UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
       
FORM10-Q
   
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2017
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-38004
Invitation Homes Inc.
(Exact name of registrant as specified in governing instruments)
       
       
 
Maryland
(State or other jurisdiction of incorporation or organization)
 
90-0939055
(I.R.S. Employer Identification No.)
 
     
 
1717 Main Street, Suite 2000
Dallas, Texas 75201
(Address of principal executive offices)(Zip Code)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   
 
(972) 421-3600
(Registrant’s telephone number, including area code)
 
       
 For the quarterly period ended
N/A
(Former name, former address and former fiscal year, if changed since last report)June 30, 2020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to 
       
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filero  Accelerated filero
Non-accelerated filerCommission File Numberx(Do not check if a smaller reporting company)Smaller reporting companyo001-38004
    Emerging growth companyx
Invitation Homes Inc.
(Exact name of registrant as specified in its charter)
Maryland90-0939055
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1717 Main Street,Suite 200075201
Dallas,Texas
(Address of principal executive offices)(Zip Code)
(972)421-3600
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueINVHNew York Stock Exchange
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes☑No☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes☑No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☑Accelerated Filer☐
Non-Accelerated Filer☐Smaller Reporting Company☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

Yes☐No☑   
As of November 8, 2017,August 3, 2020, there were 311,354,290560,533,071 shares of common stock, par value $0.01 per share, outstanding.

     







INVITATION HOMES INC.
 Page Page
PART I
Item1.Financial Statements
6
1.
Financial Statements
6
Item2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
43
2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
40
Item3.Quantitative and Qualitative Disclosures About Market Risk
70
3.
Quantitative and Qualitative Disclosures About Market Risk
70
Item4.Controls and Procedures
71
4.
Controls and Procedures
70
  
PART II
Item1.Legal Proceedings
72
1.
Legal Proceedings
72
Item1A.Risk Factors
73
1A.
Risk Factors
72
Item2.Unregistered Sales of Equity Securities and Use of Proceeds
73
2.
Unregistered Sales of Equity Securities and Use of Proceeds
74
Item3.Defaults Upon Senior Securities
73
3.
Defaults Upon Senior Securities
74
Item4.Mine Safety Disclosures
73
4.
Mine Safety Disclosures
74
Item5.Other Information
73
5.
Other Information
74
Item6.Exhibits
73
6.
Exhibits
75
  
SignaturesSignatures 
Signatures
76
   










FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), which include, but are not limited to, statements related to our expectations regarding the anticipated benefits of the proposed merger with Starwood Waypoint Homes (“SFR”), the performance of our business, our financial results, our liquidity and capital resources, and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates"“outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks associated with our ability to consummate the merger and the timing of the closing of the merger, risks associated with achieving expected revenue synergies or cost savings, risks inherent to the single-family rental industry sector and our business model, macroeconomic factors beyond our control, competition in identifying and acquiring our properties, competition in the leasing market for quality residents, increasing property taxes, homeowners’ association (“HOA”) and insurance costs, our dependence on third parties for key services, risks related to the evaluation of properties, poor resident selection and defaults and non-renewals by our residents, performance of our information technology systems, risks related to our indebtedness, and risks related to the potential negative impact of the outbreak of the coronavirus strain, known as COVID-19, on our indebtedness.financial condition, results of operations, cash flows, business, associates, and residents. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Many of these factors have been heightened as a result of the ongoing and numerous adverse impacts of COVID-19. We believe these factors include but are not limited to, those described in Exhibit 99.1 to this Quarterly Report on Form 10-Q and under Part I. Item 1A. “Risk Factors,"Factors” in our Annual Report on Form 10-K for the year ended December 31, 20162019 (the “Annual Report on Form 10-K”) and under Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at http://www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q, in the Annual Report on Form 10-K, and in our other periodic filings. The forward-looking statements speak only as of the date made,of this Quarterly Report on Form 10-Q, and we expressly disclaim any obligation or undertaking to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except to the extent otherwise required by law.






3







DEFINED TERMS
Prior to the completion of our initial public offering, our business was owned by six holding entities: Invitation Homes L.P.Inc. (“INVH”), Preeminent Holdings Inc.a real estate investment trust (“REIT”), conducts its operations through Invitation Homes 3Operating Partnership LP (“INVH LP”). THR Property Management L.P., Invitation Homes 4 L.P., Invitation Homes 5 L.P. and Invitation Homes 6 L.P. We refer to these six holding entities collectively as the “IH Holding Entities.” Unless the context suggests otherwise, references to “IH1,” “IH2,” “IH3,” “IH4,” “IH5” and “IH6” refer to Invitation Homes L.P., Preeminent Holdings Inc., Invitation Homes 3 L.P., Invitation Homes 4 L.P., Invitation Homes 5 L.P. and Invitation Homes 6 L.P., respectively, in each case including anya wholly owned subsidiaries, if applicable. The IH Holding Entities were under the common controlsubsidiary of Blackstone Real Estate Partners VII L.P.INVH LP (the “Manager”), an investment fund sponsored by The Blackstone Group L.P., and its general partner and certain affiliated funds and investment vehicles. Investment funds and vehicles associated with or designated by The Blackstone Group L.P. are referred to herein as “Blackstone” or “our Sponsor.” We refer to Blackstone, together with ourprovides all management and other equity holders, collectively as our “Pre-IPO Owners.” administrative services with respect to the properties we own. On November 16, 2017 (the “Merger Date”), INVH and certain of its affiliates entered into a series of transactions with Starwood Waypoint Homes (“SWH”) and certain SWH affiliates which resulted in SWH and its operating partnership being merged into INVH and INVH LP, respectively, with INVH and INVH LP being the surviving entities (the “Mergers”).
Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q to “Invitation Homes,” the “Company,” “we,” “our”“our,” and “us” refer (1) prior to the consummation of the reorganization transactions described in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (the “Pre-IPO Transactions”), to the combined IH Holding Entities and their consolidated subsidiaries, including Invitation Homes Operating Partnership LP (“INVH LP”) and (2) after the consummation of the Pre-IPO Transactions, to Invitation Homes Inc. and its consolidated subsidiaries (including the INVH LP and the IH Holding Entities).subsidiaries.
In this Quarterly Report on Form 10-Q:
“average monthly rent” represents the average of the contracted monthly rentrental income per home for occupied properties in an identified population of homes forover the relevantmeasurement period and reflects the impact of non-service rent concessions and contractual rent increases amortized over the life of the related lease;lease. We believe average monthly rent reflects pricing trends that significantly impact rental revenues over time, making average monthly rent useful to management and external stakeholders as a means of evaluating changes in rental revenues across periods;
“average occupancy” for an identified population of homes represents (i) the total number of days that the homes available for lease in such population were occupied during the measurement period, divided by (ii) the total number of available days in the measurement period forthat the homes in that population;such population were owned during the measurement period. We believe average occupancy significantly impacts rental revenues in a given period, making comparisons of average occupancy across different periods helpful to management and external stakeholders in evaluating changes in rental revenues across periods;
“Carolinas” includes Charlotte, NC, Greensboro, NC, Raleigh, NC, and Fort Mill, SC;
“days to re-resident” for an individual home represents the number of days a home is unoccupied between residents, calculated as the number of days between (i) the date the prior resident moves out of a home, and (ii) the date the next resident is granted access to the same home, which is deemed to be the earlier of (x) the next resident’s contractual lease start date and (y) the next resident’s move-in date;date. Days to re-resident impacts our average occupancy and thus our rental revenues, making comparisons of days to re-resident helpful to management and external stakeholders in evaluating changes in rental revenues across periods;
“in-fill” refers to markets, MSAs, submarkets, neighborhoods or other geographic areas that are typified by significant population densities and low availability of land suitable for development into competitive properties, resulting in limited opportunities for new construction;
“historical average” is the simple average of each of the six months beginning October 2019 and to and including March 2020;
“Metropolitan Statistical Area” or “MSA” is defined by the U.S.United States Office of Management and Budget as a region associated with at least one urbanized area that has a population of at least 50,000 and comprises the central county or counties containing the core, plus adjacent outlying counties having a high degree of social and economic integration with the central county or counties as measured through commuting;
“net effective rental rate growth” for any home represents the percentage difference between the monthly rent from an expiring lease and the monthly rent from the next lease and, in each case, netreflects the impact of anynon-service rent concessions and contractual rent increases amortized concessions.over the life of the related lease. Leases are either renewal leases, where our current resident chooses to stay for a subsequent lease term, or a new lease, where our previous resident moves out and a new resident signs a lease to occupy the same home;home. Net effective rental rate growth drives changes in our average monthly rent, making net effective rental rate growth useful to management and external stakeholders as a means of evaluating changes in rental revenues across periods;
“Northern California” includes Modesto, CA, Napa, CA, Oakland-Fremont-Hayward, CA, Sacramento-Arden-Arcade-Roseville, CA, San Jose-Sunnyvale-Santa Clara,Francisco-Oakland-Hayward, CA, Stockton-Lodi, CA, Vallejo-Fairfield, CA, and Yuba City, CA;


4




“PSF” means per square foot;foot. When comparing homes or cohorts of homes, we believe PSF calculations help management and external stakeholders normalize metrics for differences in property size, enabling more meaningful comparisons based on characteristics other than property size;
•
“revenue collections as a percentage of monthly billings” represents the total cash received in a given monthly period for rental revenues and other property income (including receipt of late payments that were billed in prior months) divided by the total amounts billed in that period. When a payment plan is in place with a resident, amounts are considered to be billed at the time they would have been billed based on the terms of the original lease, not the terms of the payment plan. We believe this provides management and external stakeholders with meaningful information about our success in collecting amounts due under our lease agreements;
“Same Store” or “Same Store portfolio” includes, for a given reporting period, homes that have been stabilized (definedand seasoned, excluding homes that have been sold, homes that have been identified for sale to an owner occupant and have become vacant, homes that have been deemed inoperable or significantly impaired by casualty loss events or force majeure, homes acquired in portfolio transactions that are deemed not to have undergone renovations of sufficiently similar quality and characteristics as the existing Invitation Homes Same Store portfolio, and homes in markets that we have announced an intent to exit where we no longer operate a significant number of homes for the primary purpose of income generation. Homes are considered stabilized if they have (i) completed an upfrontinitial renovation and (ii) entered into at least one post-renovationpost-initial renovation lease. An acquired portfolio that is both leased and deemed to be of sufficiently similar quality and characteristics as the existing Invitation Homes lease)Same Store portfolio may be considered stabilized at the time of acquisition. Homes are considered to be seasoned once they have been stabilized for at least 90 days15 months prior to the first day of the prior-year measurement period and excludes homes that have been sold and homes that have been designated for sale but have not yet entered into a written sale agreement during such reporting period. Same Store portfolios are established as of January 1st of each calendar year.


4


Therefore, any home includedthe year in which the Same Store portfolio will have satisfied the conditions described in clauses (i) and (ii) above prior to October 3rd of the year prior to the first year of the comparison period.was established. We believe presenting information about the portion of our portfolio that has been fully operational for the entirety of a given reporting period and its prior year comparison period provides investorsmanagement and external stakeholders with meaningful information about the performance of our comparable homes across periods and about trends in our organic business;
“Southeast United States” includes our Atlanta and Carolinas markets;
“South Florida” includes Fort Lauderdale-Pompano Beach-DeerfieldMiami-Fort Lauderdale-West Palm Beach, FL, Key West, FL, Miami-Miami Beach-Kendall, FL and West Palm Beach-Boca Raton-Delray Beach,Port St. Lucie, FL;
“Southern California” includes Anaheim-Santa Ana-Irvine, CA, Los Angeles-Long Beach-Glendale,Beach-Anaheim, CA, Oxnard-Thousand Oaks-Ventura, CA, Riverside-San Bernardino-Ontario, CA, and San Diego-Carlsbad-San Marcos,Diego-Carlsbad, CA;
“total homes” or “total portfolio” refers to the total number of homes we own, whether or not stabilized, and excludes any properties previously acquired in purchases that have been subsequently rescinded or vacated. Unless the context otherwise requires, all measures in this prospectusQuarterly Report on Form 10-Q are presented on a total portfolio basis;
“turnover rate” represents the number of instances that homes in an identified population become unoccupied in a given period, divided by the number of homes in such population. To the extent the measurement period shown is less than 12 months, the turnover rate willmay be reflected on an annualized basis;basis. We believe turnover rate impacts average occupancy and thus our rental revenues, making comparisons of turnover rate helpful to management and external stakeholders in evaluating changes in rental revenues across periods. In addition, turnover can impact our cost to maintain homes, making changes in turnover rate useful to management and external stakeholders in evaluating changes in our property operating and maintenance expenses across periods; and
“Western United States” includes our Southern California, Northern California, Seattle, Phoenix, and Las Vegas, and Denver markets.





5



PART I
FINANCIAL INFORMATION
ItemITEM 1. Financial Statements.
FINANCIAL STATEMENTS
INVITATION HOMES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share data)





 June 30,
2020		 December 31, 2019
 September 30,
2017		 December 31,
2016		 (unaudited)  
Assets: (unaudited)   
  
Investments in single-family residential properties:        
Land $2,733,834
 $2,703,388
 $4,487,945
 $4,499,346
Building and improvements 7,169,872
 7,091,457
 13,882,606
 13,747,818
 9,903,706
 9,794,845
 18,370,551

18,247,164
Less: accumulated depreciation (982,463) (792,330) (2,252,814) (2,003,972)
Investments in single-family residential properties, net 8,921,243
 9,002,515
 16,117,737

16,243,192
Cash and cash equivalents 134,441
 198,119
 571,719
 92,258
Restricted cash 153,781
 222,092
 223,894
 193,987
Goodwill 258,207
 258,207
Other assets, net 315,059
 309,625
 574,759
 605,266
Total assets $9,524,524
 $9,732,351
 $17,746,316

$17,392,910
        
Liabilities:        
Mortgage loans, net $4,157,024
 $5,254,738
 $6,118,575
 $6,238,461
Secured term loan, net 400,986
 400,978
Term loan facility, net 1,487,251
 —
 1,495,191
 1,493,747
Credit facilities, net —
 2,315,541
Revolving facility —
 —
Convertible senior notes, net 336,820
 334,299
Accounts payable and accrued expenses 160,674
 88,052
 190,344
 186,110
Resident security deposits 88,976
 86,513
 154,200
 147,787
Other liabilities 28,586
 30,084
 706,327
 325,450
Total liabilities 5,922,511
 7,774,928
 9,402,443

9,126,832
Commitments and contingencies (Note 14) 


 


        
Equity:        
Shareholders' equity    
Preferred stock, $0.01 par value per share, 900,000,000 shares authorized, none outstanding at September 30, 2017 —
 —
Common stock, $0.01 par value per share, 9,000,000,000 shares authorized, 311,354,290 outstanding at September 30, 2017 3,114
 —
Stockholders' equity    
Preferred stock, $0.01 par value per share, 900,000,000 shares authorized, none outstanding as of June 30, 2020 and December 31, 2019 —
 —
Common stock, $0.01 par value per share, 9,000,000,000 shares authorized, 560,532,679 and 541,642,725 outstanding as of June 30, 2020 and December 31, 2019, respectively 5,605
 5,416
Additional paid-in capital 3,677,182
 —
 9,515,625
 9,010,194
Accumulated deficit (86,450) —
 (595,318) (524,588)
Accumulated other comprehensive income 8,167
 —
Total shareholders' equity 3,602,013
 —
Combined equity —
 1,957,423
Accumulated other comprehensive loss (632,148) (276,600)
Total stockholders' equity 8,293,764

8,214,422
Non-controlling interests 50,109
 51,656
Total equity 3,602,013
 1,957,423
 8,343,873

8,266,078
Total liabilities and equity $9,524,524
 $9,732,351
 $17,746,316

$17,392,910
The accompanying notes are an integral part of these condensed consolidated financial statements.




6


INVITATION HOMES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares and per share data)
(unaudited)





  For the Three Months Ended For the Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Revenues:        
Rental revenues $229,375
 $221,049
 $683,975
 $654,726
Other property income 14,161
 11,989
 40,527
 33,310
Total revenues 243,536
 233,038
 724,502
 688,036
         
Operating expenses:        
Property operating and maintenance 93,267
 94,246
 274,275
 270,494
Property management expense 10,852
 7,715
 31,436
 22,638
General and administrative 27,462
 18,811
 104,154
 49,579
Depreciation and amortization 67,466
 66,480
 202,558
 198,261
Impairment and other 14,572
 1,279
 16,482
 1,642
Total operating expenses 213,619
 188,531
 628,905
 542,614
Operating income 29,917
 44,507
 95,597
 145,422
         
Other income (expenses):        
Interest expense (56,796) (68,365) (182,726) (209,165)
Other, net 613
 (1,057) (482) (1,025)
Total other income (expenses) (56,183) (69,422) (183,208) (210,190)
      

  
Loss from continuing operations (26,266) (24,915) (87,611) (64,768)
Gain on sale of property, net of tax 3,756
 2,966
 28,239
 13,178
         
Net loss $(22,510) $(21,949) $(59,372) $(51,590)
         
  Three Months Ended September 30,
2017		   February 1, 2017
through
September 30,
2017		  
Net loss available to common shareholders — basic and diluted (Note 12) $(22,745)   $(42,837)  
         
Weighted average common shares outstanding — basic and diluted 311,559,780
   311,674,226
  
         
Net loss per common share — basic and diluted $(0.07)   $(0.14)  
         
Dividends declared per common share $0.08
   $0.14
  
  For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
  2020 2019 2020 2019
Rental revenues and other property income $449,755
 $441,582
 $899,544

$877,082
         
Expenses:        
Property operating and maintenance 167,002
 166,574
 333,918
 326,920
Property management expense 14,529
 16,021
 28,901
 31,181
General and administrative 14,426
 15,956
 28,654
 42,494
Interest expense 86,071
 95,706
 170,828
 189,689
Depreciation and amortization 137,266
 133,031
 272,293
 266,640
Impairment and other (180) 1,671
 2,947
 7,063
Total expenses 419,114
 428,959
 837,541

863,987
         
Other, net 1,370
 610
 5,084
 3,735
Gain on sale of property, net of tax 11,167
 26,172
 26,367
 43,744
         
Net income 43,178

39,405
 93,454

60,574
Net income attributable to non-controlling interests (275) (463) (595) (810)
         
Net income attributable to common stockholders 42,903

38,942
 92,859

59,764
Net income available to participating securities (119) (109) (221) (215)
         
Net income available to common stockholders — basic and diluted (Note 12) $42,784
 $38,833
 $92,638
 $59,549
         
Weighted average common shares outstanding — basic 548,811,968
 525,070,036
 545,680,740
 523,265,455
Weighted average common shares outstanding — diluted 549,920,213
 525,933,643
 546,836,809
 524,190,469
         
Net income per common share — basic
$0.08
 $0.07
 $0.17
 $0.11
Net income per common share — diluted $0.08
 $0.07
 $0.17
 $0.11


The accompanying notes are an integral part of these condensed consolidated financial statements.




7


INVITATION HOMES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)




  For the Three Months Ended For the Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Net loss $(22,510) $(21,949) $(59,372) $(51,590)
Other comprehensive loss        
Unrealized losses on interest rate swaps (598) —
 (4,796) —
Losses from interest rate swaps reclassified into earnings from accumulated other comprehensive income 4,193
 —
 12,963
 —
Other comprehensive income 3,595
 —
 8,167

—
Comprehensive loss $(18,915) $(21,949) $(51,205)
$(51,590)
  For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
  2020 2019 2020 2019
Net income $43,178
 $39,405
 $93,454
 $60,574
         
Other comprehensive loss        
Unrealized losses on interest rate swaps (52,817) (148,599) (394,255) (236,467)
(Gains) losses from interest rate swaps reclassified into earnings from accumulated other comprehensive loss 28,042
 (7,891) 36,609
 (18,754)
Other comprehensive loss (24,775) (156,490) (357,646)
(255,221)
Comprehensive income (loss) 18,403

(117,085) (264,192)
(194,647)
Comprehensive (income) loss attributable to non-controlling interests (246) 1,312
 1,503
 2,583
         
Comprehensive income (loss) attributable to common stockholders $18,157

$(115,773) $(262,689) $(192,064)


The accompanying notes are an integral part of these condensed consolidated financial statements.



8


INVITATION HOMES INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF EQUITY
For the NineThree and Six Months Ended SeptemberJune 30, 20172020
(in thousands, except share information)and per share data)
(unaudited)




    Common Stock        
  Combined Equity Number of Shares Amount Additional
Paid-in Capital		 Accumulated Deficit Accumulated Other Comprehensive Income Total Equity
Balance as of December 31, 2016 $1,957,423
 —
 $—
 $—
 $—
 $—
 $1,957,423
Net loss (16,879) —
 —
 —
 —
 —
 (16,879)
Redemption of Series A Preferred Stock (1,153) —
 —
 —
 —
 —
 (1,153)
Distribution of Class B notes receivable (19,686) —
 —
 —
 —
 —
 (19,686)
Cancellation/distribution of Class B notes receivable 19,686
 —
 —
 —
 —
 —
 19,686
Share-based compensation expense 12,001
 —
 —
 —
 —
 —
 12,001
Accrued interest on Class B notes 15
 —
 —
 —
 —
 —
 15
Balance as of January 31, 2017 1,951,407
 —
 —
 —
 —
 —
 1,951,407
Pre-IPO Transactions (see Note 1) (1,951,407) 221,826,634
 2,218
 1,949,189
 —
 —
 —
Issuance of common stock — IPO —
 88,550,000
 886
 1,691,172
 —
 —
 1,692,058
IPO costs —
 —
 —
 (5,726) —
 —
 (5,726)
Net loss —
 —
 —
 —
 (42,493) —
 (42,493)
Dividends and dividend equivalents declared —
 —
 —
 —
 (43,957) —
 (43,957)
Issuance of common stock — settlement of RSUs, net of tax —
 977,656
 10
 (9,916) —
 —
 (9,906)
Share-based compensation expense —
 —
 —
 52,463
 —
 —
 52,463
Total other comprehensive income —
 —
 —
 —
 —
 8,167
 8,167
Balance as of September 30, 2017 $—
 311,354,290
 $3,114
 $3,677,182
 $(86,450) $8,167
 $3,602,013
  Common Stock            
  Number of Shares Amount Additional
Paid-in Capital		 Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Non-Controlling Interests Total Equity
Balance as of March 31, 2020 543,767,445

$5,438

$9,066,512

$(556,305)
$(607,402)
$7,908,243

$49,884

$7,958,127
Capital distributions —
 —
 —
 —
 —
 —
 (534) (534)
Net income —
 —
 —
 42,903
 —
 42,903
 275
 43,178
Dividends and dividend equivalents declared ($0.15 per share) —
 —
 —
 (81,916) —
 (81,916) —
 (81,916)
Issuance of common stock — settlement of RSUs, net of tax 74,834
 —
 (190) —
 —
 (190) —
 (190)
Issuance of common stock, net 16,690,400
 167
 447,710
 —
 —
 447,877
 —
 447,877
Share-based compensation expense —
 —
 1,593
 —
 —
 1,593
 513
 2,106
Total other comprehensive loss —
 —
 —
 —
 (24,746) (24,746) (29) (24,775)
Balance as of June 30, 2020 560,532,679
 $5,605
 $9,515,625
 $(595,318) $(632,148) $8,293,764
 $50,109
 $8,343,873


  Common Stock            
  Number of Shares Amount Additional
Paid-in Capital		 Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Non-Controlling Interests Total Equity
Balance as of December 31, 2019 541,642,725
 $5,416
 $9,010,194
 $(524,588) $(276,600) $8,214,422
 $51,656
 $8,266,078
Capital distributions —
 —
 —
 —
 —
 —
 (1,068) (1,068)
Net income —
 —
 —
 92,859
 —
 92,859
 595
 93,454
Dividends and dividend equivalents declared ($0.30 per share) —
 —
 —
 (163,589) —
 (163,589) —
 (163,589)
Issuance of common stock — settlement of RSUs, net of tax 327,488
 3
 (3,364) —
 —
 (3,361) —
 (3,361)
Issuance of common stock, net 18,562,466
 186
 503,612
 —
 —
 503,798
 —
 503,798
Share-based compensation expense —
 —
 5,183
 —
 —
 5,183
 1,024
 6,207
Total other comprehensive loss —
 —
 —
 —
 (355,548) (355,548) (2,098) (357,646)
Balance as of June 30, 2020 560,532,679
 $5,605
 $9,515,625
 $(595,318) $(632,148) $8,293,764
 $50,109
 $8,343,873

The accompanying notes are an integral part of these condensed consolidated financial statements.






9INVITATION HOMES INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)
For the Three and Six Months Ended June 30, 2019
(in thousands, except share and per share data)
(unaudited)


  Common Stock            
  Number of Shares Amount Additional
Paid-in Capital		 Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Non-Controlling Interests Total Equity
Balance as of March 31, 2019 524,989,775
 $5,250
 $8,685,058
 $(439,737) $(110,655) $8,139,916
 $81,452
 $8,221,368
Capital distributions —
 —
 —
 —
 —
 —
 (711) (711)
Net income —
 —
 —
 38,942
 —
 38,942
 463
 39,405
Dividends and dividend equivalents declared ($0.13 per share) —
 —
 —
 (68,334) —
 (68,334) —
 (68,334)
Issuance of common stock — settlement of RSUs, net of tax 137,172
 1
 (1,386) —
 —
 (1,385) —
 (1,385)
Share-based compensation expense —
 —
 3,255
 —
 —
 3,255
 360
 3,615
Total other comprehensive loss —
 —
 —
 —
 (154,715) (154,715) (1,775) (156,490)
Balance as of June 30, 2019 525,126,947
 $5,251
 $8,686,927
 $(469,129) $(265,370) $7,957,679
 $79,789
 $8,037,468
  Common Stock            
  Number of Shares Amount Additional
Paid-in Capital		 Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Non-Controlling Interests Total Equity
Balance as of December 31, 2018 520,647,977
 $5,206
 $8,629,462
 $(392,594) $(12,963) $8,229,111
 $140,075
 $8,369,186
Capital distributions —
 —
 —
 —
 —
 —
 (1,886) (1,886)
Net income —
 —
 —
 59,764
 —
 59,764
 810
 60,574
Dividends and dividend equivalents declared ($0.26 per share) —
 —
 —
 (136,299) —
 (136,299) —
 (136,299)
Issuance of common stock — settlement of RSUs, net of tax 905,677
 9
 (8,117) —
 —
 (8,108) —
 (8,108)
Share-based compensation expense —
 —
 8,862
 —
 —
 8,862
 360
 9,222
Total other comprehensive loss —
 —
 —
 —
 (251,828) (251,828) (3,393) (255,221)
Redemption of OP Units for common stock 3,573,293
 36
 56,720
 —
 (579) 56,177
 (56,177) —
Balance as of June 30, 2019 525,126,947
 $5,251
 $8,686,927
 $(469,129) $(265,370) $7,957,679
 $79,789
 $8,037,468

The accompanying notes are an integral part of these condensed consolidated financial statements.



