Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ARPI > SEC Filings for ARPI > Form 10-Q on 24-Jun-2013All Recent SEC Filings

Show all filings for AMERICAN RESIDENTIAL PROPERTIES, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for AMERICAN RESIDENTIAL PROPERTIES, INC.


24-Jun-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read together with the financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This report, including the following Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements based upon our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Cautionary Note Regarding Forward-Looking Statements," as well as the risk factors described in "Item IA. Risk Factors," of this report.

Overview

We are an internally managed real estate company that acquires, owns and manages single-family homes as rental properties. In 2008, our founders, Stephen G. Schmitz, our Chief Executive Officer and Chairman, and Laurie A. Hawkes, our President and Chief Operating Officer and a member of our Board of Directors, identified a unique opportunity to acquire homes at distressed pricing and lease them at attractive rental rates. They subsequently began developing a vertically integrated platform to acquire and manage single-family homes on an institutional scale. We were formed to expand upon our founders' vision, strategy and platform.


Table of Contents

As of March 31, 2013, we owned 2,531 properties in Arizona, California, Florida, Georgia, Illinois, Indiana, Nevada, North Carolina, South Carolina and Texas with an aggregate investment of $293.1 million, and we managed an additional 608 properties for ARP Phoenix Fund I, LP, or Phoenix Fund in Arizona and Nevada. For the period from April 1, 2013 to May 31, 2013, we acquired 1,064 single-family homes for a total purchase price of approximately $122.7 million and have contracted to acquire 601 single-family homes for a total purchase price of approximately $78.6 million, of which 186 homes are in Arizona, 4 homes are in California, 75 homes are in Florida, 50 homes are in Georgia, 69 homes are in Illinois, 123 homes are in Indiana, 417 homes are in North Carolina, 1 home is in Nevada, 12 homes are in Ohio, 12 homes are in South Carolina, 120 homes are in Tennessee and 596 homes are in Texas. We actively evaluate new markets to identify investment opportunities that we believe can generate attractive risk-adjusted returns for our stockholders. There is no assurance that we will close on the properties we have under contract.

Our primary business strategy is to acquire, restore, lease and manage single-family homes as well-maintained investment properties to generate attractive risk-adjusted returns over the long-term. We believe our founders' nearly five years of direct experience in the single-family rental sector provides us with the expertise to successfully execute our business strategy nationally to institutional standards. We have the infrastructure to acquire large numbers of properties through multiple acquisition channels. We source individual properties through auctions and brokers, and portfolios of properties through brokerages or directly from operators, investors or banks, and, in the future, we may source assets from these channels and government-sponsored entities, or GSEs. We have the experience and resources necessary to restore homes to "rent-ready" condition in an efficient and cost-effective manner, to a standard that we believe appeals to our target tenants' preferences, enabling us to attract qualified tenants and to provide a high level of service to retain our tenants. We believe that our vertically integrated acquisition and management platform is critical to executing our strategy.

In addition to our primary business strategy of acquiring, restoring, leasing and managing single-family homes, we have a private mortgage financing strategy that generates attractive returns on invested capital and provides us access to acquisition opportunities and valuable market data. As of March 31, 2013, our private mortgage portfolio had an aggregate outstanding principal balance of $25.3 million, a weighted-average interest rate of 12.1% per annum and a weighted-average remaining term of 146 days. We also owned an additional $1.2 million in long-term mortgage investments. Additionally, for the period from April 1, 2013 to May 31, 2013, we funded approximately $12.2 million in private mortgage loans.

We plan to continue acquiring single-family homes and other residential real estate related assets in markets that satisfy our investment criteria. Over time, we expect that the proportion of our total assets invested in self-managed properties, properties leased to and managed by third-party preferred operators and in private mortgage financings will vary depending upon available investment opportunities and other factors. We conduct substantially all of our operations through our Operating Partnership, in which we own a 96.7% interest, including the sole 0.3% general partnership interest that we hold through a subsidiary, after completion of the our initial public offering, or IPO in May 2013, giving effect to vested and unvested LTIP awards, including those we committed to award upon completion of the IPO .

We intend to make an election to qualify, and believe we are operating so as to qualify, as a real estate investment trust, or REIT, for federal income tax purposes beginning with our short taxable year ended December 31, 2012. Assuming that we qualify for taxation as a REIT, we will generally not be subject to federal income taxes to the extent that we distribute substantially all of our taxable income to our stockholders and meet other specific requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates, and we may be ineligible to qualify as a REIT for four subsequent tax years. Even if we qualify as a REIT, we may be subject to certain state or local income taxes, and our TRS, which is our taxable REIT subsidiary. Our TRS will be subject to federal, state and local taxes on its income. In addition, the income of any TRS that we own will be subject to taxation at regular corporate rates.

