Shareholders' Equity

Class A Common Shares

In February 2016, the Company issued 36,546,170 Class A common shares, $0.01 par value per share, in connection with the ARPI Merger (see Note 11).

In August 2014, the Company issued 17,782,861 Class A common shares, $0.01 par value per share, in an underwritten public offering and concurrent private placement, which raised gross proceeds of $313.3 million before offering costs of $4.9 million.

In July 2014, the Company issued 8,158,001 Class A common shares, $0.01 par value per share, in connection with the acquisition of Beazer Rental Homes (see Note 11).

"At the Market" Common Share Offering Program

In November 2016, the Company established an “at the market” common share offering program under which we may issue Class A common shares from time to time through various sales agents up to an aggregate of $400.0 million. The program was established in order to use the net proceeds from share issuances to repay borrowings against the Company’s revolving credit and term loan facilities, to acquire and renovate single-family properties and for related activities in accordance with the Company’s business strategy, and for working capital and general corporate purposes. The program does not have an expiration date, but may be suspended or terminated by the Company at any time. During the year ended December 31, 2016, the Company issued and sold 4.9 million Class A common shares for gross proceeds of $104.0 million, or $21.13 per share, and net proceeds of $102.8 million, after commissions and other expenses of approximately $1.2 million. Net proceeds from the issuances were used to acquire and renovate single-family properties and for working capital and general corporate purposes. As of December 31, 2016, $296.0 million remained available for future share issuances under the program.

Share Repurchase Program

On September 21, 2015, the Company announced that our board of trustees approved a share repurchase program authorizing us to repurchase up to $300.0 million of our outstanding Class A common shares from time to time in the open market or in privately negotiated transactions. The program does not have an expiration date, but may be suspended or discontinued at any time without notice. All repurchased shares are constructively retired and returned to an authorized and unissued status. In addition, the excess of the purchase price over the par value of shares repurchased is recorded as a reduction to additional paid-in capital. During the year ended December 31, 2016, we repurchased and retired 6.2 million of our Class A common shares in accordance with the program at a weighted-average price of $15.44 per share and a total price of $96.0 million. During the year ended December 31, 2015, we repurchased and retired 3.6 million of our Class A common shares in accordance with the program at a weighted-average price of $15.76 per share and a total price of $57.3 million. As of December 31, 2016, we had a remaining repurchase authorization of $146.7 million under the program.

Class B Common Shares

Former AH LLC members received a total of 635,075 shares of Class B common shares in the Company in connection with its investment in the 2012 Offering and the 2,770 Property Contribution. Each Class B common share generally entitles the holder to 50 votes on all matters that the holders of Class A common shares are entitled to vote. The issuance of Class B common shares to former AH LLC members allows former AH LLC members a voting right associated with its investment in the Company no greater than if it had solely received Class A common shares. Additionally, when the voting interest from Class A common shares and Class B common shares are added together, a shareholder is limited to a 30% total voting interest. Each Class B common share has the same economic interest as a Class A common share.

Participating Preferred Shares

Participating preferred shares represent non-voting preferred equity interests in the Company and entitle holders to a cumulative annual cash dividend equal to 5.0% for Series A participating preferred shares, 5.0% for Series B participating preferred shares and 5.5% for Series C participating preferred shares of an initial liquidation preference of $25 per share. Any time between September 30, 2017, and September 30, 2020, for the Series A and Series B participating preferred shares and between March 31, 2018, and March 31, 2021, for the Series C participating preferred shares (the "initial redemption period"), the Company has the option to redeem the preferred shares for cash or Class A common shares, at a redemption price equal to the initial liquidation preference, adjusted by an amount equal to 50% of the cumulative change in value of an index based on the purchase prices of single-family properties located in our top 20 markets (the "HPA adjustment"). During the initial redemption period, the amount payable upon redemption will be subject to a cap, such that the total internal rate of return, when considering the initial liquidation preference, the HPA adjustment and dividends up to, but excluding, the date of redemption, will not exceed 9.0%. If not redeemed by the end of the initial redemption period, the initial liquidation preference of $25 per share will be adjusted by the HPA adjustment as of September 30, 2020, for the Series A and Series B participating preferred shares and as of March 31, 2021, for the Series C participating preferred shares (the "adjusted liquidation preference") and the cumulative annual cash dividend rate will be prospectively increased to 10% of the adjusted liquidation preference. Any time after September 30, 2020, for the Series A and Series B participating preferred shares and March 31, 2021, for the Series C participating preferred shares, the Company has the option to redeem the preferred shares for cash or Class A common shares, at a redemption price equal to the adjusted liquidation preference. Because the HPA adjustment meets the definition of a derivative under ASC 815, Derivatives and Hedging, and is not clearly and closely related to the economic characteristics and risks of the underlying preferred shares, the fair value of the HPA adjustment has been reflected as a liability in the consolidated balance sheets and is adjusted to fair value each period and included in remeasurement of preferred shares in the consolidated statements of operations (see Note 15).