INVITATION HOMES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)




 For the Nine Months Ended
 September 30, For the Six Months
Ended June 30,
 2017 2016 2020 2019
Operating Activities:        
Net loss $(59,372) $(51,590)
Net income $93,454
 $60,574
        
Adjustments to reconcile net loss to net cash provided by operating activities:    
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 202,558
 198,261
 272,293
 266,640
Share-based compensation expense 64,464
 13,023
 6,207
 9,222
Amortization of deferred leasing costs 9,249
 10,505
 5,828
 5,060
Amortization of deferred financing costs 19,550
 37,323
 14,353
 20,158
Amortization of discount on mortgage loans 202
 4,158
Amortization of debt discounts 2,697
 4,709
Provisions for impairment 1,556
 1,595
 3,913
 7,329
Gain on sale of property, net of tax (28,239) (13,178) (26,367) (43,744)
Paid in kind interest on warehouse loan —
 1,122
Change in fair value of derivative instruments 3,992
 —
 2,707
 2,170
Other noncash amounts included in net loss (1,907) (1,128)
Change in operating assets and liabilities:    
Restricted cash related to security deposits (3,170) (4,917)
Other non-cash amounts included in net income (349) 785
Changes in operating assets and liabilities:    
Other assets, net (14,611) (7,010) (14,288) (9,823)
Accounts payable and accrued expenses 71,417
 54,545
 17,612
 48,771
Resident security deposits 2,463
 4,612
 6,413
 3,000
Other liabilities (885) 388
 11,462
 491
Net cash provided by operating activities 267,267
 247,709
 395,935
 375,342

        
Investing Activities:        
Changes in amounts deposited and held by others (2,146) 2,559
Amounts deposited and held by others 733
 (966)
Acquisition of single-family residential properties (154,154) (257,108) (179,901) (246,306)
Initial renovations to single-family residential properties (21,500) (47,621) (61,623) (18,749)
Other capital expenditures for single-family residential properties (34,010) (35,454) (84,025) (70,161)
Corporate capital expenditures (2,809) (3,673)
Proceeds from sale of residential properties 152,713
 107,147
Purchases of investments in debt securities (51,920) (16,036)
Proceeds from sale of single-family residential properties 228,728
 336,523
Repayment proceeds from retained debt securities 30,916
 —
 6,787
 35,687
Changes in restricted cash 71,481
 (48,599)
Net cash used in investing activities (11,429) (298,785)
Other investing activities (203) 3,163
Net cash provided by (used in) investing activities (89,504) 39,191

        
Financing Activities:        
Cash paid for employee taxes for settlement of RSUs (9,906) —
Contributions —
 138,002
Payment of dividends and dividend equivalents (43,906) —
 (163,456) (136,299)
Redemption of Series A preferred stock (1,153) —
Proceeds from IPO, net of underwriting discounts 1,692,058
 —
Distributions to non-controlling interests (1,068) (1,886)
Payment of taxes related to net share settlement of RSUs (3,361) (8,108)
Payments on mortgage loans (131,677) (709,383)
Proceeds from secured term loan —
 403,464
Payments on secured term loan (101) —
Proceeds from revolving facility 320,000
 135,000
Payments on revolving facility (320,000) (135,000)
Proceeds from issuance of common stock, net 503,798
 —
Deferred financing costs paid —
 (2,613)
Other financing activities (1,198) (244)
Net cash provided by (used in) financing activities 202,937
 (455,069)
    
Change in cash, cash equivalents, and restricted cash 509,368
 (40,536)
Cash, cash equivalents, and restricted cash, beginning of period (Note 4) 286,245
 359,991
Cash, cash equivalents, and restricted cash, end of period (Note 4) $795,613
 $319,455
    

10


INVITATION HOMES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)


  For the Nine Months Ended
  September 30,
  2017 2016
IPO costs paid (2,757) —
Proceeds from credit facilities —
 184,682
Payments on credit facilities (2,321,585) (126,675)
Proceeds from mortgage loans 996,420
 —
Payments on mortgage loans (2,086,622) (33,452)
Proceeds from term loan facility 1,500,000
 —
Payments on warehouse loans —
 (103,385)
Deferred financing costs paid (42,065) (8,774)
Net cash (used in) provided by financing activities (319,516) 50,398
     
Change in cash and cash equivalents (63,678) (678)
Cash and cash equivalents, beginning of period 198,119
 274,818
Cash and cash equivalents, end of period $134,441
 $274,140
     
Supplemental cash flow disclosures:    
Interest paid, net of amounts capitalized $164,054
 $165,487
Cash paid for income taxes 1,987
 —
     
Noncash investing and financing activities:    
Accrued renovation improvements at period end $5,537
 $6,303
Accrued residential property capital improvements at period end 4,426
 3,684
Transfer of residential property, net to other assets, net for held for sale assets 52,051
 36,616
Reclassification of IPO costs from other assets to additional paid-in capital 2,969
 —
Change in other comprehensive income from cash flow hedges 8,167
 —
  For the Six Months
Ended June 30,
  2020 2019
Supplemental cash flow disclosures:    
Interest paid, net of amounts capitalized $153,151
 $164,766
Cash paid for income taxes 967
 1,699
Cash paid for amounts included in the measurement of lease liabilities:    
Operating cash flows from operating leases 2,760
 2,581
Financing cash flows from finance leases 1,062
 244
     
Non-cash investing and financing activities:    
Accrued renovation improvements at period end $2,931
 $6,188
Accrued residential property capital improvements at period end 8,459
 12,617
Transfer of residential property, net to other assets, net for held for sale assets 98,254
 198,138
Change in other comprehensive loss from cash flow hedges (360,301) (257,358)
ROU assets obtained in exchange for operating lease liabilities 2,961
 1,721
ROU assets obtained in exchange for finance lease liabilities 9,235
 —


The accompanying notes are an integral part of these condensed consolidated financial statements.




11


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









 
Note 1—Organization and Formation
Invitation Homes Inc. (“INVH”) is a real estate investment trust (“REIT”) that conducts its operations through Invitation Homes Operating Partnership LP (“INVH LP”). INVH LP was formed for the purpose of owning, renovating, leasing, and operating single-family residential properties. On February 6, 2017, INVH completed an initial public offering (“IPO”) of 88,550,000 shares of common stock at a price to the public of $20.00 per share. An additional 221,826,634 shares of common stock were issued to the Pre-IPO Owners (as defined below) on January 31, 2017.
Prior to the IPO, we conducted our business through a combination of entities formed by Blackstone Real Estate Partners VII L.P. (“BREP VII”), an investment fund sponsored by The Blackstone Group L.P., along with BREP VII’s affiliated side-by-side funds and co-investment vehicles (“BREP VII and Affiliates”). The first Invitation Homes partnership was formed on June 12, 2012, through the establishment of Invitation Homes L.P. (“IH1”) and its wholly-owned subsidiary,Through THR Property Management L.P., a wholly owned subsidiary of INVH LP (the “Manager”). Preeminent Holdings, Inc. (“IH2”) was created on February 14, 2013, Invitation Homes 3 L.P. (“IH3”) on August 8, 2013, Invitation Homes 4 L.P. (“IH4”) on January 10, 2014, Invitation Homes 5 L.P. (“IH5”) on August 22, 2014, and Invitation Homes 6 L.P. (“IH6”) on June 15, 2015 (collectively with IH1, the “Invitation Homes Partnerships”). Through the Manager,, we provide all management and other administrative services with respect to the properties we own. The collective owners of the Invitation Homes Partnerships are referred to as the “Pre-IPO Owners.”
Invitation Homes Operating Partnership LP (“INVH LP”) and its general partner, Invitation Homes OP GP LLC (the “OP General Partner”), were formed by one of our Pre-IPO Owners on December 14, 2016. INVH LP began negotiating and entering into certain debt and hedge instruments upon its inception in anticipation of our IPO.
Prior to the IPO, the Invitation Homes Partnerships and INVH LP were under the common control of BREP VII and Affiliates. BREP VII and Affiliates had the ability to control each of the Invitation Homes Partnerships and manage and operate the Invitation Homes Partnerships through the Manager and a common board of directors. As such prior to the IPO, our historical financial statements include assets, liabilities and results of operations of INVH LP and the Invitation Homes Partnerships and their consolidated subsidiaries on a combined and consolidated basis.
As a result of the Pre-IPO Transactions described below, IH2 was effectively merged into INVH (and the assets and liabilities of IH2 were contributed to INVH LP), and the remaining Invitation Homes Partnerships became wholly owned subsidiaries of INVH through INVH LP.
On October 4, 2016, INVH was incorporated in the State of Delaware and was capitalized as of that date by an investment from one of our Pre-IPO Owners. Since inception, and through the date of the Pre-IPO Transactions (as described below), INVH did not engage in any business or activity. On February 6, 2017, INVH completed an initial public offering (“IPO”), changed its jurisdiction of incorporation to Maryland. The Pre-IPO Transactions also included amendmentsMaryland, and amended its charter to the INVH charter which provide for the issuance of up to 9,000,000,000 shares of common stock and 900,000,000 shares of preferred stock, in each case $0.01 par value per share. In connection with certain pre-IPO reorganization transactions, INVH LP became (1) owned by INVH directly and through Invitation Homes OP LLC, a wholly owned subsidiary of INVH, and (2) the owner of all of the assets, liabilities, and operations of certain pre-IPO ownership entities. These transactions were accounted for as a reorganization of entities under common control utilizing historical cost basis.
On November 16, 2017 (the “Merger Date”), INVH and certain of its affiliates entered into a series of transactions with Starwood Waypoint Homes (“SWH”) and certain SWH affiliates which resulted in SWH and its operating partnership being merged into INVH and INVH LP, respectively, with INVH and INVH LP being the surviving entities (the “Mergers”). The Mergers were accounted for as a business combination in accordance with ASC 805, Business Combinations, and INVH was designated as the accounting acquirer.
The limited partnership interests of INVH LP consist of common units and other classes of limited partnership interests that may be issued (the “OP Units”). As of June 30, 2020, INVH owns 99.4% of the common OP Units and has the full, exclusive, and complete responsibility for and discretion over the day to day management and control of INVH LP.
Our organizational structure includes several wholly owned subsidiaries of INVH LP that were formed to facilitate certain of our financing arrangements (the “Borrower Entities”). These Borrower Entities are used to align the ownership of our single-family residential properties with individualcertain of our debt instruments. Collateral for thecertain of our individual debt instruments ismay be in the form of equity interests in the Borrower Entities or in pools of single-family residential properties owned either directly by the Borrower Entities or indirectly by their wholly owned subsidiaries (see Note 6).
References to “Invitation Homes,” the “Company,” “we,” “our,” and “us” refer, collectively, to INVH, IH1, IH2, IH3, IH4, IH5, IH6, the Manager, and INVH LP.


12

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


Pre-IPO Transactions
On January 31, 2017, we effected certain transactions (the “Pre-IPO Transactions”) that resulted in INVH LP holding, directly or indirectly, all of the assets, liabilities, and results of operations of the Invitation Homes Partnerships, including the full portfolio of homes held by the Invitation Homes Partnerships. As a result of the Pre-IPO Transactions, INVH LP is wholly owned by INVH directly and through its wholly owned subsidiary, the OP General Partner. More specifically:
INVH acquired all of the assets, liabilities, and operations held directly or indirectly by IH2 through certain mergers and related transactions as follows:
IH2 Property Holdings Inc., a parent entity of IH2, merged with and into INVH, with INVH as the entity surviving the merger (the “IH2 Property Holdings Merger”), and the issued and outstanding shares of IH2 Property Holdings Inc., all of which were held by certain of the Pre-IPO Owners, were converted into newly issued shares of common stock of INVH; and
following the IH2 Property Holdings Merger, IH2 merged with and into INVH, with INVH as the entity surviving the merger (the “IH2 Merger”). In the IH2 Merger, all of the shares of common stock of IH2 issued and outstanding immediately prior to such merger, other than the shares held by INVH, were converted into shares of newly issued common stock of INVH. As a result of the IH2 Merger, INVH holds all of the assets and operations held directly or indirectly by IH2 prior to such merger;
prior to the IH2 Merger, our Pre-IPO Owners contributed to INVH their interests in each of the other Invitation Homes Partnerships (other than IH2) in exchange for newly-issued shares of INVH; and
INVH contributed to INVH LP all of the interests in the Invitation Homes Partnerships (other than IH2, the assets, liabilities and operations of which were contributed to INVH LP).
The Pre-IPO Transactions were accounted for as a reorganization of entities under common control utilizing historical cost basis.
Proposed Merger with Starwood Waypoint Homes
On August 9, 2017, we entered into a definitive agreement with Starwood Waypoint Homes (“SFR”) to form a combined company in a stock-for-stock merger of equals transaction (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, (i) SFR will be merged with and into IH Merger Sub, LLC, a wholly owned subsidiary of the Company (“REIT Merger Sub”), with REIT Merger Sub surviving as our subsidiary (the “REIT Merger”) and (ii) as promptly as practicable after the REIT Merger, Starwood Waypoint Homes Partnership, L.P. (“SFR Partnership”) will be merged with and into INVH LP, with INVH LP surviving as our subsidiary (the “Partnership Merger,” and together with the REIT Merger, the “Mergers”). In connection with the Mergers, we filed with the SEC on October 16, 2017 a definitive joint proxy statement/information statement and prospectus (File No. 333-220543) (the “Merger Proxy”), which includes more detailed information about the Mergers and the related transactions.
Under the terms of the Merger Agreement and as described in the Merger Proxy, each outstanding SFR share will be converted into 1.6140 shares of our common stock (the “Exchange Ratio”), and each outstanding unit of SFR Partnership will be converted into the right to receive 1.6140 common units, representing limited partner interests, in INVH LP. Further, each outstanding restricted share unit of SFR (an “SFR RSU”) that vest as a result of the Mergers or the Merger Agreement will automatically be converted into the right to receive our common stock based on the Exchange Ratio, plus any accrued but unpaid dividends (if any) and less certain taxes (if any). On a pro forma basis giving effect to the Mergers, the combined company will own an approximately 98.2% partnership interest in INVH LP, and the combined company will have the full, exclusive and complete responsibility for and discretion in the day-to-day management and controlconsolidated subsidiaries of INVH LP.
The REIT Merger is intended to qualify as a reorganization for U.S. federal income tax purposes, and the Partnership Merger is intended to be treated as a transaction that is generally tax free to the holders of units of SFR Partnership for U.S. federal income tax purposes. Upon the closing of the Mergers, our stockholders will own approximately 59% of the combined company’s stock, and SFR’s stockholders will own approximately 41% of the combined company’s stock. Based on the closing prices of SFR’s common shares and our common stock on October 13, 2017, the equity market capitalization of the combined company would be approximately $12.0 billion, and the total enterprise value (including debt) would be approximately $21.3 billion.


13

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


The transaction has been approved by our board of directors and SFR’s board of trustees. Completion of the Mergers is subject to, among other things, approval by the holders of the SFR’s common shares. Assuming approval is obtained, the Mergers are expected to close in the fourth quarter of 2017. We can give no assurance that the Mergers and related transactions will be completed in the above timeframe, if at all.
Two putative class actions have been filed by purported shareholders of SFR challenging the Mergers, one of which names us and certain affiliates as defendants. The lawsuits seek, among other things, injunctive relief preventing consummation of the Mergers, rescission of the transactions contemplated by the Merger Agreement should they be consummated and litigation costs, including attorneys’ fees (see Note 14 for additional information).
Note 2—Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our audited combined and consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016. Subsequent to the date of the Pre-IPO Transactions, these2019.
These condensed consolidated financial statements include the accounts of INVH and its wholly ownedconsolidated subsidiaries. Prior to the date of the Pre-IPO Transactions, these combined and consolidated financial statements include the combined accounts of INVH LP and the Invitation Homes Partnerships and their wholly owned subsidiaries.
All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. In the opinion of management, all adjustments whichthat are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in these condensed consolidated financial statements. Operating results for the ninesix months ended SeptemberJune 30, 20172020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017.2020.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







We consolidate entities when we own, directly or indirectly, a majority interest in the entity or are otherwise able to control the entity. We consolidate variable interest entities (“VIEs”) in accordance with Accounting Standards Codification (“ASC”)ASC 810,Consolidation, if we are the primary beneficiary of the VIE as determined by our power to direct the VIE’s activities and the obligation to absorb its losses or the right to receive its benefits, which are potentially significant to the VIE. A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.
Adoption of New Accounting Standards
In January 2017,As described in Note 5, we have an investment in a joint venture with the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a BusinessFederal National Mortgage Association (“FNMA”), which clarifiesis a voting interest entity. We do not hold a controlling financial interest in the definitionjoint venture but have significant influence over its operating and financial policies. Additionally, FNMA holds certain substantive participating rights that preclude the presumption of a businesscontrol by us; as such, we account for our investment using the equity method. In connection with the objectiveMergers, we initially recorded this investment at fair value in connection with purchase accounting and have subsequently adjusted for our proportionate share of evaluating whether transactions should benet earnings or losses and other comprehensive income or loss, cash contributions made and distributions received, and other adjustments, as appropriate. Distributions of operating profit from the joint venture are reported as part of operating cash flows while distributions related to a capital transaction, such as a refinancing transaction or sale, are reported as investing activities.
Non-controlling interests represent the OP Units not owned by INVH, including any vested OP Units granted in connection with certain share-based compensation awards. Non-controlling interests are presented as a separate component of equity on the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, and the condensed consolidated statements of operations for the three and six months ended June 30, 2020 include an allocation of the net income attributable to the non-controlling interest holders. Vested OP Units are redeemable for shares of our common stock on a one-for-one basis or, in our sole discretion, cash, and redemptions of OP Units are accounted for as acquisitions (or disposals)a reduction in non-controlling interests with an offset to stockholders’ equity based on the pro rata number of OP Units redeemed.
Significant Risks and Uncertainties
One of the most significant risks and uncertainties to our financial condition and results of operations is the potential adverse effect of the ongoing pandemic resulting from the coronavirus, or COVID-19. Since the outbreak, a number of our residents have requested rent deferral and/or late fee relief, and components of our rental revenues and other property income have been impacted by the pandemic. In addition, some jurisdictions across the United States have imposed temporary eviction moratoriums and are allowing residents to defer missed rent payments without incurring late fees, and such jurisdictions and other local and national authorities may expand or extend measures imposing restrictions on our ability to enforce residents’ contractual rental obligations and limiting our ability to increase rents. We cannot predict if states, municipalities, and/or local authorities will expand existing restrictions, if additional states or municipalities will implement similar restrictions, or when restrictions currently in place will expire. Certain other restrictions imposed by jurisdictions across the United States are intended to limit operations by businesses not deemed “essential businesses.” While none of the current restrictions have materially impacted our ability to provide services to our residents or homes, future measures may negatively impact our ability to access our homes, complete service requests, or make our homes ready for new residents. Many experts predict that the outbreak will trigger, or even has already triggered, a period of global economic slowdown or a global recession.
The COVID-19 pandemic could have material and adverse effects on our financial condition, results of operations, and cash flows in the near term due to, but not limited to, the following: (1) reduced economic activity that severely impacts the earnings or health of our residents, thereby causing them to be unable to fully meet their obligations to us and resulting in increases in uncollectible revenues and thus reductions in rental revenues and other property income; (2) governmental restrictions and moratoriums that negatively impact our ability to charge and collect rental revenues and other property income or impose restrictions on our ability to provide services to our residents and homes; (3) negative financial impact of the pandemic that could impact our ability to access funds available under our Revolving Facility (as defined in Note 6) or affect future compliance with financial covenants of our Credit Facility (as defined in Note 6) and other debt agreements; and (4) weaker economic conditions that could cause us to recognize impairments in value of our tangible assets or businesses. Early adoption is permitted only for transactions that occurred before the issuance date of the guidance and has not been previously reported in issued financial statements. Effective January 1, 2017, we adopted ASU 2017-01, and the adoption of this standard had no material impact on our condensed consolidated financial statements for any period presented.
In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification

goodwill.

14


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









The extent to which the COVID-19 pandemic ultimately impacts our operations depends on ongoing developments, which remain highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the extent and duration of actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic, containment measures, monetary and/or fiscal policies implemented to provide support or relief to businesses and/or residents, and other government, regulatory, and/or legislative changes precipitated by the COVID-19 pandemic, among others. While we have taken steps to mitigate the impact of the pandemic on our results of operations, there can be no assurance that these efforts will be successful.
Adoption of New Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how companies measure credit losses for certain financial assets, excluding receivables arising from operating leases. This guidance requires an entity to estimate its expected credit loss and record an allowance based on this estimate so that it is presented at the net amount expected to be collected on the statementfinancial asset. We adopted this standard as of cash flows. Effective January 1, 2017, we adopted2020, and it did not have a material impact on our condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2016-09,2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. We have elected to apply the hedge accounting expedients related to probability and the adoptionassessments of this standardeffectiveness for future London Interbank Offer Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease accommodations resulting from the COVID-19 pandemic as many lessors have been asked to provide rent deferrals, rent abatements, late fee waivers, and other lease concessions to lessees (collectively, “lease accommodations”). While the lease modification guidance in ASC 842, Leases, addresses routine changes to lease terms resulting from negotiations between a lessee and lessor, it did not contemplate the rapid implementation of lease accommodations to address the sudden liquidity constraints of some lessees arising from the COVID-19 pandemic.
Under existing lease guidance, we would have been required to determine, on a lease by lease basis, if each lease accommodation resulted from a new arrangement reached with the resident (treated within the lease modification accounting framework) or if each was contemplated under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). If certain criteria are met, the Lease Modification Q&A allows lessors to bypass the lease by lease analysis and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. We elected to apply the Lease Modification Q&A guidance not to perform a lease by lease analysis with respect to any lease accommodations and to account for such accommodations outside of the lease modification framework. The Lease Modification Q&A has not had noa material impact on our condensed consolidated financial statements for any period presented.the three and six months ended June 30, 2020. However, the extent of lease accommodations granted to residents as a result of the COVID-19 pandemic in future periods may materially affect our condensed consolidated financial statements.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These estimates are inherently subjective in nature and actual results could differ from those estimates.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Accounting Policies
There have been no changes to our significant accounting policies that have had a material impact on our condensed consolidated financial statements and related notes, compared to those policies disclosed in our audited combined and consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 other than as disclosed below.
Investments in Single-Family Residential Properties
Upon acquisition, we evaluate our acquired single-family residential properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. Upon adoption of ASU 2017-01, our purchases of homes are treated as acquisitions and are recorded at their purchase price which is allocated between land, building and improvements, and in-place lease intangibles (when a tenant is in place at the acquisition date) based upon their relative fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, bidding service and title fees, payments made to cure tax, utility, homeowners’ association (“HOA”), and other mechanic’s and miscellaneous liens, as well as other closing costs. The fair values of acquired in-place lease intangibles, if any, are based on the costs to execute similar leases, including commissions and other related costs. The origination value of in-place lease intangibles also includes an estimate of lost rent revenue at in-place rental rates during the estimated time required to lease the property. The in-place lease intangibles are amortized over the life of the leases and are recorded in other assets, net on our condensed consolidated balance sheets. Prior to our adoption of ASU 2017-01 effective January 1, 2017, acquisition costs for transactions accounted for as business combinations were expensed in the period in which they were incurred and were reflected in other expenses in the accompanying condensed consolidated statements of operations.
Earnings per Share
We use the two-class method to compute basic and diluted earnings (loss) per common share (“EPS”) because certain of our restricted stock units and restricted stock awards (see Share-Based Compensation Expense below) are participating securities as defined by GAAP. We compute basic EPS by dividing net income (loss) available to common shareholders for the period by the weighted-average number of common shares outstanding for the period, adjusted to exclude non-vested restricted stock units (“RSUs”) and restricted shares of common stock (“RSAs”). Diluted EPS is similar to computing basic EPS, except that the denominator is increased to include the dilutive effects of non-vested RSUs and RSAs except when doing so would be anti-dilutive. Prior to the IPO, our business was conducted through the Invitation Homes Partnerships which did not have a common capital structure upon which to compute historical EPS. Accordingly, EPS has not been presented for historical periods prior to the IPO.
Derivatives
We enter into interest rate swap and interest rate cap agreements (collectively, “Hedging Derivatives”) for interest rate risk management purposes. We do not enter into Hedging Derivatives for trading or other speculative purposes, and all of our Hedging Derivatives are carried at fair value on our condensed consolidated balance sheets. Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we have not elected to designate as hedges.


