.0 6.4 8.9 %
Indianapolis, IN 95.0 % 1,714 12.1 6.2 5.4 %
Houston, TX 96.7 % 1,883 12.0 6.3 5.5 %
Jacksonville, FL 95.8 % 1,981 12.0 6.6 8.2 %
Tampa, FL 97.3 % 2,122 12.0 6.3 10.3 %
Raleigh, NC 96.4 % 1,827 12.1 5.9 9.1 %
Columbus, OH 96.2 % 1,962 12.0 6.1 6.9 %
Cincinnati, OH 96.0 % 1,918 12.0 6.3 6.8 %
Orlando, FL 96.2 % 2,053 12.0 6.3 9.9 %
Salt Lake City, UT 95.8 % 2,247 12.0 5.9 8.2 %
Greater Chicago area, IL and IN 97.9 % 2,201 12.2 6.2 7.3 %
Las Vegas, NV 91.5 % 2,070 12.0 6.4 7.4 %
Charleston, SC 97.0 % 2,062 12.0 6.2 7.8 %
San Antonio, TX 94.0 % 1,859 12.0 6.0 5.3 %
Seattle, WA 93.8 % 2,496 12.0 5.5 7.8 %
Savannah/Hilton Head, SC 96.9 % 1,935 12.0 6.5 9.3 %
All Other (6) 94.7 % 1,988 12.0 6.3 7.9 %
Total/Average 95.8 % $ 2,001 12.0 6.2 8.1 %
(1)Excludes 1,115 single-family properties held for sale as of December 31,
2022 .
(2)For the year ended December 31, 2022 , Average Occupied Days Percentage
represents the number of days a property is occupied in the period divided by
the total number of days the property is owned during the same period after
initially being placed in-service.
(3)For the year ended December 31, 2022 , Average Monthly Realized Rent is
calculated as the lease component of rents and other single-family property
revenues (i.e., rents from single-family properties) divided by the product of
(a) number of properties and (b) Average Occupied Days Percentage, divided by
the number of months. For properties partially owned during the year, this is
adjusted to reflect the number of days of ownership.
(4)Average Original Lease Term and Average Remaining Lease Term are reflected as
of period end.
(5)Represents the percentage change in rent on all non-month-to-month lease
renewals and re-leases during the year ended December 31, 2022 , compared to the
annual rent of the previously expired non-month-to-month comparable long-term
lease for each property.
(6)Represents 15 markets in 13 states.
We believe these key single-family property and leasing metrics provide useful
information to investors because they allow investors to understand the
composition and performance of our properties on a market by market basis.
Management also uses these metrics to understand the composition and performance
of our properties at the market level.
Factors That Affect Our Results of Operations and Financial Condition
Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. Key factors that impact our results of operations and financial condition include the pace at which we identify and acquire suitable land and properties, the time and cost required to renovate the acquired properties, the pace and cost of our property developments, the time to lease newly acquired or developed properties at acceptable rental rates, occupancy levels, rates of tenant turnover, the length of vacancy in properties between tenant leases, our expense ratios, our ability to raise capital and our capital structure. Additionally, recent supply chain disruptions, inflationary increases in labor and material costs and labor shortages have impacted and may continue to impact certain aspects of our business, including our AMH Development Program, our renovation program associated with recently acquired properties and our maintenance program.
Property Acquisitions, Development and Dispositions
Since our formation, we have rapidly but systematically grown our portfolio of
single-family properties. Our ability to identify and acquire homes that meet
our investment criteria is impacted by home prices in our target markets, the
inventory of properties available-for-sale through traditional acquisition
channels, competition for our target assets and our available capital. We are
increasingly focused on developing "built-for-rental" homes through our internal
AMH Development Program. In addition, we also
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acquire newly constructed homes from third-party developers through our National
Builder Program. Opportunities from these new construction channels are impacted
by the availability of vacant developed lots, development land assets and
inventory of homes currently under construction or newly developed. Our level of
investment activity has fluctuated based on the number of suitable opportunities
and the level of capital available to invest. Recently, we have strategically
scaled back acquisitions through our National Builder Program and traditional
acquisition channel as the housing market adjusts to the current macroeconomic
environment. We anticipate beginning to grow in these acquisition channels when
the housing and capital markets stabilize. During the year ended December 31,
2022 , we developed or acquired 2,958 homes, including 1,320 newly constructed
homes delivered through our AMH Development Program, 1,438 homes acquired
through our National Builder Program and traditional acquisition channel and 200
homes acquired in a bulk transaction from an unconsolidated joint venture,
partially offset by 989 homes sold to third parties or contributed to an
unconsolidated joint venture. During the year ended December 31, 2022 , we also
developed an additional 863 newly constructed properties which were delivered to
our unconsolidated joint ventures, aggregating to 2,183 total program deliveries
through our AMH Development Program.
Our properties held for sale were identified based on submarket analysis, as
well as individual property-level operational review. As of December 31, 2022
and 2021, there were 1,115 and 659 properties, respectively, classified as held
for sale. We will continue to evaluate our properties for potential disposition
going forward as a normal course of business.
