UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12 |
AMERICAN HOMES 4 RENT | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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A Message from Our CEO
Dear American Homes 4 Rent shareholders:
Theres no place like home. At the end of the classic movie The Wizard of Oz, this is the realization that comes to Dorothy as she wakes up from her elaborate dream. For most of us, if there was ever a year in which Dorothys insight was true, it had to have been 2020. Homes became our schools, our offices, our vacation destinations, our escapes from long commutes and our safe havens. And we at American Homes 4 Rent were there to meet each of these needs, and others:
| Our country needs more homes as populations grow. We are building them. |
| Our country needs more rental homes to meet our changing lifestyleswe no longer work at one job or live in one city all our lives and we increasingly value an ability to rent, lease, or borrow property of all types for just the periods of time for which we need it. Our homes are acquired or built specifically to rent. |
| Our country needs more energy and water efficient homes made with more durable materials that generate less waste. These are what we build. |
| The professions that are essential to societys core functionshealth care, education, technology, government service, and real estateneed housing without barriers to entry. Many of our renters come from these segments. |
For many in the real estate sector, 2020 was a difficult year, but our business model set us apart:
| we carefully analyze the markets that we believe offer the best opportunity for long-term profitable growth and focus our acquisition and development efforts there; |
| our diversification across 22 states limits exposure of any individual economically impacted area; |
| our typical two-adult, one-child resident unit is more stable than other parts of the market; |
| our conservative financial management and strong balance sheet help us move quickly and forcefully on opportunities in the market place; |
| our relentless focus on resident satisfactionbacked by state-of-the-art digital feedback systems used from first rental day to exit interviews help enable us to respond toand even anticipateissues and enhance our resilience and market intelligence; and |
| our focus on our own peoplewhether via our hire-locally practices or our proprietary training programs and our focus on individual developmentcreates a culture in which everyone can be themselves and give their best. |
On behalf of the Board of Trustees, I am pleased to invite you to our 2021 Annual Meeting of Shareholders. The meeting will be held on Thursday, May 6, 2021, at 9:00 a.m., Pacific Time. Due to public health concerns regarding the COVID-19 pandemic, the Annual Meeting will be held in virtual-only format. You may attend the meeting virtually or by proxy. You will be able to attend and participate in the virtual Annual Meeting, vote your shares electronically and submit your questions during the meeting by visiting: www.virtualshareholdermeeting.com/AMH2021.
The matters to be considered at the meeting are described in detail in the attached notice of meeting and proxy statement. You are encouraged to review them before voting.
We ask for your voting support on the items we describe in this proxy statement so we can continue making the world a better place for our residents, our employees and you, our investors.
Your vote is important and we urge you to cast your vote as soon as possible. You may vote your shares over the Internet, by telephone, or by mail by following the instructions on the proxy card or voting instruction form by signing, dating and returning the enclosed proxy card. If you attend the virtual Annual Meeting, you may revoke your proxy at the meeting and vote your shares virtually. If you have any questions, please contact D.F. King & Co., Inc., our proxy solicitor assisting us in connection with the 2021 Annual Meeting. Shareholders in the U.S. and Canada may call toll-free at (877) 283-0321. Banks and brokers may call collect at (212) 269-5550.
We appreciate your continued trust and confidence as an investor in American Homes 4 Rent.
Sincerely,
David P. Singelyn
Chief Executive Officer and Trustee
Notice of the 2021 Annual
Meeting of Shareholders
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Date and Time
Thursday, May 6, 2021 at
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Virtual Location
Visit:
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Items of Business
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To elect as trustees the thirteen nominees named in the attached proxy statement to serve until the 2022 Annual Meeting of Shareholders; | |
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To approve the adoption of the American Homes 4 Rent 2021 Equity Incentive Plan (the 2021 Incentive Plan); | |
3 | To approve the adoption of the American Homes 4 Rent Employee Stock Purchase Plan (the ESPP); | |
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To ratify the Audit Committees appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; | |
5 | To hold a non-binding, advisory vote to approve our named executive officer compensation; | |
6 | To hold an advisory vote on the frequency of future advisory votes on executive compensation; and | |
7 |
To consider and act upon any other matters as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
Recommendations of the Board
The Board of Trustees (the Board) unanimously recommends that you vote FOR each of the trustee nominees named in the attached proxy statement, FOR approval of the adoption of the 2021 Incentive Plan, FOR approval of the adoption of the ESPP, FOR ratification of the appointment of Ernst & Young LLP, FOR approval, on an advisory basis, of our named executive officer compensation, and ONE YEAR with respect to the advisory vote on the frequency of future advisory votes on executive compensation. Detailed information concerning these proposals is included in the accompanying proxy statement.
Proxy Materials
The Notice of Meeting, Proxy Statement and Annual Report on Form 10-K are available free of charge at: www.ah4r.com/Investors/AnnualMeetingDocs2021.
Record Date
You are entitled to vote at the meeting if you were a shareholder of record at the close of business on March 9, 2021 of our Class A or Class B common shares of beneficial interest, par value $0.01 per share.
2021 Proxy Statement |
Voting
Your vote is very important. To ensure that your shares are represented at the Annual Meeting, please vote over the Internet, by telephone, or by mail as instructed on the proxy card or voting instruction form you receive. You may revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the accompanying proxy statement.
By Order of the Board,
Sara H. Vogt-Lowell
Chief Legal Officer and Secretary
March 22, 2021
If you have questions about the matters described in this proxy statement, how to submit your proxy or if you need additional copies of this proxy statement, you should contact D.F. King, the companys proxy solicitor, toll free at (877) 283-0321 (banks and brokers may call collect at (212) 269-5550).
Important Notice Regarding Availability of Proxy Materials for the 2021 Annual Meeting: This Proxy Statement and our 2020 Annual Report on Form 10-K are available on the companys website www.americanhomes4rent.com under Investor Relations.
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Summary of Material Provisions of the Employee Stock Purchase Plan |
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2021 Proxy Statement |
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Annex B American Homes 4 Rent 2021 Employee Stock Purchase Plan |
B-1 |
2021 Proxy Statement |
Build sustainably, operate efficiently
Because we build our homes to rent, we design them for long-term durability. This saves resources and lowers our total costs, including maintenance.
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HERS energy efficiency ratings: In 2020 we began a program to track Home Energy Rating System (HERS) scores for our newly built homes to demonstrate the energy efficiency and resulting savings that residents enjoy while living in our properties. |
Environmentally friendly construction: We install flooring and other materials designed to last for decades, energy-efficient LED lighting and low-flow water fixtures in our newly constructed homes and incorporate these features in our renovations of existing homes. These long-lasting materials save on the use of additional materials, like carpet, that need to be replaced every 3 to 5 years and then sent to landfills.
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Creating neighborhoods: We seek to create a sense of community by including green, open spaces in our development plans and by building amenities that facilitate neighborhood gatherings.
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Tracking HERS energy efficiency ratings for all of our newly built homes: In 2020, we began a program to track RESNET HERS scores for our newly built homes to demonstrate the energy efficiency and savings while living in our properties. A HERS rating is an assessment of energy performance: a lower score indicates it is more energy efficient. A home built to the 2006 International Energy Conservation Code receives a rating of 100 on the HERS Index, while the average American home scores 130, according to the U.S. Department of Energy.
American Homes 4 Rents average, median and mode HERS score was 57 among our 256 newly built homes in 2020 that we tracked in our pilot project markets of Arizona, Colorado and Nevada. Put another way, those houses use 43% less energy than a home built to the 2006 code and less than half the energy of a typical home in this country. Based on RESNET data, a score of 57 translates to an average annual savings of $1,316 versus the typical home and $777 compared to a new home.
For 2021, we intend to track the HERS scores for all our newly built homes to demonstrate the efficiency of our houses. |
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2021 Proxy Statement | 3 |
Delight residents, engage employees, foster community
Our success depends on our employees delighting residents with our houses that become their homes. This requires us to attract, retain and grow a skilled and diverse workforce to design and maintain high-quality homes.
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Responding to COVID-19: We established protocols to keep our residents, employees and third-party contractors safe. We instituted contactless procedures for prospective residents, as well as maintenance processes that ensured safety for both residents and employees. |
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Resident satisfaction: We closely monitor resident satisfaction, including through setting Google review goals at the company and district levels for move-in, move-out and maintenance. |
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Training and development: We strive to ensure our employees have the business and technical skills they need to succeed in their roles and advance their careers in our company. In 2020, we provided approximately 71,900 hours of training to employees, an average of 50 hours per employee. |
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Diversity, equity and inclusion: We champion inclusion and diversity by declaring one of our core competencies as Valuing Differences. We provide training to promote diversity, including unconscious bias training, and closely track and publicly report on our diversity performance. |
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Workplace safety: Our OSHA Recordable Incident Rate improved from 3.90 to 1.56 for 2020, underscoring how health and safety is a top priority. This is almost half the rate of 3.0 for the Lessors of Residential Buildings and Dwellings sector, according to the latest available Bureau of Labor Statistics data for 2019. |
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Highly engaged employees: Our focus on engaging and motivating our employees is demonstrated by our Net Promoter Score (NPS) in the top 10% for our sector. We scored an NPS of 60, 38 points above the sector benchmark, according to the results of our Q1 2021 survey. |
4 | American Homes 4 Rent |
Lead with integrity and transparency
We maintain strong corporate governance practices that include transparency, communication and integrity. In addition to the below highlights, we describe our corporate governance practices in more detail beginning on page 20.
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Good governance foundation: We adopt good governance practices, including an independent chairperson, board diversity by race and gender, annual trustee elections, majority voting, majority voting standard for bylaw amendments and M&A, special meeting rights, no poison pill, clawback and anti-hedging provisions, and we opted out of certain Maryland provisions that can limit shareholder rights.
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Board refreshment: We added three new trustees in 2020 as part of our board refreshment process. The average tenure of our trustees is 4.9 years. More than 75% of our trustees are independent trustees.
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Board oversight of ESG: In 2020, we formalized board oversight for ESG as part of committee responsibilities.
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Human capital management: In 2020, the Board made important structural changes to the committee formerly known as the Compensation Committee, repositioned as the Human Capital and Compensation Committee, to expand the responsibilities of such committee to include oversight of talent, leadership and culture, including diversity and inclusion.
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2021 Proxy Statement | 5 |
This proxy statement contains important information regarding the 2021 Annual Meeting of Shareholders (the Annual Meeting). Specifically, it identifies the proposals on which you are being asked to vote, provides information that you may find useful in determining how to vote, and describes voting procedures. This proxy statement is being sent or made available to you on or about March 22, 2021.
The Notice of Meeting, Proxy Statement and Annual Report on Form 10-K are available free of charge at:
www.ah4r.com/Investors/AnnualMeetingDocs2021.
Date and Time: Thursday, May 6, 2021, at 9:00 a.m., Pacific Time.
Virtual Location: www.virtualshareholdermeeting.com/AMH2021. To be admitted, you must enter the control number found on your proxy card or voting instruction form.
Record Date: You are entitled to vote at the Annual Meeting if you were a shareholder of record at the close of business on March 9, 2021 of our Class A or Class B common shares of beneficial interest, par value $0.01 per share.
Voting: Your vote is very important. To ensure your representation at the meeting, please vote over the Internet, by telephone, or by mail as instructed on the proxy card or voting instruction form you receive. You may revoke a proxy at any time prior to its exercise at the Annual Meeting by following the instructions in the accompanying proxy statement.
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www.virtualshare holdermeeting.com/ AMH2021 |
www.proxyvote.com |
Return your proxy in the postage-paid envelope provided |
1-800-690-6903 | |||||||||||||||||
You may vote your shares virtually at the Annual Meeting. Even if you plan to attend the Annual Meeting virtually, we recommend that you submit the accompanying proxy card or voting instruction form or vote via the Internet or by telephone by the applicable deadline so that your vote will be counted if you later decide not to attend the Annual Meeting. | You may vote your shares through the Internet by signing on to the website identified on the proxy card or voting instruction form and following the procedures described on the website. Internet voting is available 24 hours a day until 11:59 p.m. Eastern Time on the day before the Annual Meeting. If you vote through the Internet, you should not return any proxy card. | If you choose to vote by mail, simply complete the accompanying proxy card or voting instruction form, date and sign it, and return it in the pre-addressed postage-paid envelope provided. | You may vote your shares by telephone by following the voting instructions on the enclosed proxy card or voting instruction form, respectively. Telephone voting is available 24 hours a day until 11:59 p.m. Eastern Time on the day before the Annual Meeting. |
6 | American Homes 4 Rent |
As summarized below, there are distinctions between shares held of record and those owned beneficially:
| Shareholder of RecordIf your shares are registered directly in your name, you are considered the shareholder of record of those shares. As the shareholder of record, you can submit your voting instructions by Internet, telephone or mail as described on the enclosed proxy card. |
| Beneficial OwnerIf your common shares are held through a broker or bank in street name as of the close of business on the record date, you can either: (i) vote your common shares by delivering the enclosed |
voting instruction form in the pre-addressed postage-paid envelope provided, or (ii) contact the person responsible for your account to ensure that a voting instruction form is submitted on your behalf. In most instances, you will be able to do this over the Internet, by telephone or by mail as indicated on your voting instruction form. It is critical that you promptly give instructions to your brokerage firm, bank or other nominee. You may vote your shares at the virtual meeting only if you obtain a legal proxy from your brokerage firm, bank or other nominee. |
If you require assistance in changing, revoking or voting your proxy, please contact the companys proxy solicitor:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (877) 283-0321
Email: AMH@dfking.com
Unanimous Recommendations of the Board
1 |
Election of the Thirteen Trustee Nominees Named in this Proxy Statement |
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BOARD RECOMMENDATION |
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FOR |
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Approval of the Adoption of the 2021 Equity Incentive Plan (the 2021 Incentive Plan) |
BOARD RECOMMENDATION |
FOR |
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Approval of the Adoption of the Employee Stock Purchase Plan (the ESPP) |
BOARD RECOMMENDATION |
FOR |
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Ratification of the Appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2021 |
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BOARD RECOMMENDATION |
FOR |
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Advisory Vote to Approve our Named Executive Officer Compensation |
BOARD RECOMMENDATION |
FOR |
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Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation |
BOARD RECOMMENDATION |
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ONE YEAR |
These proposals are discussed in more detail in this proxy statement and you should read the entire proxy statement carefully before voting. We will also consider any other matters properly brought before the Annual Meeting or any adjournment or postponement of the Annual Meeting.
2021 Proxy Statement | 7 |
For the second consecutive year, due to public health concerns regarding the COVID-19 pandemic, the Annual Meeting will be held in virtual-only format. You will be able to attend and participate in the virtual Annual Meeting, vote your shares electronically and submit your questions during the meeting by visiting: www.virtualshareholdermeeting.com/AMH2021.
We believe this virtual format will enhance shareholder participation, as shareholders will be able to attend the Annual Meeting and engage in the live, online Q&A session from any convenient location. Conducting the meeting virtually will ensure shareholder access to management despite the ongoing uncertainty related to the COVID-19 pandemic.
The Annual Meeting will begin with a pre-recorded presentation, followed by a live webcast of the formal business of the Annual Meeting and a Q&A session.
To be admitted to the Annual Meeting, you must enter the control number found on your proxy card or voting instruction form. If your common shares are held through a broker or bank in street name as of the close of business on the record date, you may vote your shares at the virtual meeting only if you obtain a legal proxy from your brokerage firm, bank or other nominee.
You may vote your shares virtually at the Annual Meeting. To vote at the virtual Annual Meeting, you must re-enter the control number found on your proxy card or voting instruction form. Even if you plan to attend the Annual
Meeting virtually, we recommend that you submit the accompanying proxy card or voting instruction form or vote via the Internet or by telephone by the applicable deadline so that your vote will be counted if you later decide not to attend the virtual Annual Meeting.
As part of the Annual Meeting, we will hold a live, online Q&A session, where shareholders of record of our Class A or Class B common shares at the close of business on the Record Date will be allowed to ask questions. You may submit questions in real time during the Annual Meeting. We intend to answer all questions submitted before or during the Annual Meeting which are pertinent to the company and the Annual Meeting matters, as time permits. Consistent with our prior virtual and in-person annual meetings, all questions submitted will be generally addressed in the order received and we limit each shareholder to one question in order to allow us to answer questions from as many shareholders as possible.
If there are matters raised of individual concern to a shareholder, or if a question posed was not otherwise answered, we provide an opportunity for shareholders to contact us separately after the Annual Meeting through the companys website, www.americanhomes4rent.com under Investor Relations.
If you encounter any difficulties accessing or participating in the virtual Annual Meeting, please call the technical support number that will be posted on the Annual Meeting Website log-in page.
8 | American Homes 4 Rent |
Our Board of Trustees (the Board) consists of thirteen members. Ten of the current trustees are considered independent and all members of our Audit Committee, Nominating and Corporate Governance Committee and Human Capital and Compensation Committee are independent.
Despite challenges faced during the COVID-19 pandemic, we continued to grow the Board to support the success of our long-term strategy. Since January 2020, we added three new independent trustees, all of whom bring extensive operational and executive experience to the Board and two of whom enhance the diversity of our Board. During 2020, the Board also formalized oversight responsibility with respect to important ESG matters,
engaged in deeper conversations on key strategic issues and worked closely with management to pursue the companys key objectives.
Our Board believes its members collectively have the experience, qualifications, attributes and skills to continue to effectively oversee the management of the company, including a high degree of personal and professional integrity, an ability to exercise sound business judgment on a broad range of issues, sufficient experience and background to appreciate the issues facing the company, a willingness to devote the necessary time to Board duties, a commitment to representing the best interest of the company and a dedication to enhancing shareholder value. The Board unanimously recommends a vote FOR each of the thirteen nominees proposed by the Board.
