Edgar Filing: American Homes 4 Rent

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018



¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36013 (American Homes 4 Rent)

Commission File Number: 333-221878-02 (American Homes 4 Rent, L.P.)

AMERICAN HOMES 4 RENT

AMERICAN HOMES 4 RENT, L.P.

(Exact name of registrant as specified in its charter)



Maryland (American Homes 4 Rent)		46-1229660
Delaware (American Homes 4 Rent, L.P.)		80-0860173
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

30601 Agoura Road, Suite 200

Agoura Hills, California 91301

(Address of principal executive offices) (Zip Code)

(805) 413-5300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

American Homes 4 Rent ý Yes ¨ No American Homes 4 Rent, L.P. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

American Homes 4 Rent ý Yes ¨ No American Homes 4 Rent, L.P. ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



American Homes 4 Rent
Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨
American Homes 4 Rent, L.P.
Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	ý	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

American Homes 4 Rent ¨ American Homes 4 Rent, L.P. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

American Homes 4 Rent ¨ Yes ý No American Homes 4 Rent, L.P. ¨ Yes ý No

There were 295,896,219 shares of American Homes 4 Rent's Class A common shares, $0.01 par value per share, and 635,075 shares of American Homes 4 Rent's Class B common shares, $0.01 par value per share, outstanding on October 31, 2018.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2018, of American Homes 4 Rent and American Homes 4 Rent, L.P. Unless stated otherwise or the context otherwise requires, references to “AH4R" or "the General Partner" mean American Homes 4 Rent, a Maryland real estate investment trust (“REIT”), and references to “the Operating Partnership," "our operating partnership" or “the OP” mean American Homes 4 Rent, L.P., a Delaware limited partnership, and its subsidiaries taken as a whole. References to “the Company,” “we,” "our," and “us” mean collectively AH4R, the Operating Partnership and those entities/subsidiaries owned or controlled by AH4R and/or the Operating Partnership.

AH4R is the general partner of, and as of September 30, 2018, owned an approximate 84.3% common partnership interest in, the Operating Partnership. The remaining 15.7% common partnership interest was owned by limited partners. As the sole general partner of the Operating Partnership, AH4R has exclusive control of the Operating Partnership’s day-to-day management. The Company’s management operates AH4R and the Operating Partnership as one business, and the management of AH4R consists of the same members as the management of the Operating Partnership.

The Company believes that combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report provides the following benefits:


•	enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and


•	creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

The Company believes it is important to understand the few differences between AH4R and the Operating Partnership in the context of how AH4R and the Operating Partnership operate as a consolidated company. AH4R’s primary function is acting as the general partner of the Operating Partnership. The only material asset of AH4R is its partnership interest in the Operating Partnership. As a result, AH4R generally does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing equity from time to time and guaranteeing certain debt of the Operating Partnership. AH4R itself is not directly obligated under any indebtedness, but guarantees some of the debt of the Operating Partnership. The Operating Partnership owns substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures, either directly or through its subsidiaries, conducts the operations of the Company’s business and is structured as a limited partnership with no publicly traded equity. One difference between the Company and the Operating Partnership is $25.7 million of asset-backed securitization certificates issued by the Operating Partnership and purchased by AH4R. The asset-backed securitization certificates are recorded as an asset-backed securitization certificates receivable by the Company and as an amount due from affiliates by the Operating Partnership. AH4R contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, AH4R receives Operating Partnership units (“OP units”) equal to the number of shares it has issued in the equity offering. Based on the terms of the Agreement of Limited Partnership of the Operating Partnership, as amended (the "Agreement of Limited Partnership"), OP units can be exchanged for shares on a one-for-one basis. Except for net proceeds from equity issuances by AH4R, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness or through the issuance of OP units.