15

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


Pursuant to the terms of certain of our mortgage loans, we are required to maintain interest rate caps. We have elected not to designate these interest cap agreements for hedge accounting (collectively, the “Non-Designated Hedges”). We enter into interest rate swap agreements to hedge the risk arising from changes in our interest payments on variable-rate debt due to changes in the one-month London Interbank Offered Rate (“LIBOR”). In connection with the Pre-IPO Transactions, as of January 31, 2017, we have elected to account for our interest rate swap agreements as effective cash flow hedges (collectively, the “Designated Hedges”). We assess the effectiveness of these interest rate swap cash flow hedging relationships on an ongoing basis. The effect of these interest rate cap agreements and interest rate swap agreements is to reduce the variability of interest payments due to changes in LIBOR.
The fair value of Hedging Derivatives that are in an asset position are included in other assets, net and those in a liability position are included in other liabilities on our condensed consolidated balance sheets. For Non-Designated Hedges, the related changes in fair value are reflected within interest expense in the condensed consolidated statements of operations. For Designated Hedges, the effective portion of the related changes in fair value is reported as a component of other comprehensive income (loss) on our condensed consolidated balance sheets and reclassified into earnings as interest expense in our condensed consolidated statements of operations when the hedged transactions affect earnings; the ineffective portion of the changes in fair value is reflected directly within interest expense in the condensed consolidated statements of operations. See Note 7 for further discussion of derivative financial instruments.
Share-Based Compensation Expense
Prior to the IPO, we recognized share-based compensation expense for incentive compensation units granted by the Invitation Homes Partnerships (the “Class B Units”). In connection with and subsequent to the IPO, we issued RSUs that settle in shares of common stock and RSAs for which share-based compensation expense is recognized.
We recognized share-based compensation expense for the Class B Units based on the estimated fair value of the Class B Units and vesting conditions of the related incentive unit agreements. Since the Class B Units granted by IH1 were granted to employees of the Manager, a wholly owned subsidiary of IH1, the related share-based compensation expense was based on the grant-date fair value of the units and recognized in expense over the service period. Because units in IH2, IH3, IH4, IH5, and IH6 were granted to non-employees of those respective partnerships, fair value was remeasured for non-vested units at the end of each reporting period. The fair value of the Class B Units was determined based on a valuation model that took into account discounted cash flows and a market approach based on comparable companies and transactions.
We recognize share-based compensation expense for the RSUs and RSAs based on their grant-date fair value, net of expected forfeitures, over the service period from the grant date to vest date for each tranche or when any applicable performance conditions are met in accordance with the related RSU and RSA agreements. The grant-date fair value of RSUs and RSAs is generally based on the closing price of our common stock on the grant date except for market based RSU grant‑date fair values which are based on Monte-Carlo option pricing models.
Additional compensation expense is recognized if modifications to existing incentive compensation unit, RSU, or RSA agreements result in an increase in the post-modification fair value of the units that exceeds their pre-modification fair value. Share-based compensation expense is presented as a component of general and administrative expense and property management expense in our condensed consolidated statements of operations. See Note 10 for further discussion of share-based compensation expense.
Income Taxes
As a result of the Pre-IPO Transactions more fully described in Note 1, the Invitation Homes Partnerships transferred all assets, liabilities, and operations to INVH through certain mergers and related transactions, including the IH2 Property Holdings Merger. IH2 Property Holdings Inc. had previously elected to qualify as a Real Estate Investment Trust “REIT” for United States federal income tax purposes commencing with its taxable year ended December 31, 2013. Effective upon consummation of the IH2 Property Holdings Merger, INVH became subject to such REIT election.
We intend to continue to operate as a REIT, and our current and continuing qualification as a REIT depends on our ability to meet the various requirements imposed by the Internal Revenue Code of 1986, as amended (the “Code”), which are related to organizational structure, distribution levels, diversity of stock ownership and certain restrictions with regard to owned assets and categories of income. If we qualify for taxation as a REIT, we will generally not be subject to United States federal corporate income tax on our taxable income that is currently distributed to shareholders. This treatment substantially


16

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


eliminates the “double taxation” (at the corporate and stockholder levels) that generally results from an investment in a corporation. If we fail to qualify as a REIT in any taxable year, we will be subject to federal taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for subsequent taxable years.
Even if we qualify as a REIT, we may be subject to United States federal income and excise taxes in various situations, such as on our undistributed income. We also will be required to pay a 100% tax on any net income on non-arm’s length transactions between us and a TRS, defined below, and on any net income from sales of assets that were held for sale to customers in the ordinary course. In addition, we could also be subject to the alternative minimum tax on items of tax preference. State and local tax laws may not conform to the United States federal income tax treatment, and we may be subject to state or local taxation in various state or local jurisdictions, including those in which we transact business. Any taxes imposed on us reduce our operating cash flow and net income.
As part of the formation of INVH, each of the Invitation Homes Partnerships (other than IH2) transferred assets into INVH solely in exchange for shares of common stock. Certain of the assets contributed contained built-in gains. Prior to the Pre-IPO Transactions, the contributing partnerships had indirect C corporation partners to which a portion of the built-in gain would be allocated. As a result, if we dispose of any such assets during the five-year period following the date the REIT acquired such assets, we will be subject to the regulations under Section 337(d) of the Code. In general terms, such regulations subject the REIT to the maximum corporate level tax rate on the lesser of (i) such built-in gains and (ii) the gain recognized by the REIT upon a taxable disposition of the contributed assets. We may, however, choose not to sell such assets during such five-year period or to sell them in a non-taxable transaction. As such, the potential taxes associated with these built-in gains are not estimable.
Certain of our operations or a portion thereof, are conducted through taxable REIT subsidiaries, each of which we refer to as a TRS. A TRS is a subsidiary C-corporation that has not elected REIT status and as such is subject to United States federal and state corporate income tax. We use TRS entities to facilitate our ability to perform non-real estate related activities and/or perform non-customary services for residents that cannot be offered directly by a REIT.
For our TRS entities, deferred income taxes result from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for United States federal income tax purposes and are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We reduce deferred tax assets by recording a valuation allowance when we determine, based on available evidence, that it is more likely than not that the assets will not be realized. We recognize the tax consequences associated with intercompany transfers between the REIT and TRS entities when the related assets affect our GAAP net income or loss, generally through depreciation, impairment losses, or sales to third-party entities.
Tax benefits associated with uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.
We file income tax returns in the United States federal jurisdiction as well as various state and local jurisdictions. Our filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires, with open tax years varying based upon the date of incorporation of the specific entity. The years open to examination range from 2013 to present.
Recent Accounting Pronouncements
In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments. The purpose of this pronouncement is to update the guidance in the SEC paragraphs of the Accounting Standards Codification to align with ASU No. 2014-09. This new standard will be effective at the same time an entity adopts the new revenue guidance in ASU No. 2014-09, Revenue from Contracts with Customer (Topic 606) which is effective on January 1, 2018. We do not anticipate that the adoption of this standard will have a material impact on our condensed consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging:Targeted Improvements to Accounting for Hedging Activities (Topic 815). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the


17

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


option of early adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. This adoption method will require us to recognize the cumulative effect of initially applying the ASU as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that we adopt the update. While we continue to assess all potential impacts of the standard, we currently expect the adoption to have an immaterial impact on our condensed consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies the definition of modification with the objective of evaluating whether modification accounting should be applied when there are changes to the terms or conditions of a share-based payment award. The guidance will be effective for us for annual reporting periods beginning after December 15, 2017, and for interim periods within those annual periods with early adoption permitted. We are currently assessing the impact of the guidance on our condensed consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that period changes in the total of cash, cash equivalents, and amounts generally described as restricted cash or cash equivalents are explained in the statement of cash flow. Thus, amounts generally described as restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning and ending balances shown in the statement of cash flows. The guidance will be effective for us for annual reporting periods beginning after December 15, 2017, and for interim periods. The adoption of this standard will modify our current disclosures and classifications within the condensed consolidated statements of cash flows, but is not expected to have a material effect on our condensed consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which clarifies the classification of certain cash receipts and cash payments including debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, proceeds from the settlement of insurance claims, and beneficial interests in securitization transactions. The new standard will be effective for us for annual reporting periods beginning after December 15, 2017, and for interim periods within those annual periods. The adoption of this standard will modify our current disclosures and classifications within the condensed consolidated statements of cash flows, but is not expected to have a material effect on our condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than one year. Lessor accounting will remain similar to lessor accounting under current GAAP, while aligning with the FASB’s new revenue recognition guidance. The new standard will be effective for us for annual reporting periods beginning after December 15, 2018, and for interim periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the guidance on our condensed consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income. The new standard will be effective for us for annual reporting periods beginning after December 15, 2017, and for interim periods within those annual periods. We are currently evaluating the impact of the guidance on our condensed consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance on revenue recognition and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, most industry-specific guidance and some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. The standard’s core principle is that a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These judgments may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. The guidance will be effective for us for annual


18

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


reporting periods beginning after December 15, 2017, and for interim periods within those annual periods. At that time, we may adopt the full retrospective approach or the modified retrospective approach. We are currently evaluating the method of adoption of this guidance and do not anticipate that the adoption of this guidance will have a material impact on our condensed consolidated financial statements as most of our revenue is from rental revenues, which are not impacted by this standard.2019.
Note 3—Investments in Single-Family Residential Properties
The following table sets forth the net carrying amount associated with our properties by component:
  June 30,
2020		 December 31, 2019
Land $4,487,945
 $4,499,346
Single-family residential property 13,258,956
 13,121,179
Capital improvements 510,574
 513,269
Equipment 113,076
 113,370
Total gross investments in the properties 18,370,551
 18,247,164
Less: accumulated depreciation (2,252,814) (2,003,972)
Investments in single-family residential properties, net $16,117,737
 $16,243,192
  September 30,
2017		 December 31,
2016
Land $2,733,834
 $2,703,388
Single-family residential property 6,908,064
 6,829,579
Capital improvements 229,902
 229,890
Equipment 31,906
 31,988
Total gross investments in the properties 9,903,706
 9,794,845
Less: accumulated depreciation (982,463) (792,330)
Investments in single-family residential properties, net $8,921,243
 $9,002,515


As of SeptemberJune 30, 20172020 and December 31, 2016,2019, the carrying amount of the residential propertyproperties above included $122,158includes $119,454 and $122,009,$119,608, respectively, of capitalized acquisition costs (excluding purchase price), along with $62,296$68,727 and $62,169,$65,747, respectively, of capitalized interest, $25,942$26,438 and $26,050,$25,565, respectively, of capitalized property taxes, $4,722$4,643 and $4,764,$4,616, respectively, of capitalized insurance, and $2,843$2,992 and $2,890,$2,836, respectively, of capitalized HOAhomeowners’ association (“HOA”) fees.
During the three months ended SeptemberJune 30, 20172020 and 2016,2019, we recognized $66,671$135,647 and $65,446,$131,782, respectively, of depreciation expense related to the components of the properties, and $795$1,619 and $1,034,$1,249, respectively, of depreciation and amortization related to corporate furniture and equipment. These amounts are included in depreciation and amortization onin the condensed consolidated statements of operations. Further, during the three months ended SeptemberJune 30, 20172020 and 2016,2019, impairments totaling $424$1,442 and $1,076,$4,076, respectively, have been recognized and are included in impairment and other onin the condensed consolidated statements of operations.
During the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, we recognized $200,023$269,561 and $194,630,$264,302, respectively, of depreciation expense related to the components of the properties and $2,535$2,732 and $3,631,$2,338, respectively, of depreciation and amortization related to corporate furniture and equipment. These amounts are included in depreciation and amortization onin the condensed consolidated statements of operations. Further, during the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, impairments totaling $1,556$3,913 and $1,595,$7,329, respectively, have been recognized and are included in impairment and other onin the condensed consolidated statements of operations.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Note 4—Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the condensed consolidated balance sheets that sum to the total of such amounts shown in the condensed consolidated statements of cash flows:
  June 30,
2020		 December 31, 2019
Cash and cash equivalents $571,719
 $92,258
Restricted cash 223,894
 193,987
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows $795,613
 $286,245

Pursuant to the terms of the credit facility agreements and the mortgage loans describedand Secured Term Loan (as defined in Note 6,6), we are required to establish, maintain, and fund from time to time (generally, either monthly or at the time borrowings are funded) certain specified reserve accounts. These reserve accounts include, but are not limited to, the following types of accounts: (i) completion reserves; (ii) renovation reserves; (iii) leasing commission reserves; (iv) debt service reserves; (v) property tax reserves; (vi)(ii) insurance premiumreserves; (iii) capital expenditure reserves; and deductible reserves; (vii) standing reserves; (viii) special reserves; (ix) termination fee reserves; (x) eligibility reserves; (xi) collections; and (xii) non-conforming property(iv) HOA reserves. In February 2017, the credit facilities were repaid in full and all related reserve accounts were released. Prior to that time, the credit facility reserve accounts were under the sole control of the Administrative Agent, as defined in the credit facility agreements. The reserve accounts associated with theour mortgage loans and Secured Term Loan are under the sole control of the loan servicer. Additionally, we hold security


19

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


deposits pursuant to resident lease agreements that we are required to be segregated.segregate. We are also required to hold letters of credit by certain of our insurance policies. Accordingly, amounts funded to these reserve accounts, and security deposit accounts, and other restricted accounts have been classified withinon our condensed consolidated balance sheets as restricted cash. We also hold letters of credit as required by certain of our insurance policies.
The amounts funded, and to be funded, to the reserve accounts are subject to formulae included in the credit facility agreementsmortgage loan and mortgage loanSecured Term Loan agreements and are to be released to us subject to certain conditions specified thereinin the loan agreements being met. To the extent that an event of default were to occur, the loan servicer (as it relates to the mortgage loans) has discretion to use such funds to either settle the applicable operating expenses to which such reserves relate or reduce the allocated loan amount associated with a residential property of ours.
AsThe balances of September 30, 2017 and December 31, 2016, the balances in our restricted cash accounts, as of June 30, 2020 and December 31, 2019, are as set forth in the table below. AtAs of June 30, 2020 and December 31, 2016,2019, no amounts were funded to the completion, renovation, leasing commission, debt service, termination fee, and nonconforming property reserveinsurance accounts as the conditions specified in the credit facilitymortgage loan and Secured Term Loan agreements that require such funding did not exist, and none are required at September 30, 2017 as the credit facilities had been repaid in full.exist.
  June 30,
2020		 December 31, 2019
Resident security deposits $154,529
 $148,186
Property taxes 39,413
 10,443
Collections 18,759
 24,034
Capital expenditures 5,632
 5,627
Letters of credit 3,317
 3,459
Special and other reserves 2,244
 2,238
Total $223,894
 $193,987
  September 30,
2017		 December 31,
2016
Resident security deposits $89,409
 $86,239
Collections 20,354
 42,767
Property taxes 39,375
 52,256
Insurance premium and deductible —
 4,432
Standing and capital expenditure reserves 1,754
 24,409
Special reserves —
 34
Eligibility reserves 398
 9,274
Letters of credit 2,491
 2,681
Total $153,781
 $222,092

Note 5—Other Assets
At September 30, 2017 and December 31, 2016, the balances in other assets, net are as follows:
  September 30,
2017		 December 31,
2016
Investments in debt securities, net $230,619
 $209,337
Held for sale assets(1)
 12,170
 45,062
Prepaid expenses 23,412
 21,883
Deferred leasing costs, net 7,320
 7,710
Rent and other receivables, net 11,986
 11,604
Deferred financing costs, net 8,096
 —
Interest rate swap hedges (see Note 7) 5,529
 —
Corporate fixed assets, net 6,522
 6,247
Other 9,405
 7,782
Total $315,059
 $309,625
(1)As of September 30, 2017 and December 31, 2016 (unaudited), 71 and 391 properties, respectively, were classified as held for sale.


20


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









Note 5—Other Assets
As of June 30, 2020 and December 31, 2019, the balances in other assets, net are as follows:
  June 30,
2020		 December 31, 2019
Investments in debt securities, net $310,380
 $316,991
Held for sale assets(1)
 77,386
 116,529
Investment in unconsolidated joint venture 54,152
 54,778
Rent and other receivables, net 31,644
 25,244
Prepaid expenses 31,345
 32,106
ROU lease assets — operating and finance, net 23,063
 13,768
Investments in equity securities 16,734
 16,650
Corporate fixed assets, net 9,138
 9,825
Deferred leasing costs, net 7,801
 7,427
Amounts deposited and held by others 2,787
 1,348
Deferred financing costs, net 1,580
 2,765
Derivative instruments (Note 7) 86
 1,643
Other 8,663
 6,192
Total $574,759
 $605,266

(1)As of June 30, 2020 and December 31, 2019, 327 and 478 properties, respectively, are classified as held for sale.
Investments in Debt Securities, net
In connection with certain of theour Securitizations as(as defined in Note 6,6), we previously acquired $193,045have retained and purchased certificates totaling $310,380, net of Class G certificates. In 2016, we purchased $16,423unamortized discounts of Class F certificates, which had an unamortized discount of $0 and $131$2,465, as of SeptemberJune 30, 2017 and December 31, 2016, respectively. During the nine months ended September 30, 2017, we purchased $55,500 of Class B certificates, which had an unamortized discount of $3,433 as of September 30, 2017, and received repayments of $30,916 from retained debt securities.2020. These investments in debt securities are classified as held to maturity investments (for additional information about the Securitizations, see Note 6).investments. As of SeptemberJune 30, 2017 and2020, we have not recognized any credit losses with respect to these investments in debt securities. As of December 31, 2016,2019, there were no gross unrecognized holding gains or losses, and there were 0 other than temporary impairments.impairments recognized in accumulated other comprehensive loss. As of SeptemberJune 30, 2017, the Class F and G2020, our retained certificates are scheduled to mature over the next 3month to 12 months,seven years.
Investment in Unconsolidated Joint Venture
We own a 10% interest in a joint venture with FNMA to operate, lease, and manage a portfolio of properties primarily located in Arizona, California, and Nevada. A wholly owned subsidiary of INVH LP is the Class B certificates are scheduledmanaging member of the joint venture and is responsible for the operation and management of the properties, subject to mature in 10 years.FNMA’s approval of major decisions. As of June 30, 2020 and December 31, 2019, the joint venture owned 602 and 641 properties, respectively.
Rent and Other Receivables net
We lease our properties to residents pursuant to leases that generally have an initial contractual term of at least 12 months, provide for monthly payments, and are cancelable by the resident and us under certain conditions specified in the related lease agreements.
Included in Rental revenues and other assets,property income and the corresponding rent and other receivables are recorded net within the condensed consolidated balance sheets, is an allowanceof any concessions and bad debt (including actual write-offs, credit reserves, and uncollectible amounts) for doubtful accounts of $1,316 and $1,183, as of September 30, 2017 and December 31, 2016, respectively.
Deferred Financing Costs, net
In connection with our Revolving Facility (as defined in Note 6), we incurred $9,673 of financing costs during the nine months ended September 30, 2017, which have been deferred as other assets, net on our condensed consolidated balance sheet due to the line of credit features of the Revolving Facility. These deferred financing costs are being amortized as interest expense on a straight line basis over the term of the Revolving Facility.
Note 6—Debt
Mortgage Loans
As of September 30, 2017, we have completed eight securitization transactions (the “Securitizations” or the “mortgage loans”) collateralized by homes owned by the respective Invitation Homes Borrower Entities. The proceeds from the mortgage loans were used to fund (i) repayments of then-outstanding indebtedness, including credit facilities and prior securitization transactions, (ii) initial deposits in the reserve accounts, (iii) closing costs in connection with the mortgage loans, (iv) general costs associated with our operations, and (v) distributions and dividends to the Pre-IPO Owners.

all periods presented.

21


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









Variable lease payments consist of resident reimbursements for utilities, and various other fees, including late fees and lease termination fees, among others. Variable lease payments are charged based on the terms and conditions included in the resident leases. For the three months ended June 30, 2020 and 2019, rental revenues and other property income includes $19,613 and $23,253 of variable lease payments, respectively. For the six months ended June 30, 2020 and 2019, rental revenues and other property income includes $44,660 and $44,583 of variable lease payments, respectively.
Future minimum rental revenues under leases existing on our single-family residential properties as of June 30, 2020 are as follows:
Year Lease Payments to be Received
Remainder of 2020 $698,441
2021 502,586
2022 43,571
2023 —
2024 —
Thereafter —
Total $1,244,598

Right-of-Use (“ROU”) Lease Assets — Operating and Finance, net
The following table sets forthpresents supplemental information related to leases into which we have entered as a summary of the mortgage loan indebtednesslessee as of SeptemberJune 30, 20172020 and December 31, 2016:2019:
  June 30, 2020 December 31, 2019
  
Operating
Leases
 
Finance
Leases
 
Operating
Leases
 
Finance
Leases
Other assets $13,225
 $9,838
 $12,552
 $1,216
Other liabilities 14,483
 9,382
 13,787
 1,210
Weighted average remaining lease term 3.9 years
 3.6 years
 3.8 years
 2.0 years
Weighted average discount rate 4.0% 4.0% 4.0% 4.0%

        
Outstanding Principal Balance(3)
  Maturity Date 
Interest Rate(2)
 Range of Spreads 
September 30,
2017(4)
 December 31,
2016
IH1 2013-1 N/A N/A 115-365 bps $—
 $462,431
IH1 2014-1 N/A N/A 100-375 bps —
 978,231
IH1 2014-2(1)(5)
 September 9, 2018 3.13% 110-400 bps 703,241
 710,664
IH1 2014-3(1)(6)
 December 9, 2017 3.56% 120-500 bps 147,323
 766,753
IH2 2015-1, net(1)(7)
 March 9, 2018 3.60% 145-430 bps 529,443
 531,318
IH2 2015-2(1)
 June 9, 2018 3.18% 135-370 bps 628,574
 630,283
IH2 2015-3(1)
 August 9, 2018 3.41% 130-475 bps 1,169,048
 1,184,314
IH 2017-1, net(8)
 June 9, 2027 4.17% N/A 996,365
 —
Total Securitizations 4,173,994
 5,263,994
Less deferred financing costs, net (16,970) (9,256)
Total $4,157,024
 $5,254,738
Investments in Equity Securities
(1)
The initial maturity term of each of these mortgage loans is two years, individually subject to three, one-year extension options at the borrower’s discretion (provided that there is no continuing event of default under the loan agreement and the borrower obtains a replacement interest rate cap agreement in a form reasonably acceptable to the lender). Our IH1 2014-3, IH2 2015-1, IH2 2015-2, and IH2 2015-3 mortgage loans have exercised the first extension options, and IH1 2014-2 has exercised the second option.The maturity dates above are reflective of all extensions that have been exercised.
(2)
For each of our first seven mortgage loans, interest rates are based on a weighted average spread to LIBOR; as of September 30, 2017 LIBOR was 1.23%. Our IH 2017-1 mortgage loan bears interest at a fixed rate of 4.17% per annum equal to the market determined pass-through rate payable on the certificates, plus applicable servicing fees.
(3)Outstanding Principal Balance is net of discounts and does not include capitalized deferred financing costs, net.
(4)
From October 1, 2017 to November 2, 2017, we made prepayments of $2,634 on our mortgage loans related to the disposition of properties.
(5)
On October 10, 2017, we submitted a notification to request an extension of the maturity of the IH1 2014-3 mortgage loan from December 9, 2017 to December 9, 2018 upon approval. On November 9, 2017, the outstanding balance of IH1 2014-2 was repaid in full (see Note 15).
(6)
On November 9, 2017, the outstanding balance of IH1 2014-3 was repaid in full (see Note 15).
(7)
Net of unamortized discount of $0 and $55 as of September 30, 2017 and December 31, 2016, respectively.
(8)
Net of unamortized discount of $3,433 as of September 30, 2017.
Securitization Transactions
IH1 2013-1: In November 2013, we completed our first securitization transaction (“IH1 2013-1”),We hold investments in which 2013-1 IH Borrower L.P. (“S1 Borrower”),equity securities without a newly-formed special purpose entity and wholly owned subsidiary of IH1, executed a loan agreement with a third-party lender. The third-party lender made a six component term loanreadily determinable fair value. We have elected to S1 Borrowermeasure the investments at cost, less any impairment, plus or minus changes resulting from observable price changes for identical or similar investments in the same issuers. As of June 30, 2020 and December 31, 2019, the carrying amount of $479,137. Allour investments in equity securities was $16,734 and $16,650, respectively. During the six componentsmonths ended June 30, 2020, we recorded $34 of unrealized gains on our investments in equity securities which are included in other, net in the condensed consolidated statements of operations. No unrealized gains or losses were recorded during the three months ended June 30, 2020 and the three and six months ended June 30, 2019.
Deferred Financing Costs, net
In connection with our Revolving Facility, we incurred $9,673 of financing costs during the year ended December 31, 2017, which have been deferred as other assets, net on our condensed consolidated balance sheets. These deferred financing costs are being amortized as interest expense on a straight-line basis over the term of the loan were sold at par. On February 6, 2017,Revolving Facility. As of June 30, 2020 and December 31, 2019, the outstanding balanceunamortized balances of IH1 2013-1 was repaid in full.these deferred financing costs are $1,580 and $2,765, respectively.
IH1 2014-1: In May 2014, we completed our second securitization transaction (“IH1 2014-1”), in which 2014-1 IH Borrower L.P. (“S2 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH1, executed a loan agreement with a third-party lender. The third party lender made a six component term loan to S2 Borrower in the amount of $993,738. All six components of the loan were sold at par. On February 6, 2017 and March 9, 2017, we made voluntary prepayments of $291,500 and $260,000, respectively. On April 28, 2017, the outstanding balance of IH1 2014-1 was repaid in full.