Property Operations
Homes added to our portfolio through new construction channels include properties developed through our internal AMH Development Program and newly constructed properties acquired from third-party developers through our National Builder Program. Rental homes developed through our AMH Development Program involve substantial up-front costs, time to acquire and develop land, time to build the rental home, and time to lease the rental home before the home generates income. This process is dependent upon the nature of each lot acquired and the timeline varies primarily due to land development requirements. Once land development requirements have been met, historically it has taken approximately four to six months to complete the rental home vertical construction process. However, delivery of homes may be staggered to facilitate leasing absorption. Our internal construction program is managed by our team of development professionals that oversee the full rental home construction process including all land development and work performed by subcontractors. We typically incur costs between$250,000 and$450,000 to acquire and develop land and build a rental home. Homes added through our AMH Development Program are available for lease immediately upon or shortly after receipt of a certificate of occupancy. Rental homes acquired from third-party developers through our National Builder Program are dependent on the inventory of newly constructed homes and homes currently under construction. Homes added to our portfolio through traditional acquisition channels require expenditures in addition to payment of the purchase price, including property inspections, closing costs, liens, title insurance, transfer taxes, recording fees, broker commissions, property taxes and HOA fees, when applicable. In addition, we typically incur costs between$20,000 and$40,000 to renovate a home acquired through traditional acquisition channels to prepare it for rental. Renovation work varies, but may include paint, flooring, cabinetry, appliances, plumbing hardware and other items required to prepare the home for rental. The time and cost involved to prepare our homes for rental can impact our financial performance and varies among properties based on several factors, including the source of acquisition channel and age and condition of the property. Historically, it has taken approximately 20 to 90 days to complete the renovation process, which will fluctuate based on our overall acquisition volume as well as availability of construction labor and materials. Our operating results are also impacted by the amount of time it takes to market and lease a property, which can vary greatly among properties, and is impacted by local demand, our marketing techniques and the size of our available inventory. Typically, it takes approximately 10 to 30 days to lease a property after acquiring or developing a new property through our new construction channels and 20 to 40 days after completing the renovation process for a traditionally acquired property. Lastly, our operating results are impacted by the length of stay of our tenants and the amount of time it takes to prepare and re-lease a property after a tenant vacates. This process, which we refer to as "turnover," is impacted by numerous factors, including the condition of the home upon move-out of the previous tenant, and by local demand, our marketing techniques and the size of our available inventory at the time of the turnover. Typically, it takes approximately 20 to 50 days to complete the turnover process.
Revenues
Our revenues are derived primarily from rents collected from tenants for our
single-family properties under lease agreements which typically have a term of
one year. Our rental rates and occupancy levels are affected by macroeconomic
factors and local and property-level factors, including market conditions,
seasonality and tenant defaults, and the amount of time it takes to turn
properties when tenants vacate. Additionally, our ability to collect revenues
and related operating results are impacted by the credit worthiness and
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quality of our tenants. Typically, our incoming residents have household incomes
ranging from
Our rents and other single-family property revenues are comprised of rental revenue from single-family properties, fees from our single-family property rentals and "tenant charge-backs," which are primarily related to cost recoveries on utilities.
Our ability to maintain and grow revenues from our existing portfolio of homes will be dependent on our ability to retain tenants and increase rental rates. Based on our Same-Home population of properties (defined below), the year-over-year increase in Average Monthly Realized Rent per property was 8.0% for the year endedDecember 31, 2022 and we experienced turnover rates, which represents the number of tenant move-outs during the period divided by the total number of properties, of 27.7% and 29.6% during the years endedDecember 31, 2022 and 2021, respectively. Expenses
We monitor the following categories of expenses that we believe most significantly affect our results of operations.
Property Operating Expenses
Once a property is available for lease for the first time, which we refer to as "rent-ready," we incur ongoing property-related expenses which may not be subject to our control. These include primarily property taxes, repairs and maintenance ("R&M"), turnover costs, HOA fees (when applicable) and insurance.
Property Management Expenses
As we internally manage our portfolio of single-family properties through our proprietary property management platform, we incur costs such as salary expenses for property management personnel, lease expenses and operating costs for property management offices and technology expenses for maintaining as well as enhancing our property management platform. As part of developing our property management platform, we continue to make significant investments in our personnel, infrastructure, systems and technology that will impact expenses based on investment programs during the year. We believe that these investments will enable our property management platform to become more efficient over time, especially as our portfolio grows. Also included in property management expenses is noncash share-based compensation expense related to centralized and field property management employees.
Seasonality
We believe that our business and related operating results will be impacted by seasonal factors throughout the year. Historically, we have experienced higher levels of tenant move-outs and move-ins during the late spring and summer months, which impacts both our rental revenues and related turnover costs. Our property operating costs are seasonally impacted in certain markets for expenses such as HVAC repairs, turn costs and landscaping expenses during the summer season. Additionally, our single-family properties are at greater risk in certain markets for adverse weather conditions such as hurricanes in the late summer months and extreme cold weather in the winter months.
General and Administrative Expense
General and administrative expense primarily consists of corporate payroll and personnel costs, federal and state taxes, trustees' and officers' insurance expenses, audit and tax fees, trustee fees and other expenses associated with our corporate and administrative functions. In addition, we also continue to make corporate level investments to support certain initiatives which will impact expenses based on given investment programs during the year. Also included in general and administrative expense is noncash share-based compensation expense related to corporate administrative employees.
