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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation 2021 Equity Incentive Plan The Company’s 2021 Equity Incentive Plan (the “2021 Plan”), which replaced the 2012 Equity Incentive Plan (the “2012 Plan”), provides for the issuance of Class A common shares through the grant of a variety of awards including stock options, stock appreciation rights, restricted share units (“RSUs”), unrestricted shares, dividend equivalent rights and performance-based awards. When the Company issues Class A common shares under the 2012 Plan and 2021 Plan, the Operating Partnership issues an equivalent number of Class A units to AMH. RSUs granted to employees during the nine months ended September 30, 2024 and 2023 generally vest over a three-year service period. RSUs granted to non-management trustees during the nine months ended September 30, 2024 and 2023 vest over a one-year service period. During the first quarter of 2024, the Company announced that David P. Singelyn, the Company’s Chief Executive Officer, will retire effective December 31, 2024. In connection with Mr. Singelyn’s retirement, the Company and Mr. Singelyn entered into a Retirement and Award Agreement (the “Retirement Agreement”), which became effective February 21, 2024, pursuant to which Mr. Singelyn agreed to provide transition advisory services from his retirement until June 30, 2025 and the Company granted him 46,070 RSUs on February 21, 2024 which cliff vest on June 30, 2025 upon satisfaction of certain vesting conditions, including performance of his obligations under the Retirement Agreement. In addition, the Company granted Christopher C. Lau, the Company’s Chief Financial Officer, 143,968 RSUs on February 21, 2024 which cliff vest five years from the date of grant in connection with his appointment to the elevated role of Senior Executive Vice President. Performance-based restricted share units (“PSUs”) granted to certain senior employees during the nine months ended September 30, 2024 and 2023 cliff vest at the end of a three-year service period based on satisfaction of performance conditions. The performance conditions of the PSUs are measured over the three-year performance period from January 1, 2024 through December 31, 2026 for PSUs granted during the nine months ended September 30, 2024 and from January 1, 2023 through December 31, 2025 for PSUs granted during the nine months ended September 30, 2023. A portion of the PSUs are based on (i) the achievement of relative total shareholder return compared to a specified peer group (the “TSR Awards”), and a portion are based on (ii) average annual growth in core funds from operations per share (the “Core FFO Awards”). The number of PSUs that may ultimately vest range from zero to 200% of the number of PSUs granted based on the level of achievement of these performance conditions. For the TSR Awards, grant date fair value was determined using a multifactor Monte Carlo model and the resulting compensation cost is amortized over the service period regardless of whether the performance condition is achieved. For the Core FFO Awards, fair value is based on the market value on the date of grant and compensation cost is recognized based on the probable achievement of the performance condition at each reporting period. The following table summarizes stock option activity under the 2012 Plan and 2021 Plan for the nine months ended September 30, 2024 and 2023:
| For the Nine Months Ended September 30, |  |  |  |
| 2024 |  | 2023 |  |  |  |
Options outstanding at beginning of period | 522,675 |  |  | 730,550 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Exercised | (132,675) |  |  | (182,875) |  |  |  |  |
Forfeited | — |  |  | — |  |  |  |  |
Options outstanding at end of period | 390,000 |  |  | 547,675 |  |  |  |  |
Options exercisable at end of period | 390,000 |  |  | 547,675 |  |  |  |  |
The following table summarizes RSU activity under the 2012 Plan and 2021 Plan for the nine months ended September 30, 2024 and 2023:
| For the Nine Months Ended September 30,
| 2024 |  | 2023
RSUs outstanding at beginning of period | 1,090,522 |  |  | 1,024,722 |
Granted | 694,324 |  |  | 509,730 |
Vested | (553,517) |  |  | (417,616) |
Forfeited | (37,444) |  |  | (23,998) |
RSUs outstanding at end of period | 1,193,885 |  |  | 1,092,838 |
The following table summarizes PSU activity under the 2012 Plan and 2021 Plan for the nine months ended September 30, 2024 and 2023:
| For the Nine Months Ended September 30,
| 2024 |  | 2023
PSUs outstanding at beginning of period (1) | 520,219 |  |  | 294,423 |
Granted (1) | 254,157 |  |  | 227,033 |
Adjustment for performance achievement (2) | 75,109 |  |  | — |
Vested | (167,428) |  |  | — |
Forfeited (1) | (4,759) |  |  | (1,237) |
PSUs outstanding at end of period (1) | 677,298 |  |  | 520,219 |
(1)Represents target shares at grant date. (2)Represents the difference between the number of target shares at grant date and the number of actual shares earned for the three-year performance period ended December 31, 2023, which was determined and settled during the first quarter of 2024. For the TSR Awards, the following assumptions were used in the calculation of fair value using the Monte Carlo simulation model:
| For the Nine Months Ended September 30,
| 2024 |  | 2023
Expected term (years) | 3.0 |  | 3.0
Dividend yield | 2.44% |  | 2.09%
Estimated volatility (1) | 23.83% |  | 27.45%
Risk-free interest rate | 4.19% |  | 4.16%
(1)Estimated volatility for the performance period is based on 50% historical volatility and 50% implied volatility. 2021 Employee Stock Purchase Plan The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) provides for the issuance of up to 3,000,000 Class A common shares and allows employees to acquire the Company’s Class A common shares through payroll deductions, subject to maximum purchase limitations, during six-month purchase periods. The purchase price for Class A common shares may be set at a maximum discount equal to 85% of the lower of the closing price of the Company’s Class A common shares on the first day or the last day of the applicable purchase period. The 2021 ESPP terminates in June 2031 or the date on which there are no longer any Class A common shares available for issuance. When the Company issues Class A common shares under the 2021 ESPP, the Operating Partnership issues an equivalent number of Class A units to AMH. Share-Based Compensation Expense The Company’s noncash share-based compensation expense relating to corporate administrative employees is included in general and administrative expense and the noncash share-based compensation expense relating to centralized and field property management employees is included in property management expenses. Noncash share-based compensation expense relating to employees involved in the purchases of single-family properties, including newly constructed properties from third-party builders, the development of single-family properties, or the disposal of certain properties or portfolios of properties is included in acquisition and other transaction costs. The following table summarizes the activity related to the Company’s noncash share-based compensation expense for the three and nine months ended September 30, 2024 and 2023 (amounts in thousands):
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
General and administrative expense | $ | 3,601 |  |  | $ | 4,160 |  |  | $ | 17,999 |  |  | $ | 13,885 |
Property management expenses | 1,043 |  |  | 953 |  |  | 3,827 |  |  | 3,151 |
Acquisition and other transaction costs | 1,099 |  |  | 1,303 |  |  | 4,326 |  |  | 3,712 |
Total noncash share-based compensation expense | $ | 5,743 |  |  | $ | 6,416 |  |  | $ | 26,152 |  |  | $ | 20,748 |

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 505 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/505/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/718/tableOfContent + Details
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