22


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









IH1 2014-2: In August 2014, we completedNote 6—Debt
Mortgage Loans
Our securitization transactions (the “Securitizations” or the “mortgage loans”) are collateralized by certain homes owned by the respective Borrower Entities. We utilize the proceeds from our third securitizationsecuritizations to fund: (i) repayments of then-outstanding indebtedness; (ii) initial deposits into Securitization reserve accounts; (iii) closing costs in connection with the mortgage loans; and (iv) general costs associated with our operations.
The following table sets forth a summary of our mortgage loan indebtedness as of June 30, 2020 and December 31, 2019:
            
Outstanding Principal
Balance(5)
  
Origination
Date
 
Maturity
Date(1)
 
Maturity Date if
Fully Extended(2)
 
Interest
Rate(3)
 
Range of Spreads(4)
 June 30,
2020		 December 31, 2019
IH 2017-1(6)
 April 28,
2017		 June 9,
2027		 June 9,
2027		 4.23% N/A $994,606
 $995,520
SWH 2017-1(7)
 September 29,
2017		 October 9,
2020		 January 9,
2023		 1.73% 102-347 bps 736,208
 744,092
IH 2017-2(7)
 November 9,
2017		 December 9,
2020		 December 9,
2024		 1.31% 91-186 bps 616,429
 624,475
IH 2018-1(7)
 February 8,
2018		 March 9,
2021		 March 9,
2025		 1.28% 76-206 bps 780,718
 793,720
IH 2018-2(7)
 May 8,
2018		 June 9,
2021		 June 9,
2025		 1.50% 95-230 bps 934,426
 957,135
IH 2018-3(7)(8)
 June 28,
2018		 July 9,
2020		 July 9,
2025		 1.51% 105-230 bps 1,143,986
 1,213,035
IH 2018-4(7)
 November 7,
2018		 January 9,
2021		 January 9,
2026		 1.58% 115-225 bps 928,533
 938,430
Total Securitizations 6,134,906
 6,266,407
Less: deferred financing costs, net (16,331) (27,946)
Total $6,118,575
 $6,238,461
(1)The maturity dates above reflect all extension options that have been exercised.
(2)Represents the maturity date if we exercise each of the remaining one year extension options available, which are subject to certain conditions being met.
(3)
Except for IH 2017-1, interest rates are based on a weighted average spread over LIBOR (or a comparable or successor rate as provided for in our loan agreements), plus applicable servicing fees; as of June 30, 2020, LIBOR was 0.16%. Our IH 2017-1 mortgage loan bears interest at a fixed rate of 4.23% per annum, equal to the market determined pass-through rate payable on the certificates including applicable servicing fees.
(4)
Range of spreads is based on outstanding principal balances as of June 30, 2020.
(5)Outstanding principal balance is net of discounts and does not include deferred financing costs, net.
(6)
Net of unamortized discount of $2,465 and $2,641 as of June 30, 2020 and December 31, 2019, respectively.
(7)
The initial maturity term of each of these mortgage loans is two years, individually subject to 3 to 5, one year extension options at the Borrower Entity’s discretion (provided that there is no continuing event of default under the mortgage loan agreement and the Borrower Entity obtains and delivers a replacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender). Our SWH 2017-1, IH 2017-2, IH 2018-1 and IH 2018-2 mortgage loans have exercised the first extension option. The maturity dates above reflect all extensions that have been exercised.
(8)On July 9, 2020, the extension of the maturity date of the IH 2018-3 mortgage loan from July 9, 2020 to July 9, 2021 was approved by the lender (see Note 15).

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Securitization Transactions
For each Securitization transaction, (“IH1 2014-2”), in which 2014-2 IHthe Borrower L.P. (“S3 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH1,Entity executed a loan agreement with a third-partythird party lender. Except for IH 2017-1, each outstanding mortgage loan originally consisted of 6 floating rate components. The third-party lender madetwo year initial terms are individually subject to 3 to 5, one year extension options at the Borrower Entity’s discretion. Such extensions are available provided there is no continuing event of default under the respective mortgage loan agreement and the Borrower Entity obtains and delivers a termreplacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender. IH 2017-1 is a 10 year, fixed rate mortgage loan comprised of (1) six floating rate components2 components. Certificates issued by the trust in connection with Component A of IH 2017-1 benefit from FNMA’s guaranty of timely payment of principal and (2) one fixed rate component to S3 Borrowerinterest.
Each mortgage loan is secured by a pledge of the equity in the amountassets of $719,935. Of the seven loan components,respective Borrower Entities, as well as first-priority mortgages on the Class A, B, C, Dunderlying properties and G certificates were sold at par; however,a grant of security interests in all of the Class Erelated personal property. As of June 30, 2020 and F certificates were sold atDecember 31, 2019, a total discount of $3,970.35,786 and 37,040 homes, respectively, with a net book value of $6,862,201 and $7,137,576, respectively, are pledged pursuant to the mortgage loans. Each Borrower Entity has the right, subject to certain requirements and limitations outlined in the respective loan agreements, to substitute properties. We are obligated to make monthly payments of interest for each mortgage loan.
Transactions with the first payment being due upon the closing of the loan, and subsequent payments beginning October 9, 2014 and continuing monthly thereafter. On November 9, 2017, the outstanding balance of IH1 2014-2 was repaid in full (see Note 15).Trusts
IH1 2014-3: In November 2014, we completed our fourth securitization transaction (“IH1 2014-3”), in which 2014-3 IH Borrower L.P. (“S4 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH1, executed a loan agreement with a third-party lender. The third-party lender issued a term loan comprised of (1) six floating rate components and (2) one fixed rate component to S4 Borrower in the amount of $769,322. Of the seven components, the Class B and G certificates were sold at par; however, the Class A, C, D, E and F certificates were sold at a total discount of $7,235. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning December 9, 2014 and continuing monthly thereafter. On May 9, 2017 and June 9, 2017, we made voluntary prepayments of $510,000 and $100,000, respectively, from the proceeds of IH 2017-1 securitization transaction and cash flows from operations. On November 9, 2017, the outstanding balance of IH1 2014-3 was repaid in full (see Note 15).
IH2 2015-1: In January 2015, we completed our fifth securitization transaction (“IH2 2015-1”), in which 2015-1 IH2 Borrower L.P. (“S5 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH2, executed a loan agreement with a third-party lender. The third-party lender made a seven component term loan to S5 Borrower in the amount of $540,854. Six of the seven components, the Class A, B, C, D, E, and G certificates were sold at par; however, the Class F certificates were sold at a total discount of $622. The unamortized balance of this discount is included in mortgage loans, net on our condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning March 9, 2015 and continuing monthly thereafter.
IH2 2015-2: In April 2015, we completed our sixth securitization transaction (“IH2 2015-2”), in which 2015-2 IH2 Borrower L.P. (“S6 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH2, executed a loan agreement with a third-party lender. The third-party lender made a seven component term loan to S6 Borrower in the amount of $636,686. All of the components of the loan were sold at par. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning June 9, 2015 and continuing monthly thereafter.
IH2 2015-3: In June 2015, we completed our seventh securitization transaction (“IH2 2015-3”), in which 2015-3 IH2 Borrower L.P. (“S7 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH2, executed a loan agreement with a third-party lender. The third-party lender made a seven component term loan to S7 Borrower in the amount of $1,193,950. All of the components of the loan were sold at par. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning August 7, 2015 and continuing monthly thereafter.
IH 2017-1: In April 2017, we completed our eighth securitization transaction (“IH 2017-1”), in which 2017-1 IH Borrower L.P. (“S9 Borrower”), a special purpose entity previously formed in connection with IH1 2014-1 and wholly owned subsidiary of IH1, entered into a loan agreement with Wells Fargo Bank, National Association (the “FNMA Loan”), providing for a ten-year, fixed rate mortgage loan comprised of two components with a total principal amount of $1,000,000, secured by first priority mortgages on a portfolio of 7,204 of our homes. The Class A certificates, which benefit from Fannie Mae’s guaranty of timely payment of principal and interest, were sold at par. The Class B certificates represent a beneficial interest in the most subordinate component of the FNMA Loan and were sold at a total discount of $3,580. The unamortized balance of this discount is included in mortgage loans, net on our condensed consolidated balance sheet as of September 30, 2017. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning June 9, 2017 and continuing monthly thereafter.
Concurrent with the execution of each mortgage loan agreement, the respective third-partythird party lender sold each loan it originated with us to individual depositor entities (the “Depositor Entities”) who subsequently transferred each loan to Securitization-specific trust entities (the “Trusts”). The Depositor Entities associated with the IH1 2014-2, IH1 2014-3 and IH 2017-1 securitizations


23

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


for our currently outstanding Securitizations are wholly owned subsidiaries of IH1, the Depositor Entities associated with the IH2 2015-1, IH2 2015-2, and IH2 2015-3 securitizations are wholly owned subsidiaries of IH2, and the Depositor Entities associated with the IH1 2013-1 and IH1 2014-1 securitizations were wholly owned by unaffiliated third parties.
subsidiaries. We accounted for the transfertransfers of the individual Securitizations from the Depositor Entities wholly owned by IH1 and IH2Depositor Entities to the respective Trusts as a salesales under ASC Topic 860, Transfers and Servicing, with no resulting gain or loss as the Securitizations were both originated by the lender and immediately transferred at the same fair market value.
As consideration for the transfer of each loan to the Trusts, the Trusts issued certificate classes of certificates which mirror the components of the individual loan agreementsloans (collectively, the “Certificates”) to the Depositor Entities, except that Class R certificates do not have related loan components as they represent residual interests in the Trusts. The Certificates represent the entire beneficial interest in the Trusts. Following receipt of the Certificates, the Depositor Entities sold the Certificates to investors usingand used the proceeds as consideration for the loans sold to the Depositor Entities by the lenders. These transactions had no effect on our condensed consolidated financial statements other than with respect to the Class B certificatesCertificates we retained in connection with Securitizations or purchased by INVH LP, and the Class G certificates purchased by IH1 and IH2.at a later date.
For IH1 2014-2, IH1 2014-3, IH2 2015-1, IH2 2015-2, and IH2 2015-3, the Trusts made the Class A through Class F certificates available for sale to both domestic and foreign investors. With the introduction of foreign investment, IH1 and IH2, as sponsors of the respective loans, are required to retain a portion of the risk that represents a material net economic interest in each loan. The Class G certificates for IH1 2014-2, IH1 2014-3, IH2 2015-1, IH2 2015-2, and IH2 2015-3 are equal to 5% of the original principal amount of the loans in accordance with the agreements. Per the terms of the Securitization agreements, the Class G certificates are restricted certificates and were made available exclusively to IH1 and IH2, as applicable. The Class G certificates are principal only and bear a stated annual interest rate of 0.0005%. The Class G certificates are classified as held to maturity investments and are recorded in other assets, net on the condensed consolidated balance sheets (see Note 5).
For IH 2017-1, the Trust made the Class A certificates available for sale to both domestic and foreign investors. In accordance with risk retention requirements of Regulation RR (the “Risk Retention Rules”) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”), INVH LP, as the loan sponsor, is required to retain a portion of the credit risk that represents not less than 5% of the aggregate fair value of the loan as of the closing date. Per the terms of the agreement, the Class B certificates are restricted certificates that were made available exclusively to INVH LP. The Class B certificates pay interest and bear a stated annual interest rate of 4.17% plus applicable servicing fees. The Class B certificates are classified as held to maturity investments and are recorded in other assets, net on the condensed consolidated balance sheets (see Note 5).
The Trusts are structured as pass throughpass-through entities that receive principal and interest payments from the Securitizations and distribute those payments to the holders of the Certificates. The assets held by the Trusts are restricted and can only be used to fulfill the obligations of those entities. The obligations of the Trusts do not have any recourse to the general credit of any entities in these condensed consolidated financial statements. We have evaluated our interests in the Class B and Gcertain certificates of the Trusts held by us (discussed below) and determined that they do not create a more than insignificant variable interest in the Trusts. Additionally, the Class B and Gretained certificates do not provide us with any ability to direct the activities that could impact the Trusts’ economic performance. Therefore, we do not consolidate the Trusts.
General Terms Retained Certificates
As the Trusts made Certificates available for sale to both domestic and foreign investors, sponsors of the mortgage loans are required to retain a portion of the risk that represents a material net economic interest in each loan pursuant to Regulation RR (the “Risk Retention Rules”) under the Securities Exchange Act of 1934, as amended. As such, loan sponsors are required to retain a portion of the credit risk that represents not less than 5% of the aggregate fair value of the loan as of the closing date.
IH 2017-1 issued Class B certificates, which are restricted certificates that were made available exclusively to INVH LP in order to comply with the Risk Retention Rules. The Class B certificates bear a stated annual interest rate of 4.23%, including applicable servicing fees.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







For SWH 2017-1, IH 2017-2, IH 2018-1, IH 2018-2, IH 2018-3, and IH 2018-4, we retain 5% of each class of certificates to meet the Risk Retention Rules. These retained certificates accrue interest at a floating rate of LIBOR plus a spread ranging from 0.76% to 3.47%.
The retained certificates total $310,380 and $316,991 as of June 30, 2020 and December 31, 2019, respectively, and are classified as held to maturity investments and recorded in other assets, net on the condensed consolidated balance sheets (see Note 5).
Loan Covenants
The general terms that apply to all of the mortgage loans require useach Borrower Entity to maintain compliance with certain affirmative and negative covenants. Affirmative covenants with which we must comply include our,each Borrower Entity’s, and certain of ourtheir respective affiliates’, compliance with (i) licensing, permitting and legal requirements specified in the mortgage loan agreement,agreements, (ii) organizational requirements of the jurisdictions in which we, and certain of our affiliates,they are organized, (iii) federal and state tax laws, and (iv) books and records requirements specified in the respective mortgage loan agreements. Negative covenants with which we must comply include our,each Borrower Entity’s, and certain of ourtheir affiliates’, compliance with limitations surrounding (i) the amount of oureach Borrower Entity’s indebtedness and the nature of ourtheir investments, (ii) the execution of transactions with affiliates, (iii) the Manager, and (iv) the nature of oureach Borrower Entity’s business activities. At Septemberactivities, and (v) the required maintenance of specified cash reserves. As of June 30, 2017,2020, and through the date our condensed consolidated financial statements were issued, we believe we wereeach Borrower Entity is in compliance with all affirmative and negative covenants.


24

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


Prepayments
For the mortgage loans, prepayments of amounts owed by us are generally not permitted by us under the terms of the respective mortgage loan agreements unless such prepayments are made pursuant to the voluntary election andor mandatory provisions specified in such agreements. The specified mandatory provisions become effective to the extent that a property becomes characterized as a disqualified property, a property is sold, and/or upon the occurrence of a condemnation or casualty event associated with a property. To the extent either a voluntary election is made, or a mandatory prepayment condition exists, in addition to paying all interest and principal, we must also pay certain breakage costs as determined by the loan servicer and a spread maintenance premium if prepayment occurs before the month following the one or two year anniversary of the closing dates of each of the mortgage loans except for IH 2017-1. For IH 2017-1, prepayments on or before December 2026 will require a yield maintenance premium. For the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, we made voluntary and mandatory prepayments totaling $2,086,622of $131,677 and $33,452,$709,383, respectively, were made under the terms of the mortgage loan agreements. During the six months ended June 30, 2019, prepayments included the full repayment of the CSH 2016-2 mortgage loan.
Collateral
CollateralSecured Term Loan
On June 7, 2019, 2019-1 IH Borrower LP, a consolidated subsidiary (“2019-1 IH Borrower” and one of our Borrower Entities), entered into a 12 year loan agreement with a life insurance company (the “Secured Term Loan”). The Secured Term Loan bears interest at a fixed rate of 3.59%, including applicable servicing fees, for the mortgage loans includesfirst 11 years and bears interest at a floating rate based on a spread of 147 bps, including applicable servicing fees, over one month LIBOR (subject to certain adjustments as outlined in the loan agreement) for the twelfth year. The Secured Term Loan is secured by first priority mortgages on certaina portfolio of oursingle-family rental properties andas well as a grant of a security interest in all of our personal property. The following table lists the gross carrying valuesfirst priority pledge of the single-family residential properties, including held for sale properties, pledged as collateral forequity interests of 2019-1 IH Borrower. We utilized the loans asproceeds from the Secured Term Loan to fund: (i) repayments of September 30, 2017then-outstanding indebtedness; (ii) initial deposits into the Secured Term Loan’s reserve accounts; (iii) transaction costs related to the closing of the Secured Term Loan; and December 31, 2016:(iv) general corporate purposes.
  
Number of
Homes(1)
 September 30,
2017		 December 31,
2016
IH1 2013-1 —
 $—
 $533,005
IH1 2014-1 —
 —
 1,124,069
IH1 2014-2 3,611
 783,761
 785,459
IH1 2014-3 3,906
 844,455
 850,056
IH2 2015-1 2,998
 594,360
 594,155
IH2 2015-2 3,505
 744,905
 744,070
IH2 2015-3 6,973
 1,368,925
 1,382,683
IH 2017-1 7,202
 1,243,555
 —
Total 28,195

$5,579,961

$6,013,497
(1)The loans are secured by first priority mortgages on portfolios of single-family residential properties owned by S1 Borrower, S2 Borrower, S3 Borrower, S4 Borrower, S5 Borrower, S6 Borrower, S7 Borrower, and S9 Borrower. The numbers of homes noted above are as of September 30, 2017. As of December 31, 2016, a total of 30,900 homes (unaudited) were secured by the above-mentioned mortgage loans.


25


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









Debt Maturities Schedule
Future maturitiesThe following table sets forth a summary of these mortgage loansour Secured Term Loan indebtedness as of SeptemberJune 30, 2017 are set forth in the table below:2020 and December 31, 2019:
Year 
Principal(1)
2017 $147,323
2018 3,030,306
2019 and thereafter 999,798
Total payments 4,177,427
Less discounts (3,433)
Total mortgage loans, net $4,173,994
  
Maturity
Date
 
Interest
Rate(1)
 June 30,
2020		 December 31, 2019
Secured Term Loan June 9, 2031 3.59% $403,363
 $403,464
Deferred financing costs, net(2,377) (2,486)
Secured Term Loan, net$400,986
 $400,978

 
(1)
EachThe Secured Term Loan bears interest at a fixed rate of 3.59% per annum including applicable servicing fees for the mortgage loans, except IH 2017-1, arefirst 11 years and for the twelfth year bears interest at a floating rate based on a spread of 147 bps over one month LIBOR (or a comparable or successor rate as provided for in our loan agreement), including applicable servicing fees, subject to three one-year extension options atcertain adjustments as outlined in the borrower's discretion (upon approval from the lender), of which the IH1 2014-3, IH2 2015-1, IH2 2015-2, and IH2 2015-3 mortgage loans have exercised the first extension options, and IH1 2014-2 has exercised the second option.loan agreement. Interest payments are made monthly.
Collateral
The Secured Term Loan’s collateral pool contains 3,332 and 3,333 homes, respectively, as of June 30, 2020 and December 31, 2019, with a net book value of $727,530 and $734,759, respectively. 2019-1 IH Borrower has the right, subject to certain requirements and limitations outlined in the loan agreement, to substitute properties representing up to 20% of the collateral pool annually, and to substitute properties representing up to 100% of the collateral pool over the life of the Secured Term Loan. In addition, 4 times after the first anniversary of the closing date, 2019-1 IH Borrower has the right, subject to certain requirements and limitations outlined in the loan agreement, to execute a special release of collateral representing up to 15% of the then-outstanding principal balance of the Secured Term Loan in order to bring the loan-to-value ratio back in line with the Secured Term Loan’s loan-to-value ratio as of the closing date. Any such special release of collateral would not change the then-outstanding principal balance of the Secured Term Loan, but rather would reduce the number of single-family rental homes included in the collateral pool.
Loan Covenants
The Secured Term Loan requires 2019-1 IH Borrower to maintain compliance with certain affirmative and negative covenants. Affirmative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with (i) licensing, permitting and legal requirements specified in the loan agreement, (ii) organizational requirements of the jurisdictions in which they are organized, (iii) federal and state tax laws, and (iv) books and records requirements specified in the loan agreement. Negative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with limitations surrounding (i) the amount of 2019-1 IH Borrower’s indebtedness and the nature of its investments, (ii) the execution of transactions with affiliates, (iii) the Manager, (iv) the nature of 2019-1 IH Borrower’s business activities, and (v) the required maintenance of specified cash reserves. As of June 30, 2020, and through the date our condensed consolidated financial statements were issued, we believe 2019-1 IH Borrower is in compliance with all affirmative and negative covenants.
Prepayments
Prepayments of the Secured Term Loan are generally not permitted unless such prepayments are made pursuant to the voluntary election or mandatory provisions specified in the loan agreement. The specified mandatory provisions become effective to the extent that a property becomes characterized as a disqualified property, a property is sold, and/or upon the occurrence of a condemnation or casualty event associated with a property. To the extent either a voluntary election is made, or a mandatory prepayment condition exists, in addition to paying all interest and principal, we must also pay certain breakage costs as determined by the loan servicer and a yield maintenance premium if prepayment occurs before June 9, 2030. For the six months ended June 30, 2020, we made mandatory prepayments of $101. No prepayments were made for the six months ended June 30, 2019.
New Credit

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Term Loan Facility and Revolving Facility
On February 6, 2017, we entered into a loancredit agreement with a syndicate of banks, financial institutions, and institutional lenders for a new credit facility (the “New Credit“Credit Facility”)., which was amended on December 18, 2017 to include all entities and homes acquired in the Mergers. The New Credit Facility provides $2,500,000 of borrowing capacity and consists of a $1,000,000 revolving facility (the “Revolving Facility”), which will mature on February 6, 2021, with a one-yearone year extension option, and a $1,500,000 term loan facility (the “Term Loan Facility”), which will mature on February 6, 2022. The Revolving Facility also includes borrowing capacity available for letters of credit and for short-term borrowings referred to as swing line borrowings, in each case subject to certain sublimits. The New Credit Facility provides us with the option to enter into additional incremental credit facilities (including an uncommitted incremental facility that provides us with the option to increase the size of the Revolving Facility and/or the Term Loan Facility by an aggregate amount of up to $1,500,000), subject to certain limitations. Proceeds from the Term Loan Facility were used to repay existingthen-outstanding indebtedness and for general corporate purposes. Proceeds from the Revolving Facility are used for general corporate purposes.
The following table sets forth a summary of the outstanding principal amounts under such loansthe Credit Facility as of SeptemberJune 30, 2017:2020 and December 31, 2019:
  Maturity Date 
Interest Rate(1)
 September 30,
2017
Term loan facility February 6, 2022 3.03% $1,500,000
Revolving facility February 6, 2021 N/A —
Total 1,500,000
Less deferred financing costs, net (12,749)
Total $1,487,251
  Maturity
Date		 
Interest
Rate(1)
 June 30,
2020		 December 31, 2019
Term Loan Facility February 6, 2022 1.86% $1,500,000
 $1,500,000
Deferred financing costs, net (4,809) (6,253)
Term Loan Facility, net $1,495,191
 $1,493,747
         
Revolving Facility(2)
 February 6, 2021 1.91% $—
 $—
 
(1)
Interest raterates for the Term Loan Facility isand the Revolving Facility are based on LIBOR plus an applicable marginmargin. As of 1.80%; as of SeptemberJune 30, 2017,2020, the applicable margins were 1.70% and 1.75%, respectively, and LIBOR was 1.23%0.16%.
(2)
If we exercise the one year extension option, the maturity date will be February 6, 2022.
Interest Rate and Fees
Borrowings under the New Credit Facility bear interest, at our option, at a rate equal to a margin over either (a) a LIBOR rate determined by reference to the Bloomberg LIBOR rate (or a comparable or successor rate)rate as provided for in our loan agreement) for the interest period relevant to such borrowing, or (b) a base rate determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 0.50%, and (3) the LIBOR rate that would be payable on such day for a LIBOR rate loan with a one-monthone month interest period plus 1.00%. The margin is based on a total leverage based grid. The margin for the Revolving Facility ranges from 0.75% to 1.30%, in the case of base rate loans, and 1.75% to 2.30%, in the case of LIBOR rate loans. The margin for the Term Loan Facility ranges from 0.70% to 1.30%, in the case of base rate loans, and 1.70% to


26

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


2.30%, in the case of LIBOR rate loans. In addition, the New Credit Facility provides that, upon receiving an investment grade rating on its non-credit enhanced, senior unsecured long term debt of BBB- or better from Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., or Baa3 or better from Moody’s Investors Service, Inc. (an “Investment Grade Rating Event”), we may elect to convert to a credit rating based pricing grid.
In addition to paying interest on outstanding principal under the New Credit Facility, we are required to pay a facility fee to the lenders under the Revolving Facility in respect of the unused commitments thereunder. The facility fee rate is based on the daily unused amount of the Revolving Facility and is either 0.350%0.35% or 0.200%0.20% per annum based on the unused facility amount. Upon converting to a credit rating pricing based grid, the unused facility fee will no longer apply;apply and we will be required to pay a facility fee ranging from 0.125% to 0.300%. We are also required to pay customary letter of credit fees.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Prepayments and Amortization
No prepayment or amortization isprincipal reductions are required under the New Credit Facility. We are permitted to voluntarily repay amounts outstanding under the Term Loan Facility at any time without premium or penalty, subject to certain minimum amounts and the payment of customary “breakage” costs with respect to LIBOR loans. Once repaid, no further borrowings will be permitted under the Term Loan Facility.
General TermsLoan Covenants
The New Credit Facility contains certain customary affirmative and negative covenants and events of default. Such covenants will, among other things, restrict, subject to certain exceptions, our ability and that of the Subsidiary Guarantors (as defined below) and their respective subsidiaries to (i) engage in certain mergers, consolidations or liquidations, (ii) sell, lease or transfer all or substantially all of their respective assets, (iii) engage in certain transactions with affiliates, (iv) make changes to the our fiscal year, (v) make changes in the nature of our business and our subsidiaries, and (vi) incur additional indebtedness that is secured on a pari passu basis with the New Credit Facility.
The New Credit Facility also requires us, on a consolidated basis with our subsidiaries, to maintain a (i) maximum total leverage ratio, (ii) maximum secured leverage ratio, (iii) maximum unencumbered leverage ratio, (iv) minimum fixed charge coverage ratio, (v) minimum unencumbered fixed charge coverage ratio, and (vi) minimum tangible net worth. If an event of default occurs, the lenders under the New Credit Facility are entitled to take various actions, including the acceleration of amounts due under the New Credit Facility and all actions permitted to be taken by a secured creditor. At SeptemberAs of June 30, 2017,2020, and through the date ourcondensed consolidated financial statements were issued, we believe we were in compliance with all affirmative and negative covenants.
Guarantees and Security
The obligations under the New Credit Facility are guaranteed on a joint and several basis by each of our direct and indirect domestic wholly owned subsidiaries that own, directly or indirectly, unencumbered assets (the “Subsidiary Guarantors”), subject to certain exceptions. The guarantee provided by any Subsidiary Guarantor will be automatically released upon the occurrence of certain events, including if it no longer has a direct or indirect interest in an unencumbered asset or as a result of certain non-recourse refinancing transactions pursuant to which such Subsidiary Guarantor becomes contractually prohibited from providing its guaranty of the New Credit Facility. In addition, INVH may be required to provide a guarantee of the New Credit Facility under certain circumstances, including if INVH does not maintain its qualification as a REIT.
The New Credit Facility is collateralized by first priority or equivalent security interests in all the capital stock of, or other equity interests in, any Subsidiary Guarantor held by us and each of the Subsidiary Guarantors. The security interests granted under the New Credit Facility will be automatically released upon the occurrence of certain events, including upon an Investment Grade Rating Event or if the total net leverage ratio is less than or equal to 8.00:1.00 for four consecutive fiscal quarters.