Results of Operations
Net income totaled$310.0 million for the year endedDecember 31, 2022 , compared to$210.6 million for the year endedDecember 31, 2021 . This increase was primarily due to a larger number of occupied properties resulting from growth in the Company's portfolio, higher rental rates and lower uncollectible rents, as well as higher net gains on property sales, partially offset by$6.1 million of hurricane-related charges, net in the year endedDecember 31, 2022 . As we continue to grow our portfolio with a portion of our homes still recently developed, acquired and/or renovated, we distinguish our portfolio of homes between Same-Home properties and Non-Same-Home and Other properties in evaluating our operating performance. We classify a property as Same-Home if it has been stabilized longer than 90 days prior to the beginning of the earliest 27 -------------------------------------------------------------------------------- period presented under comparison and if it has not been classified as held for sale, identified for future sale, or experienced a casualty loss, which allows the performance of these properties to be compared between periods. Single-family properties that we acquire individually (i.e., not through a bulk purchase) are classified as either stabilized or non-stabilized. A property is classified as stabilized once it has been renovated by the Company or newly constructed and then initially leased or available for rent for a period greater than 90 days. Properties acquired through a bulk purchase are first considered non-stabilized, as an entire group, until (1) we have owned them for an adequate period of time to allow for complete on-boarding to our operating platform, and (2) a substantial portion of the properties have experienced tenant turnover at least once under our ownership, providing the opportunity for renovations and improvements to meet our property standards. After such time has passed, properties acquired through a bulk purchase are then evaluated on an individual property basis under our standard stabilization criteria. All other properties, including those classified as held for sale or taken out of service as a result of a casualty loss, are classified as Non-Same-Home and Other. One of the primary financial measures we use in evaluating the operating performance of our single-family properties is Core Net Operating Income ("Core NOI"), which we also present separately for our Same-Home portfolio. Core NOI is a supplemental non-GAAP financial measure that we define as core revenues, which is calculated as rents and other single-family property revenues, excluding expenses reimbursed by tenant charge-backs, 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. Core NOI also excludes (1) gain or loss on early extinguishment of debt, (2) hurricane-related charges, net, which result in material charges to our single-family property portfolio, (3) gains and losses from sales or impairments of single-family properties and other, (4) depreciation and amortization, (5) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (6) noncash share-based compensation expense, (7) interest expense, (8) general and administrative expense, and (9) other income and expense, net. 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. Core NOI and Same-Home Core NOI 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 accounting principles generally accepted inthe United States of America ("GAAP")). 28 --------------------------------------------------------------------------------
Comparison of the Year Ended
The following table presents a summary of Core NOI for our Same-Home properties,
Non-Same-Home and Other properties and total properties for the years ended
For the Year Ended December 31, 2022
Same-Home % of Non-Same-Home and % of Total % of
Properties (1) Core Revenue Other Properties Core Revenue Properties Core Revenue
Rents from single-family
properties $ 1,054,675 $ 222,317 $ 1,276,992
Fees from single-family properties 21,214 5,774 26,988 Bad debt (11,140) (4,912) (16,052) Core revenues 1,064,749 223,179 1,287,928 Property tax expense 179,726 16.9 % 37,858 17.0 % 217,584 16.9 % HOA fees, net (2) 19,409 1.8 % 4,540 2.0 % 23,949 1.9 % R&M and turnover costs, net (2) 79,560 7.5 % 20,653 9.3 % 100,213 7.8 % Insurance 11,571 1.1 % 2,523 1.1 % 14,094 1.1 % Property management expenses, net (3) 79,851 7.5 % 22,631 10.1 % 102,482 7.9 % Core property operating expenses 370,117 34.8 % 88,205 39.5 % 458,322 35.6 % Core NOI$ 694,632 65.2 %$ 134,974 60.5 %$ 829,606 64.4 % For the Year Ended December 31, 2021 Same-Home % of Non-Same-Home and % of Total % of Properties (1) Core Revenue Other Properties Core Revenue Properties Core Revenue Rents from single-family properties$ 979,896 $ 146,512 $
1,126,408
Fees from single-family properties 18,829 3,731 22,560 Bad debt (17,463) (5,927) (23,390) Core revenues 981,262 144,316 1,125,578 Property tax expense 165,135 16.8 % 25,857 17.9 % 190,992 17.0 % HOA fees, net (2) 18,445 1.9 % 3,135 2.2 % 21,580 1.9 % R&M and turnover costs, net (2) 75,808 7.7 % 15,348 10.6 % 91,156 8.1 % Insurance 10,058 1.0 % 1,690 1.2 % 11,748 1.0 % Property management expenses, net (3) 75,044 7.7 % 15,242 10.6 % 90,286 8.0 % Core property operating expenses 344,490 35.1 % 61,272 42.5 % 405,762 36.0 % Core NOI$ 636,772 64.9 % $ 83,044 57.5 %$ 719,816 64.0 % (1)Includes 47,068 properties that have been stabilized longer than 90 days prior toJanuary 1, 2021 . (2)Presented net of tenant charge-backs. (3)Presented net of tenant charge-backs and excludes noncash share-based compensation expense related to centralized and field property management employees. 29 -------------------------------------------------------------------------------- The following are reconciliations of core revenues, Same-Home core revenues, core property operating expenses, Same-Home core property operating expenses, Core NOI and Same-Home Core NOI to their respective GAAP metrics for the years endedDecember 31, 2022 and 2021 (amounts in thousands): For the
Years Ended
2022 2021
Core revenues and Same-Home core revenues
Rents and other single-family property revenues $ 1,490,534 $ 1,303,882
Tenant charge-backs (202,606) (178,304)
Core revenues 1,287,928 1,125,578
Less: Non-Same-Home core revenues 223,179 144,316
Same-Home core revenues $
1,064,749
Core property operating expenses and Same-Home core property operating expenses Property operating expenses$ 552,091 $ 490,205 Property management expenses 112,698 96,865 Noncash share-based compensation - property management (3,861) (3,004) Expenses reimbursed by tenant charge-backs (202,606) (178,304) Core property operating expenses 458,322 405,762 Less: Non-Same-Home core property operating expenses 88,205 61,272 Same-Home core property operating expenses$ 370,117
Core NOI and Same-Home Core NOI Net income $
310,025
Hurricane-related charges, net 6,133 -
Gain on sale and impairment of single-family properties and other, net
(136,459) (49,696)
Depreciation and amortization 426,531 372,848
Acquisition and other transaction costs 23,452 15,749
Noncash share-based compensation - property management 3,861 3,004
Interest expense 134,871 114,893
General and administrative expense 68,057 56,444
Other income and expense, net (6,865) (3,985)
Core NOI 829,606 719,816
Less: Non-Same-Home Core NOI 134,974 83,044
Same-Home Core NOI $
694,632
Rents and Other Single-Family Property Revenues
Rents and other single-family property revenues increased 14.3% to$1.5 billion for the year endedDecember 31, 2022 , compared to$1.3 billion for the year endedDecember 31, 2021 . Revenue growth was driven by an increase in our average occupied portfolio which grew to 54,847 homes for the year endedDecember 31, 2022 , compared to 52,542 homes for the year endedDecember 31, 2021 , as well as higher rental rates and lower uncollectible rents.
Property Operating Expenses
Property operating expenses increased 12.6% to$552.1 million for the year endedDecember 31, 2022 from$490.2 million for the year endedDecember 31, 2021 . This increase was primarily attributable to growth in our portfolio, inflationary increases in R&M and turnover costs and outsized increases in property taxes in select states across our portfolio.