Nominee |
Age | Principal Occupation |
Trustee
Since |
Committee Membership | ||||
Kenneth M. Woolley * |
74 |
Chairperson of the Board, American Homes 4 Rent
Founder and Chairperson, Extra Space Storage, Inc. |
2012 |
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David P. Singelyn |
59 | Chief Executive Officer, American Homes 4 Rent | 2012 |
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Douglas N. Benham * |
64 | President and Chief Executive Officer, DNB Advisors, LLC | 2016 |
Nominating and Corporate Governance (Chair) Human Capital and Compensation |
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Jack Corrigan |
60 | Chief Investment Officer, American Homes 4 Rent | 2012 |
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David Goldberg |
71 | Retired Executive Vice President, American Homes 4 Rent | 2019 |
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Tamara Hughes Gustavson * |
59 |
Real Estate Investor
Philanthropist |
2016 |
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Matthew J. Hart * |
69 |
Retired President and Chief Operating Officer, Hilton Hotels
Corporation |
2012 |
Human Capital and Compensation (Chair) Nominating and Corporate Governance |
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Michelle C. Kerrick * |
58 |
Former West Region Market Leader and Managing Partner of
the Los Angeles office of Deloitte & Touche LLP |
2020 |
Audit Human Capital and Compensation |
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James H. Kropp * |
72 |
Retired Chief Investment Officer, SLKW Investments,
LLC and Microproperties LLC |
2012 |
Audit (Chair) |
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Lynn C. Swann * |
69 | Director for Athene Holding Ltd. and Evoqua Water Technologies | 2020 |
Audit Nominating and Corporate Governance |
2021 Proxy Statement | 11 |
Nominee |
Age | Principal Occupation |
Trustee
Since |
Committee Membership | ||||
Winifred M. Webb * |
63 |
Chief Executive Officer, Kestrel Advisors
Former Senior Executive, Ticketmaster, and
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2019 |
Human Capital and Compensation Nominating and Corporate Governance |
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Jay Willoughby * |
62 | Chief Investment Officer, TIFF Investment Management | 2019 |
Audit Nominating and Corporate Governance |
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Matthew R. Zaist * |
46 | Former Chief Executive Officer and Director, William Lyon Homes | 2020 |
Audit Human Capital and Compensation |
* Denotes independent member of the Board.
12 | American Homes 4 Rent |
Biographical Information About Our Trustee Nominees
Set forth below is biographical information for each of the trustee nominees, including a list of the specific qualifications that were considered for membership on our Board. Each nominee has consented to be named in this proxy statement and to serve if elected.
Kenneth M. Woolley
Age: 74
Trustee since: 2012 (Chairperson since 2020) |
Chairperson of the Board, American Homes 4 Rent Founder and Chairperson, Extra Space Storage, Inc.
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Background
Extra Space Storage, Inc. (NYSE: EXR), Chief Executive Officer
Nevada West Partners (multi-family residential real estate company), Owner
Gaia Real Estate, Partner
LDS Moscow Russia West Mission, President
Brigham Young University, Associate Professor and Adjunct Associate Professor of Business Administration
Public Directorships
Extra Space Storage, Inc. (NYSE: EXR), Founder and Chairperson (since 2004) |
Education
B.A. in Physics, Brigham Young University
M.B.A. and Ph.D. in Business Administration, Stanford University
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Finance/Accounting/Auditing
Corporate Governance
Public Company Board
Consumer Experience
Risk Assessment & Management
Investor Relations |
David P.
Age: 59
Trustee since: 2012 |
Chief Executive Officer, American Homes 4 Rent
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Background
American Homes 4 Rent, Chief Executive Officer (since 2012)
American Homes 4 Rent Advisor, LLC (our former manager), Co-Founder and Chief Executive Officer
Public Storage Canada, Chairperson and President
American Commercial Equities, President
Public Storage (NYSE: PSA), Senior Vice President and Treasurer
Arthur Young & Company
Private Directorships
Deans Advisory Council to the College of Business at California State Polytechnic University
Philanthropic Foundation at California State Polytechnic University |
Education
B.S. in Accounting, California State Polytechnic University
B.S. in Computer Information Systems, California State Polytechnic University
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Finance/Accounting/Auditing
Corporate Governance
Public Company Board
Human Capital Management
Consumer Experience
Risk Assessment & Management
Investor Relations
Technology |
2021 Proxy Statement | 13 |
Douglas N.
Age: 64
Trustee since: 2016
Committees
Nominating and Corporate Governance (Chair)
Human Capital
and
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President and Chief Executive Officer, DNB Advisors, LLC
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Background
DNB Advisors, LLC, President and Chief Executive Officer (since 2006)
Arbys Restaurant Group, Inc., President and Chief Executive Officer
RTM Restaurant Group, Inc., Chief Financial Officer
Private Directorships
G&N Brands (Santiago, Chile)
United Pacific Oil Company
On the Border Mexican Grill & Cantina |
Education
B.A. in Accounting, University of West Florida
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Finance/Accounting/Auditing
Consumer Experience
Human Capital Management
Corporate Governance
ESG
Risk Assessment & Management
Investor Relations
Public Company Board |
|||
Jack Corrigan
Age: 60
Trustee since: 2012 |
Chief Investment Officer, American Homes 4 Rent
|
|||
Background
American Homes 4 Rent, Chief Investment Officer (since 2012), Chief Operating Officer (2012-2019)
American Homes 4 Rent Advisor, LLC (our former manager), Chief Operating Officer
A&H Property and Investments, Chief Executive Officer
PS Business Parks Inc. (NYSE: PSB), Chief Financial Officer
LaRue, Corrigan & McCormick, Partner
Arthur Young & Company |
Education
B.S. in Accounting, Loyola Marymount University
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Finance/Accounting/Auditing
Risk Assessment & Management
Investor Relations
|
14 | American Homes 4 Rent |
Tamara Hughes Gustavson
Age: 59
Trustee since: 2016 |
Real Estate Investor Philanthropist
|
|||
Background
American Commercial Equities, Member (since 2005)
Public Storage (NYSE: PSA), Senior Vice President-Administration
Public Directorships
Public Storage (NYSE: PSA) (since 2008)
Private Directorships
William Lawrence & Blanche Hughes Foundation
University of Southern California |
Education
B.S. in Public Affairs, University of Southern California
Qualification Highlights:
Executive Leadership
Real Estate Experience
Human Capital Management
Philanthropic Activities
Diversity
Public Company Board |
|||
2021 Proxy Statement | 15 |
Matthew J. Hart
Age: 69
Trustee since: 2012
Committees
Human Capital and Compensation (Chair)
Nominating and Corporate Governance |
Retired President and Chief Operating Officer, Hilton Hotels Corporation
|
|||
Background
Hilton Hotels Corporation, President and Chief Operating Officer, Executive Vice President, Chief Financial Officer
Walt Disney Company (NYSE: DIS), Senior Vice President and Treasurer
Host Marriott Corp., Executive Vice President and Chief Financial Officer
Marriott Corporation, Senior Vice President and Treasurer
Bankers Trust Company, Vice President, Corporate Lending
Public Directorships
American Airlines (NASDAQ: AAL), Audit Committee (Chair) (since 2013)
Air Lease Corp. (NYSE: AL), Audit Committee (Chair), Nominating and Corporate Governance Committee (since 2010)
|
Private Directorships
Heal the Bay
Education
B.A. in Economics and Sociology, Vanderbilt University
M.B.A. in Finance and Marketing, Columbia University
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Finance/Accounting/Auditing
Consumer Experience
Human Capital Management
Corporate Governance
Risk Assessment & Management
Investor Relations
Public Company Board |
Michelle C.
Age: 58
Trustee since: 2020
Committees
Audit
Human Capital and Compensation |
Former West Region Market Leader and Managing Partner of the Los Angeles office of Deloitte & Touche LLP
|
|||
Background
Deloitte & Touche LLP, West Region Market Leader and Managing Partner of the Los Angeles office (2010-2020), other positions (1985-2010)
Private Directorships
The HydraFacial Company (IPO anticipated during the first half of 2021)
LDH Growth Corp I (IPO anticipated during the first half of 2021)
Education
B.S. in Accountancy, Northern Arizona University |
Qualification Highlights:
Executive Leadership
Real Estate Experience
Finance/Accounting/Auditing
Human Capital Management
Consumer Experience
Risk Assessment & Management
Diversity
Technology |
|||
16 | American Homes 4 Rent |
James H. Kropp
Age: 72
Trustee since: 2012
Committees
Audit (Chair) |
Retired Chief Investment Officer, SLKW Investments, LLC and Microproperties LLC
|
|||
Background
SLKW Investments, LLC, Chief Investment Officer (2009-2019)
U.S. Restaurant Properties (Microproperties LLC), Chief Financial Officer
TaxEase, LLC, Chief Financial Officer
Arthur Young & Company
Public Directorships
FS KKR Capital Corp. II (NYSE: FSKR), Valuation Committee (Chair), Audit Committee (since 2015)
FS KKR Capital Corp. (NYSE: FSK), Valuation Committee (Chair), Audit Committee (since 2011)
PS Business Parks Inc. (NYSE: PSB), Compensation Committee, Nominating and Corporate Governance Committee (since 1998; retiring effective April 2021)
|
Private Directorships
KREST
National Association of Corporate Directors
Education
B.B.A. in Finance, St. Francis College
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Finance/Accounting/Auditing
Risk Assessment & Management
Investor Relations
Corporate Governance
Public Company Board |
Lynn C. Swann
Age: 69
Trustee since: 2020
Committees
Audit
Nominating and Corporate Governance |
Director for Athene Holding Ltd. and Evoqua Water Technologies
|
|||
Background
Swann, Inc., President (since 1976)
Public Directorships
Athene Holding Ltd (NYSE: ATH) (since 2020)
Evoqua Water Technologies (NYSE: AQUA) (since 2018)
Education
B.A. in Public Relations, University of Southern California |
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Human Capital Management
Corporate Governance
ESG
Diversity
Public Company Board |
|||
2021 Proxy Statement | 17 |
Winifred M.
Age: 63
Trustee since: 2019
Committees
Human Capital and Compensation
Nominating and Corporate Governance |
Chief Executive Officer, Kestrel Advisors Former Senior Executive, Ticketmaster, and The Walt Disney Company
|
|||
Background
Kestrel Advisors, Chief Executive Officer (since 2013)
Tennenbaum Capital Partners, Managing Director
Ticketmaster Entertainment, Corporate Senior Vice President, Chief Communications & Investor Relations Officer
The Walt Disney Company, Corporate Senior Vice President of Investor Relations & Shareholder Services, Executive Director for The Walt Disney Company Foundation
Public Directorships
AppFolio (NASDAQ: APPF), Audit Committee (Chair), Nominating and Corporate Governance Committee, Risk Compliance Oversight (since 2019)
Wynn Resorts (NASDAQ: WYNN), Audit Committee (Chair) (since 2018)
ABM Industries (NYSE: ABM), Audit Committee, Stakeholder & Enterprise Risk Committee (Chair) (since 2014) |
Private Directorships
Women Corporate Directors, Los Angeles/Orange County Chapter
Education
B.A., Smith College
M.B.A., Harvard University
Qualification Highlights:
Executive Leadership
Real Estate Experience
Finance/Accounting/Auditing
Consumer Experience
Human Capital Management
Corporate Governance
ESG
Risk Assessment & Management
Investor Relations
Technology
Public Company Board
Diversity |
Jay Willoughby
Age: 62
Trustee since: 2019
Committees
Audit
Nominating and Corporate Governance |
Chief Investment Officer, TIFF Investment Management
|
|||
Background
TIFF Investment Management, Chief Investment Officer (since 2015)
The Alaska Permanent Fund, Chief Investment Officer
Ironbound Capital Management, Co-Managing Partner
MLIM Equity Funds, Chief Investment Officer, Head of Research
Merrill Lynch Real Estate Fund, Senior Portfolio Manager
Private Directorships
Sustainability Accounting Standards (SASB) Foundation |
Education
B.A., Pomona College
M.B.A. in Finance, Columbia University
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Finance/Accounting/Auditing
Corporate Governance
ESG
Risk Assessment & Management
Investor Relations |
|||
18 | American Homes 4 Rent |
Matthew R. Zaist
Age: 46
Trustee since: 2020
Committees
Audit
Human Capital and Compensation |
Former Chief Executive Officer and Director, William Lyon Homes
|
|||
Background
William Lyon Homes (formerly NYSE: WLH), President and Chief Executive Officer and member of the Board (2016-2020), President and Chief Operating Officer
Public Directorships
William Lyon Homes (formerly NYSE: WLH) (2016-2020)
Private Directorships
University of Southern Californias Lusk Center for Real Estate Executive Committee
Education
B.S., Rensselaer Polytechnic Institute |
Qualification Highlights:
Executive Leadership
Real Estate Experience
Treasury/Capital Allocation
Consumer Experience
Human Capital Management
Corporate Governance
Risk Assessment & Management
Investor Relations
Capital Markets
Finance/Accounting/Auditing
Public Company Board |
|||
2021 Proxy Statement | 19 |
How We Are Selected, Elected, Evaluated, and Refreshed
We believe that our trustees should satisfy a number of qualifications, including demonstrated integrity, a record of personal accomplishments, a commitment to participation in Board activities and other attributes. We also endeavor to have a board that represents a range of qualifications, skills and depth of experience in areas that are relevant to and contribute to the Boards oversight of the companys business.
The table below summarizes the key experience, qualifications and attributes for each trustee nominee and highlights the balanced mix of experience, qualifications and attributes of the Board as a whole. This high-level summary is not intended to be an exhaustive list of each trustee nominees skills or contributions to the Board. No individual experience, qualification or attribute is solely dispositive of becoming a member of the Board.
|
Real
Estate |
Corporate
Governance |
Investor
Relations |
Public
Company Board |
Human
Capital Mgt |
Consumer
Experience |
ESG | Diversity | Tech | |||||||||
Kenneth M. Woolley |
· | · | · | · |
|
· |
|
|
|
|||||||||
David P. Singelyn |
· | · | · | · | · | · |
|
|
· | |||||||||
Douglas N. Benham |
· | · | · | · | · | · | · |
|
|
|||||||||
Jack Corrigan |
· |
|
· |
|
|
|
|
|
|
|||||||||
David Goldberg |
· | · |
|
|
|
|
|
|
|
|||||||||
Tamara Hughes Gustavson |
· |
|
|
· | · |
|
|
· |
|
|||||||||
Matthew J. Hart |
· | · | · | · | · | · |
|
|
|
|||||||||
Michelle C. Kerrick |
· |
|
|
|
· | · |
|
· | · | |||||||||
James H. Kropp |
· | · | · | · |
|
|
|
|
|
|||||||||
Lynn C. Swann |
· | · |
|
· | · |
|
· | · |
|
|||||||||
Winifred M. Webb |
· | · | · | · | · | · | · | · | · | |||||||||
Jay Willoughby |
· | · | · |
|
|
|
· |
|
|
|||||||||
Matthew R. Zaist |
· | · | · | ● | · | · |
|
|
|
|||||||||
|
13 | 10 | 9 | 9 | 8 | 7 | 4 | 4 | 3 |
20 | American Homes 4 Rent |
Trustee Diversity. Diversity and inclusion are values embedded in our culture and fundamental to our business. We believe that a Board comprised of trustees with diverse backgrounds, experiences, perspectives and viewpoints improves the dialogue and decision-making in the board room and contributes to overall Board effectiveness.
The Board strives to achieve a wide range of perspectives by having a Board composed of diverse trustees. We look for each trustee to contribute to the Boards overall diversitydiversity being broadly construed to mean a variety of identities, perspectives, personal and
professional experiences and backgrounds. This can be represented in both visible and non-visible characteristics that include but are not limited to race, ethnicity, national origin, gender and sexual orientation.
Although the Board does not establish specific goals with respect to diversity, the Boards overall diversity is a significant consideration in the trustee nomination process. The Board assesses the effectiveness of its approach to Board diversity as part of the Board and committee evaluation process.
|
|
|
|
Board Composition. Our Board consists of thirteen members. Upon the recommendation of our Nominating and Corporate Governance Committee, our Board annually nominates trustees for election or re-election to the Board to serve for a one-year term beginning with the Annual Meeting, or until their successors, if any, are elected or appointed.
Led by our Nominating and Corporate Governance Committee, our Board continues to focus on facilitating a smooth transition when trustees retire or leave the Board, as well as ensuring that the composition of our Board is systematically refreshed to maintain the desired mix of skills, experience, independence and diversity to support our strategic direction and operating environment. Since
2021 Proxy Statement | 21 |
the beginning of 2020, we have added three new trustees, all of whom qualify as independent under the rules of the New York Stock Exchange (NYSE) and bring extensive operational and executive experience to the Board, and two of whom are diverse.
Among other aspects of the succession planning and refreshment process, our Board:
| Identifies the collective mix of desired skills, experience, knowledge, diversity and independence of our Board taken as a whole, and identifies potential opportunities for enhancement in these areas; |
| Considers each current trustees experience, skills, principal occupation, reputation, independence, committee membership and diversity (including age, tenure, geographic, gender and ethnicity); |
| Engages in third-party search firms to assist with identifying and evaluating qualified candidates, as appropriate; and |
| Considers the recommendations of Board members and third parties to identify and evaluate potential trustee candidates. |
Additional information concerning the trustee nomination and selection process is provided below in Identifying and Evaluating Nominees for Trustee.
Trustee Independence. The Board evaluates the independence of each trustee annually based on information supplied by trustees and the company, and on the recommendations of the Nominating and Corporate Governance Committee. The companys Corporate Governance Guidelines require that a majority of the trustees be independent in accordance with the requirements of the rules of the NYSE. Our Board continues to comply with that requirement, with approximately 77% of the current trustees meeting these independence standards. To promote open discussion among non-management trustees, our non-management and independent trustees devote a portion of each regularly scheduled Board meeting to executive sessions without members of management present. If the group of non-management trustees includes trustees who are not independent, at least one executive session convened per year includes only independent trustees.