Convertible Senior Notes
In connection with the Mergers, we assumed SWH’s convertible senior notes. In July 2014, SWH issued $230,000 in aggregate principal amount of 3.00% convertible senior notes due 2019 (the “2019 Convertible Notes”). Interest on the 2019 Convertible Notes was payable semiannually in arrears on January 1st and July 1st of each year. The notes matured on July 1, 2019, and we settled substantially all of the outstanding balance of the 2019 Convertible Notes through the issuance of 12,553,864 shares of our common stock.

27


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









Debt Maturities ScheduleIn January 2017, SWH issued $345,000 in aggregate principal amount of 3.50% convertible senior notes due 2022 (the “2022 Convertible Notes” and together with the 2019 Convertible Notes, the “Convertible Senior Notes”). Interest on the 2022 Convertible Notes is payable semiannually in arrears on January 15th and July 15th of each year. The 2022 Convertible Notes will mature on January 15, 2022.
Future maturitiesThe following table summarizes the terms of the New Credit FacilityConvertible Senior Notes outstanding as of SeptemberJune 30, 2017 are set forth in the table below:2020 and December 31, 2019:
Year Principal
2022 $1,500,000
Credit Facilities
All of the then-existing credit facilities were paid in full on February 6, 2017 in connection with the closing of our IPO. The following table sets forth a summary of the outstanding principal amounts of these credit facilities as of September 30, 2017 and December 31, 2016:
      
Outstanding Principal Balance(1)
  Origination
Date		 Range of Spreads September 30,
2017		 December 31,
2016
IH1 2015 April 3, 2015 325 bps $—
 $85,492
IH2 2015 September 29, 2015 275 bps —
 43,859
IH3 2013 December 19, 2013 300-425 bps —
 932,583
IH4 2014 May 5, 2014 300-425 bps —
 529,866
IH5 2014 December 5, 2014 275-400 bps —
 564,348
IH6 2016 April 13, 2016 250-375 bps —
 165,437
Total —

2,321,585
Less deferred financing costs, net —
 (6,044)
Total $—
 $2,315,541
            Principal Amount
  Coupon
Rate		 
Effective
Rate(1)
 
Conversion
Rate(2)
 Maturity
Date		 Remaining Amortization
Period		 June 30,
2020		 December 31, 2019
2022 Convertible Notes 3.50% 5.12% 43.7694 January 15, 2022 1.54 years $345,000
 $345,000
Net unamortized fair value adjustment(8,180) (10,701)
Total$336,820
 $334,299
 
(1)Outstanding Principal Balance does
Effective rate includes the effect of the adjustment to the fair value of the debt as of the Merger Date, the value of which reduced the initial liability recorded to $324,252 for the 2022 Convertible Notes.
(2)
The conversion rate as of June 30, 2020 represents the number of shares of common stock issuable per $1,000 principal amount (actual $) of the 2022 Convertible Notes converted on such date, as adjusted in accordance with the indenture as a result of cash dividend payments and the effects of previous mergers. As of June 30, 2020, the 2022 Convertible Notes do not include capitalized deferred financing costs, net.meet the criteria for conversion. We have the option to settle the 2022 Convertible Notes in cash, common stock, or a combination thereof.
Terms of Conversion
On July 1, 2019, we settled substantially all of the outstanding balance of the 2019 Convertible Notes with the issuance of 12,553,864 shares of our common stock. At the settlement date, the conversion rate applicable to the 2019 Convertible Notes was 54.5954 shares of our common stock per $1,000 principal amount (actual $) of the 2019 Convertible Notes (equivalent to a conversion price of approximately $18.32 per common share — actual $). For the three and six months ended June 30, 2019, interest expense for the 2019 Convertible Notes, including non-cash amortization of discounts, was $2,783 and $5,586, respectively.
As of June 30, 2020, the conversion rate applicable to the 2022 Convertible Notes is 43.7694 shares of our common stock per $1,000 principal amount (actual $) of the 2022 Convertible Notes (equivalent to a conversion price of approximately $22.85 per common share — actual $). The conversion rate for the 2022 Convertible Notes is subject to adjustment in some events, but will not be adjusted for any accrued and unpaid interest. In addition, following certain events that occur prior to the maturity date, we will adjust the conversion rate for a holder who elects to convert its 2022 Convertible Notes in connection with such an event in certain circumstances. At any time prior to July 15, 2021, holders may convert the 2022 Convertible Notes at their option only under specific circumstances as defined in the indenture agreement, dated as of January 10, 2017, between us and our trustee, Wilmington Trust National Association (the “Convertible Notes Trustee”). On or after July 15, 2021 and until maturity, holders may convert all or any portion of the 2022 Convertible Notes at any time. Upon conversion, we will pay or deliver, as the case may be, cash, common stock, or a combination of cash and common stock, at our election. The “if-converted” value of the 2022 Convertible Notes exceeds the principal amount by $70,715 as of June 30, 2020 as the closing market price of our common stock of $27.53 per common share (actual $) exceeds the implicit conversion price. For the three months ended June 30, 2020 and 2019, interest expense for the 2022 Convertible Notes, including non-cash amortization of discounts, was $4,279 and $4,217, respectively. For the six months ended June 30, 2020 and 2019, interest expense for the 2022 Convertible Notes, including non-cash amortization of discounts, was $8,558 and $8,434, respectively.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







General Terms
We may not redeem the 2022 Convertible Notes prior to their maturity date except to the extent necessary to preserve our status as a REIT for United States federal income tax purposes, as further described in the indenture. If we undergo a fundamental change as defined in the indenture, holders may require us to repurchase for cash all or any portion of their 2022 Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.
The indenture contains customary terms and covenants and events of default. If an event of default occurs and is continuing, the Convertible Notes Trustee, by notice to us, or the holders of at least 25% in aggregate principal amount of the outstanding 2022 Convertible Notes, by notice to us and the Convertible Notes Trustee, may, and the Convertible Notes Trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest on all the 2022 Convertible Notes to be due and payable. In the case of an event of default arising out of certain events of bankruptcy, insolvency or reorganization in respect to us (as set forth in the indenture), 100% of the principal of and accrued and unpaid interest on the 2022 Convertible Notes will automatically become due and payable.
Debt Maturities Schedule
The following table summarizes the contractual maturities of our debt as of June 30, 2020:
Year 
Mortgage
Loans(1)(2)
 Secured Term Loan Term Loan Facility 
Revolving Facility(3)
 Convertible Senior Notes Total
Remainder of 2020 $2,496,623
 $—
 $—
 $—
 $—
 $2,496,623
2021 2,643,677
 —
 —
 —
 —
 2,643,677
2022 —
 —
 1,500,000
 —
 345,000
 1,845,000
2023 —
 —
 —
 —
 —
 —
2024 —
 —
 —
 —
 —
 —
Thereafter 994,606
 403,363
 —
 —
 —
 1,397,969
Total 6,134,906
 403,363
 1,500,000
 —
 345,000
 8,383,269
Less: deferred financing costs, net (16,331) (2,377) (4,809) —
 —
 (23,517)
Less: unamortized fair value adjustment —
 —
 —
 —
 (8,180) (8,180)
Total $6,118,575
 $400,986
 $1,495,191
 $—
 $336,820
 $8,351,572
(1)The maturity dates of the obligations are reflective of all extensions that have been exercised as of June 30, 2020. If fully extended, we would have no mortgage loans maturing before 2023. Such extensions are available provided there is no continuing event of default under the respective mortgage loan agreement and the Borrower Entity obtains and delivers a replacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender.
(2)On July 9, 2020, the extension of the maturity date of the IH 2018-3 mortgage loan from July 9, 2020 to July 9, 2021 was approved by the lender (see Note 15).
(3)If we exercise the one year extension option, the maturity date will be in 2022.
Note 7—Derivative Instruments
From time to time, we enter into Hedging Derivativesderivative instruments to manage the economic risk of changes in interest rates. We do not enter into derivative transactions for speculative or trading purposes. Designated hedges are derivatives that meet the criteria for hedge accounting and for whichthat we have elected to designate them as hedges. Non-Designated HedgesNon-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we havedid not electedelect to designate them as hedges.
Designated Hedges
We have entered into various interest rate swap agreements, as outlined in the table below. Certain of the Invitation Homes Partnerships and certain Borrower Entities guaranteed the obligations under each of the interest rate swaps from the date the swaps were entered into through the date of the IPO. Each of these swaps was accounted for as a non-designated hedge until January 31, 2017, when the criteria for hedge accounting were met as a result of the Pre-IPO Transactions described in Note 1. At that time, we designated these swaps for hedge accounting purposes; and the effective portion of changes in the fair value of these swaps is recorded in other comprehensive income subsequent to that date.


28


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









Designated Hedges
We have entered into various interest rate swap agreements, which are used to hedge the variable cash flows associated with variable-rate interest payments. Currently, each of our swap agreements is indexed to LIBOR and is designated for hedge accounting purposes. LIBOR is set to expire at the end of 2021, and we will work with the counterparties to our swap agreements to adjust each floating rate to a comparable or successor rate. Changes in the fair value of these swaps are recorded in other comprehensive income and are subsequently reclassified into earnings in the period in which the hedged forecasted transactions affect earnings.
The table below summarizes our interest rate swap instruments as of SeptemberJune 30, 2017:2020:
Agreement Date Forward
Effective Date		 Maturity
Date		 Strike
Rate		 Index Notional
Amount
December 21, 2016 February 28, 2017 January 31, 2022 1.97% One month LIBOR $750,000
December 11, 2019 February 28, 2017 December 31, 2024 1.74% One month LIBOR 750,000
January 12, 2017 February 28, 2017 August 7, 2020 1.59% One month LIBOR 1,100,000
April 19, 2018 January 31, 2019 January 31, 2025 2.86% One month LIBOR 400,000
February 15, 2019 March 15, 2019 March 15, 2022 2.23% One month LIBOR 800,000
April 19, 2018 March 15, 2019 November 30, 2024 2.85% One month LIBOR 400,000
April 19, 2018 March 15, 2019 February 28, 2025 2.86% One month LIBOR 400,000
June 3, 2016 July 15, 2019 July 15, 2020 1.30% One month LIBOR 450,000
January 10, 2017 January 15, 2020 January 15, 2021 2.13% One month LIBOR 550,000
May 8, 2018 March 9, 2020 June 9, 2025 2.99% One month LIBOR 325,000
May 8, 2018 June 9, 2020 June 9, 2025 2.99% One month LIBOR 595,000
June 3, 2016 July 15, 2020 July 15, 2021 1.47% One month LIBOR 450,000
June 28, 2018 August 7, 2020 July 9, 2025 2.90% One month LIBOR 1,100,000
January 10, 2017 January 15, 2021 July 15, 2021 2.23% One month LIBOR 550,000
December 9, 2019 July 15, 2021 November 30, 2024 2.90% One month LIBOR 400,000
November 7, 2018 March 15, 2022 July 31, 2025 3.14% One month LIBOR 400,000
November 7, 2018 March 15, 2022 July 31, 2025 3.16% One month LIBOR 400,000

Agreement Date Forward
Effective Date		 Maturity Date Strike Rate Index Notional Amount
December 21, 2016 February 28, 2017 January 31, 2022 1.97% One-month LIBOR $750,000
December 21, 2016 February 28, 2017 January 31, 2022 1.97% One-month LIBOR 750,000
January 12, 2017 February 28, 2017 August 7, 2020 1.59% One-month LIBOR 1,100,000
January 13, 2017 February 28, 2017 June 9, 2020 1.63% One-month LIBOR 595,000
January 20, 2017 February 28, 2017 March 9, 2020 1.60% One-month LIBOR 325,000

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income on the condensed consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the ninethree and six months ended SeptemberJune 30, 2017,2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate interest payments. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Changes in fair value related to the ineffective portion of our Designated Hedges resulted in an unrealized gain of $201 for the nine months ended September 30, 2017, which is included in interest expense in our condensed consolidated statements of operations.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve12 months, we estimate that an additional $8,094$153,198 will be reclassified to earnings as an increase toin interest expense. There were no interest rate swap agreements outstanding during the nine months ended September 30, 2016.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Non-Designated Hedges
Concurrent with entering into certain of the mortgage loan agreements and in connection with previous mergers, we entered into or acquired and maintain interest rate cap agreements with terms and notional amounts equivalent to the terms and amounts of the mortgage loans made by the third-party lenders and strike prices ranging from approximately 2.59%third party lenders. Currently, each of our cap agreements is indexed to 3.39% (collectively,LIBOR, which is set to expire at the “Strike Prices”).end of 2021. We will work with the counterparties to our cap agreements to adjust each floating rate to a comparable or successor rate. To the extent that the maturity date of one or more of the mortgage loans is extended through an exercise of one or more of the extension options, replacement or extension interest rate cap agreements must be executed with terms similar to those associated with the initial interest rate cap agreements and strike prices equal to the greater of the Strike Pricesinterest rate cap strike price and the interest rate at which the debt service coverage ratio (as defined) is not less than 1.2 to 1.0. The interest rate cap agreements, including all of our rights to payments owed by the counterpartycounterparties and all other rights, have been pledged as additional collateral for the mortgage loans.
Changes Additionally, in fair value relatedcertain instances, in order to Non-Designated Hedges resulted in unrealized lossesminimize the cash impact of $3,992 for the nine months ended September 30, 2017, which are included in interest expense in our condensed consolidated statements of operations. Of the unrealized losses, $3,674 related to changes in value onpurchasing required interest rate swaps prior to their designation on January 31, 2017, and $318 related to the non-designatedcaps, we simultaneously sell interest rate caps.caps (which have identical terms and notional amounts) such that the purchase price and sales proceeds of the related interest rate caps are intended to offset each other. The purchased and sold interest rate caps have strike prices ranging from approximately 3.24% to 5.31%.


29

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


Tabular Disclosure of Fair Values of Derivative Instruments on the Condensed Consolidated Balance Sheets
The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of SeptemberJune 30, 20172020 and December 31, 2016:2019:
Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives
 Fair Value at: Fair Value at: Fair Value as of Fair Value as of
Balance
Sheet Location		 September 30,
2017		 December 31,
2016		 Balance
Sheet Location		 September 30,
2017		 December 31,
2016		 Balance
Sheet Location		 June 30,
2020		 December 31, 2019 Balance
Sheet Location		 June 30,
2020		 December 31, 2019
Derivatives designated as
hedging instruments:		                
Interest rate swapsOther
assets		 $5,529
 $—
 Other
liabilities		 $8,068
 $—
 Other
assets		 $—
 $1,643
 Other liabilities $634,337
 $275,679
        
Derivatives not designated as
hedging instruments:		                
Interest rate swapsOther
assets		 —
 —
 Other
liabilities		 —
 8,683
Interest rate capsOther
assets		 —
 29
 Other
liabilities		 —
 —
 Other
assets		 86
 —
 Other liabilities 2
 —
Total $5,529
 $29
 $8,068
 $8,683
 $86
 $1,643
 $634,339
 $275,679
Tabular Disclosure

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Offsetting Derivatives
We enter into master netting arrangements, which reduce risk by permitting net settlement of transactions with the same counterparty. The tables below present a gross presentation, the effects of offsetting, and a net presentation of our derivatives as of June 30, 2020 and December 31, 2019:
  June 30, 2020
        Gross Amounts Not Offset in the Statement of Financial Position  
  Gross Amounts of Recognized Assets/ Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position Financial Instruments Cash Collateral Received Net
Amount
Offsetting assets:            
Derivatives $86
 $—
 $86
 $—
 $—
 $86
Offsetting liabilities:            
Derivatives $634,339
 $—
 $634,339
 $—
 $—
 $634,339

  December 31, 2019
        Gross Amounts Not Offset in the Statement of Financial Position  
  Gross Amounts of Recognized Assets/ Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position Financial Instruments Cash Collateral Received Net
Amount
Offsetting assets:            
Derivatives $1,643
 $—
 $1,643
 $(1,054) $—
 $589
Offsetting liabilities:            
Derivatives $275,679
 $—
 $275,679
 $(1,054) $—
 $274,625


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Effect of Derivative Instruments on the Condensed Consolidated Statements of Comprehensive Loss and the Condensed Consolidated Statements of Operations
The tables below present the effect of our derivative financial instruments onin the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of operations for the three months ended SeptemberJune 30, 20172020 and 2016:2019:
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain (Loss) Reclassified from Accumulated OCI into Net Loss (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Loss (Effective Portion) Location of Gain (Loss) Recognized in Net Loss on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in Net Loss on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing) 
Amount of Loss Recognized
in OCI on Derivative
 
Location of Gain
Reclassified from
Accumulated OCI
into Net Income
 Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Income Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations
For the Three
Months Ended
September 30,		   For the Three
Months Ended
September 30,		   For the Three
Months Ended
September 30,		 
For the Three Months
Ended June 30,
 
For the Three Months
Ended June 30,
 
For the Three Months
Ended June 30,
2017 2016 2017 2016 2017 2016 2020 2019 2020 2019 2020 2019
Derivatives in cash flow hedging relationships:                       
Interest rate swaps$(598) $—
 Interest
expense		 $(4,193) $—
 Interest
expense		 $163
 $—
 $(52,817) $(148,599) Interest expense $(28,042) $7,891
 $86,071
 $95,706

  Location of
Loss
Recognized in
Net Income on Derivative		 Amount of Loss Recognized in Net Income on Derivative
   
For the Three Months
Ended June 30,
   2020 2019
Derivatives not designated as hedging instruments:      
Interest rate caps Interest expense 39
 1
The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of operations for the six months ended June 30, 2020 and 2019:
  
Amount of Loss Recognized
in OCI on Derivative
 Location of Gain
Reclassified from
Accumulated OCI
into Net Income		 Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Income Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations
  For the Six Months
Ended June 30,		  For the Six Months
Ended June 30,		 For the Six Months
Ended June 30,
  2020 2019  2020 2019 2020 2019
Derivatives in cash flow hedging relationships:              
Interest rate swaps $(394,255) $(236,467) Interest expense $(36,609) $18,754
 $170,828
 $189,689

  Location of
Loss
Recognized in
Net Income on Derivative		 Amount of Loss Recognized in Net Income on Derivative
   For the Six Months
Ended June 30,
   2020 2019
Derivatives not designated as hedging instruments:      
Interest rate caps Interest expense $52
 $34


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)








 Location of
Gain (Loss)
Recognized in
Net Loss
on Derivative		 Amount of Gain (Loss) Recognized in Net Loss on Derivative
   For the Three Months Ended
September 30,
   2017 2016
Derivatives not designated as hedging instruments:     
Interest rate swapsInterest
expense		 $—
 $—
Interest rate capsInterest
expense		 (190) —
Total  $(190) $—
The tables below present the effect of our derivative financial instruments on the condensed consolidated statements of operations for the nine months ended September 30, 2017 and 2016:
 Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain (Loss) Reclassified from Accumulated OCI into Net Loss (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Loss (Effective Portion) Location of Gain (Loss) Recognized in Net Loss on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in Net Loss on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)
 For the Nine
Months Ended
September 30,		   For the Nine
Months Ended
September 30,		   For the Nine
Months Ended
September 30,
 2017 2016   2017 2016   2017 2016
Derivatives in cash flow hedging relationships:               
Interest rate swaps$(4,796) $—
 Interest
expense		 $(12,963) $—
 Interest
expense		 $201
 $—

 Location of
Gain (Loss)
Recognized in
Net Loss
on Derivative		 Amount of Gain (Loss) Recognized in Net Loss on Derivative
   For the Nine Months Ended
September 30,
   2017 2016
Derivatives not designated as hedging instruments:     
Interest rate swapsInterest
expense		 $(3,674) $—
Interest rate capsInterest
expense		 (318) —
Total  $(3,992) $—


31

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)



Credit-Risk-Related Contingent Features
We haveThe agreements with our derivative counterparties forwhich govern our interest rate swap agreements that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness.
As of SeptemberJune 30, 2017,2020, the fair value of interest rate swapcertain derivatives in a net liability position which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $8,595. As of September 30, 2017, we have not posted any collateral related to these agreements.$634,339. If we havehad breached any of these provisions at SeptemberJune 30, 2017,2020, we could have been required to settle itsthe obligations under the agreements at their termination value, which includes accrued interest and excludes the nonperformance risk related to these agreements, of $8,595.$665,305.
Note 8—Equity
Shareholders’Stockholders' Equity
In connection with our IPO,As of June 30, 2020, we have issued 310,376,634560,532,679 shares of common stock. In addition, we issue OP Units from time to time which, upon vesting, are redeemable for shares of our common stock to the publicon a 1-for-one basis or, in our sole discretion, cash and the Pre-IPO Ownersare reflected as non-controlling interests on our condensed consolidated balance sheets and 3,290,126 RSUs (see Note 10), and our IPO raised $1,692,058, netstatements of underwriting discount, and before IPO costsequity. As of $5,726. June 30, 2020, 3,463,285 outstanding OP Units are redeemable.
During the ninethree and six months ended SeptemberJune 30, 2017,2020, we issued 977,65616,765,234 and 18,889,954, respectively, shares of common stock.
Public Offering
On June 4, 2020, we completed an underwritten public offering of 16,675,000 shares of our common stock, inincluding 2,175,000 shares sold pursuant to the underwriters’ full exercise of the option to purchase additional shares. During the three and six months ended June 30, 2020, this offering generated net settlementproceeds of 1,446,351 fully vested RSUs.$447,533, after giving effect to commissions and other costs totaling $6,861.
At the Market Equity Program
On August 22, 2019, we entered into distribution agreements with a syndicate of banks (the “Agents”), pursuant to which we may sell, from time to time, up to an aggregate sales price of $800,000 of our common stock through the Agents (the “ATM Equity Program”). During the three and six months ended June 30, 2020, we sold 15,400 and 1,887,466 shares of our common stock under our ATM Equity Program, respectively, generating net proceeds of $344 and $56,265, respectively, after giving effect to Agent commissions and other costs totaling $66 and $977, respectively. As of June 30, 2020, $685,799 remains available for future offerings under the ATM Equity Program.
Dividends
To qualify as a REIT, we are required to distribute annually to our shareholdersstockholders at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We intend to pay quarterly dividends to our shareholders,stockholders, which in the aggregate are approximately equal to or exceed our net taxable income in the relevant year.
The following table summarizestiming, form, and amount of distributions, if any, to our dividends declared from January 1, 2017 throughstockholders, will be at the nine months ended September 30, 2017:
  Record Date 
Amount per
Share(1)
 Pay Date Total Amount
Paid
Q2-2017 5/15/2017 $0.06
 5/31/2017 $18,800
Q3-2017 8/15/2017 0.08
 8/31/2017 25,200
(1)Amounts are displayed in actual dollars and are paid on a per share basis.

On October 13, 2017, we declared an $0.08 dividend per share to stockholderssole discretion of record on October 24, 2017, which was paid on November 7, 2017.
Combined Equity
Prior to the IPO, our business was conducted through the Invitation Homes Partnerships which did not have a common capital structure. As described in Note 1, IH1, IH3, IH4, IH5, and IH6 are partnerships. These entities each had limited partners and a general partner (the “Class A Partners”), along with a board of directors designated in the respective limited partnership agreements. IH2 was a Delaware corporation and had issued 1,000 shares of common stock and 113 shares of Series A Preferred Stock. IH2 had a board of directors elected by the common shareholders. The same board of directors was responsible for directing the significant activities of the Invitation Homes Partnerships and INVH LP on a combined basis.
The IH2 Series A Preferred Stock ranked, in respect of rights to the payment of dividends and the distribution of assets in the event of any liquidation or dissolution, senior to the IH2 common stock. Holders of such IH2 Series A Preferred Stock shares were entitled to receive cumulative cash dividends at the rate of 12.0% per annum of the total of a liquidation preference. On January 31, 2017, in connection with the Pre-IPO Transactions, the Series A Preferred Stock was redeemed for $1,153, inclusive of the redemption premium and accrued and unpaid dividends to that date. No dividends were declared or paid with respect to the Series A Preferred Stock during the nine months ended September 30, 2016. As of

directors.

