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Debt | 12 Months Ended
--- | ---
Dec. 31, 2019
Debt Disclosure [Abstract] |
Debt | Debt All of the Company’s indebtedness is debt of the Operating Partnership. AH4R is not directly obligated under any indebtedness, but guarantees some of the debt of the Operating Partnership. The following table presents the Company’s debt as of December 31, 2019 and 2018 (in thousands):
|  |  |  |  | Outstanding Principal Balance
| Interest Rate (1) |  | Maturity Date |  | December 31, 2019 |  | December 31, 2018
AH4R 2014-SFR2 securitization | 4.42 | % |  | October 9, 2024 |  | $ | 485,828 |  |  | $ | 491,195 |
AH4R 2014-SFR3 securitization | 4.40 | % |  | December 9, 2024 |  | 501,393 |  |  | 506,760 |
AH4R 2015-SFR1 securitization (2) | 4.14 | % |  | April 9, 2045 |  | 526,560 |  |  | 532,197 |
AH4R 2015-SFR2 securitization (3) | 4.36 | % |  | October 9, 2045 |  | 457,212 |  |  | 462,358 |
Total asset-backed securitizations |  |  |  |  | 1,970,993 |  |  | 1,992,510 |
2028 unsecured senior notes (4) | 4.08 | % |  | February 15, 2028 |  | 500,000 |  |  | 500,000 |
2029 unsecured senior notes | 4.90 | % |  | February 15, 2029 |  | 400,000 |  |  | — |
Revolving credit facility (5) | 2.96 | % |  | June 30, 2022 |  | — |  |  | 250,000 |
Term loan facility (6) | N/A |  |  | N/A |  | — |  |  | 100,000 |
Total debt |  |  |  |  | 2,870,993 |  |  | 2,842,510 |
Unamortized discount on unsecured senior notes |  |  |  |  | (4,143 | ) |  | (2,546 | )
Deferred financing costs, net (7) |  |  |  |  | (33,353 | ) |  | (36,421 | )
Total debt per balance sheet |  |  |  |  | $ | 2,833,497 |  |  | $ | 2,803,543 |
(1) | Interest rates are as of December 31, 2019. Unless otherwise stated, interest rates are fixed percentages.
(2) | The AH4R 2015-SFR1 securitization has an anticipated repayment date of April 9, 2025.
(3) | The AH4R 2015-SFR2 securitization has an anticipated repayment date of October 9, 2025.
(4) | The stated interest rate on the 2028 unsecured senior notes is 4.25%, which was effectively hedged to yield an interest rate of 4.08%.
(5) | The revolving credit facility provides for a borrowing capacity of up to $800.0 million, and the Company had approximately $6.2 million and $1.1 million committed to outstanding letters of credit that reduced our borrowing capacity as of December 31, 2019 and 2018, respectively. The revolving credit facility bears interest at the London Inter-Bank Offered Rate (“LIBOR”) plus 1.20% as of December 31, 2019. LIBOR is expected to be discontinued after 2021 and the Company expects to replace the contractual reference rate with an appropriate alternative. The Company does not expect this modification to have a material impact on its financial statements.
(6) | The term loan was fully repaid in June 2019.
(7) | Deferred financing costs relate to our asset-backed securitizations, term loan facility and unsecured senior notes. Amortization of these deferred financing costs was $5.9 million, $5.8 million and $6.4 million for the years ended December 31, 2019, 2018 and 2017, respectively, which is included in gross interest, prior to interest capitalization.
