Single Family Residential REIT American Homes 4 Rent Sells a Preferred Issue
By: Tim McPartland,
Giant single family residence owner American Homes 4 Rent (NYSE:AMH) has sold a new preferred stock issue. The issue carries a coupon of 6.50% and shares should begin trading on the OTC Grey market tomorrow (Wednesday). The OTC Grey market ticker is AMHHP.
AMH currently has 3 other preferred stock issues, but all of the 3 are very different from the new issue just sold. The 3 older issues all trade with a “home price appreciation factor” which is accrued in the price of the shares. The 3 older issues trade with coupons of either 5 or 5.5%, but trade above par as they have accrued appreciation of the portfolio houses in the price. Additionally, the older issues have a “coupon penalty” which takes effect 7 years after issuance if the shares are not redeemed. This penalty coupon is 10%.
The new issue just sold with a coupon of 6.50% has none of the special items of the earlier issues and is just a standard preferred issue with the normal terms-redeemable, at the company’s option, after approximately 5 years and perpetual (meaning there is no maturity date). While this new preferred stock issue is unrated, we believe it to be a high quality issue and it should be of interest to those with a conservative outlook.
Details of this new issue can be found here.
An interesting note on American Homes 4 Rent is that B. Wayne Hughes is the chairman of the board. Mr. Hughes is the founder of REIT giants Public Storage (NYSE:PSA) and PS Business Parks (NYSE:PSB). B. Wayne Hughes has an excellent history of running profitable REITs and AMH is no exception. The company is a giant in the sector of single family residential home REITs and owns almost 48,000 single family properties. AMH pays a dividend of just 5 cents/quarter on their common shares while Funds from Operations (FFO–which is a REIT measure of profitability) was 23 cents last quarter which leaves substantial cash to be reinvested in the company.