In May 2014, the Company issued 7,600,000 5.5% Series C participating preferred shares in an underwritten public offering and concurrent private placement, raising gross proceeds of $190.0 million before offering costs of $9.7 million.

In December 2013 and January 2014, the Company issued 4,400,000 5.0% Series B participating preferred shares in an underwritten public offering which raised gross proceeds of $110.0 million before offering costs of $6.6 million.

In October 2013, the Company issued 5,060,000 5.0% Series A participating preferred shares in an underwritten public offering, which raised gross proceeds of $126.5 million before offering costs of $7.3 million.

As of December 31, 2016, the initial liquidation preference, as adjusted by an amount equal to 50% of the cumulative change in value of an index based on the purchase prices of single-family properties located in our top 20 markets, for all of the Company's outstanding 5.0% Series A participating preferred shares, 5.0% Series B participating preferred shares and 5.5% Series C participating preferred shares was $476.2 million.

Perpetual Preferred Shares

Perpetual preferred shares represent non-voting preferred equity interests in the Company and entitle holders to a cumulative annual cash dividend equal to 6.5% for Series D cumulative redeemable perpetual preferred shares ("Series D perpetual preferred shares") and 6.35% for Series E cumulative redeemable perpetual preferred shares ("Series E perpetual preferred shares"), which is applied to the liquidation preference at issuance of $25 per share. The Company may, at its option, redeem the perpetual preferred shares for cash, in whole or in part, from time to time, at any time on or after May 24, 2021, for the Series D perpetual preferred shares and June 29, 2021, for the Series E perpetual preferred shares or within 120 days after the occurrence of a change in control at a redemption price equal to the $25 per share liquidation preference, plus any accumulated and unpaid dividends.

During June 2016, the Company issued 9,200,000 6.35% Series E perpetual preferred shares in an underwritten public offering, raising gross proceeds of $230.0 million before offering costs of $7.5 million.

During May 2016, the Company issued 10,750,000 6.5% Series D perpetual preferred shares in an underwritten public offering and concurrent private placement, raising gross proceeds of $268.8 million before offering costs of $8.5 million.

Class A Units

Class A units represent voting equity interests in our operating partnership. Holders of Class A units in our operating partnership have the right to redeem the units for cash or, at the election of the Company, exchange the units for the Company's Class A common shares on a one-for-one basis. The Company owned 81.4% and 93.5% of the total 298,931,517 and 222,311,255 Class A units outstanding as of December 31, 2016 and 2015, respectively.

In February 2016, the Company issued 1,343,843 Class A units in connection with the ARPI Merger (see Note 11).

Conversion of Series C Convertible Units into Class A Units

The Series C convertible units represented voting equity interests in our operating partnership owned by former AH LLC members. On February 28, 2016, the third anniversary of their original issue date, the 31,085,974 Series C convertible units converted into Class A units on a one-for-one basis in accordance with their terms.

Conversion of Series E Convertible Units into Series D Convertible Units

The Series E convertible units represented non-voting equity interests in our operating partnership. Series E convertible units did not participate in any distributions and were convertible into Series D convertible units on February 29, 2016, subject to an earn-out provision based on the level of pro forma annualized EBITDA contribution, as defined, of the Advisor and the Property Manager. The terms of the earn-out provision were met in full and, therefore, the 4,375,000 Series E convertible units were converted into Series D convertible units on a one-for-one basis on February 29, 2016. The fair value of the Series D convertible units was estimated using a Monte Carlo simulation model, which was primarily driven by the most recent trading price of the Company’s Class A common shares into which the Series D convertible units are ultimately convertible. Based on this valuation, the conversion of Series E convertible units into Series D convertible units resulted in a gain of $11.5 million which was recorded in gain on conversion of Series E units within the consolidated statements of operations. Additionally, the Series E convertible units had a $2.8 million contingent beneficial conversion feature that represents a return to the Series E convertible unit holders in the form of additional noncontrolling interest, calculated as the difference between the estimated fair value of the Series D units and the Class A units at the time of the conversion of the Series E units into Series D units in February 2016. The contingent beneficial conversion feature was recognized when the contingency was met, which occurred when the Series D units converted into Class A units on September 30, 2016.