Property Management Expenses
Property management expenses for the years endedDecember 31, 2022 and 2021 were$112.7 million and$96.9 million , respectively, which included$3.9 million and$3.0 million , respectively, of noncash share-based compensation expense in each period related to centralized and field property management employees. The increase in property management expenses was primarily attributable to higher personnel costs from (i) the timing of increased compensation in the second half of 2021 as a result of the inflationary environment and (ii) increased headcount to support growth in our portfolio, as well as an increase in other miscellaneous property management expenses. 30 --------------------------------------------------------------------------------
Core Revenues from
Core revenues from Same-Home properties increased 8.5% to$1.1 billion for the year endedDecember 31, 2022 from$981.3 million for the year endedDecember 31, 2021 . This increase was primarily attributable to higher Average Monthly Realized Rent per property, which increased 8.0% to$1,920 per month for the year endedDecember 31, 2022 compared to$1,777 per month for the year endedDecember 31, 2021 , and lower uncollectible rents, partially offset by a decrease in Average Occupied Days Percentage, which was 97.3% for the year endedDecember 31, 2022 compared to 97.6% for the year endedDecember 31, 2021 .
Core Property Operating Expenses from
Core property operating expenses from Same-Home properties consist of direct property operating expenses, net of tenant charge-backs, and property management costs, net of tenant charge-backs, and excludes noncash share-based compensation expense. Core property operating expenses from Same-Home properties increased 7.4% to$370.1 million for the year endedDecember 31, 2022 from$344.5 million for the year endedDecember 31, 2021 primarily driven by outsized increases in property taxes in select states across our portfolio, higher property management personnel costs due to increased headcount to support growth in our portfolio, and other inflationary increases.
General and Administrative Expense
General and administrative expense primarily consists of corporate payroll and personnel costs, federal and state taxes, trustees' and officers' insurance expense, audit and tax fees, trustee fees and other expenses associated with our corporate and administrative functions. General and administrative expense for the years endedDecember 31, 2022 and 2021 was$68.1 million and$56.4 million , respectively, which included$15.3 million and$9.4 million , respectively, of noncash share-based compensation expense in each period related to corporate administrative employees. The increase in general and administrative expense was primarily related to an increase in noncash share-based compensation expense, as well as the timing of increased personnel and information technology costs to support growth in our business.
Interest Expense
Interest expense increased 17.4% to$134.9 million for the year endedDecember 31, 2022 from$114.9 million for the year endedDecember 31, 2021 . This increase was primarily due to additional interest from the issuances of the 2031 and 2051 unsecured senior notes inJuly 2021 and the 2032 and 2052 unsecured senior notes inApril 2022 , partially offset by additional capitalized interest during the year endedDecember 31, 2022 related to an increase in development activities under our AMH Development Program and an increase in properties that underwent renovation during the year endedDecember 31, 2022 .
Acquisition and Other Transaction Costs
Acquisition and other transaction costs consist primarily of costs associated with purchases of single-family properties, including newly constructed properties from third-party builders, the development of single-family properties, or the disposal of certain properties or portfolios of properties which do not qualify for capitalization. Acquisition and other transaction costs for the years endedDecember 31, 2022 and 2021 were$23.5 million and$15.7 million , respectively, which included$8.1 million and$5.4 million , respectively, of noncash share-based compensation expense in each period related to employees in these functions. The increase in acquisition and other transaction costs was primarily related to higher personnel costs associated with the growth of our portfolio and higher noncash share-based compensation expense.
Depreciation and Amortization
Depreciation and amortization expense consists primarily of depreciation of buildings and improvements. Depreciation of our assets is calculated over their useful lives on a straight-line basis over three to 30 years. Our intangible assets are amortized on a straight-line basis over the asset's estimated economic useful life. Depreciation and amortization expense increased 14.4% to$426.5 million for the year endedDecember 31, 2022 from$372.8 million for the year endedDecember 31, 2021 primarily due to growth in our average number of depreciable properties.
Hurricane-Related Charges, net
Hurricane Ian impacted certain properties primarily located inFlorida ,South Carolina andNorth Carolina , resulting in$6.1 million of hurricane-related charges, net during the year endedDecember 31, 2022 . The Company's property and casualty insurance policies provide coverage for wind and flood damage, as well as business interruption costs, during the period of remediation and repairs, subject to deductibles and limits. During the year endedDecember 31, 2022 , the Company recognized$8.9 million in gross charges 31 --------------------------------------------------------------------------------
primarily related to an estimated accrual for minor repair and remediation
costs, partially offset by an estimated
Gain on Sale and Impairment of
Gain on sale and impairment of single-family properties and other, net for the years endedDecember 31, 2022 and 2021 was$136.5 million and$49.7 million , respectively, which included$2.5 million and$0.2 million , respectively, of impairment charges related to homes classified as held for sale during each period. The increase was primarily related to an increase in properties sold as well as higher net gains from property sales, partially offset by higher impairment charges.
Other Income and Expense, net
Other income and expense, net for the years endedDecember 31, 2022 and 2021 was$6.9 million and$4.0 million , respectively, which primarily related to interest income, fees from unconsolidated joint ventures and equity in income (losses) from unconsolidated joint ventures, partially offset by expenses related to unconsolidated joint ventures and other nonrecurring expenses.
Critical Accounting Estimates
Our discussion and analysis of our historical financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could ultimately differ from these estimates. Listed below are those policies that management believes involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or our results of operations. There are other items within the financial statements that require estimation, but they are not considered critical as they do not require significant judgment or are immaterial.