No trustee qualifies as independent unless the Board affirmatively determines that the trustee has no material relationship with the company and its management, based on all relevant facts and circumstances, in accordance with NYSE rules. Material relationships may include commercial, industrial, consulting, legal, accounting, charitable, family and other business, professional and personal relationships.
Following its annual review of each trustees independence in February 2021, the Nominating and Corporate Governance Committee recommended to the Board and the Board determined that (1) each member of the Board, other than David P. Singelyn, Jack Corrigan and David Goldberg, and (2) each member of the Audit Committee, the Human Capital and Compensation Committee and the Nominating and Corporate Governance Committee is independent pursuant to the rules of the NYSE.
In determining Ms. Gustavsons independence, the Board considered, among other things, (i) that loans payable to Ms. Gustavson by each of Messrs. Singelyn and Corrigan which were secured by company securities were repaid in 2019, and (ii) that Mr. Singelyn no longer serves as manager of HF Investments 2010, LLC, which comprises trusts established by B. Wayne Hughes for certain of his heirs, including the children of Ms. Gustavson.
In addition, the Board has determined that:
| Each member of the Audit Committee meets the additional independence requirements set forth in Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and the rules of the Securities and Exchange Commission (SEC) thereunder; and |
| Each member of the Human Capital and Compensation Committee meets the NYSEs heightened independence requirements for compensation committee members. |
Trustee Retirement Policy. To encourage refreshment of the Board, the Board has adopted a mandatory retirement age for trustees of 75. The policy provides in relevant part that no trustee will be nominated for election to the Board unless he or she will be 75 or younger on the first day of such Board term.
Board Orientation and Education. Each new trustee participates in an orientation program and receives materials and briefings concerning our business, industry, management and corporate governance policies and practices. We provide continuing education for all trustees through board materials and presentations, discussions with management and the opportunity to attend external board education programs. In addition, all Board members have the opportunity to become a member of the National Association of Corporate Directors and to access the many educational resources of that organization.
Shareholder Recommendations. The policy of the Nominating and Corporate Governance Committee to consider properly submitted shareholder recommendations for candidates for membership on the
22 | American Homes 4 Rent |
Board is described below under Identifying and Evaluating Nominees for Trustee. Under this policy, shareholder recommendations may only be submitted by a shareholder entitled to submit shareholder proposals under the SEC rules. Any shareholder recommendations proposed for consideration by the Nominating and Corporate Governance Committee should include the nominees name and qualifications for Board membership, including the information required under Regulation 14A under the Exchange Act, and should be addressed to the Secretary at our principal executive offices at American Homes 4 Rent, 23975 Park Sorrento, Suite 300, Calabasas, California 91302. Recommendations for consideration at the 2022 Annual Meeting of Shareholders should be submitted within the time frame described in this proxy statement under Deadlines for receipt of shareholder proposals.
Trustee Qualifications. Members of the Board shall have the highest personal and professional integrity, shall have demonstrated exceptional ability and judgment and shall be highly effective, in conjunction with the other nominees to the Board, in serving the long-term interests of the company and its shareholders. In general, the Board seeks to add trustees who meet the independence requirements of the NYSE rules. In addition, trustee candidates must submit a completed trustee questionnaire concerning matters related to independence determination, the determination of whether a candidate qualifies as an audit committee financial expert and other proxy disclosure matters and must satisfactorily complete a background investigation by a third-party firm.
The Board has delegated to the Nominating and Corporate Governance Committee responsibility for recommending to the Board new trustees for election and assessing the skills and characteristics required of Board members in the context of the current make-up of the Board. This assessment includes trustees qualifications as independent, and may include consideration of the following, all in the context of an assessment of the perceived needs of the Board at that time:
| diversity, background, skills and experience; |
| personal qualities and characteristics, accomplishments and reputation in the business community; |
| knowledge and contacts in the communities in which the company conducts business and in the companys industry or other industries relevant to the companys business; |
| ability and willingness to devote sufficient time to serve on the Board and committees of the Board; |
| knowledge and expertise in various areas deemed appropriate by the Board; and |
| how the individuals skills, experience and personality fit with those of other trustees in maintaining an effective, collegial and responsive Board. |
We do not have a formal diversity policy and there are no other policies or guidelines that limit the selection of trustee candidates by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee and the Board have and exercise broad discretion to select trustee candidates who will best serve the Board, the company and its shareholders.
Identifying and Evaluating Nominees for Trustee. The Nominating and Corporate Governance Committee periodically assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee will consider various potential candidates for trustee.
Candidates may come to the attention of the Nominating and Corporate Governance Committee through current Board members, professional search firms, shareholders or other persons. These candidates will be evaluated at meetings of the Nominating and Corporate Governance Committee and may be considered at any point during the year.
The Nominating and Corporate Governance Committee will consider properly submitted shareholder nominations of candidates for the Board in the same manner as other candidates. Following verification of the shareholder status of persons proposing candidates, recommendations will be aggregated and considered by the Nominating and Corporate Governance Committee prior to the issuance of the proxy statement for the annual meeting. If any materials are provided by a shareholder in connection with the recommendation of a trustee candidate, such materials are forwarded to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee may also review materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a shareholder. In evaluating such nominations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board.
As discussed above in Board Composition, the Board has actively focused on refreshment with the addition of three new independent trustees since February 2020. As part of the ongoing process to identify trustee
2021 Proxy Statement | 23 |
candidates, during late 2019 and 2020, the Nominating and Corporate Governance Committee reviewed various individual candidates proposed by various Board members, shareholders, investment bankers and a search firm, Ferguson Partners. The nominee selection process involved extensive interviews and five formal meetings of the full Nominating and Governance Committee. At the conclusion of the interview process, the Nominating and Corporate Governance Committee considered feedback from the interviews, discussed the proposed candidates and unanimously recommended that the Board elect Matthew R. Zaist, Lynn C. Swann and Michelle C. Kerrick as trustees. Each of Mr. Zaist, Mr. Swann and Ms. Kerrick were unanimously elected a trustee by the Board in February 2020, August 2020 and September 2020, respectively.
The Board and the Nominating and Corporate Governance Committee will continue to consider additional qualified board candidates.
Our Board is led by the Chairperson, Kenneth M. Woolley, an independent trustee. Currently, the Board believes that having a separate Chairperson and Chief Executive Officer serves the interests of the company and its shareholders well. Our Board believes that this structure encourages open dialogue and competing views, which promotes strong checks and balances. This structure also allows the Chief Executive Officer to focus more
specifically on overseeing the companys day-to-day operations and long-term strategic planning.
Our Board has three standing committees: the Audit Committee, the Human Capital and Compensation Committee and the Nominating and Corporate Governance Committee. Each of these committees consists of at least three members, each of whom meets the independence standards of the NYSE. Matters put to a vote by any one of our three independent committees of our Board must be approved by a majority of the trustees on the committee who are present at a meeting, in person or as otherwise permitted by our bylaws, at which there is a quorum or by the unanimous written consent of the trustees serving on the committee. Additionally, our Board may from time to time establish other committees to facilitate the Boards oversight of management of the business and affairs of the company.
Each of the standing committees operates pursuant to a written charter which is reviewed and reassessed annually and that can be viewed on our website at www.americanhomes4rent.com under Investor Relations. A copy of each may be obtained by sending a written request to the companys Investor Relations Department at American Homes 4 Rent, 23975 Park Sorrento, Suite 300, Calabasas, California 91302, or submitting an information request under Investor Relations on the companys website.
Our three standing committees are described below, and the committee members in 2020 and number of meetings held in 2020 are as follows:
Trustee |
Audit
Committee |
Human Capital
and Compensation Committee |
Nominating and
Governance Committee |
|||
Douglas N. Benham |
|
Member | Chair | |||
Matthew J. Hart |
|
Chair | Member | |||
Michelle C. Kerrick (1) |
Member | Member |
|
|||
James H. Kropp |
Chair |
|
|
|||
Lynn C. Swann (1) |
Member |
|
Member | |||
Winifred M. Webb |
|
Member | Member | |||
Jay Willoughby |
Member |
|
Member | |||
Matthew R. Zaist (1) |
Member | Member |
|
|||
Number of meetings in 2020: |
4 | 5 | 6 |
(1) Mr. Zaist joined the Board in February 2020, Mr. Swann joined the Board in August 2020 and Ms. Kerrick joined the Board in September 2020.
24 | American Homes 4 Rent |
Audit Committee. Our Board has affirmatively determined that each of the Audit Committee members meets the definition of independent trustee for purposes of the NYSE rules and the independence requirements of Rule 10A-3 of the Exchange Act. Our Board has also determined that each member of our Audit Committee is financially literate and that three members, including James H. Kropp, Michelle C. Kerrick and Matthew R. Zaist, qualify as an audit committee financial expert under SEC rules and regulations. The Audit Committees principal functions consist of overseeing:
| the integrity of our consolidated financial statements and financial reporting process; |
| our accounting and financial reporting processes; |
| our systems of disclosure controls and procedures and internal control over financial reporting; |
| our compliance with financial, legal and regulatory requirements; |
| the evaluation of the qualifications, independence and performance of our independent registered public accounting firm; |
| review of all related party transactions in accordance with our Related Party Transaction Policy; |
| the performance of our internal audit functions; and |
| our overall risk exposure and management, including with respect to the companys risk assessment, risk management and risk mitigation policies and programs. |
Human Capital and Compensation Committee. In 2020, the Board made important structural changes to the committee formerly known as the Compensation Committee, repositioned as the Human Capital and Compensation Committee, to expand the responsibilities of such committee to include oversight of the companys human capital programs and policies, including with respect to diversity and inclusion.
The Human Capital and Compensation Committees principal functions consist of supporting the Board in fulfilling its oversight responsibilities relating to the following:
| reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officers compensation, evaluating our Chief Executive Officers performance in light of such goals and objectives, and determining and approving the remuneration of our Chief Executive Officer based on such evaluation; |
| reviewing and approving the compensation of our other executive officers; |
| reviewing our executive compensation policies and plans, including the companys clawback policies; |
| implementing and administering our incentive and equity-based compensation plans; |
| reviewing and discussing with management the Compensation Discussion and Analysis (CD&A) to be included in the proxy statement and to recommend to the Board the inclusion of the CD&A in the companys Annual Report on Form 10-K and annual proxy statement; |
| producing a report on executive compensation to be included in our annual proxy statement; |
| together with management, reviewing managements annual assessment of potential risks related to compensation policies and practices applicable to all employees; |
| overseeing the advisory shareholder votes on the companys executive compensation programs and policies and the frequency of such votes; |
| reviewing, evaluating and recommending changes, if appropriate, to the remuneration for trustees; |
| reviewing and reporting to the Board on the companys programs and practices for talent development and maintaining the continuity of capable management, including but not limited to succession planning for the Chief Executive Officer and other senior executives; and |
| overseeing the companys human capital programs and policies, including with respect to pay fairness and employee well-being, employee retention and development and diversity and inclusion. |
During 2020, the Human Capital and Compensation Committee made all compensation decisions for our executive officers, including the named executive officers, as set forth in the Summary Compensation Table below. In August 2020, the Human Capital and Compensation Committee retained Semler Brossy Consulting Group (Semler Brossy) to serve as its new independent, third-party compensation consultant. The Human Capital and Compensation Committee considered Semler Brossys advice on a range of compensation matters, including its consideration of possible COVID-19 related adjustments to the 2020 compensation program and its consideration of enhancements to the 2021 compensation program, in each case as discussed in more detail in Executive Compensation below.
Empowering diverse talent is a key priority for the company and the Board and the Human Capital and Compensation Committee is actively engaged in overseeing the companys people and culture. We
2021 Proxy Statement | 25 |
recognize employee engagement as a critical factor to our success and we are committed to creating and maintaining a great place to work with an inclusive culture, competitive benefits, and opportunities for training and growth. Moving forward, the Human Capital and Compensation Committee will periodically review and report to the Board on the companys programs for attracting, developing and retaining key employees, including management development programs, technology and skills training programs, employee health and well-being programs, and diversity and inclusion initiatives.
Compensation Committee Interlocks and Insider Participation. None of our current Human Capital and Compensation Committee members is or was an officer or employee, or former officer or employee, of the company. None of our executive officers serve as a member of a board of directors, board of trustees or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our Board or our Human Capital and Compensation Committee.
Oversight of Compensation Risks. In January 2021, the Human Capital and Compensation Committee considered a report from management concerning its review of potential risks related to employee compensation policies and practices. During its review, the Human Capital and Compensation Committee discussed the report with senior management and discussed managements conclusion that the companys compensation policies and practices are not reasonably likely to have a material adverse effect on the company.
To prepare the report for the Human Capital and Compensation Committees consideration, members of our senior management team, including our Chief Executive Officer, Chief Operating Officer, Chief Legal Officer and the Senior Vice President of Human Resources, reviewed each of the companys compensation programs, focusing on employee incentive compensation plans. At the completion of the review, management and the Human Capital and Compensation Committee concluded that there is little motivation or opportunity for employees to take undue risks to earn incentive compensation awards and that the incentive compensation plans properly incentivize employees to achieve long-term goals and do not create undue risks for the company.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committees principal functions consist of:
| identifying, evaluating and recommending to the Board the trustee nominees for each annual shareholder meeting or to fill any vacancy on the Board; |
| identifying individuals qualified to become members of the Board and ensuring that the Board has the requisite expertise; |
| developing and recommending to the Board for its approval qualifications for trustee candidates and periodically reviewing these qualifications with the Board; |
| reviewing the committee structure of the Board and recommending trustees to serve as members or chairs of each committee of the Board; |
| developing and recommending to the Board a set of corporate governance guidelines for the Board and, at least annually, reviewing such guidelines and recommending changes to the Board for approval as necessary; |
| considering and advising the Board on any other governance issues that may arise from time to time; |
| overseeing the annual self-evaluations of the Board and management; |
| overseeing our Boards compliance with our Code of Business Conduct and Ethics; and |
| overseeing managements efforts and activities with respect to environmental sustainability. |
How We Govern and Are Governed
Governance Highlights. We have structured our corporate governance in a manner we believe closely aligns our interests with those of our shareholders. Notable features of our corporate governance include:
| Annual Election of all Trustees |
| Majority Voting for Trustees in Uncontested Elections |
| Independent Chairperson |
| Regular Executive Sessions of Non-Management Trustees |
| Trustee Retirement Policy |
| Anti-Hedging and Anti-Short Sale Policies |
| Compensation Clawback Policy |
| Double-Trigger Vesting for Time-Based Equity Awards |
| Robust Stock Ownership Guidelines |
26 | American Homes 4 Rent |
Governance Documents. The framework of our corporate governance is set forth in our charter and bylaws and in the following documents:
| Corporate Governance Guidelines that outline the Boards overall governance practices |
| Charters of the Audit, Human Capital and Compensation and Nominating and Corporate Governance Committees |
| The Code of Business Conduct and Ethics applicable to trustees, officers and all employees |
| Code of Ethics for Senior Financial Officers |
The Corporate Governance Guidelines and the Code of Business Conduct and Ethics are reviewed at least annually by the Nominating and Corporate Governance Committee, which considers whether to recommend any changes to the Board. Each Board committee reviews its charter at least annually. The companys Code of Business Conduct and Ethics, the Corporate Governance Guidelines and the Board committee charters are available on the companys website, www.americanhomes4rent.com under Investor Relations. A copy of each may be obtained by sending a written request to the companys Investor Relations Department at American Homes 4 Rent, 23975 Park Sorrento, Suite 300, Calabasas, California 91302, or submitting an information request under Investor Relations on the companys website. Any amendments or waivers to the Code of Business Conduct and Ethics for trustees or executive officers may be made only by the Nominating and Corporate Governance Committee of our Board and will be disclosed on the companys website or other appropriate means in accordance with applicable SEC and NYSE requirements.
Board Leadership. The Chairperson presides at meetings of all non-management trustees in executive session without the presence of management. These meetings are held on a regular basis, generally before or after each regularly scheduled Board meeting and at the request of any non-management trustee. In addition, the independent trustees meet separately at least once annually. These sessions are designed to encourage open Board discussion of any matter of interest without our Chief Executive Officer or any other members of management present.
The Chairperson: (1) reviews the agendas for each Board meeting and strategic planning session, (2) in conjunction with the Nominating and Corporate Governance Committee, assists in the recruitment and selection of new trustees, (3) evaluates, along with the members of the Human Capital and Compensation Committee, the performance of the Chief Executive Officer, (4) consults with the Chief Executive Officer as to hiring other
executive officers, as well as strategic planning and succession planning for the Chief Executive Officer, (5) is regularly apprised of material shareholder inquiries and is involved in responding to these inquiries as appropriate, and (6) when necessary or appropriate, communicates with other non-management and independent trustees and calls meetings of the non-management and independent trustees.
Board and Committee Meetings and Attendance. The Board meets at regularly scheduled intervals and may hold additional special meetings as necessary or desirable in furtherance of its oversight responsibilities. As described above, the non-management trustees generally meet in executive session without the presence of management as part of each regularly scheduled Board meeting. The sessions are intended to encourage open discussion of any matter of interest without the Chief Executive Officer or any member of management present.
During 2020, the Board held eleven meetings and the Board committees held fifteen meetings. During 2020, all trustees attended at least 75% of the meetings held by the Board and all committees of the Board on which each trustee served. All of the trustees serving at the time attended the virtual 2020 Annual Meeting of Shareholders. Trustees are encouraged, but not required, to attend the Annual Meeting.
Trustee Service on Other Boards. Although the company recognizes that there may be a benefit to the company as a result of trustees broadening their experience by serving on corporate boards, it is important that each trustee have the requisite time to devote to the oversight of the companys business. Unless otherwise approved by the Board, a trustee who also serves as an executive officer may not serve on more than one public company board in addition to the companys Board, and trustees that are not executive officers of the company may not serve on more than three boards of other public companies in addition to the companys Board. In recognition of the enhanced time commitments associated with membership on a public companys audit committee, no member of the Audit Committee may serve simultaneously on audit committees of more than two other public companies.