32


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)








December 31, 2016, there were no dividend amounts declared and outstanding related to the 12.0% per annum dividend requirements of the Series A Preferred Stock.
Profits and losses, and cash distributions were allocated in accordance with the terms of the respective entity’s organizational documents. We made no distributions to our equity investors, and we received $138,002 of contributions during the nine months ended September 30, 2016.
As further described in Note 10, we granted certain individuals incentive compensation units in IH1, IH2, IH3, IH4, IH5, and IH6, which consisted of Class B units that were accounted for as a substantive class of equity due to the terms of the agreements and rights of the holders. We previously made distributions to certain Class B unitholders in the form of non-recourse cash advances totaling $11,023. Any amounts distributed to the holders of the Class B units whose Class B units were converted in connection with the Pre-IPO Transactions (see Note 10), reduced the number of converted shares common stock received by amounts previously paid to such Class B unitholders as advance distributions. As a result of the Pre-IPO Transactions, there are no longer any Class B Units outstanding.
We previously executed notes receivables with certain Class B unitholders (the “Class B Notes”) and funded $20,228 pursuant to those note agreements, of which $1,527, including accrued interest had been repaid as of December 31, 2016. On January 5, 2017, $7,723 of Class B Notes, including accrued interest, were canceled, and the transaction was accounted for as a distribution to the underlying unitholder. As part of the Pre-IPO Transactions, IH1 assigned $11,963, including accrued interest, of Class B Notes to a wholly owned subsidiary of the Pre-IPO Owners that was formed in connection with the reorganization described in Note 1, and the transaction was accounted for as a distribution. The Class B Notes were secured by certain of the Class B units of the makers of the Class B Notes and were otherwise non-recourse to the makers. The Class B Notes matured at the earlier of a liquidation event or defined dates in 2024 and bore interest of 1.57% to 1.97% per annum. As such, the Class B Notes were recorded as a component of combined equity on our condensed consolidated balance sheet as of December 31, 2016.
Note 9—Related Party Transactions
Through December 31, 2014, certain related parties provided us with consulting services for which we recorded payables. We also made offsetting income tax payments related to distributions on behalf of these related parties. During the year ended December 31, 2016, we repaid the $1,959 outstanding as of December 31, 2015.
Note 10—Share-Based Compensation
We have share-based compensation programs for the purpose of retaining certain key employees. Prior to the IPO, the program consisted of incentive compensation units, the Class B Units, granted in the form of profits interests in the Invitation Homes Partnerships. In connection with and subsequent to the IPO, we granted awards in the form of RSUs that settle in shares of common stock of INVH and RSAs that are restricted shares of common stock of INVH.
Profits Interests — Class B Units
Prior to the IPO, the Invitation Homes Partnerships granted incentive compensation units to certain key employees, which were profits interests for United States federal income tax purposes. The Class B Units were accounted for as a substantive class of equity and contained both service based and performance based vesting criteria. Recognition of compensation expense was recorded based on whether or not the award recipient was an employee of the Manager, a wholly owned subsidiary of IH1, resulting in some awards being recognized based on grant-date fair value and others being remeasured at each reporting period until the actual vesting date as required for non-employee awards. Prior to the IPO, none of the performance based vesting criteria had been achieved, and as such through the date of the IPO, no compensation expense had been recorded for performance based Class B Units. However, the IPO triggered achievement of the performance based criteria and effectively converted all such awards into service based awards.
2017 New Class B Unit Awards: Pursuant to an amended and restated partnership agreement, on January 5, 2017, IH6 issued certain individuals a total of 9,650 Class B Units that were expected to vest based on terms and conditions similar to all other Class B Units. In January 2017, an additional 188 Class B Units in total were issued from IH1, IH2, and IH3.


33

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


2017 Class B Unit Conversion: The Pre-IPO Transactions described in Note 1 resulted in accelerated vesting of 7,520 Class B Units held by certain unitholders which resulted in additional share-based compensation expense of $11,601 as of the date of the IPO. On January 31, 2017, in connection with the IPO, all of the Class B Units held by current employees of the Manager (except for 3,878 fully vested Class B Units awarded to a certain unitholder) were either converted into shares of INVH common stock or canceled based on the value of the Class B Units implied by the per share price of common stock sold to the public in the IPO. As such, a total of 730 Class B Units were converted into 62,529 RSAs, and 17,669 Class B Units were canceled for no consideration. For the Class B Units converted into RSAs, vesting and other terms of the RSAs delivered in the conversion have the same vesting and other terms applicable to the corresponding Class B Units converted.
Additionally, the obligations under the remaining 40,992 fully vested Class B Units, including those of the unitholders who are not current employees of the Manager and the one employee unitholder noted above that did not convert, were converted into similar units of newly formed subsidiaries of the Pre-IPO Owners. All Class B Units held by former employees of the Manager are fully vested.
The following table summarizes the activity related to the Class B Units for the periodour dividends declared from December 31, 2016January 1, 2019 through January 31, 2017, the date at which they were all canceled or converted:June 30, 2020:
  Class B Units

 Employee Non-employee Total Class B Units
  Number of Units Weighted Average Fair Value Number of Units Weighted Average Fair Value Number of Units Weighted Average Fair Value
Balance, December 31, 2016 9,915
 $4.2
 39,638
 $2.5
 49,553
 $2.9
Granted 85
 14.0
 9,753
 —
 9,838
 0.1
Converted to RSAs (245) (3.4) (485) (0.8) (730) (1.7)
Canceled (555) (8.2) (17,114) (0.4) (17,669) (0.6)
Converted to Units of affiliated entities (9,200) (4.0) (31,792) (2.9) (40,992) (3.2)
Balance, January 31, 2017 —
 $—
 —
 $—
 —
 $—
  Record Date 
Amount
per Share
 Pay Date Total Amount Declared
Q2-2020 May 13, 2020 $0.15
 May 29, 2020 $81,916
Q1-2020 February 12, 2020 0.15
 February 28, 2020 81,673
Q4-2019 November 13, 2019 0.13
 November 27, 2019 70,693
Q3-2019 August 15, 2019 0.13
 August 30, 2019 70,465
Q2-2019 May 15, 2019 0.13
 May 31, 2019 68,334
Q1-2019 February 13, 2019 0.13
 February 28, 2019 67,965

On July 22, 2020, our board of directors declared a dividend of $0.15 per share to stockholders of record on August 12, 2020, which is payable on August 28, 2020 (see Note 15).
As
Note 9—Related Party Transactions
Management Services
One of January 31, 2017, no Class B Units were outstanding.
RSAsour consolidated subsidiaries, as the managing member of a joint venture with FNMA (see Note 5), earns a management fee based upon the venture’s gross receipts. For the three months ended June 30, 2020 and RSUs Issued by INVH
RSAs: In connection with2019, we earned $629 and $713, respectively, and for the conversionsix months ended June 30, 2020 and 2019, we earned $1,309 and $1,449, respectively, of the Class B Unitsmanagement fees which are included in January 2017, we issued 62,529 RSAs, of which 55,211 were fully vested as of September 30, 2017, and the remaining 7,318 non-vested RSAs will vest in accordance with the original terms of the Class B Unit award agreements. The conversion of the Class B Units into RSAs resulted in a modification of the awards of which some were previously accounted for as non-employee awards. The modification resultedother, net in the reversalaccompanying condensed consolidated statements of $246 of previously recognized incentive compensation expense with respect to these non-employee awards during the nine months ended September 30, 2017.operations.
RSUs:
Note 10—Share-Based Compensation
Prior to the completion of the IPO, our board of directors adopted, and our shareholdersstockholders approved, the Invitation Homes Inc. 2017 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants, and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, and aligningto align their interests with those of our shareholders.stockholders. Under the Omnibus Incentive Plan, we may issue up to 16,000,000 shares of common stock.
Our share-based awards consist of time-vesting restricted stock units (“RSUs”), performance and asmarket based vesting RSUs (“PRSUs”), and Outperformance Awards (defined below). Time-vesting RSUs are participating securities for earnings (loss) per common share (“EPS”) purposes, and PRSUs and Outperformance Awards are not. For detailed discussion of September 30, 2017, we have awarded 4,480,982 shares under the Omnibus Incentive Plan pursuantRSUs and PRSUs issued prior to January 1, 2020, refer to our annualAnnual Report on Form 10-K for the year ended December 31, 2019.

Share-Based Awards
The following summarizes our share-based award activity during the six months ended June 30, 2020.
Annual Long Term Incentive Plan (“LTIP”) awards, Supplemental Bonus Plan, the IH6 Bonus Awards, and certain non-employee director awards.:
•
Annual LTIP Awards Granted: During the six months ended June 30, 2020, we granted 499,228 RSUs pursuant to LTIP awards (together with previously granted annual LTIP awards, “LTIP Awards”). Each award includes components which vest based on time-vesting conditions, market based vesting conditions, and performance based vesting conditions, each of which is subject to continued employment through the applicable vesting date. The time-vesting RSUs granted during the six months ended June 30, 2020 vest in three equal annual installments based on an anniversary date of March 1, 2020. The PRSUs granted during the six months ended June 30, 2020 may be earned based on the achievement of certain measures over a three year performance period that ends December 31, 2022. The number of PRSUs earned will be determined based on performance achieved during the performance period for each measure at certain threshold, target, or maximum levels and corresponding payout ranges. In general, the LTIP
Annual LTIP Awards: During the nine months ended September 30, 2017, we granted 874,410 RSUs pursuant to LTIP awards (the “LTIP Awards”) each of which is divided into three tranches (“Tranche 1,” “Tranche 2,” and “Tranche 3”). Within each tranche, 25% of the LTIP Award contains time-vesting conditions, approximately 25% of the award contains a market based vesting condition based on absolute total shareholder return, and approximately


34


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









50% of the award contains performance based vesting conditions based on compounded annual growth in our same store net operating income and adjusted funds from operations.
The time-vesting awards vest in installments based on anniversary dates of March 1, 2017 subject to continued employment through the applicable vesting date as follows: Tranche 1 on the first anniversary; Tranche 2 in two equal installments on each of the first and second anniversaries; and Tranche 3 in four equal installments on each of the first four anniversaries. The time-vesting LTIP awards are participating securities for EPS purposes.
The market and performance based awards may be earned based on the achievement of certain measures over an approximate one-, two-, or three-year performance period, which performance periods correspond, respectively, to the Tranche 1, Tranche 2, and Tranche 3 LTIP Awards. The number of RSUs earned will be determined based on performance achieved during the specified performance period for each measure at certain threshold, target, or maximum levels and corresponding payout ranges. In general, the market and performance based RSUsPRSUs are earned on the date after the end of the performance period on the date on which the performance results are certified (the “Certification Date”) by our compensation and management development committee (the “Compensation Committee”). The Tranche 1 and Tranche 2 market and performance based RSUs will vest on the Certification Date subject to continued employment through such date. The Tranche 3 market and performance based RSUs will vest in two equal installments, on the related Certification Date and December 31, 2020, subject to continued employment through such vesting dates. The market and performance based LTIP RSUs are not participating securities for EPS purposes.
All of the LTIP Awards are subject to certain change in control and retirement eligibility provisions that may impact these vesting schedules.
•
PRSU Results: In February 2020, the Compensation Committee certified performance achievement with respect to Tranche 3 of our 2017 LTIP Awards. Certain PRSUs vested and achieved performance in excess of the target level, resulting in the issuance of an additional 91,200 shares of common stock. Such awards are reflected as an increase in the number of awards granted and vested in the table below. Certain other PRSUs did not achieve performance criteria, resulting in the cancellation of 5,348 awards. Such awards are reflected as an increase in the number of awards forfeited/canceled in the table below.
Director Awards
Retention Awards: During the ninesix months ended SeptemberJune 30, 2017,2020, we issued 307,327 RSUs in the form of retention awards (the “Retention Awards”) each of which is a time-vesting award with service periods ranging from three to five years. The Retention Awards are participating securities for EPS purposes.
Supplemental Bonus Plan: In October 2016, we established a supplemental bonus plan for certain key executives and employees (the “Supplemental Bonus Plan”). Pursuant to the Supplemental Bonus plan, the awards became payable and the payment amount became determinable upon the completion of the IPO. The $59,776 of awards were converted into 2,988,120granted 58,690 time-vesting RSUs that will generally vest in three equal annual installments, commencing on the completionto members of the INVH IPO and on the first and second anniversaries thereafter. The Supplemental Bonus Plan awards are participating securities for EPS purposes.
IH6 Bonus Awards: In addition to the Class B Units granted by IH6 to certain individuals, these individuals were also granted bonus awards (the “IH6 Bonus Awards”) equal to $0.5 multiplied by the 9,650 IH6 Class B Units granted, entitling the recipients to receive bonus payments in connection with an IPO or exit event. Upon completionour board of the INVH IPO, the IH6 Bonus Awards became payable to the recipients and were converted into the right to receive shares of common stock. The $4,825 of awards were settled in the form of 241,250 RSUs that were fully vested upon issuance. The IH6 Bonus Awards are participating securities for EPS purposes.
Director Awards: INVH issued $1,398 of awards, or 69,875 RSUs, to directors, who are not our employees or employees of BREP VII. Thesewhich awards will fully vest on the date scheduled forof INVH’s 20182021 annual shareholdersstockholders meeting, subject to the director’s continued service on the board of directors through such date.
Outperformance Awards
On May 1, 2019, the Compensation Committee approved one-time equity based awards with market based vesting conditions in the form of PRSUs and OP Units (the “Outperformance Awards”). The DirectorOutperformance Awards are participating securities for EPS purposes.may be earned based on the achievement of rigorous absolute total shareholder return and relative total shareholder return thresholds over a three year performance period ending on March 31, 2022. Upon completion of the performance period, the dollar value of the awards earned under the absolute and relative total shareholder return components will be separately calculated, and the number of earned Outperformance Awards will be determined based on the earned dollar value of the awards and the stock price at the performance certification date. Earned awards will vest 50% on March 31, 2022 and 25% on each of the first and second anniversaries of such date, subject to continued employment. The current aggregate $12,390 grant-date fair value of the Outperformance Awards still outstanding was determined based on Monte-Carlo option pricing models which estimate the probability of the vesting conditions being satisfied.
Summary of Total Share-Based Awards
The following table summarizes activity related to non-vested time-vesting RSUs and PRSUs, other than Outperformance Awards, during the six months ended June 30, 2020:

  Time-Vesting Awards PRSUs 
Total Share-Based Awards(1)
  Number Weighted
Average Grant
Date Fair Value
(Actual $)		 Number Weighted Average Grant Date Fair Value (Actual $) Number Weighted
Average Grant
Date Fair Value
(Actual $)
Balance, December 31, 2019 685,069
 $22.48
 925,076
 $23.13
 1,610,145
 $22.86
Granted 225,760
 28.25
 423,358
 29.73
 649,118
 29.21
Vested(2)
 (291,694) (22.96) (152,967) (22.25) (444,661) (22.72)
Forfeited / canceled (7,362) (25.31) (17,833) (23.24) (25,195) (23.85)
Balance, June 30, 2020 611,773
 $24.35
 1,177,634
 $25.62
 1,789,407
 $25.18

35
(1)Total share-based awards excludes Outperformance Awards.
(2)All vested share-based awards are included in basic EPS for the periods after each award’s vesting date. The estimated fair value of share-based awards that fully vested during the six months ended June 30, 2020 was $9,759. During the six months ended June 30, 2020, 322 RSUs were accelerated pursuant to the terms and conditions of the Omnibus Incentive Plan and related award agreements.


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









The following tables summarize the status of non-vested RSUs and RSAs as of September 30, 2017 and changes during the period from January 31, 2017 through September 30, 2017:Grant-Date Fair Values
  RSUs RSAs Total Share-Based Awards
  Number Weighted Average
Grant-Date
Fair Value
(Actual $)		 Number Weighted Average
Grant-Date
Fair Value
(Actual $)		 Number Weighted Average
Grant-Date
Fair Value
(Actual $)
Balance, January 1, 2017 —
 $—
 —
 $—
 —
 $—
Granted 4,480,982
 20.53
 62,529
 15.50
 4,543,511
 20.46
Vested(1)
 (1,446,351) (20.00) (55,211) (15.69) (1,501,562) (19.84)
Forfeited (100,345) (20.08) —
 —
 (100,345) (20.08)
Balance, September 30, 2017 2,934,286
 $20.81
 7,318
 $14.05
 2,941,604
 $20.79
(1)All vested RSAs and RSUs are included in basic EPS for the period during which they are outstanding.

During the period from January 31, 2017 through September 30, 2017, 55,211 RSAs and 1,446,351 RSUs with an estimated fair value of $29,851 fully vested. As of September 30, 2017, 649,136 RSUs included performance and market based criteria. The grant-date fair valuevalues of the RSAs, time-vesting RSUs and RSUsPRSUs with performance condition vesting criteria isare generally based on the closing price of our common stock on the grant date. However, for the awards granted in connection with the IPO, the grant-date fair value is the opening offering price per common share, and the grant-date fair values for RSUsshare-based awards with market condition vesting criteria are based on Monte-Carlo option pricing models. The following table summarizes the significant inputs utilized in these models atfor such awards granted during the grant date:six months ended June 30, 2020:
  
For the Six Months
Ended June 30, 2020
Expected volatility(1)
 17.2%—17.3%
Risk-free rate 0.85%
Expected holding period (years) 2.09
—2.84
June 23, 2017
Expected volatility(1)
25%
Risk-free rate1.40%
Expected holding period (years)0.52-2.52
 
(1)Expected volatility iswas estimated based on the leverage adjusted historical volatility of certain of our peer companies over a historical term commensurate withINVH’s realized returns and the remaining expected holding period.applicable index.


36

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)



Summary of Total Share-Based Compensation Expense
During the three and six months ended SeptemberJune 30, 20172020 and 2016,2019, we recognized $12,004 and $4,711 respectively, of share-based compensation expense comprised of the following:as follows:
  Share-Based Compensation Expense for the Three Months Ended September 30,
  2017 2016
  General and Administrative Property Management Expense General and Administrative Property Management Expense
Class B Units $—
 $—
 $4,665
 $46
RSUs 9,307
 2,691
 —
 —
RSAs 2
 4
 —
 —
Total $9,309
 $2,695
 $4,665
 $46
During the nine months ended September 30, 2017 and 2016, we recognized $64,464 and $13,023 respectively, of share-based compensation expense, comprised of the following:
  Share-Based Compensation Expense for the Nine Months Ended September 30,  
  2017 2016  
  General and Administrative Property Management Expense General and Administrative Property Management Expense Unrecognized Expense at
September 30, 2017
Class B Units $11,998
 $3
 $12,724
 $299
 $—
RSUs 44,646
 8,047
 —
 —
 40,591
RSAs (184) (46) —
 —
 14
Total $56,460
 $8,004
 $12,724
 $299
 $40,605
  For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
  2020 2019 2020 2019
General and administrative $1,659
 $2,795
 $4,927
 $7,715
Property management expense 447
 820
 1,280
 1,507
Total $2,106
 $3,615
 $6,207
 $9,222
As of SeptemberJune 30, 2017,2020, there was $40,605is $27,382 of unrecognized share-based compensation expense related to non-vested RSUs and RSAsshare-based awards which is expected to be recognized over a weighted average period of 1.722.10 years.
Note 11—Fair Value Measurements
The carrying amounts of restricted cash, certain components of other assets, accounts payable and accrued expenses, resident security deposits, and certain components of other liabilities approximate fair value due to the short maturity of these amounts. Our interest rate swap agreements and interest rate cap agreements are the only financial instruments recorded at fair value on a recurring basis within our condensed consolidated financial statements. The fair values of our interest rate caps and swaps, which are classified as Level 2 in the fair value hierarchy, are estimated using market values of instruments with similar attributes and maturities. See Note 7 for the details of the condensed consolidated balance sheet classification and the fair values for the interest rate caps and swaps.


37


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









The following table displays the carrying values and fair values of financial instruments as of SeptemberJune 30, 20172020 and December 31, 2016:2019:
    September 30, 2017 December 31, 2016
    Carrying
Value		 Fair
Value		 Carrying
Value		 Fair
Value
Assets carried at historical cost on the consolidated balance sheets          
Investments in debt securities Level 2 $230,619
 $234,514
 $209,337
 $209,390
           
Liabilities carried at historical cost on the consolidated balance sheets          
Mortgage loans(1)
 Level 2 $4,173,994
 $4,196,400
 $5,263,994
 $5,265,180
Term loan facility(2)
 Level 3 1,500,000
 1,501,030
 —
 —
Credit facilities(3)
 Level 3 —
 —
 2,321,585
 2,329,551
    June 30, 2020 December 31, 2019
    Carrying
Value		 Fair
Value		 Carrying
Value		 Fair
Value
Assets carried at historical cost on the condensed consolidated balance sheets:          
Investments in debt securities(1)
 Level 2 $310,380
 $309,011
 $316,991
 $318,299
           
Liabilities carried at historical cost on the condensed consolidated balance sheets:          
Mortgage loans(2)
 Level 2 $6,134,906
 $6,113,628
 $6,266,407
 $6,292,261
Secured Term Loan(3)
 Level 3 403,363
 450,008
 403,464
 411,213
Term Loan Facility(4)
 Level 3 1,500,000
 1,491,166
 1,500,000
 1,500,444
Convertible Senior Notes(5)
 Level 3 336,820
 351,456
 334,299
 346,489
 
(1)The carrying values of investments in debt securities are shown net of discount.
(2)The carrying values of the mortgage loans are shown net of discount and exclude $16,970$16,331 and $9,256$27,946 of deferred financing costs as of SeptemberJune 30, 20172020 and December 31, 2016,2019, respectively.
(2)The carrying value of the term loan facility excludes $12,749 of deferred financing costs as of September 30, 2017.
(3)The carrying valuesvalue of the credit facilities exclude $6,044Secured Term Loan excludes $2,377 and $2,486 of deferred financing costs as of June 30, 2020 and December 31, 2016.2019, respectively.
(4)The carrying value of the Term Loan Facility excludes $4,809 and $6,253 of deferred financing costs as of June 30, 2020 and December 31, 2019, respectively.
(5)The carrying values of the Convertible Senior Notes include unamortized discounts of $8,180 and $10,701 as of June 30, 2020 and December 31, 2019, respectively.


The fair values of our investmentsinvestment in debt securities and of our mortgage loans, which are classified as Level 2 in the fair value hierarchy, are estimated based on market bid prices of comparable instruments at the end of the period. The fair values offollowing table displays the significant unobserverable inputs used to develop our credit facilities and Term Loan Facility, which are classified as Level 3 in the fair value hierarchy, are estimated using a discounted cash flow methodology based on market interest rate data and other market factors available at the endmeasurements as of the period.June 30, 2020:
  
Quantitative Information about Level 3 Fair Value Measurement(1)
  Fair Value Valuation Technique Unobservable Input Rate
Secured Term Loan $450,008
 Discounted Cash Flow Effective Rate 2.39%
Term Loan Facility 1,491,166
 Discounted Cash Flow Effective Rate 2.19%—2.28%
Convertible Senior Notes 351,456
 Discounted Cash Flow Effective Rate 2.26%
(1)Our Level 3 fair value instruments require interest only monthly payments.


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)







Our assets measured at fair value on a nonrecurring basis are those assets for which we have recorded impairments. The assets for which we have recorded impairments, measured at fair value on a nonrecurring basis, are summarized below:
 Three Months Ended September 30, Nine Months Ended
September 30,		 For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
��2017 2016 2017 2016 2020 2019 2020 2019
Investments in single-family residential properties, net held for use (Level 3)        
Investments in single-family residential properties, net held for use (Level 3):        
Pre-impairment amount $1,827
 $1,350
 $2,323
 $2,407
 $451
 $7,313
 $451
 $7,553
Total impairments (360) (421) (627) (650) (89) (1,788) (89) (1,818)
Fair value $1,467
 $929
 $1,696
 $1,757
 $362
 $5,525
 $362
 $5,735
  For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
  2020 2019 2020 2019
Investments in single-family residential properties, net held for sale (Level 3):        
Pre-impairment amount $6,994
 $12,090
 $17,794
 $31,114
Total impairments (1,353) (2,288) (3,824) (5,511)
Fair value $5,641
 $9,802
 $13,970
 $25,603
  Three Months Ended September 30, Nine Months Ended
September 30,
  2017 2016 2017 2016
Investments in single-family residential properties, net held for sale (Level 3)        
Pre-impairment amount $988
 $36,698
 $9,115
 $40,657
Total impairments (64) (655) (929) (945)
Fair value $924

$36,043

$8,186
 $39,712


For additional information related to our single-family residential properties during the threeas of June 30, 2020 and nine months ended September 30, 2017 and 2016,December 31, 2019, refer to Note 3.


38
Note 12—Earnings per Share

Basic and diluted EPS are calculated as follows:
  For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
  2020 2019 2020 2019
(in thousands, except share and per share data)        
Numerator:        
Net income available to common stockholders — basic and diluted $42,784
 $38,833
 $92,638
 $59,549
         
Denominator:        
Weighted average common shares outstanding — basic 548,811,968
 525,070,036
 545,680,740
 523,265,455
Effect of dilutive securities:        
Incremental shares attributed to non-vested share-based awards 1,108,245
 863,607
 1,156,069
 925,014
Weighted average common shares outstanding — diluted 549,920,213
 525,933,643
 546,836,809
 524,190,469
         
Net income per common share — basic $0.08
 $0.07
 $0.17
 $0.11
Net income per common share — diluted $0.08
 $0.07
 $0.17
 $0.11

Incremental shares attributed to non-vested share-based awards are excluded from the computation of diluted EPS when they are anti-dilutive. For the three and six months ended June 30, 2020, 342,849 and 250,538 incremental shares attributed to non-vested share-based awards, respectively, and 9,495 incremental shares attributed to non-vested share-based awards for the six months ended June 30, 2019 are excluded from the denominator as their inclusion would have been anti-dilutive. For the three months ended June 30, 2019, all incremental shares attributed to non-vested share-based awards were included in the denominator.

