American Homes 4 Rent (AMH) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Our revenue and expenses are not directly correlated, and because a large percentage of our costs and expenses are fixed, we may not be able to adapt our cost structure to offset declines in our revenue
2. 02High inflation could adversely affect our operating results
3. 03Significant increases in property taxes could adversely affect our operating results
4. 04The loss of key management and staff could materially and adversely affect us
5. 05Our investments are, and are expected to continue to be, concentrated in single-family properties and we have a significant number of properties in certain geographic markets, which exposes us to significant risks if there are adverse conditions in our sector or our key markets
6. 06We may not be able to effectively control the timing and costs relating to the renovation of properties, which may adversely affect our operating results and our ability to make distributions
7. 07We face significant competition for acquisitions of our target properties, which may limit our strategic opportunities and increase the cost to acquire those properties
8. 08Our success depends on us attracting and retaining quality tenants
9. 09Bulk portfolio acquisitions subject us to the risk of acquiring properties that do not fit our target investment criteria and may be costly or time consuming to divest, which may adversely affect our operating results
10. 10Our significant development activities expose us to additional operational and real estate risks, which may adversely affect our financial condition and operating results
11. 11Our success in expanding our development activities depends in large part on our ability to acquire land in our target markets that is suitable for residential homebuilding and meets our land investment criteria
12. 12If we experience disruptions, shortages or increased costs of labor and supplies or other circumstances beyond our control, there could be delays or increased costs in constructing new rental homes, which could adversely affect our business
13. 13Our short-term leases require us to re-lease our properties frequently, which we may be unable to do on attractive terms, on a timely basis or at all
14. 14We are self-insured against many potential losses, and uninsured or underinsured losses relating to properties may adversely affect our financial condition, operating results, cash flows and ability to make distributions
15. 15Contingent or unknown liabilities associated with our property acquisitions could adversely affect our financial condition, cash flows and operating results
16. 16We are highly dependent on information systems and systems failures and delays could significantly disrupt our business, which may, in turn, adversely affect our financial condition and operating results
17. 17If our confidential information is compromised or corrupted, including as a result of a cybersecurity incident, our business operations and reputation could be damaged, which could adversely affect our financial condition and operating results
18. 18HOA rules and restrictions subject us to increased costs and restrict our business operations
19. 19Joint venture investments that we make could be adversely affected by our lack of sole decision-making authority, our reliance on joint venture partners’ financial condition and disputes between us and our joint venture partners
20. 20We are involved in a variety of litigation
21. 21New laws and regulations could impede our ability to operate or grow our business
22. 22Government investigations or legal proceedings brought by governmental authorities may result in significant costs and expenses and reputational harm and may divert resources from our operations
23. 23Elevated interest rates could adversely impact us and our tenants
24. 24Our revolving credit facility, unsecured senior notes and securitizations contain financial and operating covenants that could restrict our business and investment activities
25. 25Pandemics and other public health emergencies could have a material adverse effect on our business, results of operations, cash flows, and financial condition
26. 26Our use of artificial intelligence could expose us to various risks

Risks Related to the Real Estate Industry

1. 27Environmentally hazardous conditions may adversely affect our financial condition, cash flows and operating results
2. 28Tenant relief laws, including laws restricting evictions, rent control laws and other regulations that limit our ability to increase rental rates may negatively impact our rental income and profitability
3. 29Class action, tenant rights and consumer demands, litigation and adverse media publicity could directly limit and constrain our operations and may result in significant litigation expenses
4. 30The direct and indirect impacts of climate change may adversely affect our business
5. 31It would be difficult for us to quickly generate cash from sales of our properties

Risks Related to Our Ownership, Organization and Structure

1. 32Our senior management, trustees and their affiliates may have significant voting influence due to their stock ownership
2. 33Provisions of the Company’s declaration of trust may limit the ability of a third-party to acquire control of the Company by authorizing the Company’s board of trustees to issue additional securities
3. 34Provisions of Maryland law may limit the ability of a third-party to acquire control of us by requiring the Company’s board of trustees or shareholders to approve proposals to acquire our company or effect a change in control

Risks Related to Qualification and Operation as a REIT

1. 35Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distribution to our shareholders
2. 36we have not requested and do not intend to request a ruling from the Internal Revenue Service (the “IRS”) that we qualify as a REIT. As a result, we cannot assure you that we qualify or that we will remain qualified as a REIT
3. 37Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow
4. 38Complying with the REIT requirements may cause us to forgo and/or liquidate otherwise attractive investments
5. 39The prohibited transactions tax may limit our ability to engage in sale transactions
6. 40opportunistically to renovate in anticipation of immediate resale, we will need to conduct that activity through our TRS to avoid the 100% prohibited transactions tax
7. 41Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
8. 42Our ownership of our TRS is subject to limitations and our transactions with our TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms
9. 43You may be restricted from acquiring or transferring certain amounts of our shares
10. 44To satisfy the REIT distribution requirements, we may be forced to take certain actions to raise funds if we have insufficient cash flow which could materially and adversely affect us and the trading price of our common or preferred shares
11. 45We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our outstanding common or preferred shares
12. 46The “fast-pay stock” rules could apply if we issue preferred shares in a reopening, which could subject our shareholders to adverse U.S. federal income tax consequences