American Homes 4 Rent (NYSE:AMH), a real estate investment trust (REIT) with a market capitalization of $15.9 billion, has completed an offering of $500 million in senior unsecured notes with a 5.250% interest rate, due March 15, 2035. The transaction took place on Monday, as part of the company's capital management strategy.
According to InvestingPro data, the company maintains a strong financial health score, with liquid assets exceeding short-term obligations.
The notes, issued by American Homes 4 Rent's operating partnership, were sold at 99.484% of their par value. Interest on these notes is payable semi-annually, starting March 15, 2025. The notes rank equally with all of the operating partnership’s existing and future unsecured and unsubordinated debt.
As per the terms set forth in the indenture, the notes may be redeemed in whole or in part before maturity. The redemption price will be the greater of a make-whole amount or 100% of the principal, plus accrued interest. Starting December 15, 2034, the redemption price will be 100% of the principal amount. This offering adds to the company's total debt position of $4.53 billion, as reported in recent financial statements.
The indenture also includes covenants limiting the operating partnership's ability to incur additional debt and to undertake mergers or asset sales, among other restrictions. However, these covenants are subject to several exceptions and qualifications. Additionally, the operating partnership is required to maintain a certain level of unencumbered assets relative to its unsecured indebtedness.
The offering was executed under an automatic shelf registration statement filed with the Securities and Exchange Commission (SEC) on June 9, 2023. The notes were offered through a prospectus supplement filed on December 2, 2024.
This financial move is based on information from a press release statement.
In other recent news, American Homes 4 Rent has seen significant financial growth, reporting a 4.4% increase in year-over-year revenue and a 5.4% increase in core net operating income. The company issued $500 million in senior notes as part of its strategy to secure long-term financing and further invest in its portfolio of single-family rental homes.
The notes are unsecured and rank equally with the operating partnership's current and future unsecured debt.
Investment firm Evercore ISI upgraded American Homes 4 Rent from "In Line" to "Outperform," suggesting a potential return of approximately 16%. The upgrade was prompted by expectations that high mortgage rates will continue to fuel demand for single-family rentals, potentially increasing the company's pricing power. However, Keefe, Bruyette & Woods adjusted the price target for American Homes 4 Rent to $38 from the previous $39, while maintaining a Market Perform rating on the stock.
The company's development program is set to deliver 2,300 homes this year, having already acquired 1,700 homes for $480 million, with a projected 6% net operating income. Despite challenges such as hurricane impacts, American Homes 4 Rent reported net income of $73.8 million, or $0.20 per diluted share, and revised its 2024 guidance to include core funds from operations of $1.77 per share.
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