Single Family Residential Giant American Homes 4 Rent Sells a New Preferred
By: Tim McPartland,
By Tim McPartland
American Homes 4 Rent (NYSE: AMH) has sold another new preferred stock issue.
It was only three months ago that the real estate investment trust (REIT) sold its last preferred stock offering. The new issue has a coupon of 5.875%, which is identical to its new issue in April.
The latest new issue is a bit smaller than the last one, with just 4.6 million shares offered. The proceeds from this offering will be used for purchases of additional single-family homes, which will be renovated and leased out.
American Homes 4 Rent is one of the largest owners of single-family houses in the United States, with over 48,000 properties located in 22 states. The company was founded and is controlled by B. Wayne Hughes and his family. Mr. Hughes was the founder of giant REITs Public Storage (NYSE:PSA) and PS Business Parks (NYSE:PSB). All three REITs that Mr. Hughes controls rely heavily on preferred stock issuance to finance the businesses, and this new issue will be the seventh outstanding preferred issue for AMH.
This new issue is rated BB by Standard and Poor’s and is not rated by Moody’s. As AMH is a REIT, dividends on this issue are not qualified for preferential tax treatment and are taxed at ordinary tax rates. Dividends generally are cumulative and are paid quarterly. The REIT has the option to redeem the issue in about five years.
While the coupon of this new issue is relatively meager, it a quality issue, as single-family residences have long been relatively stable assets. As a perpetual (having no stated maturity date) security, we would expect it to react negatively to increases in long-term interest rates.
To compare all seven issues that AMH has outstanding, you can go to the preferred stock page arranged by the issuer here. Investors should be aware that the preferred stock series A, B and C, which American Homes 4 Rent has outstanding, are “participating” preferreds. This means that they have a stated coupon, but holders participate in the appreciation of the property portfolio. These three issues are not directly comparable to the other four issues.
Shares should begin trading on the OTC Grey Market under the temporary ticker symbol of AMMRP on Wednesday.
To get more information on preferred stocks and exchange traded debt (baby bonds), screen them, set up your own portfolio and receive email alerts, go to www.preferred-stock.com now.
Tim McPartland is a private investor with over 45 years of investment experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.