Property Portfolio

The following three tables present summary statistics of our single-family homes by metropolitan statistical areas, or MSAs and metro division as of March 31, 2013. The first table includes our entire portfolio of single-family homes. The second table includes only the single-family homes that we manage. The third table includes only the single-family homes that our preferred operators manage.


Table of Contents

           Total Portfolio of Single-Family Homes-Summary Statistics

                                (March 31, 2013)



                                                                               Average
                                         Number of         Aggregate          Investment          Percent         Average Age        Average Size
MSA / Metro Division                       Homes          Investment         Per Home (1)        Leased(2)          (years)          (square feet)
Phoenix, AZ                                   1,045      $ 135,307,596      $      129,481               83 %               17                1,694
Chicago, IL                                     304      $  39,756,816      $      130,779              100 %               57                1,396
Inland Empire, CA                               209      $  36,060,024      $      172,536               70 %               15                1,914
Winston-Salem, NC                               136      $  15,733,024      $      115,684               82 %               11                1,327
Indianapolis, IN                                265      $  14,194,815      $       53,565               95 %               57                1,199
Dallas-Fort Worth, TX                            78      $  12,381,876      $      158,742               86 %               11                2,141
Atlanta, GA                                     169      $  11,923,660      $       70,554               95 %               20                1,515
Other-California (non-Inland Empire)             82      $   9,597,854      $      117,047               28 %               36                1,336
Las Vegas, NV                                    63      $   6,465,244      $      102,623               94 %               14                1,533
Fort Myers, FL                                  138      $   6,347,448      $       45,996              100 %                9                1,126
Houston, TX                                      24      $   2,867,232      $      119,468              100 %                7                1,808
Raleigh-Cary, NC                                  6      $   1,181,004      $      196,834               -  %               13                2,347
Charlotte, NC-SC                                 11      $   1,120,097      $      101,827              100 %                6                1,859
Charleston, SC                                    1      $     136,520      $      136,520               -  %                7                1,360

Total / Weighted Average                      2,531      $ 293,073,210      $      115,793               86 %               25                1,563

(1) For self-managed homes, represents average purchase price (including broker commissions and closing costs) plus average capital expenditures. For preferred operator program homes, represents purchase price (including broker commissions and closing costs) paid by us for the portfolio divided by the number of homes in the portfolio and does not include past, expected or budgeted general and administrative expenses associated with ongoing monitoring activities of our investment. The preferred operator is obligated to pay for all taxes, insurance, other expenses and capital expenditures (including significant capital improvements) required for the management, operation and maintenance of the properties. Accordingly, absent a default by the preferred operator under a long-term lease agreement with us, we expect to incur no expenses related to properties under our preferred operator program, other than general and administrative expenses associated with ongoing monitoring activities of our investment.

(2) Includes both self-managed homes and preferred operator program homes. We classify homes in our preferred operator program as 100% leased, because each preferred operator is obligated to pay us 100% of the base rent specified in the applicable lease irrespective of whether or not the homes are occupied by residential sub-tenants. This does not mean that 100% of the homes leased to preferred operators are occupied by residential sub-tenants. If a preferred operator is unable to lease a material portion of the homes it leases from us to residential sub-tenants, it may adversely affect such operator's ability to pay rent to us under the lease. We are also eligible to receive percentage rents on a quarterly basis equal to a fixed percentage of gross revenue that the preferred operator collects from its residential sub-tenants who occupy the homes.


Table of Contents

        Portfolio of Self-Managed Single-Family Homes-Summary Statistics

                                (March 31, 2013)