Investments in Real Estate - Estimating Purchase Price Allocation
Purchases of single-family properties are treated as asset acquisitions and, as such, are recorded at their purchase price, including acquisition costs, which is allocated to land and building based upon their relative fair values at the date of acquisition. Fair value is determined in accordance with ASC 820, Fair Value Measurements and Disclosures, and is primarily based on unobservable data inputs. In making estimates of fair values for purposes of allocating the purchase price of individually acquired properties subject to an existing lease, the Company utilizes its own market knowledge obtained from historical transactions, its AMH Development Program and published market data. In this regard, the Company also utilizes information obtained from county tax assessment records to assist in the determination of the fair value of the land and building. The allocation of the consideration to the various components of properties acquired during the year can have an effect on our net income due to the useful depreciable and amortizable lives applicable to each component and the recognition of the related depreciation and amortization expense. For example, if a greater portion of the fair value is allocated to land, which does not depreciate, our net income would be higher. Typically, we allocate between 10% to 30% of the purchase price of properties to land. For the year endedDecember 31, 2022 , the Company purchased 1,605 single-family properties treated as asset acquisitions for accounting purposes for a total purchase price of$571.8 million , net of holding costs, which was included in cash paid for single-family properties within the consolidated statement of cash flows.
Impairment of Long-Lived Assets - Estimating Future Cash Flows
We evaluate our long-lived assets for impairment periodically or whenever events or circumstances indicate that their carrying amount may not be recoverable. Significant indicators of impairment may include, but are not limited to, declines in home values, rental rates and occupancy percentages, as well as significant changes in the economy. If an impairment indicator exists, we compare the expected future undiscounted cash flows against the net carrying amount. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding anticipated hold periods, future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. If the sum of the estimated undiscounted cash flows is less than the net carrying amount, we record an impairment loss for the difference between the estimated fair value of the individual property and the carrying amount of the property at that date. Because cash flows on properties considered to be long-lived assets to be held and used are considered on an undiscounted basis to determine whether an asset has been impaired, our established strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. No significant impairments on operating properties were recorded during the years endedDecember 31, 2022 , 2021 and 2020. 32 --------------------------------------------------------------------------------
Recent Accounting Pronouncements
See Note 2. Significant Accounting Policies to our consolidated financial statements included as a separate section in Part IV, "Item 15. Exhibit and Financial Statement Schedules" of this Annual Report on Form 10-K for a discussion of the adoption and potential impact of recently issued accounting standards, if any.
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, make distributions to our shareholders and OP unitholders, including AMH, and meet other general requirements of our business. Our liquidity, to a certain extent, is subject to general economic, financial, competitive and other factors beyond our control.
Sources of Capital
We expect to satisfy our cash requirements through cash provided by operations, long-term secured and unsecured borrowings, issuances of debt and equity securities (including OP units), property dispositions and joint venture transactions. We expect to meet our operating liquidity requirements and our dividend distributions generally through cash on hand and cash provided by operations. For our acquisition and development expenditures, we expect to supplement these sources through the issuance of equity securities, including under our At-the-Market Program described below, borrowings under our credit facility, issuances of unsecured senior notes and proceeds from sales of single-family properties. However, our real estate assets are illiquid in nature. A timely liquidation of assets might not be a viable source of short-term liquidity should a cash flow shortfall arise, and we may need to source liquidity from other financing alternatives including drawing on our revolving credit facility. Our liquidity and capital resources as ofDecember 31, 2022 included cash and cash equivalents of$69.2 million . Additionally, as ofDecember 31, 2022 , we had$130.0 million of outstanding borrowings and$4.0 million committed to outstanding letters of credit under our$1.25 billion revolving credit facility, leaving$1.1 billion of remaining borrowing capacity. As described below, inJanuary 2023 , we also issued and physically settled the remaining 8,000,000 Class A common shares under theJanuary 2022 Forward Sale Agreements, receiving net proceeds of$298.4 million . We maintain an investment grade credit rating which provides for greater availability of and lower cost of debt financing.
Uses of Capital
Our expected material cash requirements over the next twelve months consist of (i) contractually obligated expenditures, including payments of principal and interest, (ii) other essential expenditures, including property operating expenses, HOA fees (as applicable), real estate taxes, maintenance capital expenditures, general and administrative expenses and dividends on our equity securities including those paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including to pay for the acquisition, development and renovation of our properties and repurchases of our securities. With respect to our contractually obligated expenditures, our cash requirements within the next twelve months include accounts payable and accrued expenses, interest payments on debt obligations, principal amortization on our asset-backed securitizations, operating lease obligations and purchase commitments to acquire single-family properties and land for ourAMH Development Program. See Note 7. Debt, Note 8. Accounts Payable and Accrued Expenses and Note 14. Commitments and Contingencies to our consolidated financial statements included as a separate section in Part IV, "Item 15. Exhibit and Financial Statement Schedules" of this Annual Report on Form 10-K for a discussion of our material short-term and long-term cash requirements. 33 -------------------------------------------------------------------------------- A summary of our contractual obligations as ofDecember 31, 2022 is presented below (amounts in thousands): Payments by Period Total Less than 1 year Thereafter Debt maturities (1)$ 4,581,628 $ 20,714$ 4,560,914 Interest on debt obligations (2) 1,379,937 181,928
1,198,009