Shareholders' equity, partners' capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership are accounted for as partners' capital in the Operating Partnership's financial statements and as noncontrolling interests in the Company's financial statements. The noncontrolling interests in the Operating Partnership's financial statements include an outside ownership interest in a consolidated subsidiary of the Company, which was liquidated during the second quarter of 2018. The noncontrolling interests in the Company's financial statements include the same noncontrolling interests at the Operating Partnership level, as well as the limited partnership interests in the Operating Partnership. The differences between shareholders' equity and partners' capital result from differences in the equity and capital issued at the Company and Operating Partnership levels.

To help investors understand the differences between the Company and the Operating Partnership, this report provides

separate consolidated financial statements for the Company and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of each entity's debt, noncontrolling interests and shareholders' equity or partners' capital, as applicable; and a combined Management's Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

American Homes 4 Rent

American Homes 4 Rent, L.P.

Form 10-Q

INDEX



		Page
	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	i

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

	American Homes 4 Rent

	Condensed Consolidated Balance Sheets as of September 30, 2018, and December 31, 2017	1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017	3

	Condensed Consolidated Statement of Equity for the nine months ended September 30, 2018	4

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	5

	American Homes 4 Rent, L.P.

	Condensed Consolidated Balance Sheets as of September 30, 2018, and December 31, 2017	7

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	8

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017	9

	Condensed Consolidated Statement of Capital for the nine months ended September 30, 2018	10

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	11

	American Homes 4 Rent and American Homes 4 Rent, L.P.

	Notes to Unaudited Condensed Consolidated Financial Statements	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58

Item 4.	Controls and Procedures	58

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	59

Item 1A.	Risk Factors	59

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59

Item 3.	Defaults Upon Senior Securities	60

Item 4.	Mine Safety Disclosures	60

Item 5.	Other Information	60

Item 6.	Exhibits	60

	Exhibit Index	61

	Signatures	63

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this Quarterly Report on Form 10-Q of American Homes 4 Rent ("AH4R” or “the General Partner") and of American Homes 4 Rent, L.P. ("the Operating Partnership," "our operating partnership," or “the OP”) including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future operations, revenues, income and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors, including those discussed or incorporated by reference under Part II, Item 1A.”Risk Factors”, Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance, and you should not unduly rely on them. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this report. We are not obligated to update or revise these statements as a result of new information, future events or otherwise, unless required by applicable law.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

American Homes 4 Rent

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share data)



	September 30, 2018			December 31, 2017
	(Unaudited)
Assets
Single-family properties:
Land	$	1,689,207		$	1,665,631
Buildings and improvements	7,385,387			7,303,270
Single-family properties held for sale, net	299,551			35,803
	9,374,145			9,004,704
Less: accumulated depreciation	(1,115,588		)	(939,724		)
Single-family properties, net	8,258,557			8,064,980
Cash and cash equivalents	110,138			46,156
Restricted cash	156,026			136,667
Rent and other receivables, net	36,078			30,144
Escrow deposits, prepaid expenses and other assets	251,245			171,851
Deferred costs and other intangibles, net	13,437			13,025
Asset-backed securitization certificates	25,666			25,666
Goodwill	120,279			120,279
Total assets	$	8,971,426		$	8,608,768

Liabilities
Revolving credit facility	$	—		$	140,000
Term loan facility, net	99,176			198,023
Asset-backed securitizations, net	1,965,417			1,977,308
Unsecured senior notes, net	492,603			—
Exchangeable senior notes, net	114,507			111,697
Secured note payable	—			48,859
Accounts payable and accrued expenses	305,935			222,867
Amounts payable to affiliates	4,784			4,720
Participating preferred shares derivative liability	—			29,470
Total liabilities	2,982,422			2,732,944