                                                                                                                                                                                     Leased Homes
                                                                                                                                                                                              Annual
                                                                                                                                                                                              Average
                                                                                                                                                                                             Rent per
                                                                                                                                                                                              Leased
                                                                                                                                                                               Average       Home as a
                                                              Average                                                                                                          Monthly      Percentage
                                                             Purchase         Average                                                                             Average        Rent       of Average
                                                 Number        Price          Capital            Average                                             Average        Size         Per        Investment
                                                   of           Per         Expenditures        Investment         Aggregate        Percentage         Age        (square       Leased      Per Leased
MSA / Metro Division                              Homes      Home (1)       Per Home (2)       Per  Home(3)       Investment          Leased         (years)       feet)         Home         Home(4)
Phoenix, AZ                                          887     $ 138,686     $        1,804     $      140,490     $ 124,614,630               80 %        11.2        1,775     $  1,032             8.9 %
Inland Empire, CA                                    209     $ 155,931     $       16,605     $      172,536     $  36,060,024               70 %        15.4        1,914     $  1,393             9.8 %
Winston-Salem, NC                                    136     $ 115,619     $           65     $      115,684     $  15,733,024               82 %        11.0        1,327     $  1,076            11.3 %
Dallas-Fort Worth, TX                                 78     $ 157,904     $          838     $      158,742     $  12,381,876               86 %        11.3        2,141     $  1,505            11.3 %
Other-California (non-Inland Empire)                  82     $ 107,776     $        9,271     $      117,047     $   9,597,854               28 %        35.6        1,336     $  1,215            10.5 %
Las Vegas, NV                                         50     $ 103,084     $        9,012     $      112,096     $   5,604,800               92 %         6.7        1,620     $  1,052            11.4 %
Houston, TX                                           24     $ 119,372     $           96     $      119,468     $   2,867,232              100 %         6.8        1,808     $  1,213            12.2 %
Indianapolis, IN                                      20     $ 101,500     $           65     $      101,565     $   2,031,300               40 %         7.8        1,480     $  1,047            13.4 %
Atlanta, GA                                           28     $  66,659     $        2,174     $       68,833     $   1,927,324               68 %        26.0        1,429     $    884            15.1 %
Raleigh-Cary, NC                                       6     $ 196,536     $          298     $      196,834     $   1,181,004               -  %        13.3        2,347     $     -               -  %
Charleston, SC                                         1     $ 136,455     $           65     $      136,520     $     136,520               -  %         7.3        1,360     $     -               -  %

Total /Weighted Average                            1,521     $ 135,249     $        4,222     $      139,471     $ 212,135,588               76 %        13.1        1,736     $  1,115             9.6 %

(1) Average purchase price includes broker commissions and closing costs.

(2) Represents average capital expenditures per home as of March 31, 2013. Does not include additional expected or future capital expenditures.

(3) Represents average purchase price plus average capital expenditures.

(4) Represents annualized average monthly rent per leased home as a percentage of our average investment (average purchase price per home plus average capital expenditures) per leased home. Does not include a provision for payment of ongoing property expenses (such as insurance, taxes, HOA fees and maintenance) or an allocation of our general and administrative expense, all of which materially impact our results. Accordingly, it should not be interpreted as a measure of profitability, and its utility in evaluating our business is limited. Average monthly rent for leased homes may not be indicative of average rents we may achieve on our vacant homes.

 Portfolio of Preferred Operator Program Single-Family Homes-Summary Statistics

                                (March 31, 2013)



                                                                                                                         Average
                                                                                                                         Monthly          Annual
                                                                                                                        Rent Per        Rent as a
                                                                                                                          Home          Percentage
                                            Average                                                       Average        Paid by        of Average
                                           Investment                                        Average        Size        Preferred       Investment
                           Number of          Per           Aggregate         Percent          Age        (square       Operator           Per
MSA / Metro Division         Homes          Home (1)        Investment       Leased(2)       (years)       feet)        to Us (3)        Home (4)
Chicago, IL                       304     $    130,779     $ 39,756,816             100 %          57        1,396     $       781              7.2 %
Indianapolis, IN                  245     $     49,647     $ 12,163,515             100 %          62        1,176     $       372              9.0 %
Phoenix, AZ                       158     $     67,677     $ 10,692,966             100 %          47        1,239     $       451              8.0 %
Atlanta, GA                       141     $     70,896     $  9,996,336             100 %          19        1,532     $       473              8.0 %
Fort Myers, FL                    138     $     45,996     $  6,347,448             100 %           9        1,126     $       307              8.0 %
Charlotte, NC-SC                   11     $    101,827     $  1,120,097             100 %           6        1,859     $       636              7.5 %
Las Vegas, NV                      13     $     66,188     $    860,444             100 %          42        1,198     $       441              8.0 %

Total /Weighted Average         1,010     $     80,136     $ 80,937,622             100 %          44        1,303     $       516              7.7 %

(1) Represents purchase price (including broker commissions and closing costs) paid by us for the portfolio divided by the number of homes in the portfolio and does not include past, expected or budgeted general and administrative expenses associated with ongoing monitoring activities of our investment. The preferred operator is obligated to pay for all taxes, insurance, other expenses and capital expenditures (including significant capital improvements) required for the management, operation and maintenance of the properties. Accordingly, absent a default by the preferred operator under a long-term lease agreement with us, we expect to incur no expenses related to properties under our preferred operator program, other than general and administrative expenses associated with ongoing monitoring activities of our investment.