Operating lease obligations 22,764 3,917 18,847 Purchase obligations (3) 241,151 226,404 14,747 Total$ 6,225,480 $ 432,963$ 5,792,517 (1)Amounts represent principal amounts due and exclude unamortized discounts and deferred financing costs. (2)Represents estimated future interest payments on our debt instruments based on applicable interest rates as ofDecember 31, 2022 and assumes the repayment of the AMH 2015-1 and 2015-2 securitizations on their anticipated repayment dates in 2025. The fully extended maturity dates for the AMH 2015-1 and 2015-2 securitizations are in 2045 and the interest rates increase on the anticipated repayment dates in 2025. If the AMH 2015-1 and 2015-2 securitizations are not repaid on the anticipated repayment dates in 2025, our interest on debt obligations above would increase. Future interest payments on debt obligations would also be impacted by the level of borrowing on our revolving credit facility in the future. (3)Represents commitments to acquire 52 single-family properties for an aggregate purchase price of$12.3 million and land relating to our AMH Development Program for an aggregate purchase price of$228.9 million . The timing of these obligations due within one year may be extended beyondDecember 31, 2023 . Cash Flows The following table summarizes the Company's and theOperating Partnership's cash flows for the years endedDecember 31, 2022 and 2021 (amounts in thousands): For the Years Ended December 31, 2022 2021 Change Net cash provided by operating activities $ 665,518$ 595,200 $ 70,318 Net cash used for investing activities (1,425,502) (1,733,465) 307,963 Net cash provided by financing activities 786,177 1,064,955 (278,778) Net increase (decrease) in cash, cash equivalents and restricted cash $ 26,193$ (73,310) $ 99,503 Operating Activities Our cash flows provided by operating activities, which is our principal source of cash flows, depend on numerous factors, including the occupancy level of our properties, the rental rates achieved on our leases, the collection of rent from our tenants and the level of property operating expenses, property management expenses and general and administrative expenses. Net cash provided by operating activities increased$70.3 million , or 11.8%, from$595.2 million during the year endedDecember 31, 2021 to$665.5 million during the year endedDecember 31, 2022 , primarily as a result of increased cash flows generated from a larger number of occupied properties, higher rental rates and lower uncollectible rents, partially offset by higher cash outflows for property related expenses as a result of inflationary increases and growth in our portfolio. 34 --------------------------------------------------------------------------------
Investing Activities
For the Years Ended December 31,
(Amounts in thousands) 2022 2021 ChangeSources of cash from investing activities: Net proceeds received from sales of single-family properties and other
$ 292,509 $ 132,072 $ 160,437
Distributions from joint ventures 68,310 57,550 10,760
Proceeds from notes receivable related to the sale of properties
34,090 1,253 32,837
Change in escrow deposits for purchase of single-family properties
20,431 (33,005) 53,436
Proceeds received from storm-related insurance claims 1,981 4,842 (2,861)
$ 417,321 $ 162,712 $ 254,609
Uses of cash for investing activities:
Cash paid for development activity $
(921,423)
(595,171) (850,071) 254,900
Recurring and other capital expenditures for single-family properties
(138,779) (122,551) (16,228)
Renovations to single-family properties (98,019) (47,681) (50,338)
Investment in unconsolidated joint ventures (25,313) (29,260) 3,947
Other investing activities (49,570) (22,367) (27,203)
Cash paid for deposits on land option contracts (14,548) - (14,548)
$
(1,842,823)
Net cash used for investing activities $
(1,425,502)
Net cash used for investing activities decreased$308.0 million , or 17.8%, from$1.7 billion during the year endedDecember 31, 2021 to$1.4 billion during the year endedDecember 31, 2022 . Our investing activities are most significantly impacted by the strategic expansion of our portfolio through traditional acquisition channels, the development of "built-for-rental" homes through our AMH Development Program and the acquisition of newly built properties through our National Builder Program. Cash outflows for the addition of single-family properties to our portfolio through these channels decreased$211.2 million during the year endedDecember 31, 2022 primarily due to a strategic scale back in the acquisition of single-family properties through our National Builder Program and traditional acquisition channel during the second half of the year endedDecember 31, 2022 as the housing market adjusts to the current macroeconomic environment. Homes acquired through our traditional acquisition channel require additional expenditures to prepare them for rental, and cash outflows for renovations to single-family properties increased$50.3 million primarily as a result of an increased volume of properties that underwent initial or property-enhancing renovations during the year endedDecember 31, 2022 . Recurring and other capital expenditures for single-family properties increased$16.2 million primarily due to growth in our portfolio and inflationary increases in costs. The development of "built-for-rental" homes and our property-enhancing capital expenditures may reduce recurring and other capital expenditures on an average per-home basis in the future. We use cash generated from operating and financing activities and by recycling capital through the sale of single-family properties to invest in the strategic expansion of our single-family property portfolio. Net proceeds received from the sale of single-family properties and other increased$160.4 million as a result of an increased volume of properties sold and a higher average realized sales price per property during the year endedDecember 31, 2022 and proceeds from notes receivable related to the sale of properties increased$32.8 million year-over-year. Net cash inflows from unconsolidated joint ventures increased$14.7 million during the year endedDecember 31, 2022 due to the timing of contributions and distributions to and from our unconsolidated joint ventures. Cash outflows for other investing activities increased$27.2 million primarily due to investments in venture capital funds focused on proptech and decarbonization in the real estate industry during the year endedDecember 31, 2022 and a year-over-year increase in cash outflows for information technology projects. Cash outflows for deposits on land option contracts increased$14.5 million as a result of deposits made during the year endedDecember 31, 2022 .
Financing Activities
Net cash provided by financing activities decreased$278.8 million from$1.1 billion during the year endedDecember 31, 2021 to$786.2 million during the year endedDecember 31, 2022 primarily due to the debt and equity activity described below, partially offset by$60.2 million of proceeds from liabilities related to consolidated land not owned during the year endedDecember 31, 2022 (see Land Option Contracts in Note 2. Significant Accounting Policies).
Debt
As of
35
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aggregate principal amount of $2.6 billion . The Company also amended its
existing revolving credit facility during the year ended December 31, 2021 to
provide for maximum borrowings of up to $1.25 billion and extend its maturity
date to 2025 with two six-month extension options at the Company's election if
certain conditions are met. As of December 31, 2022 , the Company had $130.0
million of outstanding borrowings under its revolving credit facility.
During the year ended December 31, 2022 , the Company issued $900.0 million of
unsecured senior notes, receiving $876.8 million in proceeds, net of discount,
and paid $8.2 million in deferred financing costs. The Company also borrowed
$620.0 million and paid down $840.0 million on its revolving credit facility and
repaid $22.6 million on its asset-backed securitizations. During the year ended
December 31, 2021 , the Company issued $750.0 million of unsecured senior notes,
receiving $737.2 million in proceeds, net of discount, and paid $18.0 million in
deferred financing costs and $4.0 million for the settlement of a treasury lock
(see Note 12. Fair Value) in connection with the issuances. The Company also
borrowed $1.4 billion and paid down $1.1 billion on its revolving credit
facility and repaid $24.3 million on its asset-backed securitizations.