Commitments and contingencies

Equity
Shareholders’ equity:
Class A common shares, $0.01 par value per share, 450,000,000 shares authorized, 295,896,219 and 286,114,637 shares issued and outstanding at September 30, 2018, and December 31, 2017, respectively	2,959			2,861
Class B common shares, $0.01 par value per share, 50,000,000 shares authorized, 635,075 shares issued and outstanding at September 30, 2018, and December 31, 2017	6			6
Preferred shares, $0.01 par value per share, 100,000,000 shares authorized, 35,350,000 and 38,350,000 shares issued and outstanding at September 30, 2018, and December 31, 2017, respectively	354			384
Additional paid-in capital	5,750,309			5,600,256
Accumulated deficit	(493,995		)	(453,953		)
Accumulated other comprehensive income	9,026			75
Total shareholders’ equity	5,268,659			5,149,629
Noncontrolling interest	720,345			726,195
Total equity	5,989,004			5,875,824

Total liabilities and equity	$	8,971,426		$	8,608,768

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent

Condensed Consolidated Statements of Operations

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

(Unaudited)



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2018		2017		2018			2017
Revenues:
Rents from single-family properties	$	231,324	$	207,490	$	676,558		$	613,245
Fees from single-family properties	2,711		2,843		8,298			8,137
Tenant charge-backs	44,152		36,094		112,876			91,849
Other	1,865		409		4,807			4,367
Total revenues	280,052		246,836		802,539			717,598

Expenses:
Property operating expenses	113,600		97,944		313,430			267,203
Property management expenses	18,865		17,447		56,468			52,367
General and administrative expense	9,265		8,525		28,173			26,746
Interest expense	30,930		26,592		92,209			86,873
Acquisition fees and costs expensed	1,055		1,306		3,687			3,814
Depreciation and amortization	79,940		74,790		237,562			221,459
Hurricane-related charges, net	—		10,136		—			10,136
Other	1,069		1,285		3,520			4,202
Total expenses	254,724		238,025		735,049			672,800

Gain on sale of single-family properties and other, net	4,953		1,895		10,449			6,375
Loss on early extinguishment of debt	—		—		(1,447		)	(6,555		)
Remeasurement of participating preferred shares	—		8,391		1,212			1,341

Net income	30,281		19,097		77,704			45,959

Noncontrolling interest	2,881		309		845			(22		)
Dividends on preferred shares	12,223		17,253		38,804			46,122
Redemption of participating preferred shares	—		—		32,215			—

Net income (loss) attributable to common shareholders	$	15,177	$	1,535	$	5,840		$	(141	)

Weighted-average shares outstanding:
Basic	296,214,509		266,767,313		292,656,914			256,768,343
Diluted	296,967,649		289,153,060		293,319,245			256,768,343

Net income (loss) attributable to common shareholders per share:
Basic	$	0.05	$	0.01	$	0.02		$	—
Diluted	$	0.05	$	—	$	0.02		$	—

Dividends declared per common share	$	0.05	$	0.05	$	0.15		$	0.15

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands)

(Unaudited)



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2018			2017		2018			2017
Net income	$	30,281		$	19,097	$	77,704		$	45,959
Other comprehensive (loss) income:
Gain on cash flow hedging instruments:
Gain on settlement of cash flow hedging instrument	—			—		9,553			—
Reclassification adjustment for amortization of interest expense included in net income	(241		)	—		(602		)	(28		)
Gain on investment in equity securities:
Reclassification adjustment for realized gain included in net income	—			—		—			(67		)
Other comprehensive (loss) income	(241		)	—		8,951			(95		)
Comprehensive income	30,040			19,097		86,655			45,864
Comprehensive income (loss) attributable to noncontrolling interests	2,835			309		2,269			(5		)
Dividends on preferred shares	12,223			17,253		38,804			46,122
Redemption of participating preferred shares	—			—		32,215			—
Comprehensive income (loss) attributable to common shareholders	$	14,982		$	1,535	$	13,367		$	(253	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent

Condensed Consolidated Statement of Equity

(Amounts in thousands, except share data)

(Unaudited)



	Class A common shares					Class B common shares			Preferred shares
	Number of shares		Amount			Number of shares	Amount		Number of shares		Amount			Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income		Shareholders’ equity			Noncontrolling interest			Total equity

Balances at December 31, 2017	286,114,637		$	2,861		635,075	$	6	38,350,000		$	384		$	5,600,256		$	(453,953	)	$	75	$	5,149,629		$	726,195		$	5,875,824