(2) We classify homes in our preferred operator program as 100% leased, because each preferred operator is obligated to pay us 100% of the base rent specified in the applicable lease irrespective of whether or not the homes are occupied by residential sub-tenants. This does not mean that 100% of the homes leased to preferred operators are occupied by residential sub-tenants. If a preferred operator is unable to lease a material portion of the homes it leases from us to residential sub-tenants, it may adversely affect such operator's ability to pay rent to us under the lease. We are also eligible to receive percentage rents on a quarterly basis equal to a fixed percentage of gross revenue that the preferred operator collects from its residential sub-tenants who occupy the homes.

(3) Represents the initial annual base rent payable to us by the preferred operator pursuant to the portfolio lease divided by 12 and then divided by the number of homes included in the lease. Does not include percentage rents we are also eligible to receive in addition to base rents on a quarterly basis equal to a fixed percentage of gross revenue that the preferred operator collects from its residential sub-tenants who occupy the homes. The percentage rents we are eligible to receive fluctuate based on both the occupancy rates of the underlying homes and the rental rates paid by the residential sub-tenants.

(4) Represents annualized average monthly rent paid by preferred operator to us as a percentage of our average investment per home.


Table of Contents

Stabilized Properties

When we acquire a property that is not leased, we must possess, restore, market and lease the property before it becomes a revenue generating asset. We refer to this process as property stabilization. We anticipate that, on average, the stabilization period for each non-leased property will range from 90 to 180 days, depending on factors such as the channel through which the property was acquired, the age and condition of the property and whether the property was vacant when we acquired it. Similarly, the time to market and lease a property is driven by local demand, our marketing techniques and the size of our available inventory. Consequently, we expect that most properties that were not leased at the time of acquisition should be stabilized within six months thereafter and that properties owned for more than six months provide the best indication of how our portfolio will perform over the long-term. As of March 31, 2013, we owned 729 properties for six months or longer, 82% of which were leased (classifying 138 homes in our preferred operator program as 100% leased because each preferred operator is obligated to pay us 100% of the base rent specified in the applicable lease irrespective of whether or not the homes are occupied by residential sub-tenants).

The following table presents summary statistics of our portfolio of self-managed single-family homes we owned for at least six months as of March 31, 2013.

  Portfolio of Self-Managed Properties Owned for Six Months or Longer-Summary
                                   Statistics

                                (March 31, 2013)



                                                                                                                                                                                   Leased Homes
                                                                                                                                                                                            Annual
                                                                                                                                                                                            Average
                                                                                                                                                                                           Rent Per
                                                                                                                                                                                            Leased
                                                                                                                                                                             Average       Home as a
                                                                             Average                                                                                         Monthly      Percentage
                                                                            Purchase         Average           Average                                                         Rent       of Average
                                                                              Price          Capital          Investment                                                       Per        Investment
                                                               Number          Per         Expenditure           Per           Homes          Homes         Percentage        Leased      Per Leased
MSA / Metro Division                                          of Homes      Home (1)       Per Home (2)        Home (3)        Leased       Vacant(4)         Leased           Home         Home(5)
Phoenix, AZ                                                         327     $ 124,923     $        2,007     $    126,930          281              46               86 %    $    979             9.4 %
Inland Empire, CA                                                   193     $ 158,136     $       16,834     $    174,970          136              57               71 %    $  1,403             9.8 %
Las Vegas, NV                                                        34     $ 100,374     $        8,100     $    108,474           33               1               97 %    $  1,019            11.3 %
Other-California (non-Inland Empire)                                 32     $ 102,837     $       12,198     $    115,035            6              26               19 %    $  1,285            12.3 %
Dallas-Fort Worth, TX                                                 5     $ 173,024     $        2,312     $    175,336            5              -               100 %    $  1,725            11.8 %

Total / Weighted Average                                            591     $ 133,568     $        7,754     $    141,322          461             130               78 %    $  1,119             9.7 %

(1) Average purchase price includes broker commissions and closing costs.

(2) Represents average capital expenditures per home as of March 31, 2013. Does not include additional expected or future capital expenditures.

(3) Represents average purchase price plus average capital expenditures.

(4) As of March 31, 2013, 87 homes were available for rent, 36 homes were undergoing renovation and seven homes had unauthorized occupants.

(5) Represents annualized average monthly rent per leased home as a percentage of our average investment (average purchase price per home plus average capital expenditures) per leased home. Does not include a provision for payment of ongoing property expenses (such as insurance, taxes, HOA fees and maintenance) or an allocation of our general and administrative expense, all of which materially impact our results. Accordingly, it should not be interpreted as a measure of profitability, and its utility in evaluating our business is limited. Average monthly rent for leased homes may not be indicative of average rents we may achieve on our vacant homes.

Highlights of First Quarter of 2013

Credit Facility

. . .

  Add ARPI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ARPI - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.