Board Responsibilities and Oversight of Risk Management. The Board is responsible for overseeing the companys approach to major risks and policies for assessing and managing these risks. As part of its oversight function, the Board regularly receives presentations from management on areas of risk facing our business. The Board and management actively engage in discussions about these potential and perceived risks to the business.
2021 Proxy Statement | 27 |
In addition, the Board is assisted in its oversight responsibilities by the standing Board committees, which have assigned areas of oversight responsibility for various matters as described in the Board committee charters and as provided in the NYSE rules. These oversight responsibilities are summarized below.
Board
|
Overall oversight of the risk management process |
|
Development of business strategy and major resource allocation |
|
Leadership of management succession planning |
|
Business conduct and compliance oversight |
|
Receipt of regular reports from Board committees on specific risk oversight responsibilities |
Board Committees
Audit Committee Oversight of Risk |
Human Capital and Compensation
Committee Oversight of Risk |
Nominating and Corporate
Governance Committee Oversight of Risk |
||
Oversight of enterprise risk management activities, including the companys risk assessment, risk management and risk mitigation policies and programs
Oversight of accounting and financial reporting
Oversight of integrity of financial statements
Oversight of compliance with legal and regulatory requirements applicable to accounting and financial reporting processes
Oversight of the companys policies and procedures with respect to cybersecurity risk management
Oversight of the performance of internal audit function
Oversight of the effectiveness of internal controls
Oversight of registered public accounting firms qualifications, performance and independence
Review of proposed swaps and equity and debt hedging transactions |
Oversight of compensation related risks and overall philosophy
Oversight of regulatory compliance with respect to compensation matters
Oversight of the companys human capital programs and policies, including with respect to pay fairness and employee well-being, employee retention and development, and diversity and inclusion |
Oversight of overall corporate governance leadership
Provides recommendations regarding Board and committee composition
Oversight of Board succession planning
Oversight of regulatory compliance and environmental sustainability and corporate governance initiatives
Oversight of the evaluation of the Board and management |
Management
|
Identify material risks |
|
Implement appropriate risk management strategies |
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Integrate risk management into our decision-making process |
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Ensure that information with respect to material risks is transmitted to senior executives and the Board |
28 | American Homes 4 Rent |
Risk Areas
|
Strategic |
|
Operational |
|
Financial |
|
Legal, Regulatory
and Compliance |
|||||||
Reputation
Market Dynamics
Acquisitions and Dispositions
Development |
Sales and Marketing
Service and Delivery
Information Systems and Cybersecurity
Infrastructure and Assets
Hazards and Weather
People |
Financial Reporting and Internal Controls
Capital Structure
Market
Liquidity and Credit
Tax
Insurance |
Compliance with Laws
Litigation
Environmental
Social
Governance |
Our Board has established a compensation program for our non-management trustees that includes a mix of cash and equity compensation. The Human Capital and Compensation Committee annually evaluates the adequacy of the trustee compensation program.
Retainers. For 2020, each non-management trustee received the following cash compensation:
| an annual cash retainer of $75,000; |
| an additional annual cash retainer of $25,000 for the Chairperson; |
| an additional annual cash retainer of $20,000 to the chair of the Audit Committee; |
| an additional annual cash retainer of $12,500 to the chair of the Human Capital and Compensation Committee; and |
| an additional annual cash retainer of $12,500 to the chair of the Nominating and Corporate Governance Committee. |
For 2021, the annual retainer for non-management trustees was set at $75,000. The annual retainer for the Chairperson was set at $50,000. The annual retainer for the chair of the Audit Committee was set at $20,000 and for the chairs of the Human Capital and Compensation Committee and the Nominating and Corporate Governance Committee was set at $12,500. The annual retainer for the members of the Audit Committee was set at $7,500 and for the members of the Human Capital and Compensation Committee and the Nominating and Corporate Governance Committee was set at $5,000.
The company also reimburses non-management trustees for reasonable out-of-pocket expenses incurred in the performance of their duties as trustees, including without limitation, travel expenses in connection with their attendance in-person at Board and committee meetings. Trustees who are employees do not receive any compensation for their services as trustees. We do not anticipate holding in-person Board or committee meetings in the first half of 2021. However, given the ongoing uncertainty of the COVID-19 pandemic and the vaccine rollout, we recognize that it may be safe to hold in-person meetings at some time before the end of 2021. If so, this policy will apply and the company will reimburse travel expenses in connection with trustees attendance at these meetings.
Equity Awards. For 2020, on the date of the Annual Meeting, each non-management trustee received an award of restricted share units with a value of $100,000 as determined by the closing price on the NYSE of the companys Class A common shares on the date of grant. New trustees appointed during 2020 also received an award of restricted share units with a value of $100,000 as determined by the closing price on the NYSE of the companys Class A common shares on the date of grant. The grant date for the award to new trustees is the date their service commences. Awards for new trustees and the annual grants to non-management trustees vest in full one year from the date of grant. For 2021, the value of the equity award was set at $125,000.
2021 Proxy Statement | 29 |
Trustee Compensation Table. The following table presents information relating to the total compensation of our non-employee trustees for the fiscal year ended December 31, 2020. Mr. Zaist joined the Board in February 2020, Mr. Swann joined the Board in August 2020 and Ms. Kerrick joined the Board in September 2020.
Messrs. Singelyn and Corrigan did not receive any compensation for their services as trustees in 2020. Mr. Singelyns compensation as our Chief Executive Officer and Mr. Corrigans compensation as our Chief Investment Officer is described beginning on page 60.
Name |
Paid in Cash ($) | Stock Awards ($) (1)(2) | Total ($) | ||||||||||||
Kenneth M. Woolley |
$93,750 | $100,000 | $193,750 | ||||||||||||
Douglas N. Benham |
$87,500 | $100,000 | $187,500 | ||||||||||||
David Goldberg |
$75,000 | $100,000 | $175,000 | ||||||||||||
Tamara Hughes Gustavson |
$87,500 | $100,000 | $187,500 | ||||||||||||
Matthew J. Hart |
$93,750 | $100,000 | $193,750 | ||||||||||||
Michelle C. Kerrick |
$37,500 | $100,000 | $137,500 | ||||||||||||
James H. Kropp |
$95,000 | $100,000 | $195,000 | ||||||||||||
Lynn C. Swann |
$37,500 | $100,000 | $137,500 | ||||||||||||
Winifred M. Webb |
$75,000 | $100,000 | $175,000 | ||||||||||||
Jay Willoughby |
$75,000 | $100,000 | $175,000 | ||||||||||||
Matthew R. Zaist |
$75,000 | $202,300 | $277,300 |
(1) Restricted share unit awards valued at the closing share price on the NYSE of $25.28 per share for Class A common shares on May 7, 2020, which was the date of grant for all trustees but for Mr. Swann and Ms. Kerrick, which were valued at the closing share prices on August 5, 2020 ($29.05) and September 9, 2020 ($29.20), respectively. Mr. Zaist also received restricted share unit awards valued at the closing share price of $25.68 on February 27, 2020, which was the date of this additional grant.
(2) As of December 31, 2020, each non-management trustee had the following number of options outstanding: Messrs. Hart and Woolley each held a total of 60,000, of which 52,500 are fully vested and exercisable; Mr. Kropp held a total of 50,000, of which 42,500 are fully vested and exercisable; Ms. Gustavson and Mr. Benham each held a total of 30,000, of which 22,500 are fully vested and exercisable; Ms. Webb and Mr. Willoughby each held a total of 10,000, of which 2,500 are fully vested and exercisable. Mr. Singelyn held fully vested options to acquire 25,000 shares which were not awarded in connection with his service as a trustee. In addition, as of December 31, 2020, (i) Mses. Gustavson and Webb, and Messrs. Benham, Goldberg, Hart, Kropp, Willoughby, Woolley and Zaist held 3,956 restricted share units which vest in full on May 7, 2021, (ii) Ms. Kerrick held 3,425 restricted share units which vest in full on September 9, 2021, (iii) Mr. Swann held 3,443 restricted share units which vest in full on August 5, 2021, and (iv) Mr. Zaist also held 3,985 restricted share units which vest in full on February 27, 2021.
Trustee Share Ownership Policy. Our share ownership guidelines approved by the Board are intended to align the interests of the companys executive officers and independent trustees with the interests of the companys shareholders. The policy applies to the companys Chief Executive Officer, other Section 16 officers and the independent members of the Board. Each independent trustee covered by the policy is expected to own Class A common shares and equivalents (including Class A partnership units that are convertible into Class A common shares and unvested restricted stock units (RSUs) that are only subject to time vesting) of the company with an aggregate market value of five times the previous year annual cash retainer (excluding any Board committee fees) for each independent trustee. For
information regarding requirements for executive officers, see Executive Officer Ownership of Company SharesShare Ownership Policy below.
Securities that have been pledged and shares underlying vested or unvested options are not counted for purposes of the policy. Current independent trustees are expected to be in compliance by February 24, 2026, the fifth anniversary of the effective date of the policy. New trustees are expected to be in compliance within five years of their appointment.
The Human Capital and Compensation Committee of the Board has the authority to administer and interpret, to monitor compliance with, and to make all determinations regarding the share ownership policy.
30 | American Homes 4 Rent |
How You Can Communicate With Us
We value and actively solicit feedback from our shareholders. During fiscal year 2020, management met with over 420 institutional investors at virtual conferences, non-deal roadshows and industry calls.
We encourage all shareholders to contact our investor relations team with any questions or comments by:
|
|
|
|
|||
investors@ah4r.com |
Visit www.americanhomes4rent.com under Investor Relations |
Write
to
Attn: Investor Relations 23975 Park Sorrento, Suite 300 Calabasas, CA 91302 |
Call (855) 794-AH4R (2447) |
The Board also welcomes feedback from shareholders and other interested parties. We receive a large volume of correspondence regarding a wide range of subjects each day, including correspondence relating to ordinary business operations. As a result, our individual trustees are often not able to respond to all communications directly. Therefore, the Board has established a process for managing communications to the Board and individual trustees. Any shareholder communication to
the Board should be addressed to: Board of Trustees, c/o Corporate Secretary, American Homes 4 Rent, 23975 Park Sorrento, Suite 300, Calabasas, California 91302. Communications that are intended for a specified individual trustee or group of trustees should be addressed to the trustee(s) c/o Corporate Secretary at the above address, and all such communications received will be forwarded to the designated trustee(s).
2021 Proxy Statement | 31 |
We are asking our shareholders to approve adoption of the American Homes 4 Rent 2021 Equity Incentive Plan.
The Board approved the 2021 Incentive Plan on February 24, 2021, subject to shareholder approval. The Board believes that the adoption of the 2021 Incentive Plan is in the best interest of our shareholders and the company because equity-based awards help to attract, motivate, and retain talented employees, trustees and other service providers, align employee and shareholder interests, link employee compensation with performance, and maintain a culture based on employee share ownership. Equity has been and is expected to continue to be a significant component of the total compensation of our key executives.
The 2021 Incentive Plan is intended to replace the companys existing equity compensation plan, the American Homes 4 Rent 2012 Equity Incentive Plan (as amended, the 2012 Incentive Plan). If approved, the maximum number of common shares available for issuance under the 2021 Incentive Plan will be equal to the sum of (i) 8,500,000 common shares, (ii) the number of common shares available for future awards under the 2012 Incentive Plan as of the effective date of the 2021 Incentive Plan, and (iii) the number of common shares related to awards outstanding under the 2012 Incentive Plan as of the effective date that later terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such common shares and become available for issuance under the 2021 Incentive Plan.
If the 2021 Incentive Plan is not approved by our shareholders, the 2021 Incentive Plan will not become effective, the 2012 Incentive Plan will continue in effect, and we may continue to grant awards under the 2012 Incentive Plan to the extent of the common shares remaining available for issuance under that plan. As of the record date, there were 885,508 shares remaining available for issuance under the 2012 Incentive Plan (without giving effect to additional shares that may become available upon the future expiration, forfeiture or cancellation of outstanding awards).
Summary of Material Provisions of the 2021 Incentive Plan
A summary of the material terms of the 2021 Incentive Plan is set forth below. This summary is qualified in its entirety by the full text of the 2021 Incentive Plan, a copy of which is attached as Annex A to this proxy statement and which is incorporated by reference into this Proposal 2. We encourage shareholders to read and refer to the complete plan document in Annex A for a more complete description of the 2021 Incentive Plan.
General: The 2021 Incentive Plan permits the grant of awards of share options, share appreciation rights (SARs), restricted shares, restricted share units, deferred share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, LTIP Units (as defined below), and other rights or interests that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to common shares, to any employee, officer, trustee or director of the company or an affiliate of the company, any other service provider currently providing direct services to the company or an affiliate of the company (including a consultant or advisor), or to any other person whose participation in the 2021 Incentive Plan is determined by the Human Capital and Compensation Committee to be in the best interest of the company. Each award granted under the 2021 Incentive Plan will be evidenced by an award agreement in such form or forms as may be determined by the Human Capital and Compensation Committee that sets forth the terms and conditions of the award.
Administration of the 2021 Incentive Plan: The 2021 Incentive Plan will be administered by the Human Capital and Compensation Committee, and the Human Capital and Compensation Committee will determine all terms of awards under the 2021 Incentive Plan. During any time when the company has a class of equity registered under Section 12 of the Exchange Act, each member of the Human Capital and Compensation Committee that administers the 2021 Incentive Plan will be (i) a non-employee director within the meaning of Rule 16b-3 of the Exchange Act, and (ii) for so long as the common shares are listed on the NYSE, an independent director in accordance with the requirements of the rules of the NYSE. The Human Capital and Compensation Committee will also determine who will receive awards under the 2021 Incentive Plan, the type of award and its terms and conditions and the number of common shares subject to the award, if the award is equity-based. The Human Capital and Compensation Committee will also interpret and construe the provisions of the 2021 Incentive Plan. During any period of time in which there is not a compensation committee, the 2021 Incentive Plan will be administered by the Board or another committee appointed by the Board. References below to the Human Capital and Compensation Committee include a reference to the Board or another committee appointed by the Board for those periods in which the Board or such other committee appointed by the Board is acting.
Eligibility: All employees and officers of the company and its subsidiaries and affiliates are eligible to receive awards under the 2021 Incentive Plan. In addition,
34 | American Homes 4 Rent |
non-employee trustees or directors of the company or any subsidiary or affiliate of the company, other service providers (who are natural persons) currently providing direct services to the company or a subsidiary or affiliate of the company, or any other person whose participation in the 2021 Incentive Plan is determined by the Human Capital and Compensation Committee to be in the best interest of the company may receive awards under the 2021 Incentive Plan. As of March 9, 2021, the company had approximately 1,434 employees and 11 non-employee trustees.
Share Authorization: The number of common shares that may be issued under the 2021 Incentive Plan is equal to the sum of (i) 8,500,000 common shares, (ii) the number of common shares available for future awards under the 2012 Incentive Plan as of the effective date of the 2021 Incentive Plan, and (iii) the number of common shares related to awards outstanding under the 2012 Incentive Plan as of the effective date that later terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such common shares and become available for issuance under the 2021 Incentive Plan. Any of the common shares available for issuance under the 2021 Incentive Plan may be used for any type of award under the 2021 Incentive Plan. In connection with share splits, distributions, recapitalizations, spin-offs, share dividends and certain other events, the Human Capital and Compensation Committee will make proportionate adjustments that it deems appropriate in the aggregate number and kind of shares that may be issued under the 2021 Incentive Plan and the number and kind of shares that are subject to outstanding awards. Any shares covered by an award that terminates by expiration, forfeiture, cancellation, or otherwise without the issuance of any shares subject to such award will again be available for purposes of the 2021 Incentive Plan. The number of common shares available for issuance under the 2021 Incentive Plan will not be increased by the number of common shares (i) tendered or withheld or subject to an award surrendered in connection with the purchase of shares upon exercise of an option, (ii) deducted or delivered from payment of an award of an option or SAR in connection with the companys tax withholding obligations, or (iii) purchased by the company with proceeds from option exercises. The number of common shares available for issuance under the 2021 Incentive Plan will not be increased by the number of common shares tendered or withheld or subject to an award (other than an option or SAR) surrendered in connection with the purchase of shares or deducted or delivered from payment of an award (other than an option or SAR) in connection with the companys tax withholding obligations.
No awards have been issued under the 2021 Incentive Plan.
Share Usage: Any common shares that are subject to awards will be counted against the 2021 Incentive Plan share limit as one common share for every one common share subject to the award. The maximum number of common shares issuable under a performance share grant will be counted against the 2021 Incentive Plan share limit as of the applicable grant date, but such number will be adjusted to equal the actual number of shares issued upon settlement of the performance share grant to the extent different from such maximum number of shares.
No Repricing: Except in connection with certain corporate transactions involving the company, the company may not, without shareholder approval, (i) amend an outstanding option or SAR to reduce the exercise price of the option or the strike price of the SAR, (ii) cancel outstanding options or SARs in exchange for options or SARs with an exercise price or strike price, as applicable, that is less than the exercise price or strike price, as applicable, of the original options or SARs, (iii) cancel outstanding options or SARs with an exercise price or strike price, as applicable, above the current share price in exchange for cash or other securities, or (iv) take any other action that is treated as a repricing under U.S. generally accepted accounting principles.