Share-based compensation	—		—			—	—		—		—			2,750			—			—		2,750			—			2,750

Common stock issued under share-based compensation plans, net of shares withheld for employee taxes	736,918		7			—	—		—		—			10,882			—			—		10,889			—			10,889

Issuance of perpetual preferred shares, net of offering costs of $4,022	—		—			—	—		4,600,000		46			110,932			—			—		110,978			—			110,978

Redemption of Series C participating preferred shares into Class A common shares	10,848,827		109			—	—		(7,600,000	)	(76		)	60,440			(32,215		)	—		28,258			—			28,258

Repurchase of Class A common shares	(1,804,163	)	(18		)	—	—		—		—			(34,951		)	—			—		(34,969		)	—			(34,969		)

Liquidation of consolidated joint venture	—		—			—	—		—		—			—			(1,849		)	—		(1,849		)	1,608			(241		)

Distributions to equity holders:
Preferred shares	—		—			—	—		—		—			—			(38,804		)	—		(38,804		)	—			(38,804		)
Noncontrolling interests	—		—			—	—		—		—			—			—					—			(8,303		)	(8,303		)
Common shares	—		—			—	—		—		—			—			(44,033		)	—		(44,033		)	—			(44,033		)

Net income	—		—			—	—		—		—			—			76,859			—		76,859			845			77,704

Total other comprehensive income	—		—			—	—		—		—			—			—			8,951		8,951			—			8,951

Balances at September 30, 2018	295,896,219		$	2,959		635,075	$	6	35,350,000		$	354		$	5,750,309		$	(493,995	)	$	9,026	$	5,268,659		$	720,345		$	5,989,004

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)



	For the Nine Months Ended September 30,
	2018			2017
Operating activities
Net income	$	77,704		$	45,959
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	237,562			221,459
Noncash amortization of deferred financing costs	5,838			6,285
Noncash amortization of discounts on debt instruments	2,984			2,624
Noncash amortization of cash flow hedging instrument	(602		)	—
Noncash share-based compensation	2,750			3,175
Provision for bad debt	6,365			5,142
Hurricane-related charges, net	—			10,136
Loss on early extinguishment of debt	1,447			6,555
Remeasurement of participating preferred shares	(1,212		)	(1,341		)
Equity in net earnings of unconsolidated ventures	(423		)	(1,367		)
Net gain on sale of single-family properties and other	(10,449		)	(6,375		)
Loss on impairment of single-family properties	2,796			3,786
Net gain on resolutions of mortgage loans	—			(17		)
Other changes in operating assets and liabilities:
Rent and other receivables	(16,314		)	(11,929		)
Prepaid expenses and other assets	(7,427		)	(5,690		)
Deferred leasing costs	(9,556		)	(5,361		)
Accounts payable and accrued expenses	87,438			71,325
Amounts payable to affiliates	(2,438		)	5,009
Net cash provided by operating activities	376,463			349,375

Investing activities
Cash paid for single-family properties	(333,082		)	(462,875		)
Change in escrow deposits for purchase of single-family properties	(2,194		)	(2,710		)
Net proceeds received from sales of single-family properties and other	47,757			68,618
Proceeds received from hurricane-related insurance claims	4,000			—
Investment in unconsolidated joint venture	(3,800		)	—
Distributions from joint ventures	36,251			5,981
Collections from mortgage financing receivables	—			83
Initial renovations to single-family properties	(40,898		)	(31,208		)
Recurring and other capital expenditures for single-family properties	(40,470		)	(26,725		)
Other purchases of productive assets	(149,475		)	(38,060		)
Net cash used for investing activities	(481,911		)	(486,896		)

