Single family residential (SFR) REIT American Homes 4 Rent (NYSE:AMH) has announced a new issue of preferred stock would be sold. This is 1st perpetual preferred issued by a REIT in some time.
As most of you know American Homes 4 Rent is a large owner of single family properties and was formed back when the mortgage crisis was in full blown mode. More recently the company has focused on the rental of their large, 52,000, portfolio of houses.
AMH was initially formed with the backing of B Wayne Hughes–the founder of giant storage REIT Public Storage (NYSE:PSA) and PS Business Properties (NYSE:PSB). B Wayne Hughes remains the Chairman of American Homes 4 Rent. Like Public Storage, AMH, has depended upon the issuance of preferred stock in a large way to help finance the business.
AMH currently pays a meager 5 cents/share per quarter to common holders while generating about 23 cents/share in adjusted funds from operations (AFFO). The company carries $2.4 billion in debt against $8.8 billion in assets–like other B Wayne Hughes companies the use of extreme leverage is avoided. While we are NOT impressed with the financial performance of SFR REITs the asset quality is generally good and investors seem to believe that SFR REITs are safer than other real estate assets–even though shares are rated Ba1 by Moodys and BB by S&P.
AMH has 4 current preferred issues outstanding with coupon ranging from 5.875% to 6.50%.
Pricing and size of this new issue have not yet been announced.