Options: The 2021 Incentive Plan provides for the grant of options to purchase one or more common shares. The term of an option cannot exceed ten years from the date of grant; provided that in the event the participant is a 10% shareholder, an option granted to such participant that is intended to be an incentive share option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code), will not be exercisable five years from the date of grant. The Human Capital and Compensation Committee determines at what time or times each option may be exercised and the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised. Options may become exercisable in installments. Except in the case of substitute awards (as defined in the 2021 Incentive Plan), the exercise price of each option granted under the 2021 Incentive Plan cannot be less than the fair market value of a common share on the grant date of such option; provided that in the event the participant is a 10% shareholder, an option granted to such participant that is intended to be an incentive share option cannot be less than 110% of the fair market value of a common share on the grant date of such option. All options granted under the 2021 Incentive Plan will be non-qualified share options or incentive share options.
2021 Proxy Statement | 35 |
The exercise price for any option generally is payable (i) in cash or cash equivalents, (ii) to the extent the award agreement provides and subject to certain limitations set forth in the 2021 Incentive Plan, by the tender of common shares (or attestation of ownership of such common shares) with an aggregate fair market value on the date on which the option is exercised equal to the exercise or purchase price, (iii) to the extent the award agreement provides, by payment through a broker in accordance with procedures established by the company, or (iv) to the extent the award agreement provides and/or unless otherwise specified in an award agreement, any other form permissible by applicable laws, including net exercise or settlement.
Share Awards and Share Units: The 2021 Incentive Plan provides for the grant of share awards (which includes awards of unrestricted shares and awards of restricted shares), restricted share units and deferred share units. An award of restricted shares, restricted share units or deferred share units may be subject to such restrictions as the Human Capital and Compensation Committee may determine. The restrictions, if any, may lapse over a specified period of time or through the satisfaction of conditions, in installments or otherwise, as the Human Capital and Compensation Committee may determine. A participant who receives restricted shares will have all of the rights of a shareholder as to those shares, including, without limitation, the right to vote and the right to receive dividends or distributions on the shares, except that the Board may require any dividends to be reinvested in common shares, which may or may not be subject to the same vesting conditions and restrictions as applicable to such restricted shares. A participant who receives restricted share units or deferred share units will have no such rights, provided that the Human Capital and Compensation Committee may provide in an award agreement evidencing a grant of restricted share units or deferred share units that the participant will be entitled to receive dividend equivalent payments in respect of such restricted share units or deferred share units. Dividend equivalents paid on restricted share units or deferred share units which vest or are earned based upon the achievement of performance goals will not vest unless such performance goals are achieved. During the restricted period, if any, applicable to such restricted share awards, restricted share units or deferred share units, a participant is prohibited from selling, transferring, assigning, pledging or otherwise encumbering or disposing of his or her restricted share awards, restricted share units or deferred share units.
Share Appreciation Rights: The 2021 Incentive Plan provides for the grant of SARs, which provide the recipient with the right to receive, upon exercise of the
SAR, cash, common shares or a combination of the two. The amount that the recipient will receive upon exercise of the SARs generally will equal the excess of the fair market value of the common shares on the date of exercise over the per share strike price of the SAR as determined by the Human Capital and Compensation Committee. SARs will become exercisable in accordance with terms determined by the Human Capital and Compensation Committee. SARs may be granted in tandem with an option grant or independently from an option grant. The term of a SAR cannot exceed ten years from the date of grant.
Performance-Based Awards: The 2021 Incentive Plan provides for the grant of performance-based awards, which are awards of options, SARs, restricted shares, restricted share units, deferred share units, performance shares, other equity-based awards or cash made subject to the achievement of performance goals over a performance period specified by the Human Capital and Compensation Committee. The Human Capital and Compensation Committee will determine the applicable performance period, the performance goals and such other conditions that apply to the performance-based award. Performance goals may relate to financial performance, the participants performance or such other criteria determined by the Human Capital and Compensation Committee. If the performance goals are met, performance-based awards will be paid in cash, common shares, other awards or a combination thereof.
LTIP Units: The 2021 Incentive Plan provides for the grant of awards in the form of a unit of American Homes 4 Rent, L.P., our operating partnership (LTIP Unit). LTIP Units are intended to qualify as profits interests within the meaning of the Code. The Human Capital and Compensation Committee will determine the terms and conditions (including vesting conditions) applicable to any LTIP Units granted under the 2021 Incentive Plan; provided, however, that LTIP Units may be issued only to a participant for the performance of services to or for the benefit of our operating partnership (i) in the participants capacity as a partner of our operating partnership, (ii) in anticipation of the participant becoming a partner of our operating partnership, or (iii) as otherwise determined by the Human Capital and Compensation Committee. LTIP Units will be subject to the terms and conditions of the partnership agreement of our operating partnership and such other restrictions, including restrictions on transferability, as the Human Capital and Compensation Committee imposes.
Dividend Equivalent Rights: The 2021 Incentive Plan provides for the grant of dividend equivalent rights in connection with the grant of certain equity-based awards. Dividend equivalent rights may be paid currently or
36 | American Homes 4 Rent |
accrued as contingent cash obligations and may be payable in cash, common shares or a combination of the two. The Human Capital and Compensation Committee will determine the terms of any dividend equivalent rights. No dividend equivalent rights can be granted in tandem with an option or SAR.
Recoupment: Award agreements for awards granted pursuant to the 2021 Incentive Plan may provide that the award is subject to mandatory repayment by the recipient to the company of any gain realized by the recipient to the extent the recipient is in violation of or in conflict with certain agreements with the company (including but not limited to an employment or non-competition agreement) or any obligation to the company (including but not limited to a confidentiality obligation). Awards are also subject to mandatory repayment to the extent the grantee is or becomes subject to (i) the Companys Executive Officer Performance-Based Compensation Recovery Policy, (ii) any other clawback or recoupment policy adopted to comply with the requirements of any applicable law, rule or regulation, or otherwise, or (iii) any law, rule or regulation which imposes mandatory recoupment.
Change in Control: Except as otherwise provided in the applicable award agreement, if the company experiences a Change in Control in which outstanding awards will be assumed or continued by the surviving entity, then such awards will continue in the manner and under the terms so provided to the extent that provision is made in writing in connection with such Change in Control for the assumption or continuation of such awards or the substitution for such awards of new awards relating to the equity of the successor entity, or a parent or subsidiary of such successor entity, with appropriate adjustments as to the number of shares and, if applicable, exercise prices. All incomplete performance periods in respect of each performance-based award will end on the date of the Change in Control and the performance goals applicable to such award will be deemed satisfied (i) based on the level of performance achieved as of the date of the Change in Control, if determinable, or (ii) at the target level, if not determinable. Each such performance-based award will become a time-based award and will otherwise vest in accordance with the applicable award agreement. In the event an award is assumed, continued or substituted upon the consummation of any Change in Control and the employment of the holder of such award is terminated without cause (as defined in the 2021 Incentive Plan) within two years following the consummation of such Change in Control, such award will be fully vested and may be exercised in full, to the extent applicable, beginning on the date of such termination and for the one-year period immediately following such termination or for such longer period as the Human
Capital and Compensation Committee will determine.
Except as otherwise provided in the applicable award agreement, if the company experiences a Change in Control (as defined below) in which outstanding awards will not be assumed or continued by the surviving entity: (i) all restricted shares, restricted share units, deferred share units and dividend equivalent rights will vest and the underlying common shares will be delivered immediately before the Change in Control, and (ii) (x) all options and SARs will become exercisable fifteen days before the Change in Control and terminate upon the consummation of the Change in Control, or (y) at the Human Capital and Compensation Committees discretion, any options, SARs, restricted shares, restricted share units, deferred share units and/or dividend equivalent rights may be cancelled and cashed out in connection with the Change in Control for an amount in cash or securities having a value, in the case of restricted shares, restricted share units, deferred share units and dividend equivalent rights, equal to the formula or fixed price per share paid to the shareholders pursuant to such Change in Control and, in the case of options or SARs, equal to the product of the number of common shares subject to such options or SARs multiplied by the amount, if any, by which the formula or fixed price per share paid to shareholders pursuant to such Change in Control exceeds the exercise price or strike price applicable to such options or SARs. In the event the option exercise price or SAR exercise price of an award exceeds the price per share paid to shareholders in the Change in Control, such options and SARs may be terminated for no consideration. In the case of performance-based awards, if less than half of the performance period has lapsed, such awards will be treated as though target performance has been achieved immediately prior to the occurrence of the Change in Control. If at least half the performance period has lapsed, actual performance to date will be determined as of a date reasonably proximal to the date of the consummation of the Change in Control as determined by the Human Capital and Compensation Committee, and such level of performance will be treated as achieved immediately prior to the occurrence of the Change in Control.
A Change in Control under the 2021 Incentive Plan means, unless provided otherwise in an award agreement, the occurrence of any of the following:
(a) |
any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the company or any affiliate, any trustee or other fiduciary holding securities under any employee benefit plan of the company, or any company owned, directly or indirectly, by the shareholders of the company in substantially the same proportions as |
2021 Proxy Statement | 37 |
their ownership of common shares), becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the company representing more than 50% of the combined voting power of the companys then outstanding securities; |
(b) |
during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new trustee (other than a trustee designated by a person who has entered into an agreement with the company to effect a transaction described in clause (a), (c), or (d) or a trustee whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) whose election by the Board or nomination for election by the companys shareholders was approved by a vote of at least two-thirds of the trustees then still in office who either were trustees at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board; |
(c) |
a merger or consolidation of the company with any other corporation, other than a merger or consolidation that would result in the voting securities of the company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) 50% or more of the combined voting power of the voting securities of the company or such surviving entity outstanding immediately after such merger or consolidation; provided that, a merger or consolidation effected to implement a recapitalization of the company (or similar transaction) in which no person (other than those covered by the exceptions in clause (a)) acquires more than 50% of the combined voting power of the companys then outstanding securities will not constitute a Change in Control; or |
(d) |
a complete liquidation or dissolution of the company or the consummation of a sale or disposition by the company of all or substantially all of the companys assets other than the sale or disposition of all or substantially all of the assets of the company to a person or persons who beneficially own, directly or indirectly, 50% or more of the combined voting power of the outstanding voting securities of the company at the time of the sale. |
Amendment or Termination: The Board may amend, suspend or terminate the 2021 Incentive Plan at any time; provided that no amendment, suspension or termination may impair rights or obligations under any outstanding award without the participants consent or violate the 2021 Incentive Plans prohibition on repricing. The shareholders must approve any amendment if such approval is required under applicable law or stock exchange requirements. The shareholders also must approve any amendment that changes the no-repricing provisions of the 2021 Incentive Plan. The 2021 Incentive Plan has a term of ten years, but may be terminated earlier by the Board at any time, as described above.
New Plan Benefits: As of March 9, 2021, no awards have been made under the 2021 Incentive Plan. Because benefits under the 2021 Incentive Plan are discretionary and will depend on the actions of the Human Capital and Compensation Committee, the performance of the company and the value of common shares, it is not possible to determine the benefits that will be received if shareholders approve the 2021 Incentive Plan.
Summary of U.S. Federal Income Tax Consequences
The federal income tax consequences of awards under the 2021 Incentive Plan for participants and the company will depend on the type of award granted. The following description of tax consequences is intended only for the general information of shareholders. A participant in the 2021 Incentive Plan should not rely on this description and instead should consult his or her own tax advisor.
Options: Under current law the grant of an option generally will have no federal income tax consequences for the participant or the company. Upon the exercise of an option, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of common shares on the exercise date over the exercise price. Generally, the company will be entitled to a deduction equal to the amount of ordinary income recognized by the participant and at the time the participant recognizes such income for tax purposes, if the company complies with applicable reporting requirements and subject to the limit on the deductibility under Section 162(m) of the Code.
Share Appreciation Rights: Under current law, the grant of a SAR generally will have no federal income tax consequences for the participant. Upon the exercise of a SAR, the participant will recognize ordinary income equal to the amount of cash paid and the fair market value of any common shares delivered to the participant. Generally, the company will be entitled to a deduction
38 | American Homes 4 Rent |
equal to the amount of ordinary income recognized by the participant and at the time the participant recognizes such income for tax purposes, if the company complies with applicable reporting requirements and subject to the limit on the deductibility under Section 162(m) of the Code.
Restricted Shares: Under current law, the grant of restricted shares generally will have no federal income tax consequences to the participant or the company. The participant will generally recognize ordinary income on the date the award vests, in an amount equal to the value of the shares on the vesting date. Under Section 83(b) of the Code, a participant may elect to recognize income on the date of grant rather than the date of vesting in an amount equal to the fair market value of the shares on the date of grant (less the purchase price for such shares, if any). Pursuant to the 2021 Incentive Plan, participants may not file Section 83(b) elections with respect to restricted shares. Generally, the company will be entitled to a deduction equal to the amount of ordinary income recognized by the participant and at the time the participant recognizes such income for tax purposes, if the company complies with applicable reporting requirements and subject to the limit on the deductibility under Section 162(m) of the Code.
Restricted Share Units, Deferred Share Units and Performance-Based Awards: Under current law, the grant of a restricted share unit award, a deferred share unit award or a performance-based award generally will have no federal income tax consequences to the participant or the company. The participant generally will recognize ordinary income when payment is actually or constructively received by the participant in satisfaction of the restricted share unit award, deferred share unit award or performance-based award, in an amount equal to the amount of cash paid and the fair market value of any shares delivered to the participant. Generally, the company will be entitled to a deduction equal to the amount of ordinary income recognized by the participant and at the time the participant recognizes such income for tax purposes, if the company complies with applicable reporting requirements and subject to the limit on the deductibility under Section 162(m) of the Code.
Unrestricted Shares: Under current law, upon the grant of an award of unrestricted shares, a participant will be required to recognize ordinary income in an amount equal to the fair market value of the shares on the date of grant, reduced by the amount, if any, paid for such shares. Upon a participants disposition of such shares, any gain realized in excess of the amount reported as ordinary income will be reportable by the participant as a capital gain, and any loss will be reportable as a capital loss. Capital gain or loss will be long-term if the participant held the shares for more than one year
(otherwise, the capital gain or loss will be short-term). Generally, the company will be entitled to a deduction equal to the amount of ordinary income recognized by the participant and at the time the participant recognizes such income for tax purposes, if the company complies with applicable reporting requirements and subject to the limit on the deductibility under Section 162(m) of the Code.
LTIP Units: Under current law, the grant of an award of LTIP Units generally will have no federal income tax consequences to the participant or the company. If the LTIP Units are not vested as of the date of grant, the vesting of the LTIP Units generally will have no federal income tax consequences to the participant or the company. Taxable income of our operating partnership allocable to the LTIP Units prior to vesting is taxed as compensation income to the participant subject to withholding taxes unless the participant has made a timely election under Section 83(b) of the Code. Generally, the company will be entitled to a deduction equal to the amount of ordinary income recognized by the participant and at the time the participant recognizes such income for tax purposes, if the company complies with applicable reporting requirements and subject to the limit on the deductibility under Section 162(m) of the Code.
Dividend Equivalents: Under current law, the grant of dividend equivalents generally will have no federal income tax consequences for the participant. Generally, the participant will recognize ordinary income on the amount distributed to the participant pursuant to the award of dividend equivalent rights. Generally, the company will be entitled to a deduction equal to the amount of ordinary income recognized by the participant and at the time the participant recognizes such income for tax purposes, if the company complies with applicable reporting requirements and subject to the limit on the deductibility under Section 162(m) of the Code.
Certain payments made to employees and other service providers in connection with a Change in Control may constitute parachute payments subject to tax penalties imposed on both the company and the recipient under Sections 280G and 4999 of the Code. In general, when the value of parachute payments equals or exceeds three times the employees base amount, the employee is subject to a 20% nondeductible excise tax on the excess over the base amount and the company is denied a tax deduction for the payments. The base amount is generally defined as the employees average compensation for the five calendar years prior to the date of the Change in Control. The value of accelerated vesting of restricted shares, options, or other awards in connection with a Change in Control can constitute a
2021 Proxy Statement | 39 |
parachute payment. The 2021 Incentive Plan contains a modified form of a safe harbor cap, which limits the amount of potential parachute payments that a recipient may receive to no more than 299% of the recipients base amount, but only if such cutback results in larger after-tax payments to the recipient.
Shareholder approval of the 2021 Incentive Plan is necessary in order for the company to meet the NYSE shareholder approval requirements.
In its determination to approve the 2021 Incentive Plan, the Board reviewed an analysis prepared by Semler Brossy, which included an analysis of certain burn rate, dilution and overhang metrics, the expected duration of the 2021 Incentive Plan, the cost of the 2021 Incentive Plan, as well as best market practices and trends.
Specifically, the Board considered:
Burn Rate: Our three-year average burn rate is 0.14% as shown in the table below.
|
Share Options |
Time-Based
RSUs |
Earned
Performance Awards |
Unadjusted
Total |
Adjusted
Total(1) |
Weighted
Common Shares Outstanding |
Unadjusted
Burn Rate |
Adjusted
Burn Rate |
||||||||||||||||||||||||||||||||
2020 |
0 | 470,147 | 0 | 470,147 | 1,175,368 | 306,613,197 | 0.15 | % | 0.38% | |||||||||||||||||||||||||||||||
2019 |
20,000 | 350,334 | 0 | 370,334 | 895,835 | 299,415,397 | 0.12 | % | 0.30% | |||||||||||||||||||||||||||||||
2018 |
140,000 | 304,400 | 0 | 444,400 | 901,000 | 293,640,500 | 0.15 | % | 0.31% | |||||||||||||||||||||||||||||||
Three-year Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.14 | % | 0.33% |
(1) The adjusted total is derived by multiplying the number of time-based RSUs and earned performance awards by the Institutional Shareholder Services options-equivalent multiplier of 2.5 to provide more equivalent valuation between stock options and full value shares.
