Share-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

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, 2023 and 2022 generally vest over a three-year service period. RSUs granted to non-management trustees during the nine months ended September 30, 2023 and 2022 vest over a one-year service period.

Performance-based restricted share units (“PSUs”) granted to certain senior employees during the nine months ended September 30, 2023 and 2022 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 January 1, 2023 through December 31, 2025 for PSUs granted during the nine months ended September 30, 2023 and January 1, 2022 through December 31, 2024 for PSUs granted during the nine months ended September 30, 2022. 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, 2023 and 2022:


	For the Nine Months Ended September 30,
	2023	2022
Options outstanding at beginning of period	730,550	824,300
Granted	—	—
Exercised	(182,875)	(63,750)
Forfeited	—	—
Options outstanding at end of period	547,675	760,550
Options exercisable at end of period	547,675	755,550

The following table summarizes RSU activity under the 2012 Plan and 2021 Plan for the nine months ended September 30, 2023 and 2022:


	For the Nine Months Ended September 30,
	2023	2022
RSUs outstanding at beginning of period	1,024,722	1,050,599
Awarded	509,730	465,171
Vested	(417,616)	(439,331)
Forfeited	(23,998)	(37,045)
RSUs outstanding at end of period	1,092,838	1,039,394

The following table summarizes PSU activity under the 2012 Plan and 2021 Plan for the nine months ended September 30, 2023 and 2022:


	For the Nine Months Ended September 30,
	2023	2022
PSUs outstanding at beginning of period	294,423	92,319
Awarded	227,033	202,104
Vested	—	—
Forfeited	(1,237)	—
PSUs outstanding at end of period	520,219	294,423

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,
	2023	2022
Expected term (years)	3.0	3.0
Dividend yield	2.09%	1.03%
Estimated volatility (1)	27.45%	27.62%
Risk-free interest rate	4.16%	1.39%

(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, 2023 and 2022 (amounts in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
General and administrative expense	$	4,160	$	3,390	$	13,885	$	13,352
Property management expenses	953		1,015		3,151		3,146
Acquisition and other transaction costs	1,303		1,275		3,712		7,230
Total noncash share-based compensation expense	$	6,416	$	5,680	$	20,748	$	23,728