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)








Note 12—Earnings per Share
We compute EPS only for the period our common stock was outstanding during 2017, referred to as the Post-IPO period. We have defined the Post-IPO period as February 1, 2017, the date our shares began trading on the New York Stock Exchange, through September 30, 2017, or 92 and 242 days of activity, respectively, for the three months ended September 30, 2017, and for the Post-IPO period. Basic EPS is computed by dividing the net loss available to common shareholders for the Post-IPO period by the weighted average number of shares outstanding during the Post-IPO period, adjusted for non-vested shares of RSUs and RSAs. Diluted EPS is similar to computing basic EPS, except that the denominator is increased to include the dilutive effects of non-vested RSUs and RSAs except when doing so would be anti-dilutive.
All outstanding non-vested RSUs and RSAs that have nonforfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing EPS pursuant to the two-class method. The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating securities according to dividends or dividend equivalent and participation rights in undistributed earnings in periods when we have net income. Certain of our non-vested RSUs and RSAs are considered participating securities as identified in Note 10.
Basic and diluted EPS are calculated as follows:
(in thousands, except share and per share data) Three Months Ended September 30,
2017		 February 1, 2017
through
September 30,
2017
Numerator:    
Net loss available to common shareholders — basic and diluted $(22,745) $(42,837)
     
Denominator:    
Weighted average common shares outstanding — basic and diluted 311,559,780
 311,674,226
     
Net loss per common share — basic and diluted $(0.07) $(0.14)


For the three and six months ended SeptemberJune 30, 20172020 and 2019, the vested OP Units have been excluded from the computation of EPS because all income attributable to the OP Units has been recorded as non-controlling interest and thus excluded from net income available to common stockholders.
Using the “if-converted” method, 12,553,864 potential shares of common stock for the period from February 1, 2017 through September 30, 2017, incremental shares of 951,217 and 623,375, respectively, attributed to non-vested RSUs and RSAs were2019 Convertible Notes are excluded from the computation of diluted EPS because we had a net loss for the periods.three and six months ended June 30, 2019 as they are anti-dilutive. For the three and six months ended June 30, 2020 and 2019, 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes are also excluded from the computation of diluted EPS as they are anti-dilutive. Additionally, no adjustment to the numerator is required for interest expense related to the Convertible Senior Notes for the three and six months ended June 30, 2020 and 2019. See Note 6 for further discussion about the Convertible Senior Notes.
Note 13—Income Tax
We account for income taxes under the asset and liability method. For the TRSs,our taxable REIT subsidiaries (“TRSs”), deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. We provide a valuation allowance, from time to time, for deferred tax assets for which we do not consider realization of such assets to be more likely than not.
As of SeptemberJune 30, 2017, there were no2020 and December 31, 2019, we have not recorded any deferred tax assets and liabilities or unrecognized tax benefits recorded.benefits. We do not anticipate a significant change in unrecognized tax benefits within the next 12 months.
During the nine months ended September 30, 2017, weWe have sold assets that were either subject to Section 337(d) of the Internal Revenue Code (see additional discussion in Note 2).of 1986, as amended, or were held by TRSs. These transactions resulted in $2,506$299 and $844 of current income tax expense for the three months ended June 30, 2020 and 2019, respectively, and $429 and $1,605 of current income tax expense for the six months ended June 30, 2020 and 2019, which has been recorded in gain on sale of property, net of tax onin the condensed consolidated statementstatements of operations.


39
Note 14—Commitments and Contingencies

Lease Commitments
The following table sets forth our fixed lease payment commitments as a lessee as of June 30, 2020, for the periods below:
Year 
Operating
Leases
 
Finance
Leases
Remainder of 2020 $2,353
 $1,533
2021 4,735
 3,009
2022 3,228
 2,456
2023 2,220
 2,410
2024 2,084
 680
Thereafter 1,096
 —
Total lease payments 15,716
 10,088
Less: imputed interest (1,233) (706)
Total lease liability $14,483
 $9,382


INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)









Note 14—CommitmentsThe components of lease expense for the three and Contingenciessix months ended June 30, 2020 and 2019 are as follows:
  For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
  2020 2019 2020 2019
Operating lease cost:        
Fixed lease cost $1,158
 $916
 $2,151
 $1,897
Variable lease cost 262
 356
 597
 699
Total operating lease cost $1,420
 $1,272
 $2,748
 $2,596
         
Finance lease cost:        
Amortization of ROU assets $713
 $129
 $921
 $237
Interest on lease liabilities 128
 5
 270
 18
Total finance lease cost $841
 $134
 $1,191
 $255

Insurance Policies
Pursuant to the terms of certain of our credit facility agreements and mortgage loan agreements (see Note 6), laws and regulations of the jurisdictions in which our properties are located, and general business practices, we are required to procure insurance on our properties. For the nine months ended SeptemberAs of June 30, 2017 and 2016,2020, there are no material contingent liabilities related to uninsured losses have been incurred with respect to the properties except as described below.
Effects of Hurricane Irma
On September 10, 2017, Hurricane Irma made landfall in Southern Florida and traveled through Florida before entering Georgia as a tropical storm. We estimate that damages caused by Hurricane Irma totaled approximately $16,000 which we have accrued at September 30, 2017 and is included in impairment and other in our condensed consolidated statements of operations for the three and nine months ended September 30, 2017. A portion of the foregoing damages may be recoverable through our insurance policies that provide coverage for wind damage, flood damage and business interruption, which are subject to deductibles and limits.properties.
Legal Matters
We are subject to various legal proceedings and claims that arise in the ordinary course of our business. We accrue a liability when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. We do not believe that the following litigationfinal outcome of these proceedings or matters will have a materiallymaterial adverse impacteffect on our condensed consolidated financial statements, and no accruals for the following items have been recorded in our condensed consolidated financial statements, as we have not determined that any loss is probable, nor is the amount of any potential loss estimable.
Litigation Relating to the Mergers
Two putative class actions have been filed by purported shareholders of SFR challenging the Mergers. The first suit, styled as Berg v. Starwood Waypoint Homes, et. al., No. 1:17-cv-02896, was filed in the United States District Court for the District of Maryland on September 29, 2017, and is against SFR, SFR Partnership, SFR’s trustees, us, INVH LP, and REIT Merger Sub (the “Berg Lawsuit”). The second suit, styled as Bushansky v. Starwood Waypoint Homes, et. al., No. 1:17-cv-02936, was filed in the United States District Court for the District of Maryland on October 4, 2017, and is against SFR, SFR Partnership and SFR’s trustees (the “Bushansky Lawsuit” and, collectively with the Berg Lawsuit, the “Lawsuits”). The Bushansky Lawsuit does not name the Company or any of its affiliates as defendants. The Lawsuits allege that SFR and its trustees violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by allegedly disseminating a false and misleading Form S-4 containing a joint proxy statement/prospectus. The Lawsuits further allege that SFR’s trustees allegedly violated Section 20(a) of the Exchange Act by failing to exercise proper control over the person(s) who violated Section 14(a) of the Exchange Act. The Berg Lawsuit additionally alleges that we violated Section 20(a) of the Exchange Act. The Lawsuits seek, among other things, injunctive relief preventing consummation of the Mergers, rescission of the transactions contemplated by the Merger Agreement should they be consummated and litigation costs, including attorneys’ fees. The Berg Lawsuit also seeks injunctive relief directing SFR’s trustees to disseminate a registration statement that does not contain any untrue statements of material fact and declaratory relief that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act. The Bushansky Lawsuit also seeks rescissory damages in the event of a merger and requests that the action be maintained as a class action. We and SFR intend to defend vigorously against the Lawsuits.
Other Matters
SEC Investigation “In the Matter of Certain Single Family Rental Securitizations”
Radian Group Inc. (“Radian”),the indirect parent company of Green River Capital LLC (“GRC”), which is a service provider that provides certain broker price opinions (“BPO”) to the Company, disclosed in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 that GRC had received a letter in March 2017 from the staff of the SEC stating that it is conducting an investigation captioned “In the Matter of Certain Single Family Rental Securitizations” and requesting information from market participants. Radian disclosed that the letter asked GRC to provide information regarding BPOs that GRC provided on properties included in single family rental securitization transactions.


40

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


In September 2017, we received a letter from the staff of the SEC stating that it is conducting an investigation captioned “In the Matter of Certain Single Family Rental Securitizations.” The letter enclosed a subpoena that requests the production of certain documents and communications related to our Securitizations, including, without limitation, those related to BPOs provided on our properties included in our Securitizations. The SEC letter indicates that its investigation is a fact-finding inquiry and does not mean that the SEC has a negative opinion of any person or security. We are cooperating with the SEC. We understand that other transaction parties in securitizations have received requests in this matter. As the SEC’s investigation is ongoing, we cannot currently predict the timing, the outcome or the scope of such investigation.
Severance and Retention
In June 2017, our board of directors, upon recommendation of our Compensation Committee, approved and adopted our Invitation Homes Inc. Executive Severance Plan (the “Executive Severance Plan”); and, in September 2017, adopted severance guidelines for those not covered by the Executive Severance Plan (the “Severance Guidelines” and, together with the Executive Severance Plan, the “Severance Plans”). The Severance Plans provide all qualified employees specified benefits following such person’s qualifying termination of employment.
In addition, and in connection with the Mergers, in August 2017, we entered into agreements with several of our executives, which provide the executives, as applicable, with benefits in the event the Mergers are consummated and/or where the executive experiences a qualifying termination within a specified period of time following such consummation. If the Mergers are consummated and a participant under either a Severance Plan or an executive agreements experiences a qualifying termination, such person will be entitled to specified benefits.statements.
Note 15—Subsequent Events
In connection with the preparation of the accompanying condensed consolidated financial statements, we have evaluated events and transactions occurring after SeptemberJune 30, 2017,2020, for potential recognition or disclosure.
ExtensionsExtension of Existing Mortgage LoansLoan
On October 10, 2017, we submitted a notification to request anJuly 9, 2020, the extension of the maturity date of the IH1 2014-3IH 2018-3 mortgage loan from DecemberJuly 9, 20172020 to DecemberJuly 9, 2018 upon approval.2021 was approved by the lender.
Dividend Declaration
On October 13, 2017, theJuly 22, 2020, our board of directors declared an $0.08a dividend of $0.15 per share to stockholders of record on October 24, 2017,August 12, 2020, which was paidis payable on November 7, 2017.August 28, 2020.
IH 2017-2 Securitization
On November 9, 2017, we completed a securitization transaction in connection with which we entered into a loan agreement with a third-party lender, providing for a new mortgage loan comprised of six components with a total principal amount of $865,027 (“IH 2017-2”). IH 2017-2 has a stated maturity in December 2019, with five one-year extension options, and is secured by first priority mortgages on a portfolio of 4,419 of our homes. Each of the six components of IH 2017-2 bears interest at a floating rate equal to LIBOR plus an applicable spread that ranges from 85 to 300 bps, with a weighted average spread to LIBOR of 144 bps. IH 2017-2 was subsequently transferred to a trust in exchange for pass-through certificates issued by the trust. In connection with IH 2017-2, we purchased and will retain 5% of each class of certificates for risk-retention purposes, totaling $43,254.
We utilized proceeds from IH 2017-2 to repay IH1 2014-2 and IH1 2014-3, to fund certain reserves, and for general corporate purposes.
Residential Property Dispositions
Between October 1, 2017 and November 2, 2017, we disposed of 55 homes with a net carrying amount of $8,996 as of September 30, 2017, for an aggregate net sales price of $11,546. A portion of the proceeds were used to make various prepayments on our mortgage loans totaling $2,634. At September 30, 2017, 44 of these properties were classified as held for




41

INVITATION HOMES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(unaudited)


sale and presented in other assets, net and 11 were classified as investments in single-family residential properties on our condensed consolidated balance sheet.


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the information appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2016.10-K. This discussion and analysis contains forward-looking statements based upon our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set further as described in Exhibit 99.1 to this Quarterly Report on Form 10-Q andforth under Part I. Item 1A. “Risk Factors,"Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.and Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q.
Capitalized terms used without definition have the meaning provided elsewhere in this Quarterly Report on Form 10-Q.
Overview
Invitation Homes is a leading owner and operator of single-family homes for lease, offering residents high-quality homes in desirablesought-after neighborhoods across America. With nearly 50,000approximately 80,000 homes for lease in 1316 markets across the country as of SeptemberJune 30, 2017,2020, Invitation Homes is meeting changing lifestyle demands by providing residents access to updated homes with features they value, such as close proximity to jobs and access to good schools. Our mission statement, “Together with you, we make a house a home,” reflects our commitment to high-touch service that continuously enhances residents’ living experiences and provides homes where individuals and families can thrive.
We have selected locationsoperate in markets with strong demand drivers, high barriers to entry, and high rent-growthrent growth potential, primarily in the Western United States, Florida, and Florida.the Southeast United States. Through disciplined market and asset selection, as well as through strategic mergers and acquisitions, we designed our portfolio to capture the operating benefits of local density as well as economies of scale that we believe cannot be readily replicated. Since our founding in 2012, we have built a proven, vertically integrated operating platform that allowsenables us to effectively and efficiently acquire, renovate, lease, maintain, and manage our homes.
We invest in markets that we expect will exhibit lower new supply, stronger job and household formation growth, and superior NOInet operating income (“NOI”) growth relative to the broader U.S.United States housing and rental market.markets. Within our 1316 markets, we target attractive neighborhoods in in-fill locations with multiple demand generators,drivers, such as proximity to major employment centers, desirable schools, and transportation corridors. Our homes average approximately 1,8601,870 square feet with three bedrooms and two bathrooms, appealing to a resident base that we believe is less transitory than the typical multifamily resident. As of September 30, 2017, we had made approximately $1.2 billion ofWe invest in the upfront renovation investment in theof homes in our portfolio representing approximately $25,000 per home, in order to address capital needs, reduce ongoing maintenance costs, and drive resident demand. The in-fill locations and high quality of our homes and service further differentiate our resident experience, which we continue to refine.
COVID-19
The outbreak of COVID-19 in many countries, including the United States, has had a significant adverse impact on global and United States economic activity and has contributed to significant volatility and disruption in financial markets. The ultimate impacts remain unknown, but could include the potential worsening of global and United States economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending, and the market for acquisition and disposition of single-family homes, as well as other unanticipated consequences. As a result, our portfolio benefits from high occupancy and low turnover rates, andsuch, we are well positioned to drive strong rent growth, attractive margins and predictable cash flows.
Reorganization and Initial Public Offering
On January 31, 2017, we and our Pre-IPO Owners effected certain transactions (the “Pre-IPO Transactions”) that resulted inclosely monitoring the INVH LP holding, directly or indirectly, allimpact of the assets, liabilities,ongoing COVID-19 pandemic on all aspects of our business, including operating, investment management, and capital markets activities.
With the safety and well-being of our residents and associates being our highest priority, we continue to follow protocols that enable teams to safely continue providing outstanding service to residents. The safety and service measures currently in place include: (1) creating and implementing a safety training program for all associates; (2) maintaining a three-month supply of masks, gloves, shoe covers, and hand sanitizer for field teams; (3) continuing to leverage self-show and virtual-tour technology as both safety measures and competitive advantages; (4) adhering to strict safety protocols for maintenance service trips; and (5) adapting to offer virtual options for resident move-in orientations and pre-move-out visits.


40




Neither these procedural adjustments nor the overall impact of the COVID-19 pandemic created significant disruptions to our business model during the three and six months ended June 30, 2020. However, the pandemic did impact our business, including operating, investment management, and capital markets activities as more fully described below.
Operations
The direct impacts on our results of operations reflectedand key operating metrics from the effects of the COVID-19 pandemic may include, but are not limited to: (1) a decrease in gross rental revenues and other property income (before concessions and bad debt) due to jurisdictional restrictions on rent increases and late fees; (2) an increase in occupancy due to lower turnover partially driven by residents’ decisions not to relocate during the pandemic, strong demand for homes that become vacant, and the impact of eviction moratoriums; (3) an increase in uncollectible revenues (or decline in rent collections percentages) due to resident hardships and eviction moratoriums; and (4) a decrease in property operating and maintenance expenses for turnover costs (lower turnover rates) and property administrative fees (eviction moratoriums).
In March, to act on our core values of "Genuine Care" and "Standout Citizenship," we began to offer solutions for residents experiencing financial hardship when requested, including the ongoing creation of payment plans, without late fees, for residents requiring flexibility to meet rental obligations over time and a voluntary moratorium on evictions through June 2020. Additionally, we continue to adhere to federal, state, and local restrictions on items such as evictions, rent increases, and late fees as appropriate.
The ongoing COVID-19 outbreak in the United States has led certain states and cities, including those in which we own properties and where our principal places of business are located, to impose and continue to implement measures intended to control the spread of COVID-19, including instituting quarantines, restrictions on travel, “shelter in place” rules, and restrictions on types of business that may continue to operate. We depend on rental revenues and other property income from residents for substantially all of our revenues. Overall revenue collections as a percentage of monthly billings was 94% in April, 96% in May, 98% in June, and 97% in July, compared to a historical average of 99%. While collection of revenues has remained near historical levels thus far through the pandemic, the COVID-19 outbreak, as well as continuing measures taken by governmental authorities and private actors to limit the spread of this virus or mitigate its impact, is interfering with the ability of some of our residents to meet their lease obligations and make their rent payments on time or at all. In addition, some jurisdictions across the United States have imposed temporary eviction moratoriums and are allowing residents to defer missed rent payments without incurring late fees, and such jurisdictions and other local and national authorities may expand or extend measures imposing restrictions on our ability to enforce residents’ contractual rental obligations and limiting our ability to increase rents. We cannot predict if states, municipalities, and/or local authorities will expand existing restrictions, if additional states or municipalities will implement similar restrictions, or when restrictions currently in place will expire. Such measures are likely to enable residents to stay in their homes despite an inability to pay because of financial or other hardship stemming from the pandemic.
Certain other restrictions imposed by jurisdictions across the United States are intended to limit operations by businesses not deemed “essential businesses.” While none of the current restrictions have materially impacted our ability to provide services to our residents or homes, future measures may negatively impact our ability to access our homes, complete service requests, or make our homes ready for new residents. Since the pandemic began, we have continued to complete emergency work orders, and we now schedule non-emergency maintenance service requests on a case-by-case basis. For all service calls, we work with residents to ensure they are addressed in a timely and safe manner.
A majority of our homes are located in areas where COVID-19 infection rates are greater than the national average. As such, the pandemic may disproportionately impact our ability to lease homes, collect rents, service our homes, and perform other fundamental property management functions.
While COVID-19 and related containment measures may interfere with the ability of our associates, suppliers, and other business partners to carry out their assigned tasks or to supply materials and services at ordinary levels of performance relative to the conduct of our business in the future, to date we have not experienced such disruptions. Our office-based associates continue to work from home and will continue to do so until we determine it is in our condensed consolidatedand their best interests to return to our offices. Additionally, changes to the working environment have not had a material effect on our internal controls over financial statements, includingreporting since the full portfoliopandemic began (see Part I. Item 4. “Controls and Procedures” for additional information).


41




Investment Management
We continue to successfully source and effectuate compelling acquisition and disposition opportunities. Since the pandemic began, we have continued to sell homes identified for disposition. We resumed sourcing new acquisitions in June 2020 after pausing activity from mid-March through May. That said, our ability to acquire or dispose of homes heldproperties could be impaired by local rules and ordinances that could be put in place to mitigate the impact of the COVID-19 pandemic, and a general decline in economic and business activity could adversely affect the single-family residential housing market and our ability to acquire and dispose of homes.
Capital Markets
To date, our access to capital markets has not been significantly impacted by the IH Holding Entities. COVID-19 pandemic. We continue to make scheduled debt service payments and do not anticipate non-compliance with our key affirmative and negative debt covenants. (see “ — Liquidity and Capital Resources” for additional information). That said, a severe disruption of, and/or instability in, the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations, including acquisitions, or address maturing liabilities on a timely basis.
Current Status
As a result of our differentiated business model and measures taken to maximize operating and financial results, we have experienced positive trends in many key performance metrics and maintained a favorable liquidity position during the Pre-IPO Transactions,COVID-19 pandemic:
Resident satisfaction survey scores have continued to climb as we further refine our COVID-19 response.
Same Store average occupancy has continued to climb through the INVH LP is wholly owned by Invitation Homes Inc. (“INVH”) directlysummer reaching record highs of 97.5% in the second quarter of 2020 and through its wholly owned subsidiary, Invitation Homes OP GP LLC, which serves as97.8% in July 2020. Same Store average occupancy was 170 bps higher in July 2020 than in July 2019. Same Store new lease rent growth accelerated during the INVH LP’s sole general partner.three months ended June 30, 2020 and averaged 4.9% in July.
As of June 30, 2020, total liquidity from unrestricted cash and undrawn credit facility capacity was $1,571.7 million.
These strong underlying trends in our business and our favorable liquidity position have afforded us the opportunity to pursue or resume pursuing initiatives aimed at generating incremental value for shareholders, including:
Successful issuance and sale of 16.7 million common shares for net proceeds of $447.5 million to provide capital primarily for acquisition opportunities.
Full repayment of the $270.0 million revolving credit facility balance that had been drawn in March.
Resumption of sourcing new acquisitions in June, returning us to an acquisition pace similar to pre-COVID-19 levels.
Ongoing Considerations
The Pre-IPO Transactionssituation surrounding the ongoing COVID-19 pandemic remains fluid, and the ensuing impact of the COVID-19 pandemic on our rental revenues and other property income, in particular, cannot be fully be determined at present due to an inability to estimate actual collection rates, occupancy levels, and expiration of temporary restrictions on evictions, rent increases, and late fees. We will continue to actively manage our response in collaboration with our residents and business partners and to assess potential impacts to our financial position and operating results, as well as potential adverse developments in our business.
In addition to the foregoing uncertainties, we are unable to predict the impact that the COVID-19 pandemic will have been accounted for as a reorganizationon our future financial condition, results of entities under common control utilizing historical cost basis. Accordingly, after January 31, 2017, our condensed consolidated financial statementsoperations, and cash flows due to numerous uncertainties regarding external factors. These uncertainties include the accounts of INVHscope, severity, and its wholly owned subsidiaries. Prior to that date, our condensed combined financial statements include the combined accountsduration of the INVH LPpandemic, the extent and duration of actions taken to contain the pandemic or mitigate its impact, and the IH Holding Entitiesdirect and their wholly owned subsidiaries.indirect economic effects of the pandemic, containment measures, monetary and/or fiscal policies implemented to provide support or relief to businesses and/or residents, and other government, regulatory, and/or legislative changes precipitated by the COVID-19 pandemic, among others. For further information regarding the impact of COVID-19 on our Company, see Part II. Item 1A. “Risk Factors.”
On February 6, 2017, INVH completed an initial public offering of 88,550,000 shares of common stock at a price to the public of $20.00 per share (the “IPO”). An additional 221,826,634 shares of common stock were issued to the Pre-IPO Owners.





4342






Our Portfolio
The following table provides summary information regarding our total and Same Store portfolioportfolios as of and for the periodthree months ended SeptemberJune 30, 20172020 as noted below:
Market 
Number
of Homes(1)
 
Average
Occupancy(2)
 
Average Monthly
Rent(3)
 
Average Monthly
Rent PSF(3)
 
% of
Revenue(4)
 
Number of Homes(1)
 
Average Occupancy(2)
 
Average Monthly
Rent(3)
 
Average Monthly
Rent PSF(3)
 
% of
Revenue(4)
Western United States          
Western United States:  
Southern California 4,631
 95.5% $2,288
 $1.34
 12.8% 8,000 97.3% $2,515 $1.48 13.3%
Northern California 2,857
 95.4% 1,801
 1.14
 6.7% 4,301 96.9% 2,199 1.42 6.5%
Seattle 3,246
 94.0% 1,975
 1.04
 8.3% 3,555 95.6% 2,302 1.20 5.6%
Phoenix 5,443
 94.4% 1,188
 0.75
 8.2% 7,861 95.5% 1,454 0.89 7.9%
Las Vegas 961
 95.7% 1,475
 0.76
 1.8% 3,003 95.7% 1,687 0.85 3.4%
Denver 2,298 94.9% 2,092 1.16 3.3%
Western United States Subtotal 17,138
 94.9% 1,754
 1.04
 37.8% 29,018 96.2% 2,039 1.18 40.0%
            
Florida          
Florida:  
South Florida 5,577
 92.9% 2,198
 1.14
 14.5% 8,454 95.3% 2,221 1.19 12.4%
Tampa 4,915
 94.3% 1,602
 0.82
 9.6% 8,107 96.2% 1,710 0.92 9.5%
Orlando 3,736
 95.2% 1,539
 0.81
 7.1% 6,147 95.6% 1,714 0.92 7.1%
Jacksonville 1,953
 94.8% 1,577
 0.79
 3.8% 1,858 96.7% 1,721 0.87 2.2%
Florida Subtotal 16,181
 94.1% 1,787
 0.92
 35.0% 24,566 95.8% 1,887 1.01 31.2%
            
Southeast United States          
Southeast United States:  
Atlanta 7,337
 94.7% 1,402
 0.68
 12.5% 12,501 96.5% 1,553 0.75 13.1%
Charlotte 3,132
 94.2% 1,395
 0.70
 5.2%
Carolinas 4,719 96.4% 1,623 0.75 5.2%
Southeast United States Subtotal 10,469
 94.6% 1,400
 0.68
 17.7% 17,220 96.5% 1,572 0.75 18.3%
            
Midwest United States          
Texas:  
Houston 2,190 94.5% 1,583 0.81 2.4%
Dallas 2,376 93.5% 1,832 0.87 2.9%
Texas Subtotal 4,566 94.0% 1,711 0.85 5.3%
  
Midwest United States:  
Chicago 2,898
 93.0% 2,029
 1.21
 6.9% 2,699 95.4% 2,009 1.24 3.6%
Minneapolis 1,181
 94.5% 1,786
 0.90
 2.6% 1,129 97.1% 1,933 0.99 1.5%
Midwest United States Subtotal 4,079
 93.4% 1,958
 1.11
 9.5% 3,828 95.9% 1,986 1.15 5.1%
Total/Average 47,867
 94.4% $1,705
 $0.92
 100.0%
            
Same Store Portfolio Total/Average 42,795
 95.4% $1,706
 $0.92
 90.5%
Announced Market-in-Exit:  
Nashville(5)
 58 65.0% 2,157 0.82 0.1%
  
Total / Average 79,256 96.0% $1,869 $1.00 100.0%
Same Store Total / Average 72,261 97.5% $1,868 $1.00 92.2%
 
(1)As of SeptemberJune 30, 2017.2020.
(2)Represents average occupancy for the three months ended SeptemberJune 30, 2017.2020.
(3)Represents average monthly rent for the three months ended SeptemberJune 30, 2017.2020.
(4)
Represents the percentage of total revenuerental revenues and other property income generated in each market for the three months ended SeptemberJune 30, 2017.2020.
(5)In December 2019, we announced a plan to fully exit the Nashville market and sold 708 homes in Nashville in a bulk transaction. As of June 30, 2020, we have 58 remaining homes in the market.