Overhang and Dilution: The estimated overhang, based on outstanding equity-based awards (1,741,837) and shares remaining available under the 2012 Incentive Plan (1,417,627), and the estimated dilution, based on outstanding equity-based awards plus the new requested shares (8,500,000), are approximately 1.0% and 3.7%, respectively, as of December 31, 2020. There are currently 1,090,300 options and 651,537 RSUs outstanding. The remaining common shares available for future awards under the 2012 Incentive Plan as of the effective date of the 2021 Incentive Plan and the number of common shares related to awards outstanding under the 2012 Incentive Plan as of the effective date that later terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such common shares and become available for issuance under the 2021 Incentive Plan will be available under the 2021 Incentive Plan as of its effective date. See the table below for the reconciliation of our outstanding equity-based awards, broken out by share options, RSUs and performance-based RSUs.
|
Share
Options |
RSUs |
Performance-Based
RSUs |
Total | ||||||||||||||||
Balance as of December 31, 2019 |
1,529,800 | 599,109 | 0 | 2,128,909 | ||||||||||||||||
Granted in 2020 |
0 | 470,147 | 0 | 470,147 | ||||||||||||||||
Balance as of December 31, 2020 |
1,090,300 | 651,537 | 0 | 1,741,837 |
40 | American Homes 4 Rent |
Plan Duration: If we continue to make equity grants consistent with our 2021 practices (which is not necessarily reflective of grants made per our three-year historical burn rate), we estimate that the 2021 Incentive Plan will last approximately 12 years.
Plan Cost: Based on generally accepted evaluation methodologies used by proxy advisory firms, we concluded that the number of shares under the 2021 Incentive Plan is well within generally accepted standards
as measured by an analysis of the 2021 Incentive Plan cost relative to industry standards.
In light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the competitive labor markets in which we compete, our Board believes the approval of the 2021 Incentive Plan is in the best interest of our shareholders and the company.
2021 Proxy Statement | 41 |
We are asking our shareholders to approve adoption of the proposed American Homes 4 Rent 2021 Employee Stock Purchase Plan.
The Board believes that an employee stock purchase plan encourages the companys employees to acquire our common shares, thereby fostering broad alignment of employees interests with the interests of our shareholders; fosters good employee relations; and provides the company an ability to recruit, retain, and reward employees in an extremely competitive employment environment.
Key Features of the Employee Stock Purchase Plan
As described further below, the ESPP generally:
| Reserves 3,000,000 common shares for issuance pursuant to the ESPP; |
| Permits a participant to contribute up to 10% of his or her annual base salary each pay period through after-tax payroll deductions; |
| Unless otherwise determined by the Administrator (as defined below), establishes six-month offering periods commencing in January and July of each calendar year; |
| Permits participants to purchase common shares at a discount, which will be set by the Administrator, up to a maximum discount equal to the lesser of 85% of the closing price for the common shares on the first day or the last day of the applicable offering period; |
| Limits the value of shares that a participant may purchase in a calendar year to the lesser of $25,000 and 10% of a participants annual base salary; and |
| Will not qualify as an employee stock purchase plan as defined in Section 423 of the Code. |
Summary of Material Provisions of the Employee Stock Purchase Plan
A summary of the material terms of the ESPP is set forth below. This summary is qualified in its entirety by the full text of the ESPP, a copy of which is attached as Annex B to this proxy statement and which is incorporated by reference into this Proposal 3. We encourage shareholders to read and refer to the complete plan document in Annex B for a more complete description of the ESPP.
Share Reserve: Subject to adjustment in connection with certain corporate transactions, the maximum number of common shares that may be purchased under the ESPP will be 3,000,000 shares. The common shares reserved for issuance under the ESPP may be authorized but unissued shares or shares purchased on the open market.
Administration: The ESPP will be administered, at the companys expense, under the direction of the Board, the Human Capital and Compensation Committee of the Board, or any other committee of the Board designated by the Board from time to time (any such entity, the Administrator). The Administrator will initially be the Human Capital and Compensation Committee. The Administrator will have the authority to take any actions it deems necessary or advisable for the administration of the ESPP, including, without limitation, (i) interpreting and construing the ESPP and options granted thereunder, (ii) prescribing, adopting, amending, suspending, waiving, and rescinding rules and regulations it deems appropriate to administer and implement the ESPP, (iii) correcting any defect, supplying any omission or reconciling any inconsistency in the ESPP or options granted thereunder, (iv) making determinations about eligibility, (v) determining the purchase price, (vi) establishing the timing and length of offering periods and purchase periods, (vii) establishing minimum and maximum contribution rates, (viii) establishing new or changing existing limits on the number of common shares a participant may elect to purchase with respect to any offering period, if such limits are announced prior to the first offering period to be affected, (ix) delegating to one or more individuals such duties and functions related to the operation and administration of the ESPP as the Administrator so determines, except to the extent prohibited by applicable law, (x) permitting payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the processing of properly completed enrollment forms, and (xi) furnishing information to the custodian for the ESPP as the custodian may require. The Administrators decisions will be final, conclusive, and binding upon all persons.
Eligibility: Except as set forth below, generally, natural persons who have been full-time employees of the company or any subsidiary of the company for at least sixty days may be eligible to participate in the ESPP. In order for shares to be purchased on behalf of a participant under the ESPP, the participant must be an eligible employee on the first day of the applicable offering period. The following employees are ineligible to participate in the ESPP: (i) employees who, after exercising their options to purchase common shares under the ESPP, would own, directly or indirectly, common shares (including shares that may be acquired under any outstanding options under the ESPP) representing 5% or more of the total combined voting power of all classes of the companys capital stock; (ii) employees who are citizens or residents of a foreign jurisdiction (without regard to whether such employees
44 | American Homes 4 Rent |
are also U.S. citizens or resident aliens), if the grant of an option under the ESPP or an offering period to such employee is prohibited under the laws of such foreign jurisdiction; and (iii) any of our executive officers or other employees who must file reports under Section 16 of the Exchange Act. The Administrator may, at any time in its sole discretion, if it deems advisable to do so, exclude the participation of the employees of a subsidiary from eligibility to participate in a future offering period. Special rules apply to employees who are considered Restricted Persons under our Policy on Inside Information and Insider Trading.
Notwithstanding the foregoing, the Administrator will have the authority to establish a different definition of eligible employee as it may deem advisable or necessary.
As of March 9, 2021, approximately 1,429 employees of the company and its subsidiaries may become eligible to participate in the ESPP.
Participation Election: An eligible employee may become a participant for an offering period under the ESPP by completing and submitting an enrollment form to the company or its designee. Such enrollment form will authorize the company to make after-tax payroll deductions in whole percentages up to 10% of the participants annual base salary on each pay day following enrollment in the offering period under the ESPP, subject to the $25,000 annual limit described below. The Administrator will credit the deductions or contributions to the participants account under the ESPP.
Subject to certain exceptions, a participant may cease his or her payroll deductions during an offering period by properly completing and timely submitting a new enrollment form to the company or its designee, at any time prior to the last day of such offering period. If a participant ceases his or her payroll deductions during an offering period, the participant will automatically be withdrawn by the company from the offering period and will be refunded his or her accumulated payroll deductions for such offering period, without interest. A participant may increase or decrease his or her payroll deductions to take effect on the first trading day of the next offering period, by properly completing and timely submitting a new enrollment form to the company or its designee.
Once an eligible employee becomes a participant in the ESPP, the participant will automatically participate in each successive offering period until such time as the participant ceases his or her payroll deductions or is no longer eligible to participate in the ESPP or a specific offering period under the ESPP.
All employee decisions related to the ESPP, including enrollment, withdrawal and changes in participation, are subject to our Policy on Inside Information and Insider Trading.
Offering Periods and Purchase Periods: The Administrator will determine the length and duration of the periods during which payroll deductions will accumulate to purchase common shares. Each of these periods is known as an offering period. The periods during which payroll deductions will accumulate for these purchases are referred to as purchase periods. While the Administrator has discretion to establish the offering periods and purchase periods under the ESPP, until otherwise determined by the Administrator, the ESPP will have six-month offering periods (with concurrent purchase periods) commencing on January 1st and July 1st of each calendar year and ending on June 30th and December 31st, respectively.
Purchase Price: The purchase price for each purchase period shall be determined by the Administrator, provided that the purchase price shall not be less than the lesser of 85% of the fair market value per common share (i) on the first trading day of the purchase period or (ii) on the last trading day of the purchase period.
The fair market value of a common share for purposes of the ESPP will generally be the closing price per share as reported on the NYSE. On March 9, 2021, the closing price of our common shares, as reported on the NYSE, was $30.21 per share.
Purchase of Shares: On the last trading day of the offering period, a participant is deemed to purchase the number of whole common shares determined by dividing the total amount of payroll deductions withheld from the participants paychecks during the offering period by the purchase price. Any cash not applied to the purchase of fractional shares will be refunded to the participant after the end of the offering period.
Purchase Limitations: No participant may purchase common shares in any calendar year under the ESPP and under all other employee stock purchase plans of the company and its subsidiaries having an aggregate fair market value in excess of the lesser of $25,000 and 10% of the participants annual base salary. In addition, the Administrator may impose a limit on the number of common shares a participant may purchase during the offering period.
If the Administrator determines that the total number of common shares of remaining available under the ESPP is insufficient to permit all participants to exercise their options to purchase shares, the Administrator will make a
2021 Proxy Statement | 45 |
participation adjustment and proportionately reduce the number of shares purchasable by all participants.
Termination of Participation: A participant will automatically be withdrawn by the company from an offering period under the ESPP (i) upon a termination of employment with the company or its subsidiaries, (ii) in certain cases, following a leave of absence or a temporary period of ineligibility, and (iii) upon cessation of eligibility to participate in the ESPP for any reason. A participant may also voluntarily cease participating in the ESPP until the close of business on the third business day prior to the last day in a purchase period and withdraw the balance accumulated in such participants account. A participant who terminates participation in the ESPP may again commence participation in the ESPP no earlier than the second window period following the date of termination. Upon termination of participation, any accumulated amounts will be refunded to the participant without interest.
Shareholder Rights: A participant shall not be a shareholder or have any rights as a shareholder with respect to common shares subject to the participants options under the ESPP until the common shares are purchased pursuant to the options and such common shares are transferred into the participants name on the companys books and records. Common shares purchased under the ESPP will be held by the custodian designated under the ESPP. Following purchase and transfer of common shares into the participants name on the companys books and records, a participant will become a shareholder with respect to the common shares purchased and will thereupon have all dividend, voting, and other ownership rights incident thereto.
Notwithstanding the foregoing, the Administrator has the right to limit sales or other transfers of the common shares by imposing a holding period and to require that any sales of common shares during the holding period be performed through a licensed broker acceptable to the company. The Administrator will not initially impose a holding period.
Transferability: A participants options to purchase common shares under the ESPP may not be sold, pledged, assigned, or transferred in any manner, whether voluntarily, by operation of law, or otherwise. Any payment of cash or issuance of common shares under the ESPP may be made only to the participant (or, in the event of the participants death, to the participants estate or beneficiary). During a participants lifetime, only such participant may exercise his or her options to purchase common shares under the ESPP.
Corporate Transactions: If the number of outstanding common shares is increased or decreased or the
common shares are changed into or exchanged for a different number or kind of shares or other securities of the company by reason of any recapitalization, reclassification, stock split, reverse stock split, spin-off, combination of shares, exchange of shares, stock dividend, or other distribution payable in capital stock, or other increase or decrease in common shares effected without receipt of consideration by the company, the number and kinds of common shares for which options may be made under the ESPP will be adjusted proportionately and accordingly by the Administrator. In addition, the number and kind of shares for which options are outstanding will be similarly adjusted so that the proportionate interest of a participant immediately following such event will, to the extent practicable, be the same as immediately prior to such event.
Upon a merger, consolidation, or reorganization of the company with one or more other corporations in which the company is not the surviving entity, or upon a Change in Control (as defined in the 2021 Incentive Plan), the ESPP and all options outstanding thereunder will terminate, except to the extent provision is made in writing in connection with such transaction for the continuation or assumption of the ESPP, or for the substitution of the options under the ESPP with new options covering the capital stock of the successor entity, with corresponding appropriate adjustments to the number and kinds of shares and purchase prices. With respect to any offering period that is ongoing between the time of the announcement of such merger, consolidation, or reorganization or Change in Control and the effectiveness of the transaction, at the discretion of the Administrator, either (i) the offering period will end on the last trading day prior to effectiveness of the transaction, and the options of each participant will automatically be exercised on such last trading day, or (ii) all outstanding purchase rights will be terminated and accumulated contributions will be refunded to each participant prior to effectiveness of the transaction.
Subject to the foregoing, if the company is the surviving corporation in any reorganization, merger, or consolidation of the company with one or more other corporations, all outstanding options under the ESPP will pertain to and apply to the securities to which a holder of the number of common shares subject to such options would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the purchase price per share so that the aggregate purchase price after such adjustment will be the same as the aggregate purchase price of the shares subject to such options immediately prior to such reorganization, merger or consolidation.
46 | American Homes 4 Rent |
Term: If approved by the shareholders at the Annual Meeting, the ESPP will become effective as of July 1, 2021. The ESPP will terminate on the earliest of (i) the day before the 10th anniversary of the effective date of the ESPP, (ii) the date on which all common shares reserved for issuance under the ESPP have been issued, (iii) the date the ESPP is terminated in connection with certain corporate transactions, and (iv) the date the Board terminates the ESPP.
Amendment, Suspension, or Termination: The Board or the Administrator may, at any time and from time to time, amend or suspend the ESPP or an offering period under the ESPP; provided, however, that no amendment or suspension will, without the consent of the participant, impair any vested rights of a participant. Any such amendment is subject to shareholder approval to the extent such approval is required under applicable law. The Board may terminate the ESPP at any time.
Summary of U.S. Federal Income Tax Consequences: The following summary of U.S. federal income tax consequences is intended only as a general guide, under current U.S. federal income tax law, of participation in the ESPP and does not attempt to describe all potential tax consequences. This discussion is intended for the information of our shareholders considering how to vote at the 2021 Annual Meeting and not as tax guidance to participants in the ESPP. The following summary is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Tax consequences are subject to change, and a taxpayers particular situation may be such that some variation in application of the described rules is applicable. Accordingly, participants are advised to consult their own tax advisors with respect to the tax consequences of participating in the ESPP.
Because we are structured as an UPREIT and substantially all of our employees are employed by a subsidiary of our operating partnership, the ESPP will not qualify as an employee stock purchase plan as defined in Section 423 of the Code. A general summary of the current federal income tax consequences regarding the ESPP is stated below.
Tax Treatment of ESPP Participants: The amount withheld from a participants pay under the ESPP will be taxable ordinary income to the participant and will be included in gross income for federal income and payroll tax purposes in the year in which such amount otherwise would have been paid to the participant.
Upon the purchase of shares under the ESPP (on the last trading day of a purchase period), a participant will recognize ordinary income, subject to withholding, in an amount equal to the excess of the fair market value of the shares on the date of purchase over his or her purchase price. The ordinary income recognized is added to the participants basis in the shares. Upon the participants sale or disposition of shares purchased under the ESPP, any gain realized will be taxed as capital gain and any loss realized will be a capital loss. Whether the capital gain or loss will be long-term or short-term will depend on how long the participant held the shares.
Tax Treatment of the Company: The company will be entitled, with respect to the purchase of the shares under the ESPP, to an income tax deduction in an amount equal to the ordinary income recognized by the participant in the same taxable year in which the participant recognizes such income.
2021 Proxy Statement | 47 |
The Audit Committee is responsible for appointing the companys independent registered public accounting firm. Ernst & Young LLP (EY) was first appointed as the companys independent registered public accounting firm in August 2016. In February 2021, the Audit Committee re-appointed EY to serve as the companys independent registered public accounting firm for the fiscal year ending December 31, 2021, subject to ratification of the appointment by the companys shareholders. The Board believes that the selection of EY is in the best interest of the company and its shareholders and recommends that shareholders ratify the Audit Committees appointment of EY as the independent registered public accounting firm.
Although we are not required to seek ratification of the appointment of EY, the Board believes that doing so is a matter of good corporate governance. Even if the appointment of EY is ratified by the shareholders, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that a change would be in the best interest of the company and its shareholders. If shareholders do not ratify the appointment of EY, the Audit Committee will reconsider its selection but may determine to confirm the appointment.
Representatives from EY will be in attendance at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
The following table shows the fees billed to the company by EY for audit and other services provided for fiscal years 2020 and 2019:
|
2020 | 2019 | ||||||
Audit fees (1) |
$ | 1,439,366 | $ | 1,416,009 | ||||
Audit-related fees (2) |
$ | 2,740 | $ | 1,995 | ||||
Tax fees |
| | ||||||
All other fees (3) |
$ | 75,000 | | |||||
Total |
$ | 1,517,106 | $ | 1,418,004 |
(1) Audit fees represent fees for professional services provided in connection with the integrated audit of the companys annual financial statements and internal control over financial reporting, review of the quarterly financial statements included in the companys quarterly reports on Form 10-Q and other professional services in connection with the companys registration statements, securities offerings and audits of financial statements of certain acquired assets.
(2) Audit-related fees include fees for access to EYs online accounting research tools.
(3) All other fees include fees for professional services provided in connection with a customer segmentation analysis in 2020.
Auditor Independence: The Audit Committee has determined that the provision of the non-audit services described above is compatible with maintaining the independence of the companys independent registered public accounting firm.
Policy to Approve Services of Independent Registered Public Accounting Firm: The Audit Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy relating to services performed by the companys independent registered public accounting firm. Pursuant to the Audit and Non-Audit Services Pre-Approval Policy, all audit and permissible non-audit services must be separately pre-approved by the Audit Committee. The Audit Committee has delegated authority to its Chairperson to specifically pre-approve engagements for the performance of audit and permissible non-audit services, for which the estimated cost for all such services shall not exceed $200,000 prior to reporting
such pre-approved engagements to the Audit Committee. The Chairperson must report all pre-approval decisions to the Audit Committee at its next scheduled meeting for review and provide a description of the terms of the engagement, including:
| the type of services covered by the engagement; |
| the dates the engagement is scheduled to commence and terminate; |
| the estimated fees payable by us pursuant to the engagement; |
| other material terms of the engagement; and |
| such other information as the Audit Committee may request. |
Under this policy, the Audit Committee pre-approved all services performed by EY during 2020, including those listed in the previous table.