For additional information regarding the Company's debt issuances, see Note 7.
Debt to our consolidated financial statements included as a separate section in
Part IV, "Item 15. Exhibit and Financial Statement Schedules" of this Annual
Report on Form 10-K.
Class A Common Share Offerings
During the first quarter of 2022, the Company completed an underwritten public offering for 23,000,000 of its Class A common shares of beneficial interest,$0.01 par value per share, of which 10,000,000 shares were issued directly by the Company and 13,000,000 shares were offered on a forward basis at the request of the Company by the forward sellers. In connection with this offering, the Company entered into forward sale agreements with the forward purchasers (the "2022 Forward Sale Agreements") for these 13,000,000 shares which are accounted for in equity. The Company received net proceeds of$375.8 million from the 10,000,000 Class A common shares issued directly by the Company after deducting underwriting fees and before offering costs of approximately$0.2 million . The Company did not initially receive proceeds from the sale of the Class A common shares offered on a forward basis. During the third quarter of 2022, the Company issued and physically settled 5,000,000 Class A common shares under the 2022 Forward Sale Agreements, receiving net proceeds of$185.6 million . The Company used these net proceeds to repay indebtedness under its revolving credit facility and for general corporate purposes. As ofDecember 31, 2022 , 8,000,000 Class A common shares remained available for future settlement under the 2022 Forward Sale Agreements. InJanuary 2023 , the Company issued and physically settled the remaining 8,000,000 Class A common shares, receiving net proceeds of$298.4 million . The Company used these net proceeds to repay indebtedness under its revolving credit facility and for general corporate purposes. During the second quarter of 2021, the Company completed an underwritten public offering for 18,745,000 of its Class A common shares of beneficial interest,$0.01 par value per share, of which 5,500,000 shares were issued directly by the Company and 13,245,000 shares were offered on a forward basis at the request of the Company by the forward sellers. In connection with this offering, the Company entered into forward sale agreements with the forward purchasers (the "2021 Forward Sale Agreements") for these 13,245,000 shares which are accounted for in equity. The Company received net proceeds of$194.0 million from the 5,500,000 Class A common shares issued directly by the Company after deducting underwriting fees and before offering costs of approximately$0.2 million . The Company used the net proceeds to repay indebtedness under its revolving credit facility, to partially fund the redemption of its Series D and Series E perpetual preferred shares discussed below and for general corporate purposes. The Company did not initially receive proceeds from the sale of the Class A common shares offered on a forward basis. During the third and fourth quarters of 2021, the Company issued and physically settled all 13,245,000 Class A common shares under the 2021 Forward Sale Agreements, receiving net proceeds of$463.5 million . The Company used these net proceeds for general corporate purposes including property acquisitions and developments. When the Company issues common shares, theOperating Partnership issues an equivalent number of units of partnership interest of a corresponding class to AMH, with theOperating Partnership receiving the net proceeds from the share issuances.
Redemptions of Perpetual Preferred Shares
During the second quarter of 2022, the Company redeemed all 6,200,000 shares of the outstanding 5.875% Series F perpetual preferred shares,$0.01 par value per share, for cash at the liquidation preference of$25.00 per share plus any accrued and unpaid dividends in accordance with the terms of such shares.The Operating Partnership also redeemed its corresponding Series F perpetual preferred units. As a result of the redemption, the Company recorded a$5.3 million allocation of income to the Series F perpetual preferred shareholders within the consolidated statements of operations during the year endedDecember 31, 2022 , which represents the initial liquidation value of the Series F perpetual preferred shares in excess of its carrying value as of the redemption date. During the second quarter of 2021, the Company redeemed all 10,750,000 shares of the outstanding 6.500% Series D perpetual preferred shares,$0.01 par value per share, for cash at a liquidation preference of$25.00 per share plus any accrued and unpaid 36 -------------------------------------------------------------------------------- dividends in accordance with the terms of such shares.The Operating Partnership also redeemed its corresponding Series D perpetual preferred units. As a result of the redemption, the Company recorded an$8.5 million allocation of income to the Series D perpetual preferred shareholders within the consolidated statements of operations during the year endedDecember 31, 2021 , which represents the initial liquidation value of the Series D perpetual preferred shares in excess of its carrying value as of the redemption date. During the second quarter of 2021, the Company redeemed all 9,200,000 shares of the outstanding 6.350% Series E perpetual preferred shares,$0.01 par value per share, for cash at a liquidation preference of$25.00 per share plus accrued and unpaid dividends in accordance with the terms of such shares.The Operating Partnership also redeemed its corresponding Series E perpetual preferred units. As a result of the redemption, the Company recorded a$7.4 million allocation of income to the Series E perpetual preferred shareholders within the consolidated statements of operations during the year endedDecember 31, 2021 , which represents the initial liquidation value of the Series E perpetual preferred shares in excess of its carrying value as of the redemption date.