Early Extinguishment of Debt During the year ended December 31, 2019, the Company paid off the $100.0 million remaining outstanding principal on our term loan facility, which resulted in $0.7 million of charges related to the write-off of unamortized deferred financing costs. During the year ended December 31, 2018, the Company paid off the outstanding principal on the secured note payable of approximately $48.4 million, which resulted in $0.5 million of charges related to the early extinguishment of debt. The payoff of the secured note payable also resulted in the release of the 572 homes pledged as collateral and $2.1 million of restricted cash for lender requirements. Also during the year ended December 31, 2018, the Company paid down $100.0 million on our term loan facility, which resulted in $0.9 million of charges related to the write-off of unamortized deferred financing costs. During the year ended December 31, 2017, the Company paid off the outstanding principal on the AH4R 2014-SFR1 asset-backed securitization of approximately $455.4 million using proceeds from the Class A common share offering in the first quarter of 2017 and available cash, which resulted in $6.6 million of charges primarily related to the write-off of unamortized deferred financing costs. The payoff of the AH4R 2014-SFR1 asset-backed securitization also resulted in the release of the 3,799 homes pledged as collateral and $9.4 million of restricted cash for lender requirements. The charges resulting from early the extinguishment of debt and write-off of unamortized deferred financing costs were included in loss on early extinguishment of debt within the consolidated statements of operations. Debt Maturities The following table summarizes the contractual maturities of the Company’s principal debt balances on a fully extended basis as of December 31, 2019 (in thousands):
| Debt Maturities |
2020 | $ | 20,714 |
2021 | 20,714 |
2022 | 20,714 |
2023 | 20,714 |
2024 | 955,875 |
Thereafter | 1,832,262 |
Total debt | $ | 2,870,993 |
Encumbered Properties The following table displays the number of properties pledged as collateral for the Company’s asset-backed securitization loans and the aggregate net book values as of December 31, 2019 and 2018 (in thousands, except property data):
| December 31, 2019 |  | December 31, 2018
| Number of Properties |  | Net Book Value |  | Number of Properties |  | Net Book Value
AH4R 2014-SFR2 securitization | 4,543 |  |  | $ | 592,203 |  |  | 4,546 |  |  | $ | 611,279 |
AH4R 2014-SFR3 securitization | 4,587 |  |  | 642,189 |  |  | 4,588 |  |  | 662,068 |
AH4R 2015-SFR1 securitization | 4,696 |  |  | 641,595 |  |  | 4,697 |  |  | 662,202 |
AH4R 2015-SFR2 securitization | 4,175 |  |  | 592,900 |  |  | 4,178 |  |  | 612,835 |
Total encumbered properties | 18,001 |  |  | $ | 2,468,887 |  |  | 18,009 |  |  | $ | 2,548,384 |
Asset-backed Securitizations General Terms As of December 31, 2019, the Company has completed multiple asset-backed securitizations, all of which have certain general characteristics in common. The asset-backed securitization transactions resulted in newly-formed special purpose entities (the “Borrowers”), which entered into loans with third-party lenders. The Borrowers are each wholly owned by respective special purpose entities (the “Equity Owners”), which are wholly owned by the Operating Partnership. The loans were represented by promissory notes that were immediately transferred by the third-party lenders to subsidiaries of the Company and then to Real Estate Mortgage Investment Conduit (“REMIC”) trusts in exchange for single-family rental pass-through certificates representing all the beneficial ownership interests in the respective loans and trusts. Upon receipt of the certificates, the subsidiaries sold the certificates to investors. The principal amount of each class of certificates corresponds to the corresponding principal amount of the loan components with an additional class to hold the residual REMIC interest. The loans require monthly payments of interest together with principal payments representing one-twelfth of one percent of the original principal amount of the loans. The loans are secured by first priority mortgages on pools of single-family residential properties transferred to the Borrowers from the Company’s portfolio of properties. The Borrowers’ homes were substantially similar to the other properties owned by the Company and were leased to tenants underwritten on substantially the same basis as the tenants in the Company’s other properties. During the duration of the loans, the Borrowers’ properties may not generally be transferred, sold or otherwise securitized and the Company can substitute properties if a property owned by the Borrowers becomes a disqualified property under the terms of the loan or voluntarily with properties eligible for substitution, in limited circumstances, subject to the terms, conditions and limitations provided in the loan agreements. The loans are also secured by a security interest in all of the Borrowers’ personal property and a pledge of all of the assets of the Equity Owners, including a security interest in their membership interests in the Borrowers. The Company provides a limited guaranty (i) for certain losses arising out of designated acts of intentional misconduct and (ii) for the principal amount of the loans and all other obligations under the loan agreements in the event of insolvency or bankruptcy proceedings. The Company has accounted for the transfers of the notes from its subsidiaries to the trusts as sales under ASC 860, Transfers and Servicing, with no resulting gain or loss as the notes were both originated by the third-party lenders and immediately transferred at the same fair market value. The Company has also evaluated and not identified any variable interests in the trusts. Accordingly, the Company consolidates, at historical cost basis, the homes placed as collateral for the notes, and the principal balances outstanding on the notes are included in asset-backed securitizations, net within the consolidated balance sheets. The loan agreements provide that the Borrowers maintain covenants typical for securitization transactions including maintaining certain reserve accounts and a debt service coverage ratio of at least 1.20 to 1.00. The loan agreements define the debt service coverage ratio as of any determination date as a ratio in which the numerator is the net cash flow divided by the aggregate debt service for the 12-month period following the date of determination. AH4R 2014-SFR2 Securitization The AH4R 2014-SFR2 securitization, which was completed during the third quarter of 2014, is a fixed-rate loan for $513.3 million with a 10-year term, maturity date of October 9, 2024, and a duration-adjusted weighted-average interest rate of 4.42%. The loan was originally secured by first priority mortgages on a portfolio of 4,487 single-family residential properties. Also, in addition to the single-family rental pass-through certificates sold to third parties, the Company acquired all of the Class F certificates, which bear no interest, for $25.7 million. The Company has evaluated the purchased Class F certificates as a variable interest in the trust and has concluded that the Class F certificates will not absorb a majority of the trust’s expected losses or receive a majority of the trust’s expected residual returns. Additionally, the Company has concluded that the Class F certificates do not provide the Company with any ability to direct activities that could impact the trust’s economic performance. The Company does not consolidate the trust and the $25.7 million of purchased Class F certificates have been reflected as asset-backed securitization certificates in the Company’s consolidated balance sheets and as amounts due from affiliates in the Operating Partnership’s consolidated balance sheets. Gross proceeds to the Company from the transaction, after purchase of the Class F certificates, were $487.7 million, before issuance costs of $12.9 million, and were used to pay down the outstanding balance on the credit facility and for general corporate purposes. AH4R 2014-SFR3 Securitization The AH4R 2014-SFR3 securitization, which was completed during the fourth quarter of 2014, is a fixed-rate loan for $528.4 million with a 10-year term, maturity date of December 9, 2024, and a duration-adjusted weighted-average interest rate of 4.40%. The loan was originally secured by first priority mortgages on a portfolio of 4,503 single-family residential properties owned by the Borrower. Gross proceeds from the transaction were $528.4 million, before issuance costs of $12.9 million, and were used to pay down the outstanding balance on the credit facility and for general corporate purposes. AH4R 2015-SFR1 Securitization The AH4R 2015-SFR1 securitization, which was completed during the first quarter of 2015, is a fixed-rate loan for $552.8 million with a 30-year term, maturity date of April 9, 2045, and a duration-adjusted weighted-average interest rate of 4.14%. The loan was originally secured by first priority mortgages on a pool of 4,661 single-family residential properties owned by the Borrower and has an anticipated repayment date of April 9, 2025. Gross proceeds from the transaction were $552.8 million, before issuance costs of $13.3 million, and were used to pay down the outstanding balance on the credit facility and for general corporate purposes. AH4R 2015-SFR2 Securitization The AH4R 2015-SFR2 securitization, which was completed during the third quarter of 2015, is a fixed-rate loan for $477.7 million with a 30-year term, maturity date of October 9, 2045, and a duration-adjusted weighted-average interest rate of 4.36%. The loan was originally secured by first priority mortgages on a portfolio of 4,125 single-family residential properties owned by the Borrower and has an anticipated repayment date of October 9, 2025. Gross proceeds from the transaction were $477.7 million, before issuance costs of $11.3 million, and were used to pay down the outstanding balance on the credit facility and for general corporate purposes. Unsecured Senior Notes During the first quarter of 2019, the Operating Partnership issued $400.0 million of 4.90% unsecured senior notes with a maturity date of February 15, 2029 (the “2029 Notes”). Interest on the 2029 Notes, which commenced on August 15, 2019, is payable semi-annually in arrears on February 15 and August 15 of each