50 | American Homes 4 Rent |
The Audit Committees responsibilities include appointing the companys independent registered public accounting firm, pre-approving audit and non-audit services provided by the firm and assisting the Board in providing oversight to the companys financial reporting process. In fulfilling its oversight responsibilities, the Audit Committee meets with the companys independent registered public accounting firm, internal auditors and management to review accounting, auditing, internal controls and financial reporting matters.
Management is responsible for the companys financial statements, including the estimates and judgments on which they are based, for maintaining effective internal controls over financial reporting and for assessing the effectiveness of internal controls over financial reporting. The independent registered public accounting firm is responsible for performing an independent audit of the companys consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and for issuing a report thereon. It is not the Audit Committees responsibility to plan or conduct audits or to determine that the companys financial statements and disclosures are complete, accurate and in accordance with U.S. generally accepted accounting principles and applicable laws, rules and regulations. The Audit Committees responsibility is to monitor and oversee these processes and the Audit Committee necessarily relies on the work and assurances of the companys management and of the companys independent registered public accounting firm.
As part of its oversight responsibilities related to the companys financial statements included in the companys Annual Report on Form 10-K, the Audit Committee met with management and EY, the companys independent registered public accounting firm, and reviewed and discussed with them the audited consolidated financial statements. Management
represented to the Audit Committee that the companys consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee discussed with EY the matters required to be discussed by the applicable requirements of the PCAOB. The Audit Committee also discussed with EY the overall scope and plans for the annual audit, the results of their examinations, their evaluation of the companys internal controls and the overall quality of the companys financial reporting.
The companys independent registered public accounting firm also provided to the Audit Committee the written disclosures and the letter required by the applicable rules of the PCAOB, and the Audit Committee discussed with the independent registered public accounting firm that firms independence. In addition, the Audit Committee has considered whether the independent registered public accounting firms provision of non-audit services to the company and its affiliates is compatible with the firms independence.
The Audit Committee met with representatives of management, internal audit, legal counsel and the companys independent registered public accounting firm on a regular basis throughout the year to discuss the progress of managements testing and evaluation of the companys system of internal control over financial reporting in response to the applicable requirements of the Sarbanes-Oxley Act of 2002 and related SEC regulations. At the conclusion of this process, the Audit Committee received from management its assessment and report on the effectiveness of the companys internal controls over financial reporting. In addition, the Audit Committee received from EY its assessment of and opinion on the companys internal control over financial reporting as of December 31, 2020. The Audit Committee reviewed and discussed the results of managements assessment and EYs audit.
2021 Proxy Statement | 51 |
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in the companys Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the Securities and Exchange Commission. The Audit Committee also approved the appointment of EY as the companys independent registered public accountants for the fiscal year ending December 31, 2021 and recommended that
the Board submit this appointment to the companys
shareholders for ratification at the Annual Meeting.
THE AUDIT COMMITTEE
James H. Kropp, Chair
Michelle C. Kerrick
Lynn C. Swann
Jay Willoughby
Matthew R. Zaist
52 | American Homes 4 Rent |
Share Ownership of 5% or Greater Beneficial Owners
The following table sets forth information regarding the beneficial ownership of our common shares and common shares into which units in American Homes 4 Rent, L.P., our operating partnership (OP units), may be exchangeable by each person known by us to be the beneficial owner of 5% or more of our common shares and OP units as of December 31, 2020.
Name and Address |
Number of Common Shares Beneficially Owned (1) |
Number of Common Shares and OP Units Beneficially Owned (2) |
Percentage of All
Common Shares
|
Percentage of All
Owned (2) |
||||
The Vanguard Group
Malvern, PA 19355 (3) |
38,710,680 |
38,710,680 |
12.22% |
10.51% |
||||
JPMorgan Chase & Co. 383 Madison Avenue New York, NY 10017 (4) |
22,612,805 |
22,612,805 |
7.14% |
6.14% |
||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 (5) |
22,003,185 |
22,003,185 |
6.95% |
5.97% |
||||
Tamara Hughes Gustavson c/o Malibu Management 22917 Pacific Coast Highway, Suite 300 Malibu, CA 90265 (6)(7) |
20,261,737 |
20,261,737 |
6.40% |
5.50% |
||||
Principal Real Estate Investors, LLC 801 Grand Ave Des Moines, IA 50392 (8) |
19,451,957 |
19,451,957 |
6.14% |
5.28% |
||||
B. Wayne Hughes
c/o Malibu Management
Malibu, CA 90265 (7) |
18,409,565 |
18,409,565 |
5.81% |
5.00% |
||||
HF Investments 2010, LLC
c/o Malibu Management
Malibu, CA 90265 (9) |
6,645,581 |
54,765,472 |
2.10% |
14.87% |
(1) Assumes a total of 316,021,385 Class A and 635,075 Class B common shares are outstanding as of December 31, 2020. All Class B common shares are held by HF Investments 2010, LLC (HF LLC).
(2) Assumes a total of 316,656,460 common shares and 51,726,980 OP units (which OP units may be redeemed for cash or, at our option, exchanged for our Class A common shares) are outstanding as of December 31, 2020, excluding OP units held by the company.
(3) This information is as of December 31, 2020 and is based on a Schedule 13G/A filed on February 10, 2021 by The Vanguard Group as investment advisor to report that it has shared voting power with respect to 780,564 Class A common shares, sole dispositive power with respect to 37,706,283 Class A common shares and shared dispositive power with respect to 1,004,397 Class A common shares.
(4) This information is as of December 31, 2020 and is based on a Schedule 13G filed on January 8, 2021 by JPMorgan Chase & Co. to report that it has sole voting power with respect to 20,219,460 Class A common shares and sole dispositive power with respect to 22,612,805 Class A common shares.
(5) This information is as of December 31, 2020 and is based on a Schedule 13G/A filed on January 29, 2021 by BlackRock, Inc. to report that it has sole voting power with respect to 20,479,919 Class A common shares and sole dispositive power with respect to 22,003,185 Class A common shares.
2021 Proxy Statement | 53 |
(6) Includes 27,500 shares underlying stock options granted under the 2012 Incentive Plan that have vested or will vest within 60 days of December 31, 2020. Does not include any shares held by HF LLC which is comprised of trusts established by B. Wayne Hughes, for certain of his heirs, including the children of Ms. Gustavson. Shares held by HF LLC are reported separately in this table. Mr. Singelyn was the sole manager of HF LLC.
(7) Mr. Hughes co-founded the company with Mr. Singelyn and was Chairperson of the Board until May 2019. Ms. Gustavson is his daughter. The information is based on information contained in Form 4s filed by Mr. Hughes on December 1, 2020 and by Ms. Gustavson on May 7, 2020. Mr. Hughes and Ms. Gustavson have filed a joint Schedule 13D, as amended most recently on March 12, 2020, to report their collective ownership of Class A common shares and may constitute a group within the meaning of section 13(d)(3) of the Exchange Act, although each of these persons disclaims beneficial ownership of the Class A common shares owned by the others.
(8) This information is as of December 31, 2020 and is based on a Schedule 13G filed on February 16, 2021 by Principal Real Estate Investors, LLC to report that it has shared voting power with respect to 19,451,957 Class A common shares and shared dispositive power with respect to 19,451,957 Class A common shares.
(9) HF Investments 2010, LLC is comprised of trusts established by Mr. Hughes for certain of his heirs. Mr. Singelyn was the sole manager of HF LLC as of December 31, 2020. Mr. Singelyn resigned as sole manager of HF LLC as of February 15, 2021. As the sole manager of HF LLC, Mr. Singelyn had voting and dispositive power over the 54,765,472 common shares and OP units directly owned by HF LLC and may have been deemed to have beneficial ownership over such securities. Mr. Singelyn disclaims beneficial ownership of all common shares and OP units owned by HF LLC during the time he served as sole manager. HF LLC ownership interests disclaimed by Mr. Singelyn include:
(i) 6,010,506 Class A common shares;
(ii) 635,075 Class B common shares (for voting purposes, each Class B common share entitles the holder to 50 votes on all matters on which the holders of Class A common shares are entitled to vote); and
(iii) 48,119,891 Class A units issued by our operating partnership (Class A units).
54 | American Homes 4 Rent |
Share Ownership of Trustees and Management
The following table sets forth information, as of March 1, 2021, regarding the beneficial ownership of our common shares and common shares into which OP units may be exchangeable by (1) each of our executive officers, (2) each of our trustees and (3) all of our executive officers and trustees as a group. Except as otherwise indicated, each trustee and executive officer has sole voting and investment power over his or her shares.
Name |
Number of Common
Shares Beneficially Owned (1) |
Number of Common
Shares and OP Units Beneficially Owned (2) |
Percentage of All
Common Shares Beneficially Owned (1) |
Percentage of All
OP Units Beneficially
|
||||||||||||||||
Kenneth M. Woolley (4) |
67,006 | 67,006 | * | * | ||||||||||||||||
David P. Singelyn (3)(4) |
334,298 | 1,934,298 | * | * | ||||||||||||||||
Douglas N. Benham (4) |
48,695 | 60,903 | * | * | ||||||||||||||||
Jack Corrigan |
193,162 | 893,162 | * | * | ||||||||||||||||
David Goldberg |
35,996 | 576,062 | * | * | ||||||||||||||||
Tamara Hughes Gustavson (4)(5) |
20,261,737 | 20,261,737 | 6.39 | % | 5.50 | % | ||||||||||||||
Matthew J. Hart (4) |
78,173 | 78,173 | * | * | ||||||||||||||||
Michelle C. Kerrick |
| | | | ||||||||||||||||
James H. Kropp (4) |
71,983 | 71,983 | * | * | ||||||||||||||||
Christopher C. Lau (4) |
47,632 | 47,632 | * | * | ||||||||||||||||
Bryan Smith (4) |
287,771 | 287,771 | * | * | ||||||||||||||||
Lynn C. Swann |
13,000 | 13,000 | * | * | ||||||||||||||||
Sara H. Vogt-Lowell (4) |
66,512 | 66,512 | * | * | ||||||||||||||||
Winifred M. Webb (4) |
8,173 | 8,173 | * | * | ||||||||||||||||
Jay Willoughby (4) |
8,173 | 8,173 | * | * | ||||||||||||||||
Matthew R. Zaist |
3,985 | 3,985 | | | ||||||||||||||||
All trustees and executive officers as a group (16 persons) (3)(4) |
21,526,296 | 24,378,570 | 6.79 | % | 6.61 | % |
* Represents less than 1.0%
(1) Includes shares of Class A and Class B common shares held of record or beneficially by members of the immediate family of executive officers of the company.
(2) Assumes 316,211,674 Class A common shares, 635,075 Class B common shares and 51,726,980 OP units (which OP units may be redeemed for cash or, at our option, exchanged for our Class A common shares) are outstanding as of March 1, 2021, excluding OP units held by the company.
(3) Mr. Singelyn has pledged 1,000,000 Class A partnership units and 175,000 Class A common shares.
(4) Includes the following vested share options granted under the 2012 Incentive Plan that have vested or will vest within 60 days of March 1, 2021: 25,000 for Mr. Singelyn, 267,500 for Mr. Smith, 7,500 for Mr. Lau, 40,000 for Ms. Vogt-Lowell, 57,500 for each of Messrs. Hart and Woolley, 47,500 for Mr. Kropp, 27,500 for Mr. Benham and Ms. Gustavson, and 5,000 for Ms. Webb and Mr. Willoughby.
(5) Includes 27,500 shares underlying stock options granted under the 2012 Incentive Plan that have vested or will vest within 60 days of March 1, 2021. Does not include any shares held by HF LLC, which is comprised of trusts established by B. Wayne Hughes for certain of his heirs, including the children of Ms. Gustavson. Ms. Gustavson disclaims any beneficial ownership of the shares and units held by HF LLC. HF LLC ownership interests include:
(i) 6,010,506 Class A common shares;
(ii) 635,075 Class B common shares issued (for voting purposes, each Class B common share entitles the holder to 50 votes on all matters on which the holders of Class A common shares are entitled to vote); and
(iii) 48,119,891 Class A units.
2021 Proxy Statement | 55 |
Executive Officer Ownership of
Company Shares
Our share ownership guidelines approved by the Board are intended to align the interests of the companys executive officers and trustees with the interests of the companys shareholders. The policy applies to the companys Chief Executive Officer, other Section 16 officers and the independent members of the Board. Each person covered by the policy is expected to own Class A common shares and equivalents (including Class A partnership units that are convertible into Class A common shares and unvested RSUs that are only subject to time vesting) of the company with an aggregate market value of:
| Six times the previous year annual base salary for the Chief Executive Officer; |
| Three times the previous year annual base salary for the other executive officers; and |
| Five times the previous year annual cash retainer (excluding any Board committee fees) for each independent trustee. |
Securities that have been pledged and shares underlying vested or unvested options are not counted for purposes of the policy.
Our Chief Executive Officer was required to be in compliance with the policy on its effective date and is currently in compliance. All other covered persons subject to the policy are expected to be in compliance by February 24, 2026, the fifth anniversary of the effective date of the policy. Covered persons already subject to the policy that become subject to increased ownership requirements as a result of a promotion are expected to be in compliance with the increased threshold by the fifth anniversary of the promotion.
Pursuant to the companys Executive Officer Performance-Based Compensation Recovery Policy, the Human Capital and Compensation Committee will recover from any current or former executive officer, regardless of fault, that portion of equity and cash performance-based compensation based on financial
information required to be reported under the securities laws that would not have been paid in the three completed fiscal years preceding the year in which an accounting restatement is required to be filed to correct a material error as a result of misconduct.
The anti-hedging provisions of our insider trading policy prohibits trustees, officers and employees from directly or indirectly engaging in hedging against future declines in the market value of any securities of the company. This would cover the purchase of financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our securities.
Waivers of these prohibitions are not permitted under the policy. The objective of this policy is to further enhance alignment between the interests of our trustees, officers and employees and those of our shareholders.
Policy Regarding Pledging of Shares
Our securities trading policy discourages, but does not prohibit, the pledging of common shares by insiders. In 2012, in connection with his acquisition of interests in the companys former sponsor, AH LLC, Mr. Singelyn obtained loans that have been refinanced with a loan from a third-party lender that is secured by a pledge of a portion of his holdings of common shares and operating partnership units. Our Board recognizes that maintaining this pledge facilitates liquidity and financial flexibility for Mr. Singelyn.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the companys trustees and executive officers and persons who own more than 10% of any registered class of the companys equity securities to file reports of ownership and changes of ownership of those securities with the SEC and the NYSE. Executive officers, trustees and
56 | American Homes 4 Rent |
greater than 10% shareholders are required by SEC regulations to provide the company with a copy of all Section 16(a) forms that they file. Based on a review of the reports submitted to the company and of filings on the SECs EDGAR website and of written representations from executive officers and trustees, the company
believes that all trustees and officers filed timely reports during 2020; however, B. Wayne Hughes, a shareholder and our former Chairperson, filed an amended Form 4 to report holdings of 1,700 shares of the company that he inadvertently omitted from the original Form 4.
2021 Proxy Statement | 57 |
Set forth below is certain information regarding each of our current executive officers, other than Messrs. Singelyn and Corrigan, whose biographical information is presented under Biographical Information About Our Trustee Nominees. Our executive officers are appointed annually by, and serve at the discretion of, the Board. There are no family relationships between any of the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected.
58 | American Homes 4 Rent |
Christopher
C.
Age: 39 |
Chief Financial Officer
|
|||
Background
American Homes 4 Rent, Chief Financial Officer (since 2018); Vice President, Senior Vice President and then Executive Vice President Finance (2013-2018)
National Rental Home Council, Member and Chair of the Finance Committee (since 2018)
Deloitte & Touche LLP, Senior Manager, Real Estate M&A Advisory; Senior Manager, Real Estate Audit |
Education
B.S. in Accounting, San Diego State University
Certified Public Accountant (inactive) |
|||
Bryan Smith
Age: 47 |
Chief Operating Officer
|
|||
Background
American Homes 4 Rent, Chief Operating Officer (since 2019); Executive Vice President and President of Property Management (2015-2019); Senior Vice President and Director of Property Management (2012-2015)
American Homes 4 Rent Advisor, LLC (our former manager), Senior Vice President of Acquisitions
Tax Review Group, Partner
Watermark Group, Partner and Chief Financial Officer
Deloitte & Touche LLP, Senior |
Education
B.A. in Business Economics, University of California, Los Angeles
M.B.A., UCLA Anderson School of Management
Certified Public Accountant (inactive) |
Sara H. Vogt-Lowell
Age: 45 |
Chief Legal Officer
|
|||
Background
American Homes 4 Rent, Chief Legal Officer (since 2012)
American Homes 4 Rent Advisor, LLC (our former manager), Chief Legal Officer
Public Storage Canada and American Commercial Equities, General Counsel
Latham & Watkins LLP, Member, Finance Department |
Education
B.A. in Political Science, University of California, Los Angeles
J.D., University of California, Berkeley
Member of the California State Bar |
|||
2021 Proxy Statement | 59 |
Compensation Discussion and Analysis
The Compensation Discussion and Analysis explains the objectives of our executive compensation programs, outlines the elements of executive officer compensation and describes the factors considered by the Human Capital and Compensation Committee (as used in this section, the Committee) to determine the amounts of compensation for our named executive officers for 2020 performance.
For 2020 our named executive officers, also called NEOs, are: (i) David P. Singelyn, Chief Executive Officer and a trustee; (ii) Jack Corrigan, Chief Investment Officer and a trustee; (iii) Bryan Smith, Chief Operating Officer; (iv) Christopher C. Lau, Chief Financial Officer; (v) Sara H. Vogt-Lowell, Chief Legal Officer; and (vi) Stephanie G. Heim, our former Chief Governance Officer who resigned in July 2020.