Financing activities
Proceeds from issuance of Class A common shares	—			694,765
Payments of Class A common share issuance costs	—			(10,444		)
Proceeds from issuance of perpetual preferred shares	115,000			270,000
Payments of perpetual preferred share issuance costs	(3,750		)	(9,229		)
Repurchase of Class A common shares	(34,969		)	—
Share-based compensation proceeds, net	8,871			988
Redemptions of Class A units	—			(169		)
Payments on asset-backed securitizations	(15,669		)	(472,470		)
Proceeds from revolving credit facility	155,000			62,000
Payments on revolving credit facility	(295,000		)	(112,000		)
Proceeds from term loan facility	—			25,000
Payments on term loan facility	(100,000		)	(100,000		)
Payments on secured note payable	(49,427		)	(721		)
Proceeds from unsecured senior notes, net of discount	497,210			—
Settlement of cash flow hedging instrument	9,628			—
Distributions to noncontrolling interests	(8,303		)	(8,333		)
Distributions to common shareholders	(43,524		)	(38,890		)
Distributions to preferred shareholders	(41,178		)	(46,122		)

American Homes 4 Rent

Condensed Consolidated Statements of Cash Flows (continued)

(Amounts in thousands)

(Unaudited)



	For the Nine Months Ended September 30,
	2018			2017
Financing activities (continued)
Deferred financing costs paid	(5,100		)	(3,974		)
Net cash provided by financing activities	188,789			250,401

Net increase in cash, cash equivalents and restricted cash	83,341			112,880
Cash, cash equivalents and restricted cash, beginning of period	182,823			250,241
Cash, cash equivalents and restricted cash, end of period (see Note 3)	$	266,164		$	363,121

Supplemental cash flow information
Cash payments for interest, net of amounts capitalized	$	(80,942	)	$	(77,964	)

Supplemental schedule of noncash investing and financing activities
Accounts payable and accrued expenses related to property acquisitions, renovations and construction	$	(107	)	$	7,151
Transfer of term loan borrowings to revolving credit facility	$	—		$	50,000
Transfer of deferred financing costs from term loan to revolving credit facility	$	—		$	1,524
Transfers of completed homebuilding deliveries to properties	$	64,867		$	3,010
Property and land contributions to an unconsolidated joint venture	$	(40,942	)	$	—
Note receivable related to a bulk sale of properties, net of discount	$	—		$	5,635
Redemption of participating preferred shares	$	(28,258	)	$	—
Accrued distributions to affiliates	$	(129	)	$	—
Accrued distributions to non-affiliates	$	(1,773	)	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent, L.P.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except unit data)



	September 30, 2018			December 31, 2017
	(Unaudited)
Assets
Single-family properties:
Land	$	1,689,207		$	1,665,631
Buildings and improvements	7,385,387			7,303,270
Single-family properties held for sale, net	299,551			35,803
	9,374,145			9,004,704
Less: accumulated depreciation	(1,115,588		)	(939,724		)
Single-family properties, net	8,258,557			8,064,980
Cash and cash equivalents	110,138			46,156
Restricted cash	156,026			136,667
Rent and other receivables, net	36,078			30,144
Escrow deposits, prepaid expenses and other assets	248,614			171,851
Amounts due from affiliates	28,297			25,666
Deferred costs and other intangibles, net	13,437			13,025
Goodwill	120,279			120,279
Total assets	$	8,971,426		$	8,608,768

Liabilities
Revolving credit facility	$	—		$	140,000
Term loan facility, net	99,176			198,023
Asset-backed securitizations, net	1,965,417			1,977,308
Unsecured senior notes, net	492,603			—
Exchangeable senior notes, net	114,507			111,697
Secured note payable	—			48,859
Accounts payable and accrued expenses	305,935			222,867
Amounts payable to affiliates	4,784			4,720
Participating preferred units derivative liability	—			29,470
Total liabilities	2,982,422			2,732,944

Commitments and contingencies

Capital
Partners' capital:
General partner:
Common units (296,531,294 and 286,749,712 units issued and outstanding at September 30, 2018, and December 31, 2017, respectively)	4,405,198			4,248,236
Preferred units (35,350,000 and 38,350,000 units issued and outstanding at September 30, 2018, and December 31, 2017, respectively)	854,435			901,318
Limited partners:
Common units (55,350,153 units issued and outstanding at September 30, 2018, and December 31, 2017)	720,345			727,544
Accumulated other comprehensive income	9,026			75
Total partners' capital	5,989,004			5,877,173
Noncontrolling interest	—			(1,349		)
Total capital	5,989,004			5,875,824

Total liabilities and capital	$	8,971,426		$	8,608,768

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent, L.P.