year. The Operating Partnership received net proceeds of $395.3 million from this issuance, after underwriting fees of approximately $2.6 million and a $2.1 million discount, and before offering costs of $1.0 million. The Operating Partnership used the net proceeds from this issuance to repay amounts outstanding on our revolving credit facility and for general corporate purposes. The 2029 Notes are the Operating Partnership’s unsecured and unsubordinated obligation and rank equally in right of payment with all of the Operating Partnership’s existing and future unsecured and unsubordinated indebtedness. The indenture requires that we maintain certain financial covenants. The Operating Partnership may redeem the 2029 Notes at any time, in whole or in part, at the applicable redemption price specified in the indenture with respect to the 2029 Notes. If the 2029 Notes are redeemed on or after November 15, 2028 (three months prior to the maturity date), the redemption price will be equal to 100% of the principal amount of the 2029 Notes being redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date. During the first quarter of 2018, the Operating Partnership issued $500.0 million of 4.25% unsecured senior notes with a maturity date of February 15, 2028 (the “2028 Notes”). Interest on the 2028 Notes, which commenced on August 15, 2018, is payable semi-annually in arrears on February 15 and August 15 of each year. The Operating Partnership received net proceeds of $494.0 million from this issuance, after underwriting fees of approximately $3.2 million and a $2.8 million discount, and before offering costs of $1.9 million. The net proceeds from this issuance were used for general corporate purposes, including, without limitation, acquisitions of additional properties, the repayment of outstanding indebtedness, capital expenditures, the expansion, redevelopment and/or improvement of our properties, working capital and other general purposes, including repurchases of securities. The 2028 Notes are the Operating Partnership’s unsecured and unsubordinated obligation and rank equally in right of payment with all of the Operating Partnership’s existing and future unsecured and unsubordinated indebtedness. The indenture requires that we maintain certain financial covenants. The Operating Partnership may redeem the 2028 Notes at any time, in whole or in part, at the applicable redemption price specified in the indenture with respect to the 2028 Notes. If the 2028 Notes are redeemed on or after November 15, 2027 (three months prior to the maturity date), the redemption price will be equal to 100% of the principal amount of the 2028 Notes being redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date. Including the effect of a cash flow hedging instrument settled during the first quarter of 2018 (see Note 12), the 2028 Notes yield an effective interest rate of 4.08%. Credit Facilities During the second quarter of 2017, the Company amended our $1.0 billion credit agreement to expand our borrowing capacity on the revolving credit facility to $800.0 million and reduce the term loan facility to $200.0 million. The Company subsequently paid off the term loan facility during the second quarter of 2019. The interest rate on the revolving credit facility is, at the Company’s election, LIBOR plus a margin ranging from 0.825% to 1.55% or a base rate (generally determined according to a prime rate or federal funds rate) plus a margin ranging from 0.00% to 0.55%. The actual margin is determined based on the Company’s credit ratings in effect from time to time. Based on current corporate ratings for LIBOR-based borrowings as of December 31, 2019, the revolving credit facility bears interest at 1-month LIBOR plus 1.20%. In addition, the Company is required to pay a commitment fee in the amount of 0.25% of the principal amount of the commitments, which is also based on the Company’s credit rating. The credit agreement includes an accordion feature allowing the revolving credit facility or the term loan facility to be increased to an aggregate amount not to exceed $1.75 billion, subject to certain conditions. The revolving credit facility matures on June 30, 2021, with two six-month extension options at the Company’s election upon payment of an extension fee. The credit agreement requires that we maintain certain financial covenants. As of December 31, 2019, the Company had no outstanding borrowings against the revolving credit facility. Interest Expense The following table displays our (i) total gross interest, which includes fees on our credit facilities and amortization of deferred financing costs, the discounts on unsecured senior notes and the fair value of the exchange settlement feature of the exchangeable senior notes, and (ii) capitalized interest for the years ended December 31, 2019, 2018 and 2017 (in thousands):
| For the Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Gross interest cost | $ | 138,211 |  |  | $ | 129,571 |  |  | $ | 118,276 |
Capitalized interest | (11,097 | ) |  | (6,671 | ) |  | (5,656 | )
Interest expense | $ | 127,114 |  |  | $ | 122,900 |  |  | $ | 112,620 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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