Shareholders’ Equity / Partners' Capital

When the Company issues common or preferred shares, the Operating Partnership issues an equivalent number of units of partnership interest of a corresponding class to AH4R, with the Operating Partnership receiving the net proceeds from the share issuances.

Class A Common Share Offering

During the first quarter of 2017, the Company issued 14,842,982 Class A common shares of beneficial interest, $0.01 par value per share, in an underwritten public offering and concurrent private placement, raising gross proceeds to the Company of $336.5 million after underwriter's discount and before offering costs of approximately $0.3 million. The Operating Partnership issued an equivalent number of corresponding Class A units to AH4R in exchange for the net proceeds from the issuance.

During the third quarter of 2017, the Company issued 13,800,000 Class A common shares of beneficial interest, $0.01 par value per share, in an underwritten public offering, raising gross proceeds of $312.0 million before offering costs of approximately $9.2 million. The Operating Partnership issued an equivalent number of corresponding Class A units to AH4R in exchange for the net proceeds from the issuance.

At-the-Market Common Share Offering Program

In November 2016, the Company established an at-the-market common share offering program under which we were able to issue Class A common shares from time to time through various sales agents up to an aggregate of $400.0 million (the "Original At-the-Market Program"), which was replaced in August 2017 with an at-the-market common share offering program with a $500.0 million capacity on the same terms (the "At-the-Market Program"). 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 may be suspended or terminated by the Company at any time. During the nine months ended September 30, 2017, the Company issued and sold 2.0 million Class A common shares under the Original At-the-Market Program for gross proceeds of $46.2 million, or $22.74 per share, and net proceeds of $45.6 million, after commissions and other expenses of approximately $0.6 million. The Operating Partnership issued an equivalent number of corresponding Class A units to AH4R in exchange for the net proceeds from the share issuances. As of September 30, 2017, $500.0 million remained available for future share issuances under the At-the-Market Program.

Share Repurchase Program

In September 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. The Operating Partnership funds the repurchases and constructively retires an equivalent number of corresponding Class A units. During the nine months ended September 30, 2017, we did not repurchase and retire any of our Class A common shares. During the nine months ended September 30, 2016, we repurchased and retired 6.2 million of our Class A common shares, on a settlement date basis, in accordance with the program at a weighted-average price of $15.44 per share and a total price of $96.0 million. As of September 30, 2017, we had a remaining repurchase authorization of $146.7 million under the program.

Participating Preferred Shares

As of September 30, 2017, the initial liquidation preference on the Company’s participating preferred shares, 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 $490.7 million. As of September 30, 2017, the Operating Partnership had a liquidation preference on its corresponding participating preferred units for the same amount.

Conversion of Series A and B Participating Preferred Shares into Class A Common Shares

On October 3, 2017, the Company converted all 5,060,000 shares of the outstanding 5.0% Series A participating preferred shares and all 4,400,000 shares of the outstanding 5.0% Series B participating preferred shares into Class A common shares of beneficial interest, $0.01 par value, in accordance with the conversion terms in the Articles Supplementary. This resulted in 12,398,276 total Class A common shares issued from the conversion, based on a conversion ratio of 1.3106 Class A common shares issued per Series A and B participating preferred share. The Operating Partnership also converted its corresponding Series A and B participating preferred units into Class A units on October 3, 2017. The conversion ratio was calculated by dividing (1) the initial liquidation preference on the Series A and B participating preferred shares, 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, plus unaccrued dividends by (2) the one-day volume weighted-average price (“VWAP”) of the Company’s Class A common shares on September 27, 2017, the date the Company delivered the required notice of conversion. As a result of the conversion, the Company will record a $27.6 million allocation of income to the Series A and B participating preferred shareholders in the fourth quarter of 2017, which represents the initial liquidation value in excess of initial recorded equity carrying value, due to the bifurcation of the home price appreciation amount as a liability upon issuance. As the Series A and B participating preferred shares were converted into Class A common shares on October 3, 2017, the related participating preferred shares derivative liability was therefore remeasured based on the actual liquidation value at September 30, 2017.

Perpetual Preferred Shares

During the second quarter of 2017, the Company issued 6,200,000 5.875% Series F cumulative redeemable perpetual preferred shares in an underwritten public offering, raising gross proceeds of $155.0 million before offering costs of approximately $5.3 million, with a liquidation preference of $25.00 per share. The Operating Partnership issued an equivalent number of the same class of perpetual preferred units to AH4R in exchange for the net proceeds from the share issuance.

During the third quarter of 2017, the Company issued 4,600,000 5.875% Series G cumulative redeemable perpetual preferred shares in an underwritten public offering, raising gross proceeds of $115.0 million before offering costs of approximately $4.1 million, with a liquidation preference of $25.00 per share. The Operating Partnership issued an equivalent number of the same class of perpetual preferred units to AH4R in exchange for the net proceeds from the share issuance.

Distributions

During the quarter ended September 30, 2017, our board of trustees declared distributions that totaled $0.05 per share on our Class A and Class B common shares, $0.31 on our 5.0% Series A participating preferred shares, $0.31 on our 5.0% Series B participating preferred shares, $0.34 on our 5.5% Series C participating preferred shares, $0.41 on our 6.5% Series D perpetual preferred shares, $0.40 on our 6.35% Series E perpetual preferred shares and $0.37 on our 5.875% Series F perpetual preferred shares. Distributions declared on our 5.875% Series G perpetual preferred shares were for a pro-rated amount of $0.30 during the quarter ended September 30, 2017. During the quarter ended September 30, 2016, our board of trustees declared distributions that totaled $0.05 per share on our Class A and Class B common shares, $0.31 on our 5.0% Series A participating preferred shares, $0.31 on our 5.0% Series B participating preferred shares, $0.34 on our 5.5% Series C participating preferred shares and $0.41 on our 6.5% Series D perpetual preferred shares. Distributions declared on our 6.35% Series E perpetual preferred shares were for a pro-rated amount of $0.41 per share during the quarter ended September 30, 2016. Distributions declared on our Series D convertible units totaled $0.04 per unit for the quarter ended September 30, 2016, which represented 70% of distributions declared on Class A units. The Operating Partnership funds the payment of distributions, and an equivalent amount of distributions were declared on the corresponding Operating Partnership units.