Conversion of Series D Convertible Units into Class A Units

The Series D convertible units represented non-voting equity interests in our operating partnership owned by former AH LLC members and began participating in distributions, representing 70% of distributions declared on Class A units, 30 months after their issuance. The Series D convertible units were automatically convertible into Class A units on a one-for-one basis only after the later of (1) 30 months after the date of issuance and (2) the earlier of (i) the date on which adjusted funds from operations per Class A common share aggregated to $0.80 or more over four consecutive quarters following the original issuance date of the units and (ii) the date on which the daily closing price of our Class A common shares on the NYSE averaged $18.00 or more for two consecutive quarters following the original issuance date of the units. On September 30, 2016, the above-referenced conversion contingency was met and the 8,750,000 Series D convertible units (including the 4,375,000 Series E units that converted into Series D units on February 29, 2016) were converted into Class A units on a one-for-one basis, which resulted in a $7.6 million noncash charge (including $2.8 million from the Series E units that converted to Series D units on February 29, 2016) that was included in noncontrolling interest within the consolidated statements of operations. The noncash charge relates to a contingent beneficial conversion feature that represents a return to the Series D convertible unit holders in the form of additional noncontrolling interest, calculated as the difference between the estimated fair value of the Series D units and the Class A units at the time of their respective issuances, which was recognized when the contingency was met.

Distributions

To qualify as a REIT, we are required to distribute annually to our shareholders at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We intend to pay quarterly dividends to our shareholders, which in the aggregate are approximately equal to or exceed our net taxable income in the relevant year. During the year ended December 31, 2016, our board of trustees declared distributions that totaled $0.20 per share on our Class A and Class B common shares, $1.25 per share on our 5.0% Series A participating preferred shares, $1.25 per share on our 5.0% Series B participating preferred shares, $1.38 per share on our 5.5% Series C participating preferred shares, $0.98 per share on our 6.5% Series D perpetual preferred shares, $0.80 per share on our 6.35% Series E perpetual preferred shares, $0.07 per unit on our Series C convertible units (prior to their conversion to Class A units on February 28, 2016) and $0.11 per unit on our Series D convertible units (prior to their conversion to Class A units on September 30, 2016). During the year ended December 31, 2015, our board of trustees declared distributions that totaled $0.20 per share on our Class A and Class B common shares, $1.25 per share on our 5.0% Series A participating preferred shares, $1.25 per share on our 5.0% Series B participating preferred shares, $1.38 per share on our 5.5% Series C participating preferred shares and $0.60 per unit on our Series C convertible units. During the year ended December 31, 2014, our board of trustees declared distributions that totaled $0.20 per share on our Class A and Class B common shares, $1.25 per share on our 5.0% Series A participating preferred shares, $1.29 per share on our 5.0% Series B participating preferred shares, $0.91 per share on our 5.5% Series C participating preferred shares and $0.60 per unit on our Series C convertible units.

Noncontrolling Interest

Noncontrolling interest as reflected in the Company's consolidated balance sheets primarily consists of the interest held by former AH LLC members in units in the Company's operating partnership. Former AH LLC members owned 54,276,644 and 14,440,670, or approximately 18.2% and 6.5%, of the total 298,931,517 and 222,311,255 Class A units in our operating partnership as of December 31, 2016 and 2015, respectively. Additionally, former AH LLC members owned zero and all 31,085,974 of the Series C convertible units and owned zero and all 4,375,000 of the Series D convertible units in our operating partnership as of December 31, 2016 and 2015, respectively. Noncontrolling interest also includes interests held by former ARPI employees in Class A units of the Company's operating partnership, which were issued in connection with the ARPI Merger in February 2016. Former ARPI Class A unit holders owned 1,279,316, or approximately 0.4% of the total 298,931,517 Class A units in the operating partnership as of December 31, 2016. Also included in noncontrolling interest is the outside ownership interest in a consolidated subsidiary of the Company.