Condensed Consolidated Statements of Operations

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

(Unaudited)



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2018		2017			2018			2017
Revenues:
Rents from single-family properties	$	231,324	$	207,490		$	676,558		$	613,245
Fees from single-family properties	2,711		2,843			8,298			8,137
Tenant charge-backs	44,152		36,094			112,876			91,849
Other	1,865		409			4,807			4,367
Total revenues	280,052		246,836			802,539			717,598

Expenses:
Property operating expenses	113,600		97,944			313,430			267,203
Property management expenses	18,865		17,447			56,468			52,367
General and administrative expense	9,265		8,525			28,173			26,746
Interest expense	30,930		26,592			92,209			86,873
Acquisition fees and costs expensed	1,055		1,306			3,687			3,814
Depreciation and amortization	79,940		74,790			237,562			221,459
Hurricane-related charges, net	—		10,136			—			10,136
Other	1,069		1,285			3,520			4,202
Total expenses	254,724		238,025			735,049			672,800

Gain on sale of single-family properties and other, net	4,953		1,895			10,449			6,375
Loss on early extinguishment of debt	—		—			(1,447		)	(6,555		)
Remeasurement of participating preferred units	—		8,391			1,212			1,341

Net income	30,281		19,097			77,704			45,959

Noncontrolling interest	—		(31		)	(259		)	8
Preferred distributions	12,223		17,253			38,804			46,122
Redemption of participating preferred units	—		—			32,215			—

Net income (loss) attributable to common unitholders	$	18,058	$	1,875		$	6,944		$	(171	)

Weighted-average common units outstanding:
Basic	351,564,662		322,303,138			348,007,067			312,315,728
Diluted	352,317,802		344,688,885			348,669,398			312,315,728

Net income (loss) attributable to common unitholders per unit:
Basic	$	0.05	$	0.01		$	0.02		$	—
Diluted	$	0.05	$	—		$	0.02		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent, L.P.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands)

(Unaudited)



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Net income	$	30,281		$	19,097		$	77,704		$	45,959
Other comprehensive (loss) income:
Gain on cash flow hedging instruments:
Gain on settlement of cash flow hedging instrument	—			—			9,553			—
Reclassification adjustment for amortization of interest expense included in net income	(241		)	—			(602		)	(28		)
Gain on investment in equity securities:
Reclassification adjustment for realized gain included in net income	—			—			—			(67		)
Other comprehensive (loss) income	(241		)	—			8,951			(95		)
Comprehensive income	30,040			19,097			86,655			45,864
Comprehensive (loss) income attributable to noncontrolling interests	—			(31		)	(259		)	8
Preferred distributions	12,223			17,253			38,804			46,122
Redemption of participating preferred units	—			—			32,215			—
Comprehensive income (loss) attributable to common unitholders	$	17,817		$	1,875		$	15,895		$	(266	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent, L.P.

Condensed Consolidated Statement of Capital

(Amounts in thousands, except unit data)

(Unaudited)



	General Partner								Limited Partners				Accumulated other comprehensive income		Total partners' capital			Noncontrolling interest			Total capital
	Common capital					Preferred capital amount			Common capital
	Units		Amount						Units	Amount

Balances at December 31, 2017	286,749,712		$	4,248,236		$	901,318		55,350,153	$	727,544		$	75	$	5,877,173		$	(1,349	)	$	5,875,824

Share-based compensation	—		2,750			—			—	—			—		2,750			—			2,750

Common units issued under share-based compensation plans, net of units withheld for employee taxes	736,918		10,889			—			—	—			—		10,889			—			10,889