Noncontrolling Interest

Noncontrolling interest as reflected in the Company’s condensed consolidated balance sheets primarily consists of the interests held by former AH LLC members in units in the Operating Partnership. Former AH LLC members owned 54,276,644, or approximately 16.5% and 18.2%, of the total 329,690,244 and 298,931,517 Class A units in the Operating Partnership as of September 30, 2017, and December 31, 2016, respectively. Noncontrolling interest also includes interests held by non-affiliates in Class A units in the Operating Partnership. Non-affiliate Class A unitholders owned 1,172,822 and 1,279,316, or approximately 0.3% and 0.4% of the total 329,690,244 and 298,931,517 Class A units in the Operating Partnership as of September 30, 2017, and December 31, 2016, respectively. Also included in noncontrolling interest is the outside ownership interest in a consolidated subsidiary of the Operating Partnership.

The following table summarizes the income or loss allocated to noncontrolling interests as reflected in the Company's condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016:



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Preferred income allocated to Series C convertible units	$	—		$	—		$	—		$	3,027
Net income (loss) allocated to Class A units	340			(27		)	(30		)	108
Net income allocated to Series D convertible units	—			—			—			133
Beneficial conversion feature	—			7,569			—			7,569
Net (loss) income allocated to noncontrolling interest in a consolidated subsidiary	(31		)	(226		)	8			(446		)
	$	309		$	7,316		$	(22	)	$	10,391

Noncontrolling interest as reflected in the Operating Partnership's condensed consolidated balance sheets consists solely of the outside ownership interest in a consolidated subsidiary of the Operating Partnership. Income and loss allocated to the Operating Partnership's noncontrolling interest is reflected in noncontrolling interest within the Operating Partnership's condensed consolidated statements of operations. The Operating Partnership units owned by former AH LLC members and non-affiliates that are reflected as noncontrolling interest in the Company's condensed consolidated balance sheets are reflected as limited partner capital in the Operating Partnership's condensed consolidated balance sheets.

2012 Equity Incentive Plan

The Company's employees are compensated through the Operating Partnership, including share-based compensation. When the Company issues Class A common shares under the 2012 Equity Incentive Plan (the "Plan"), the Operating Partnership issues an equivalent number of Class A units to AH4R.

During the nine months ended September 30, 2017 and 2016, the Company granted stock options for 385,600 and 708,000 Class A common shares, respectively, and 174,000 and 74,100 restricted stock units, respectively, to certain employees of the Company under the Plan. The options and restricted stock units granted during the nine months ended September 30, 2017 and 2016, vest over four years and expire 10 years from the date of grant.

The following table summarizes stock option activity under the Plan for the nine months ended September 30, 2017 and 2016:



	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (1) (in thousands)
Options outstanding at January 1, 2016	2,484,400		$	16.22	8.0	$	1,225
Granted	708,000		14.15
Exercised	(172,250	)	16.12			680
Forfeited	(153,150	)	16.36
Options outstanding at September 30, 2016	2,867,000		$	15.70	7.8	$	17,021
Options exercisable at September 30, 2016	1,051,125		$	16.04	7.1	$	5,885

Options outstanding at January 1, 2017	2,826,500		$	15.69	7.6	$	14,956
Granted	385,600		23.38
Exercised	(62,655	)	15.77			444
Forfeited	(85,250	)	16.24
Options outstanding at September 30, 2017	3,064,195		$	16.64	7.1	$	16,149
Options exercisable at September 30, 2017	1,681,595		$	15.90	6.3	$	9,764


(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 granted during the nine months ended September 30, 2017 and 2016:



	2017			2016
Weighted-average fair value	$	3.82		$	2.82
Expected term (years)		7.0			7.0
Dividend yield		3.0	%		3.0	%
Volatility		21.3	%		27.3	%
Risk-free interest rate		2.2	%		1.5	%

The following table summarizes the activity that relates to the Company’s restricted stock units under the Plan for the nine months ended September 30, 2017 and 2016:



	2017		2016
Restricted stock units at beginning of period	130,150		91,650
Units awarded	174,000		74,100
Units vested	(42,475	)	(27,250	)
Units forfeited	(16,200	)	(6,550	)
Restricted stock units at end of the period	245,475		131,950

For the three months ended September 30, 2017 and 2016, total non-cash share-based compensation expense related to stock options and restricted stock units was $1.1 million and $0.9 million, respectively, of which $0.7 million and $0.5 million, respectively, related to corporate administrative employees and was included in general and administrative expense and $0.4 million related to centralized and field property management employees and was included in property management expenses within the condensed consolidated statements of operations. For the nine months ended September 30, 2017 and 2016, total non-cash share-based compensation expense related to stock options and restricted stock units was $3.2 million and $2.7 million, respectively, of which $1.9 million and $1.6 million, respectively, related to corporate administrative employees and was included in general and administrative expense and $1.3 million and $1.1 million, respectively, related to centralized and field property management employees and was included in property management expenses within the condensed consolidated statements of operations.