The following table summarizes the activity that relates to the Company’s noncontrolling interest as reflected in the consolidated statements of operations for the years ended December 31, 2016, 2015 and 2014 (in thousands):



	For the Years Ended December 31,
	2016			2015			2014
Preferred income allocated to Series C convertible units	$	3,027		$	18,792		$	18,600
Net loss allocated to Class A units	(6,417		)	(4,282		)	(3,372		)
Net income allocated to Series D convertible units	134			—			—
Beneficial conversion feature related to conversion of Series D and E units	7,569			—			—
Net loss allocated to noncontrolling interests in certain consolidated subsidiaries	(562		)	(157		)	(263		)
Total noncontrolling interest	$	3,751		$	14,353		$	14,965

2012 Equity Incentive Plan

In 2012, we adopted the 2012 Equity Incentive Plan (the "Plan") to provide persons with an incentive to contribute to the success of the Company and to operate and manage our business in a manner that will provide for the Company's long-term growth and profitability. The Plan provides for the issuance of up to 6,000,000 Class A common shares through the grant of a variety of awards including stock options, stock appreciation rights, restricted stock, unrestricted shares, dividend equivalent rights and performance-based awards. The Plan terminates in November 2022, unless it is earlier terminated by our board of trustees.

During the year ended December 31, 2016, the Company granted stock options for 708,000 Class A common shares and 74,100 restricted stock units to certain employees of the Company. During the year ended December 31, 2015, the Company granted stock options for 588,500 Class A common shares and 44,000 restricted stock units to certain employees of the Company. During the year ended December 31, 2014, the Company granted stock options for 1,270,000 Class A common shares and 92,000 restricted stock units to certain employees of the Company.

All of the options and restricted stock units granted during the years ended December 31, 2016, 2015 and 2014, vest over four years and expire 10 years from the date of grant. Noncash share-based compensation expense related to these options is based on the estimated fair value on the date of grant and is recognized in expense over the service period. Such expense is adjusted to consider estimated forfeitures. Estimated forfeitures are adjusted to reflect actual forfeitures at the end of the vesting period.

The following table summarizes stock option activity under the Plan for the years ended December 31, 2016, 2015 and 2014:



	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (1) (in thousands)
Options outstanding at December 31, 2013	1,190,000		$	15.48	9.3	$	862
Granted	1,270,000		16.74
Exercised	(28,750	)	15.00			74
Forfeited	(266,250	)	15.88
Options outstanding at December 31, 2014	2,165,000		$	16.17	8.8	$	1,890
Granted	588,500		16.49
Exercised	(16,600	)	15.16			19
Forfeited	(252,500	)	16.57
Options outstanding at December 31, 2015	2,484,400		$	16.22	8.0	$	1,225
Granted	708,000		14.15
Exercised	(196,000	)	16.18			790
Forfeited	(169,900	)	16.38
Options outstanding at December 31, 2016	2,826,500		$	15.69	7.6	$	14,956
Options exercisable at December 31, 2016	1,245,375		$	15.94	6.7	$	6,276


(1)	Intrinsic value for activities other than exercises is defined as the difference between the grant price and the market value on the last trading day of the period for those stock options where the market value is greater than the exercise price. For exercises, intrinsic value is defined as the difference between the grant price and the market value on the date of exercise.

The following table summarizes the Black-Scholes Option Pricing Model inputs used for valuation of the stock options for Class A common shares issued during the years ended December 31, 2016, 2015 and 2014:



	2016			2015			2014
Weighted-average fair value	$	2.82		$	4.57		$	5.06
Expected term (years)	7.0			7.0			7.0
Dividend yield	3.0		%	3.0		%	3.0		%
Volatility	27.3		%	35.9		%	38.5		%
Risk-free interest rate	1.5		%	1.9		%	2.2		%

The following table summarizes the activity that relates to the Company's restricted stock units under the Plan for the years ended December 31, 2016, 2015 and 2014:



	2016		2015		2014
Restricted stock units at beginning of period	91,650		85,000		—
Units awarded	74,100		44,000		92,000
Units vested	(27,250	)	(22,000	)	—
Units forfeited	(8,350	)	(15,350	)	(7,000	)
Restricted stock units at end of the period	130,150		91,650		85,000

Total non-cash share-based compensation expense related to stock options and restricted stock units was $3.6 million, $3.1 million and $2.6 million for the years ended December 31, 2016, 2015 and 2014, respectively.

As of December 31, 2016, there was a total unrecognized compensation cost of $4.1 million for unvested stock options and $1.3 million for unvested restricted stock and restricted stock units, which includes estimated forfeitures. The unrecognized compensation cost for unvested stock options and restricted stock and restricted stock units is expected to be recognized over a weighted-average period of 1.43 and 2.13 years, respectively.