At-the-Market Common Share Offering Program
During the second quarter of 2020, the Company extended its at-the-market common share offering program under which it can issue Class A common shares from time to time through various sales agents up to an aggregate gross sales offering price of$500.0 million (the "At-the-Market Program"). The At-the-Market Program also provides that we may enter into forward contracts for our Class A common shares with forward sellers and forward purchasers. The Company intends to use any net proceeds from the At-the-Market Program (i) to repay indebtedness the Company has incurred or expects to incur under its revolving credit facility, (ii) to develop new single-family properties and communities, (iii) to acquire and renovate single-family properties and for related activities in accordance with its business strategy and (iv) for working capital and general corporate purposes, including repurchases of the Company's securities, acquisitions of additional properties, capital expenditures and the expansion, redevelopment and/or improvement of properties in the Company's portfolio. The At-the-Market Program may be suspended or terminated by the Company at any time. During the year endedDecember 31, 2022 , no shares were issued under the At-the-Market Program. During the year endedDecember 31, 2021 , the Company issued 1,749,286 Class A common shares under the At-the-Market Program, raising$72.3 million in gross proceeds before commissions and other expenses of approximately$1.1 million . As ofDecember 31, 2022 , 1,835,416 shares have been issued under the At-the-Market Program and$425.2 million remained available for future share issuances. Share Repurchase Program The Company's board of trustees authorized the establishment of our share repurchase program for the repurchase of up to$300.0 million of our outstanding Class A common shares and up to$250.0 million of our outstanding preferred shares from time to time in the open market or in privately negotiated transactions. The program does not have an expiration date, but may be suspended or discontinued at any time without notice. All repurchased shares are constructively retired and returned to an authorized and unissued status.The Operating Partnership funds the repurchases and constructively retires an equivalent number of corresponding Class A units. During the years endedDecember 31, 2022 and 2021, we did not repurchase and retire any of our Class A common shares or preferred shares. As ofDecember 31, 2022 , we had a remaining repurchase authorization of up to$265.1 million of our outstanding Class A common shares and up to$250.0 million of our outstanding preferred shares under the program. Distributions As a REIT, we generally are required to distribute annually to our shareholders at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and any net capital gains) and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our REIT taxable income (determined without regard to the deduction for dividends paid and including any net capital gains).The Operating Partnership funds the payment of distributions. AMH had an NOL forU.S. federal income tax purposes of an estimated$11.8 million as ofDecember 31, 2022 and$25.4 million as ofDecember 31, 2021 . We intend to use our NOL (to the extent available) to reduce our REIT taxable income to the extent that REIT taxable income is not reduced by our deduction for dividends paid.
During the years ended
Additional Non-GAAP Measures
Funds from Operations ("FFO") / Core FFO / Adjusted FFO attributable to common share and unit holders
FFO attributable to common share and unit holders is a non-GAAP financial measure that we calculate in accordance with the definition approved by theNational 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 37 --------------------------------------------------------------------------------
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 and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (2) noncash share-based compensation expense, (3) hurricane-related charges, net, which result in material charges to our single-family property portfolio, (4) gain or loss on early extinguishment of debt and (5) the allocation of income to our perpetual 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 estimateRecurring 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 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 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. The following is a reconciliation of the Company's net income attributable to common shareholders, determined in accordance with GAAP, 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 years endedDecember 31, 2022 and 2021 (amounts in thousands): For the
Years Ended
2022 2021
Net income attributable to common shareholders $ 250,781 $ 135,290
Adjustments:
Noncontrolling interests in the Operating Partnership 36,887 21,467
Gain on sale and impairment of single-family properties and other, net
(136,459) (49,696)
Adjustments for unconsolidated joint ventures 344 1,873
Depreciation and amortization 426,531 372,848
Less: depreciation and amortization of non-real estate assets (13,358)
(11,151)
FFO attributable to common share and unit holders (1) $ 564,726 $ 470,631
Adjustments:
Acquisition, other transaction costs and other 23,452 15,749
Noncash share-based compensation - general and administrative 15,318
9,361
Noncash share-based compensation - property management 3,861 3,004
Hurricane-related charges, net 6,133 -
Redemption of perpetual preferred shares 5,276 15,879
Core FFO attributable to common share and unit holders (1)
(65,636) (52,134)
Leasing costs (2,586) (3,422)
Adjusted FFO attributable to common share and unit holders (1)
(1)Unit holders include former AH LLC members and other non-affiliates that own Class A units in theOperating Partnership and their OP units are reflected as noncontrolling interests in the Company's consolidated financial statements. See Note 9. Shareholders' Equity / Partners' Capital to our consolidated financial statements included as a separate section in Part IV, "Item 15. Exhibit and Financial Statement Schedules" of this Annual Report on Form 10-K. 38 --------------------------------------------------------------------------------
EBITDA / EBITDAre / Adjusted EBITDAre / Fully Adjusted EBITDAre
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure and is used by us and others as a supplemental measure of performance. EBITDAre is a supplemental non-GAAP financial measure, which we calculate in accordance with the definition approved by NAREIT by adjusting EBITDA for gains and losses from sales or impairments of single-family properties and adjusting for unconsolidated partnerships and joint ventures on the same basis. Adjusted EBITDAre is a supplemental non-GAAP financial measure calculated by adjusting EBITDAre for (1) acquisition and other transaction costs incurred with business combinations and the acquisition or disposition of properties as well as nonrecurring items unrelated to ongoing operations, (2) noncash share-based compensation expense, (3) hurricane-related charges, net, which result in material charges to our single-family property portfolio, and (4) gain or loss on early extinguishment of debt. Fully Adjusted EBITDAre is a supplemental non-GAAP financial measure calculated by adjusting Adjusted EBITDAre for (1) Recurring Capital Expenditures and (2) leasing costs. 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 actualRecurring 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 believe these metrics provide useful information to investors because they exclude the impact of various income and expense items that are not indicative of operating performance. The following is a reconciliation of net income, as determined in accordance with GAAP, to EBITDA, EBITDAre, Adjusted EBITDAre and Fully Adjusted EBITDAre for the years endedDecember 31, 2022 and 2021 (amounts in thousands): For the Years Ended December 31, 2022 2021 Net income$ 310,025 $ 210,559 Interest expense 134,871 114,893 Depreciation and amortization 426,531 372,848 EBITDA $
871,427
Gain on sale and impairment of single-family properties and other, net
(136,459) (49,696)
Adjustments for unconsolidated joint ventures 344 1,873
EBITDAre $
735,312
Noncash share-based compensation - general and administrative 15,318
9,361
Noncash share-based compensation - property management 3,861 3,004
Acquisition, other transaction costs and other 23,452 15,749
Hurricane-related charges, net 6,133 -
Adjusted EBITDAre $ 784,076 $ 678,591
Recurring Capital Expenditures (65,636) (52,134)
Leasing costs (2,586) (3,422)
Fully Adjusted EBITDAre $ 715,854 $ 623,035
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