Issuance of perpetual preferred units, net of offering costs of $4,022	—		—			110,978			—	—			—		110,978			—			110,978

Redemption of Series C participating preferred units into Class A units	10,848,827		186,119			(157,861		)	—	—			—		28,258			—			28,258

Repurchase of Class A units	(1,804,163	)	(34,969		)	—			—	—			—		(34,969		)	—			(34,969		)

Liquidation of consolidated joint venture	—		(1,849		)	—			—	—			—		(1,849		)	1,608			(241		)

Distributions to capital holders:
Preferred units	—		—			(38,804		)	—	—			—		(38,804		)	—			(38,804		)
Noncontrolling interests	—		—			—			—	—					—			—			—
Common units	—		(44,033		)	—			—	(8,303		)	—		(52,336		)	—			(52,336		)

Net income	—		38,055			38,804			—	1,104			—		77,963			(259		)	77,704

Total other comprehensive income	—		—			—			—	—			8,951		8,951			—			8,951

Balances at September 30, 2018	296,531,294		$	4,405,198		$	854,435		55,350,153	$	720,345		$	9,026	$	5,989,004		$	—		$	5,989,004

The accompanying notes are an integral part of these condensed consolidated financial statements.

American Homes 4 Rent, L.P.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)



	For the Nine Months Ended September 30,
	2018			2017
Operating activities
Net income	$	77,704		$	45,959
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	237,562			221,459
Noncash amortization of deferred financing costs	5,838			6,285
Noncash amortization of discounts on debt instruments	2,984			2,624
Noncash amortization of cash flow hedging instrument	(602		)	—
Noncash share-based compensation	2,750			3,175
Provision for bad debt	6,365			5,142
Hurricane-related charges, net	—			10,136
Loss on early extinguishment of debt	1,447			6,555
Remeasurement of participating preferred units	(1,212		)	(1,341		)
Equity in net earnings of unconsolidated ventures	(423		)	(1,367		)
Net gain on sale of single-family properties and other	(10,449		)	(6,375		)
Loss on impairment of single-family properties	2,796			3,786
Net gain on resolutions of mortgage loans	—			(17		)
Other changes in operating assets and liabilities:
Rent and other receivables	(16,314		)	(11,929		)
Prepaid expenses and other assets	(7,427		)	(5,690		)
Deferred leasing costs	(9,556		)	(5,361		)
Accounts payable and accrued expenses	87,438			71,325
Amounts payable to affiliates	(2,438		)	5,009
Net cash provided by operating activities	376,463			349,375

Investing activities
Cash paid for single-family properties	(333,082		)	(462,875		)
Change in escrow deposits for purchase of single-family properties	(2,194		)	(2,710		)
Net proceeds received from sales of single-family properties and other	47,757			68,618
Proceeds received from hurricane-related insurance claims	4,000			—
Investment in unconsolidated joint venture	(3,800		)	—
Distributions from joint ventures	36,251			5,981
Collections from mortgage financing receivables	—			83
Initial renovations to single-family properties	(40,898		)	(31,208		)
Recurring and other capital expenditures for single-family properties	(40,470		)	(26,725		)
Other purchases of productive assets	(149,475		)	(38,060		)
Net cash used for investing activities	(481,911		)	(486,896		)

Financing activities
Proceeds from issuance of Class A units	—			694,765
Payments of Class A unit issuance costs	—			(10,444		)
Proceeds from issuance of perpetual preferred units	115,000			270,000
Payments of perpetual preferred unit issuance costs	(3,750		)	(9,229		)
Repurchase of Class A units	(34,969		)	—
Share-based compensation proceeds, net	8,871			988
Redemptions of Class A units	—			(169		)
Payments on asset-backed securitizations	(15,669		)	(472,470		)
Proceeds from revolving credit facility	155,000			62,000
Payments on revolving credit facility	(295,000		)	(112,000		)
Proceeds from term loan facility	—