2020 Say-on-Pay Vote Results and Shareholder Engagement
At our 2020 Annual Meeting of Shareholders, 98.7% of votes cast supported our say-on-pay proposal. Our Committee feels that this level of support is indicative of broad approval of our compensation program.
Over the course of 2020, the company maintained an ongoing dialogue with a broad set of shareholders on diverse topics including business operations and strategy, financial results, corporate governance, environmental and social priorities, and executive compensation. Members of management and, as appropriate, members of the Board participated in these meetings.
The 2020 compensation program for NEOs consisted of three components: (i) an annual base salary; (ii) an annual cash incentive based substantially on the achievement of pre-determined performance criteria consisting of corporate metrics, business unit goals and personal goals; and (iii) long-term equity incentives designed to directly link executive compensation with shareholder outcomes.
Since the company commenced operations in 2012, it has historically paid certain of its executive officers, particularly the Chief Executive Officer, annual total compensation at levels well below its peers. In doing so the company considered the significant equity ownership such executives had as a result of their role in founding the firm and the retention protections inherent in the manner in which that equity ownership had been financed. Starting in 2019, the year Messrs. Singleyn and Corrigan repaid the loans payable to Ms. Gustavson that were secured by securities in the company to finance their equity investments in the company at its founding, the company, in order to address retention risks, began to transition NEO annual total compensation to levels more competitive with peer pay practices and more representative of the value and contributions of the management team. In 2020, the company continued this transition by modestly increasing NEO salaries, target bonuses and equity grant values.
As discussed below, the Committee, with the assistance of its new independent compensation consultant, has approved a number of enhancements to the compensation program for NEOs for 2021 to better align NEO compensation with performance, peer compensation practices and the interests of our shareholders.
60 | American Homes 4 Rent |
Compensation Philosophy, Objectives and Governance
The primary goal of our executive compensation program is to align the interests of our NEOs with those of our shareholders in a way that allows us to attract and retain the best executive talent. The Committee oversees the compensation of our NEOs, including setting base salaries, awarding annual cash incentives and granting equity awards. The following table highlights key features of our executive compensation program that demonstrate our ongoing commitment to promoting shareholder interests through sound compensation governance practices.
What We Do |
What We Dont Do | |
✓ DO require double trigger change in control benefits |
✘ NO compensation or incentives that encourage risk-taking reasonably likely to have a material adverse effect on the company |
|
✓ DO seek to align pay and performance with a balanced mix of company and individual performance criteria tied to operational and strategic objectives (including diversity and inclusion and human capital management objectives) established at the beginning of the performance period by the Committee |
✘ NO tax gross-ups for any executive officers |
|
✓ DO award a significant percentage of NEO total compensation in the form of equity which, starting in 2021, will include awards subject to multi-year, performance-based vesting based on absolute Core FFO and relative TSR goals |
✘ NO single-trigger change in control cash or equity payments |
|
✓ DO have robust NEO stock ownership guidelines |
✘ NO re-pricing or buyouts of underwater stock options |
|
✓ DO have a compensation clawback policy for executive compensation covering both cash and equity incentives |
✘ NO hedging transactions by employees or trustees involving our securities |
|
✓ DO annually review a compensation risk assessment with the Committee |
✘ NO guarantees of cash incentive compensation or of equity grants |
|
✓ DO provide caps within annual and long-term incentive plan awards |
✘ NO long-term employment contracts with executive officers |
|
✓ DO engage an independent compensation consultant to advise the Committee |
✘ NO excessive perquisites or special health and welfare plans to executives |
Elements of Executive Officer Compensation
Component |
Form | Objective and Explanation | ||
Salary |
Cash |
Base level compensation, rewards day-to-day performance and standard job duties Reflects level of responsibilities and experience/tenure |
||
Performance-Based Annual
|
Cash |
Designed to reward the achievement of specific, pre-established annual financial and operational objectives 2020 performance objectives consisted of company, business unit and personal goals while 2021 performance objectives will only consist of company and personal goals Committee has discretion to adjust performance criteria, including to address extraordinary events |
||
Equity Awards |
Service-based RSUs and performance-based RSUs |
Provide alignment of interests with shareholders Multi-year vesting periods aid in retention Service-based RSUs further support retention as they retain some value and provide a retention incentive even during difficult market conditions, when we may need it most Starting in 2021, performance-based RSUs will motivate executives to focus on sustained financial performance and long-term value creation |
2021 Proxy Statement | 61 |
Changes to Compensation of the CEO
As a founder and significant shareholder of the company, Mr. Singelyn historically agreed to accept a below-market salary and to forego any bonus or equity incentives during the companys initial growth phase. Starting in 2019, the Committee began transitioning to market compensation for Mr. Singelyn. As part of this process, Mr. Singelyns base salary was increased by $20,000 in 2020 to $570,000, his performance-based cash incentive target was increased from 150% to 200% of base salary, and he was granted equity awards, as described below. The Committee intends to continue this transition over the next several years until the Committee determines that Mr. Singelyn is paid at a level competitive with CEOs in the companys peer group. Mr. Singelyns pay is currently in the bottom 25% of the peer group.
Changes to Compensation of the other Named Executive Officers
Starting in 2019, the Committee, based on peer company compensation information, began transitioning NEO compensation to levels competitive with its peer group. As part of that transition process, and on consideration of the recommendation of Mr. Singelyn and the views of other Board members, the Committee increased 2020 base salaries for Mr. Corrigan to $570,000, for Mr. Smith to $450,000, for Mr. Lau to $450,000 and for Ms. Vogt-Lowell to $350,000 and increased the performance-based incentive bonus targets for Mr. Smith, Mr. Lau and Ms. Vogt-Lowell to 125% of base salary.
Performance-based Incentive Bonuses2020 Performance Metrics and Targets
The 2020 incentive plan targets established by the Committee in February 2020 were:
NEO |
Title | Target % of base salary | |||||
David P. Singelyn |
Chief Executive Officer |
200% | |||||
Jack Corrigan |
Chief Investment Officer |
125% | |||||
Bryan Smith |
Chief Operating Officer |
125% | |||||
Christopher C. Lau |
Chief Financial Officer |
125% | |||||
Sara H. Vogt-Lowell |
Chief Legal Officer |
125% |
2020 performance-based incentive bonuses were based on corporate metrics, business unit and personal goals that were established for each NEO by the Committee in February 2020.
| Corporate Metrics: In February 2020, the Committee set the corporate metrics as growth in Core Funds from Operations, or Core FFO, and Same Home Core Net Operating Income after Capital Expenditures, or Same Home NOI. The Committee selected Core FFO as a corporate metric because it is a commonly used measure of REIT performance by investors. The Committee also selected Same Home NOI because the company uses it as its primary financial measure to |
evaluate the operating performance and cash flow of its properties. The Same Home property pool provides a comparable means to measure the performance of NOI across performance periods. In addition, the Committee also set development and acquisition goals as corporate metrics for Mr. Corrigan, our Chief Investment Officer, given the importance of growth to the companys strategy. |
| Business Unit and Personal Goals: The 2020 business unit and personal goals set for each NEO are set forth below under 2020 Performance-based Cash Incentive Awards. |
62 | American Homes 4 Rent |
Growth in Core FFO
The target Core FFO goal for 2020 was $1.19 per common share, an 8.2% increase over the 2019 target. The threshold, target and maximum bonus payable at the targets set by the Committee is set forth below. In the event the result achieved was between target levels in the chart, the bonus paid is adjusted accordingly.
% of Bonus Paid |
Core FFO Goal | ||||
0% |
Less than $1.131 (less than 95%) | ||||
0-100% interpolated |
$1.131-$1.190 (95%-100%) | ||||
100-150% interpolated |
$1.190-$1.250 (100%-105%) | ||||
150% |
Greater than $1.250 (105%) |
Same Home NOI
The Committee set the target for 2020 Same Home NOI growth as 3.3%, an increase over the 2019 target of 3.1%. The threshold, target and maximum bonus payable at the targets set by the Committee is set forth below. In the event the result achieved was between target levels in the chart, the bonus paid is adjusted accordingly.
% of Bonus Paid |
Same Home NOI Growth | ||||
0% |
<2.8% | ||||
0-100% interpolated |
= or >2.8% and = or <3.3% | ||||
100-150% interpolated |
= or >3.3% and = or < 3.8% | ||||
150% |
= or >3.8% |
Investment ProductionDevelopment and Acquisition
The following tables identify the development and acquisition goals established for Mr. Corrigan and the corresponding percentage of bonus earned. In the event the result achieved was between target levels in the chart, the bonus paid is adjusted accordingly. Since Mr. Corrigans ability to achieve these goals was dependent on the availability of capital, the Committee retained the discretion to adjust the targets as appropriate if capital was not available to acquire, build and deliver these levels of homes.
% of Bonus Paid |
DevelopmentHomes Delivered | ||||
0% |
Less than 1,538 (85%) | ||||
0-100% interpolated |
Between 1,538 and 1,810 (100%) | ||||
100-150% interpolated |
Between 1,810 and 2,082 (115%) | ||||
150% |
Greater than 2,082 |
% of Bonus Paid |
Homes Acquired | ||||
0% |
Less than 2,941 (85%) | ||||
0-100% interpolated |
Between 2,941 and 3,460 (100%) | ||||
100-150% interpolated |
Between 3,460 and 3,979 (115%) | ||||
150% |
Greater than 3,979 |
2021 Proxy Statement | 63 |
Committee Assessment of Achievement of 2020 Goals
Although the company was not as significantly adversely impacted by the COVID-19 pandemic as many other companies, the pandemic did adversely impact the companys 2020 Core FFO and Same Home NOI results due to:
| significantly increased levels of uncollectible rents and uncollectible resident utility reimbursements resulting from resident financial distress related to the pandemic, increased expenses for HVAC system replacements (given increased usage due to stay-at-home orders) and increased costs associated with enhanced cleaning and safety protocols, including acquisition of personal protective equipment; |
| the impact of the companys responsible pandemic-responsive decisions to waive late fees and month-to-month lease premiums, to halt evictions for nonpayment of rent, and to offer zero percent increases on newly signed renewals during part of 2020; and |
| local and federal government eviction moratoriums that adversely impacted the companys ability to address uncollectible rent issues and achieve target corporate metrics. |
The COVID-19 pandemic also significantly impacted the companys ability to achieve targeted development and acquisition production goals. In response to the significant adverse economic impact of the COVID-19 pandemic, the company elected to temporarily suspend its traditional acquisition channel and National Builder Program acquisitions given market uncertainties regarding future asset values and in order to preserve capital. In addition, compliance with state and local mandates related to COVID-19 impacted construction activity and the timing of deliveries. In May 2020 the company lowered its 2020 guidance on construction deliveries to between 1,000 and 1,200 homes from 1,200 to 1,500 homes.
In August 2020, the Committee discussed the impact of the pandemic on the companys ability to achieve the corporate metric targets applicable to the annual cash incentive and discussed possible adjustments. In November 2020, the Committee discussed the matter further, including possible adjustments to the calculation of Core FFO and Same Home NOI for the extraordinary items attributable to the COVID-19 pandemic.
In January 2021, the Committee determined, after further deliberations and consultation with Semler Brossy, that it would adjust the calculation of Core FFO and Same Home NOI for purposes of the 2020 bonus for the extraordinary increases in uncollectible rents, uncollectible resident utility reimbursements and expenses for new cleaning and safety protocols, in each case by amounts that the Committee determined were attributable to the COVID-19 pandemic based on historical norms. The Committee also determined that, given the COVID-19 impediments to acquisitions and developments, it would award the portion of Mr. Corrigans bonus attributable to development and acquisition production at 95% of target. For 2020, development deliveries were 1,647 and homes acquired were 2,592. In making these decisions the Committee considered, among other things, that these pandemic-related impacts on the metrics were not considered when the goals were set in February 2020, that the company, under the leadership of the NEOs had outperformed the companys average residential peer set in both Core FFO and Same Home NOI growth metrics, that the company had significantly exceeded its May 2020 revised development production guidance. The Committee also believes there are increased retention risks facing the company given the companys outperformance and well-funded new entrants into the sector.
However, given these calculation adjustments and the Committees decision that NEOs not receive bonuses at levels above those paid to other employees, the Committee determined that 2020 payouts related to Core FFO and Same Home NOI results would be capped at 95% of target amounts.
64 | American Homes 4 Rent |
The following table reflects the adjustments made to the Core FFO and Same Home NOI growth goals and the related awards:
|
Result | % of Target Earned | Agreed Award % ** | ||||||||||||
Core FFO * |
$1.2068 | 114.04% | 95% | ||||||||||||
Same Home NOI Growth * |
3.86% | 150% | 95% |
*As adjusted by the Committee. Reported 2020 results, which did not reflect any COVID-19 adjustments, were Core FFO of $1.1622 per share and Same Home NOI growth of 1.05%, and would have resulted in 52.94% and 0% earned, respectively.
** As discussed above, the Committee agreed to cap the amount of awards attributable to Core FFO and Same Home NOI growth at 95% of target. Also, due to the impact of COVID-19, the Committee exercised its discretion to award 95% for development deliveries and homes acquired.
The Committee determined that COVID-19 pandemic adjustments to business unit and personal goals were not necessary or appropriate, except that the operational efficiency computation was adjusted for COVID-19 expense impacts. After assessing 2020 NEO performance based on these business unit and personal goals, the Committee determined, taking into consideration the recommendation of Mr. Singelyn with respect to the other NEOs, that the NEOs had achieved target levels for their respective business unit and personal goals, except as noted in the table below.
2020 Performance-based Cash Incentive Awards
The following table details the target goal, the results described above, and corresponding cash incentive award for each NEO, as determined by the Committee:
Company Goals |
David P.
Singelyn |
Jack
Corrigan |
Bryan
Smith |
Christopher
C. Lau |
Sara H.
Vogt- Lowell |
|
||||||||||||||||||||||||
Target
%
|
Target
%
|
Target
%
|
Target
%
|
Target
%
|
||||||||||||||||||||||||||
Core Funds from Operations |
|
50 |
% |
|
45 |
% |
|
20 |
% |
|
40 |
% |
|
60 |
% |
|
|
|
||||||||||||
|
47.50 |
% |
|
42.80 |
% |
|
19 |
% |
|
38 |
% |
|
57 |
% |
|
|
|
|||||||||||||
Same Home Core NOI after Capital Expenditures |
|
25 |
% |
|
|
|
|
40 |
% |
|
20 |
% |
|
|
|
|
|
|
||||||||||||
|
23.75 |
% |
|
|
|
|
38 |
% |
|
19 |
% |
|
|
|
|
|
|
|||||||||||||
Investment production-development |
|
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
9.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment production-total acquisition |
|
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
9.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
2021 Proxy Statement | 65 |
Company Goals |
David P.
Singelyn |
Jack
Corrigan |
Bryan
Smith |
Christopher
C. Lau |
Sara H.
Vogt- Lowell |
|
||||||||||||||||||||||||
Target
%
|
Target
%
|
Target
%
|
Target
%
|
Target
%
|
|
|||||||||||||||||||||||||
Business and Personal Goals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Strategic plan |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operational efficiency |
|
|
|
|
10 |
% |
|
10 |
% |
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
10 |
% |
|
9.91 |
% |
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment yields |
|
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
New business lines |
|
|
|
|
|
|
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
|
|
||||||||||||
|
|
|
|
|
|
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
|
|
|||||||||||||
Succession planning |
|
|
|
|
|
|
|
5 |
% |
|
5 |
% |
|
15 |
% |
|
|
|
||||||||||||
|
|
|
|
|
|
|
5 |
% |
|
5 |
% |
|
15 |
% |
|
|
|
|||||||||||||
Balance sheet |
|
|
|
|
|
|
|
|
|
|
10 |
% |
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
10 |
% |
|
|
|
|
|
|
|||||||||||||
ESG |
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
|
|
||||||||||||
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
10 |
% |
|
|
|
|||||||||||||
Personal |
|
5 |
% |
|
5 |
% |
|
5 |
% |
|
5 |
% |
|
5 |
% |
|
|
|
||||||||||||
|
5 |
% |
|
5 |
% |
|
5 |
% |
|
5 |
% |
|
5 |
% |
|
|
|
|||||||||||||
Total Target Award |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
|
|
||||||||||||
$ |
1,140,000 |
|
$ |
712,500 |
|
$ |
562,500 |
|
$ |
562,500 |
|
$ |
437,500 |
|
|
|
|
|||||||||||||
% Achieved Bonus Award |
|
96.3 |
% |
|
96.8 |
% |
|
96.9 |
% |
|
97.0 |
% |
|
97.0 |
% |
|
|
|
||||||||||||
$ |
1,097,250 |
|
$ |
689,345 |
|
$ |
545,119 |
|
$ |
545,625 |
|
$ |
424,375 |
|
|
|
|
66 | American Homes 4 Rent |
2020 Equity Awards
The Committee believes equity awards help align management and shareholder interests by increasing the percentage of total compensation that consists of equity, supporting long-term value creation and promoting the retention and stability of our executive management team. In February 2020, the Committee granted 59,589 RSUs to Mr. Singelyn, 47,400 RSUs to Mr. Corrigan, 31,600 RSUs to Mr. Lau, 33,857 RSUs to Mr. Smith and 20,586 RSUs to Ms. Vogt-Lowell. The awards vest in equal annual installments over three years beginning one year from the date of grant. The Committee considered Mr. Singelyns recommendations in determining the grants to Messrs. Corrigan, Smith and Lau and Ms. Vogt-Lowell.
Although the company has consistently received strong support for its compensation programs (averaging almost 99% support on say-on-pay votes over the last three years), in August 2020 the Committee retained Semler Brossy as its compensation consultant to, among other things, provide an analysis of the competitiveness of the companys executive pay practices and to provide advice on making enh