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Factors That Affect Our Results of Operations and Financial Condition
Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. See Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K, as updated in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q, for more information regarding factors that could materially adversely affect our results of operations and financial condition. Key factors that impact our results of operations and financial condition include market fundamentals, property acquisitions and renovations, rental rates and occupancy levels, turnover rates and days to re-resident homes, property improvements and maintenance, property acquisitions and renovations, and financing arrangements. Sensitivity to many of these factors has been heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
Market Fundamentals:Our results are impacted by housing market fundamentals and supply and demand conditions in our markets, particularly in the Western United States and Florida, which represented 72.8%71.2% of our rental revenues and other property income during the three months ended SeptemberJune 30, 2017. In recent periods, our Western United States2020. We are actively monitoring the impact of the COVID-19 outbreak on market fundamentals and Florida markets have experienced favorable demandare quickly implementing changes in pricing as market fundamentals in the form of employment growth and household formation rates and favorable supply fundamentals such as the rate of new supply delivery. We believe these supply and demand fundamentals have driven favorable rental rate growth and home price appreciation for our Western United States and Florida markets in recent periods and we expect these trends to continue in the near to intermediate term.shift.
Rental Rates and Occupancy Levels: Rental rates and occupancy levels are primary drivers of rental revenues and other property income. Our rental rates and occupancy levels are affected by macroeconomic factors and local and property-level factors, including market conditions, seasonality, resident defaults, and the amount of time it takes to prepare a home for its next resident and re-lease homes when residents vacate. An important driver of rental rate growth is our ability to increase monthly rents from expiring leases, which typically have a term of one to two years. The ongoing COVID-19 pandemic has negatively impacted our ability to increase rents and may impact our ability to maintain occupancy levels.
Collection Rates: Our rental revenues and other property income is impacted by the rate at which we collect such revenues from our residents. We routinely work with residents facing financial hardships who need flexibility to fulfill their lease obligations, but the ongoing COVID-19 pandemic has increased the number of such residents. When requested, we work with these residents to create payment plans, without late fees, and then actively manage these receivables. However, a portion of these amounts may not ultimately be collected, and our estimate of amounts billed to residents that may ultimately be uncollectible decreases our rental revenues and other property income.
Turnover Rates and Days to Re-Resident: Other drivers of rental revenues and property operating and maintenance expense include increasing the length of stay of our residents, minimizing resident turnover rates, and reducing the number of days a home is unoccupied between residents. Our operating results are also are impacted by the amount of time it takes to market and lease a property.property, which is a component of the number of days a home is unoccupied between residents. The period of time to market and lease a property can vary greatly and is impacted by local demand, our marketing techniques, the size of our available inventory, and both current economic conditions and outlook.future economic outlook, both of which are impacted by the ongoing COVID-19 pandemic. Days to re-resident may be negatively affected by homes potentially remaining vacant while prospective residents remain in their current housing. Our turnover rate may be affected by the current COVID-19 pandemic as a result of delayed eviction proceedings and/or move outs potentially being canceled by residents who have not secured their next housing plans. Increases in turnover rates and the average number of days to re-resident increase property operating and maintenance expenses and reduce rental revenues as the homes are not generating income during this period.period of vacancy.
Property Improvements and Maintenance: Property improvements and maintenance impact capital expenditures, property operating and maintenance expense, and rental revenues. We actively manage our homes on a total portfolio basis to determine what capital and maintenance needs may be required, and what opportunities we may have to generate additional revenues or expense savings from such expenditures. Due to our size and scale both nationally and locally, we believe we are able to purchase goods and services at favorable prices.
While the COVID-19 outbreak has required us to modify our property improvement and maintenance procedures to accommodate resident preferences, as a currently designated “essential business” we are presently continuing to complete all emergency maintenance work orders. Additionally, as of June 2020, we resumed completion of non-emergency work orders on a case-by-case basis and began addressing our backlog of deferred work orders. However, future potential governmental measures may restrict our ability to function as an “essential business.”


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Property Acquisitions and Renovations: Future growth in rental revenues and operatingother property income may be impacted by our ability to identify and acquire homes, our pace of property acquisitions, and the time and cost required to renovate and lease a newly acquired home. Our ability to identify and acquire single-family homes that meet our investment criteria is impacted by home prices in targeted acquisition locations, the inventory of homes available for sale through our acquisition channels, and competition for our target assets. All of these factors may be negatively impacted by the COVID-19 outbreak, potentially reducing the number of homes we acquire.
The acquisition of homes involves expenditures in addition to payment of the purchase price, including payments for acquisition fees, property inspections, closing costs, title insurance, transfer taxes, recording fees, broker commissions, property taxes, and HOA fees (when applicable). Additionally, we typically incur costs to renovate a home to prepare it for rental. RenovationThe scope of renovation work varies, but may include paint, flooring, carpeting, cabinetry, appliances, plumbing hardware, roof replacement, HVAC replacement, and other items required to prepare the home for rental. The time and cost involved in accessing our homes and preparing them for rental can significantly impact our financial performance. The time to renovate a newly acquired property can vary significantly among homes for several reasons, including the property’s acquisition channel, the condition of the property, and whether the property was vacant when acquired.acquired, and whether there are any state or local restrictions on our ability to complete renovations as an essential business function. Additionally, COVID-19 and related containment measures may interfere with the ability of our suppliers and other business partners to carry out their assigned tasks and/or source labor or supply materials at ordinary levels of performance relative to the conduct of our business. Due to our size and scale both nationally and locally, we believe we are able to purchase goods and services at favorable prices.
Financing Arrangements: Financing arrangements directly impact our interest expense, mortgage loans, secured term loan, term loan facility, and revolving facility, and convertible debt, as well as our ability to acquire and renovate homes. We have historically utilized indebtedness to acquirefund the acquisition and renovaterenovation of new homes. Our current financing arrangements contain financial covenants, and certain financing arrangements contain variable interest rate terms. Interest rates are impacted by the characteristics of our homes, market conditions and the terms of the underlying financing arrangements. Inability by our residents to meet their lease obligations due to the COVID-19 pandemic could reduce our cash flows, which could impact our ability to make all required debt service payments. Furthermore, the COVID-19 pandemic has resulted in a widespread health crisis adversely affecting the economy and financial markets of many countries resulting in an economic downturn that could negatively affect our ability to access financial markets as well as our business, results of operations, and financial condition. See Part I. Item 3. “Quantitative and Qualitative Disclosures about Market Risk” for further discussion regarding interest rate risk. Our future financing arrangements may not have similar terms with respect to amounts, interest rates, financial covenants, and durations.


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Recent Events
Initial Public Offering
On February 6, 2017, we completed our IPO in which we sold 88,550,000 shares of common stock at an initial public offering price of $20.00 per share. The shares offered and sold in the offering were registered under the Securities Act pursuant to our Registration Statement on Form S-11, which was declared effective by the SEC on January 31, 2017. The common stock is listed on the NYSE under the symbol "INVH" and began trading publicly on February 1, 2017. The offering generated net proceeds of $1,692.1 million to us after underwriting discounts, but before other transaction costs. We used a portion of the net proceeds, together with the borrowings under the Term Loan Facility of our New Credit Facility (described below), to repay all of our existing credit facilities and our mortgage loan relating to the IH1 2013-1 securitization and a portion of the mortgage loan relating to the IH1 2014-1 securitization transaction, and to pay fees and expenses related to the offering.
In March 2017, we used the remaining IPO proceeds, together with cash on hand, to voluntarily prepay approximately $260.0 million of additional borrowings outstanding under the mortgage loan relating to the IH1 2014-1 securitization transaction, reducing the outstanding principal balance to approximately $421.0 million.
New Credit Facility
On February 6, 2017, INVH LP entered into a new credit agreement with the lenders party thereto, Bank of America, N.A., as administrative agent and the other parties party thereto. The new credit agreement provides for senior secured credit facilities (together, collectively, the “New Credit Facility”) consisting of (i) a $1,000.0 million revolving facility (the “Revolving Facility”), which will mature on February 6, 2021, with a one-year extension option subject to certain conditions and (ii) a $1,500.0 million “Term Loan Facility,” which will mature on February 6, 2022. See “—Liquidity and Capital Resources.”
Fannie Mae Securitization Transaction
On April  28, 2017, we completed a securitization transaction pursuant to which we entered into a loan agreement, providing for a new ten-year, fixed rate mortgage loan comprised of two components with a total principal amount of $1,000.0 million (the “FNMA Loan”). The FNMA Loan will mature June 9, 2027 and is secured by first priority mortgages on a portfolio of 7,204 of our homes. See “—Liquidity and Capital Resources.”
We used proceeds from the FNMA Loan to repay the remaining $420.0 million outstanding under our mortgage loan relating to the IH1 2014-1 securitization transaction, to fund certain reserves and to pay transaction fees and expenses incurred with respect to the FNMA Loan. The IH1 2014-1 mortgage loan outstanding balance had been reduced as of April 28, 2017 due to prepayments from IPO proceeds and application of proceeds from sales of homes. On May 9, 2017, we used the remaining proceeds to voluntarily prepay $510.0 million of our mortgage loan relating to the IH1 2014-3 securitization transaction. On June 9, 2017, we made a $100.0 million prepayment, reducing the outstanding principal balance to approximately $151.0 million.
Proposed Merger with SFR
On August 9, 2017, we entered into a definitive agreement with SFR to form a combined company in a stock-for-stock merger of equals transaction (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, (i) SFR will be merged with and into IH Merger Sub, LLC, a wholly owned subsidiary of the Company (“REIT Merger Sub”)re, with REIT Merger Sub surviving as our subsidiary (the “REIT Merger”) and (ii) as promptly as practicable after the REIT Merger, Starwood Waypoint Homes Partnership, L.P. (“SFR Partnership”) will be merged with and into INVH LP, with INVH LP surviving as our wholly owned subsidiary (the “Partnership Merger,” and together with the REIT Merger, the “Mergers”). In connection with the Mergers, we filed with the SEC on October 16, 2017 a definitive joint proxy statement/information statement and prospectus (File No. 333-220543) (the “Merger Proxy”), which includes more detailed information about the Mergers and the related transactions.
Under the terms of the Merger Agreement and as described in the Merger Proxy, each outstanding SFR share will be converted into 1.6140 shares of our common stock (the “Exchange Ratio”), and each outstanding unit of SFR Partnership will be converted into the right to receive 1.6140 common units, representing limited partner interests, in INVH LP. Further, each


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outstanding restricted share unit of SFR (an “SFR RSU”) that vest as a result of the Mergers or the Merger Agreement will automatically be converted into the right to receive our common stock based on the Exchange Ratio, plus any accrued but unpaid dividends (if any) and less certain taxes (if any). At the effective time of the REIT Merger, each SFR RSU that does not vest as a result of the Mergers or the Merger Agreement will be automatically assumed by us and converted into an equivalent stock-based incentive award unit with respect to our common stock and be subject to the same terms and conditions as applicable to such awards. On a pro forma basis giving effect to the Mergers, the combined company will own an approximately 98.2% partnership interest in INVH LP and the combined company will have the full, exclusive and complete responsibility for and discretion in the day-to-day management and control of INVH LP.
The REIT Merger is intended to qualify as a reorganization for U.S. federal income tax purposes, and the Partnership Merger is intended to be treated as a transaction that is generally tax free to the holders of units of SFR Partnership for U.S. federal income tax purposes. Upon the closing of the Mergers, our stockholders will own approximately 59% of the combined company’s stock, and SFR’s stockholders will own approximately 41% of the combined company’s stock. Based on the closing prices of SFR’s common shares and our common stock on October 13, 2017, the equity market capitalization of the combined company would be approximately $12.0 billion, and the total enterprise value (including debt) would be approximately $21.3 billion.
The transaction has been approved by our board of directors and SFR’s board of trustees. Completion of the Mergers is subject to, among other things, approval by the holders of the SFR’s common shares. Assuming approval is obtained, the Mergers are expected to close in the fourth quarter of 2017. We can give no assurance that the Mergers and related transactions will be completed in the above timeframe, if at all. During the third quarter of 2017, we incurred $4.9 million of fees and expenses related to the Mergers, which are included in general and administrative for the three and nine months ended September 30, 2017 in the condensed consolidated statements of operations and $2.7 million of direct offering costs which will be charged to equity upon completion of the Mergers and are included in other assets, net on the condensed consolidated balance sheet as of September 30, 2017. Other transaction costs are expected to be incurred in the fourth quarter of 2017 and in 2018 in connection with the closing of the Mergers.
Two putative class actions have been filed by purported shareholders of SFR challenging the Mergers, one of which names us and certain affiliates as defendants. The lawsuits seek, among other things, injunctive relief preventing consummation of the Mergers, rescission of the transactions contemplated by the Merger Agreement should they be consummated and litigation costs, including attorneys’ fees. Please see Part II, Item  I. Legal Proceedings “Litigation Relating to the Mergers” in this Quarterly Report on Form 10-Q for more details.
Dividend Declaration
On October 13, 2017, the board of directors declared an $0.08 dividend per share to stockholders of record on October 24, 2017, which was paid on November 7, 2017.
IH 2017-2 Securitization
On November 9, 2017, we completed a securitization transaction in connection with which we entered into a loan agreement with a third-party lender, providing for a new mortgage loan comprised of six components with a total principal amount of $865.0 million (“IH 2017-2”). IH 2017-2 has a stated maturity in December 2019, with five one-year extension options, and is secured by first priority mortgages on a portfolio of 4,419 of our homes. Each of the six components of IH 2017-2 bears interest at a floating rate equal to LIBOR plus an applicable spread that ranges from 85 to 300 bps, with a weighted average spread to LIBOR of 144 bps. IH 2017-2 was subsequently transferred to a trust in exchange for pass-through certificates issued by the trust. In connection with IH 2017-2, we purchased and will retain 5% of each class of certificates for risk-retention purposes, totaling $43.3 million.
We utilized proceeds from IH 2017-2 to repay IH1 2014-2 and IH1 2014-3, to fund certain reserves, and for general corporate purposes.


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Components of Revenues and Expenses
The following is a description of the components of our revenues and expenses:expenses.
Revenues
Rental Revenues and Other Property Income
Rental revenues, net of any concessions and bad debt (including write-offs, credit reserves, and uncollectible amounts,amounts), consist of rents collected under lease agreements related to our single-family homes for lease. These include leases that weWe enter into leases directly with our residents, whichand the leases typically have a term of one to two years.
Other Property Income
Other property income is comprised of: (i) resident reimbursements for utilities, HOA fines, and other charge-backs; (ii) rent and non-refundable deposits associated with pets; and (iii) various other fees, including applicationlate fees and lease termination fees.fees, among others.
Expenses
Property Operating and Maintenance
Once a property is available for its initial lease, which we refer to as “rent-ready,” we incur ongoing property-related expenses, which consist primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel


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expenses, utility expenses, repairs and maintenance, leasing costs, marketing expenses, and marketing.property administration. Prior to a property being “rent-ready,” certain of these expenses are capitalized as building and improvements. Once a property is “rent-ready,” expenditures for ordinary maintenancerepairs and repairsmaintenance thereafter are expensed as incurred, and we capitalize expenditures that improve or extend the life of a home.
Property Management Expense
Property management expense represents personnel and other costs associated with the oversight and management of our portfolio of homes. All of our homes are managed through our internal property manager.
General and Administrative
General and administrative expense represents personnel costs, professional fees, and other costs associated with our day to dayday-to-day activities. We have incurred additional legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. General and administrative expense also includes IPO related and merger and transaction-related costsexpenses, among other things, that are of a non-recurring nature. As a result,
Share-Based Compensation Expense
All share-based compensation expense is recognized in our condensed consolidated statements of operations as components of general and administrative expense in the historical periods discussed in “—Results of Operations” may not be comparable to general and administrative expense in periods from and after the IPO and the REIT Merger.
Share-Based Compensation Expense
Certain current and former employees, as well as certain of our founders, were granted Class B incentive units in certain of the IH Holding Entities or their parent entities. In connection with the IPO, all of the Class B units were converted into shares of common stock, canceled, or converted into similar units of newly formed subsidiaries of the Pre-IPO Owners.property management expense. We have recognized incentive compensation expense related to the value of those units in our results of operations. In connection with and subsequent to the IPO, we modified certain of our incentiveissue share-based awards and issued new awards in order to align our employees’ interests with those of our investors. All incentive unit and share-based compensation
Interest Expense
Interest expense is recognizedincludes interest payable on our statementsdebt instruments, payments and receipts related to our interest rate swap agreements, amortization of operations as a component of generaldiscounts and administrativedeferred financing costs, unrealized gains (losses) on non-designated hedging instruments, and non-cash interest expense and property management expense.related to our interest rate swap agreements.
Depreciation and Amortization
We recognize depreciation and amortization expense associated primarily with our homes and other capital expenditures over their expected useful lives.


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Impairment and Other
Impairment and other represents provisions for impairment when the carrying amount of our single-family residential properties is not recoverable and casualty losses, net of any insurance recoveries.
Interest Expense
Interest expense includes interest expense as well as amortization of discounts and deferred financing costs from our financing arrangements, and unrealized gains (losses) on non-designated hedging instruments. Interest expense for periods prior to the IPO and our 2017 refinancing activity discussed in “—Recent Events” does not reflect the impact of the following: (i) certain financing transactions that we completed concurrently with the completion of the IPO; (ii) certain hedging instruments; (iii) the FNMA Loan that was entered into on April 28, 2017 as defined in “—Liquidity and Capital Resources”; or (iv) the repayment of certain indebtedness with a portion of the net proceeds from the IPO, the New Credit Facility, and the FNMA Loan.
Other, net
Other, net includes interest income, third party management fee income, equity in earnings from an unconsolidated joint venture, unrealized gains from investments in equity securities, and other miscellaneous income and expenses, and acquisition costs (in periods prior to January 1, 2017).expenses.
Gain (Loss) on Sale of Property, net of tax
Gain (loss) on sale of property, net of tax consists of net gains and losses resulting from sales of our homes.


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Results of Operations
Portfolio Information
As of June 30, 2020 and 2019, we owned 79,256 and 80,322 single-family rental homes, respectively, in our total portfolio. During the three months ended June 30, 2020 and 2019, we acquired 147 and 740 homes, respectively, and sold 416 and 779 homes, respectively. During the three months ended June 30, 2020 and 2019, we owned an average of 79,449 and 80,455 single-family rental homes, respectively. During the six months ended June 30, 2020 and 2019, we acquired 651 and 948 homes, respectively, and sold 900 and 1,433 homes, respectively. During the six months ended June 30, 2020 and 2019, we owned an average of 79,475 and 80,559 single-family rental homes, respectively.


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We believe presenting information about the portion of our total portfolio that has been fully operational for the entirety of both a given reporting period and its prior year comparison period provides investors with meaningful information about the performance of our comparable homes across periods, and about trends in our organic business. To do so, we provide information regarding the performance of our Same Store portfolio.
As of June 30, 2020, our Same Store portfolio consisted of 72,261 single-family rental homes.
Three Months Ended SeptemberJune 30, 20172020 Compared to Three Months Ended SeptemberJune 30, 20162019
The following table sets forth a comparison of the results of operations for the three months ended SeptemberJune 30, 20172020 and 2016:2019:
  Three Months Ended
September 30,		    
($ in thousands) 2017 2016 $ Change % Change
Revenues:        
Rental revenues $229,375
 $221,049
 $8,326
 3.8 %
Other property income 14,161
 11,989
 2,172
 18.1 %
Total revenues 243,536
 233,038
 10,498
 4.5 %
         
Operating expenses:        
Property operating and maintenance 93,267
 94,246
 (979) (1.0)%
Property management expense 10,852
 7,715
 3,137
 40.7 %
General and administrative 27,462
 18,811
 8,651
 46.0 %
Depreciation and amortization 67,466
 66,480
 986
 1.5 %
Impairment and other 14,572
 1,279
 13,293
 N/M
Total operating expenses 213,619
 188,531
 25,088
 13.3 %
Operating income 29,917
 44,507
 (14,590) (32.8)%
         
Other income (expenses):        
Interest expense (56,796) (68,365) (11,569) (16.9)%
Other, net 613
 (1,057) (1,670) (158.0)%
Total other income (expenses) (56,183) (69,422) (13,239) (19.1)%
         
Loss from continuing operations $(26,266) $(24,915) $1,351
 5.4 %
  For the Three Months
Ended June 30,		    
($ in thousands) 2020 2019 $ Change % Change
Rental revenues and other property income $449,755
 $441,582
 $8,173
 1.9 %
         
Expenses:        
Property operating and maintenance 167,002
 166,574
 428
 0.3 %
Property management expense 14,529
 16,021
 (1,492) (9.3)%
General and administrative 14,426
 15,956
 (1,530) (9.6)%
Interest expense 86,071
 95,706
 (9,635) (10.1)%
Depreciation and amortization 137,266
 133,031
 4,235
 3.2 %
Impairment and other (180) 1,671
 (1,851) (110.8)%
Total expenses 419,114
 428,959
 (9,845) (2.3)%
         
Other, net 1,370
 610
 760
 124.6 %
Gain on sale of property, net of tax 11,167
 26,172
 (15,005) (57.3)%
         
Net income $43,178
 $39,405
 $3,773
 9.6 %
Rental Revenues and Other Property Income
As of September 30, 2017 and 2016, we owned 47,867 and 48,431 single-family homes for lease, respectively, generating rental revenue of $229.4 million and $221.0 million, respectively, forFor the three months then ended. Rentalended June 30, 2020 and 2019, total portfolio rental revenues increased 3.8% due toand other property income totaled $449.8 million and $441.6 million, respectively, an increase of 1.9%, driven by an increase in average occupancy, average monthly rent per occupied home, despiteand utilities reimbursements, partially offset by an increase in bad debt, reduced fee income, and a 1,006 home decrease between periods in the average number of homes owned and a relatively flat occupancy. During the three months ended September 30, 2017 and 2016, we acquired 270 and 209 homes, respectively, and sold 128 and 131 homes, respectively.owned.
Average occupancy for the three months ended June 30, 2020 and 2019 for the total portfolio was 94.4%96.0% and 94.3%94.6%, respectively. Average monthly rent per occupied home for the total portfolio for the three months ended SeptemberJune 30, 20172020 and 2016, respectively. Average rent per occupied home in actual dollars2019 was $1,869 and $1,800, respectively, a 3.8% increase. For our Same Store portfolio, average occupancy was 97.5% and 96.5% for the three months ended SeptemberJune 30, 2017 was $1,705, compared to $1,6232020 and 2019, respectively, and average monthly rent per occupied home for the three months ended SeptemberJune 30, 2016,2020 and 2019 was $1,868 and $1,801, respectively, a 5.1%3.7% increase.
For ourThe annualized turnover rate for the Same Store portfolio our average occupancy was 95.4% and 95.5% for the three months ended SeptemberJune 30, 20172020 and 2016, respectively,2019 was 27.7% and our32.9%, respectively. For the Same Store portfolio, an average rent per occupied home in actual dollarsremained unoccupied for 37 and 42 days between residents for the three months ended SeptemberJune 30, 2017 was $1,706, compared2020 and 2019, respectively. The decreases in these two metrics contributed to $1,637 forour increase in occupancy on a year over year basis. Furthermore, we believe the three months ended September 30, 2016, a 4.2% increase.decrease in turnover is partially attributable to the effects of the COVID-19 pandemic (e.g., eviction moratoriums and residents who are not inclined to relocate during this period). We cannot predict how long eviction moratoriums will remain in place nor when the general effects of the pandemic will subside and how those items may affect our turnover and occupancy rates.


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To monitor prospective changes in average monthly rent per occupied home, we compare the monthly rent from an expiring lease to the monthly rent from the next lease for the same home, in each case, net of any amortized concessions.non-service concessions, to calculate net effective rental rate growth. Leases are either renewal leases, where our current resident stays for a subsequent lease term, or a new lease,leases, where our previous resident moves out and a new resident signs a lease to occupy the same home. The following information regarding our renewal leases
Renewal lease net effective rental rate growth for the total portfolio averaged 3.5% and new leases is with respect to our total portfolio. For5.4% for the three months ended SeptemberJune 30, 20172020 and 2016, the blended


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average between renewal lease2019, respectively, and new lease net effective rental rate growth for the total portfolio averaged 4.4%2.9% and 6.2%,5.3% for the three months ended June 30, 2020 and 2019, respectively. This totalFor our Same Store portfolio, blended rate is comprised of an average renewal lease net effective rental rate growth of 5.0%averaged 3.5% and 5.8%5.3% for the three months ended June 30, 2020 and an average2019, respectively, and new lease net effective rental rate growth of 3.6%averaged 2.7% and 6.5%5.2% for the three months ended SeptemberJune 30, 20172020 and 2016,2019, respectively.
The COVID-19 pandemic has negatively impacted our rental revenues and other property income in three notable ways: (1) lower collection rates, which caused our bad debt to increase from 0.4% of gross rental income for the three months ended June 30, 2019 to 1.9% of gross rental income for the three months ended June 30, 2020; (2) non-enforcement of late fees during the three months ended June 30, 2020, which was a primary driver of a decrease in fee income year over year; and (3) lower reimbursements of move out and other costs as a result of lower turnover and eviction moratoriums. The decreases in fee income and reimbursements were partially offset by continued increases in utilities reimbursements as more utilities remained in our name compared to the prior year.
The COVID-19 pandemic is likely to continue to affect our collection rates and ability to raise rents and charge fees, and the impact of jurisdictional restrictions on rental rates, late fees, payment deferral programs, and eviction moratoriums is likely to affect our ability to increase rental revenues and other operating income.
Expenses
For the three months ended SeptemberJune 30, 20172020 and 2016, the turnover rate for our Same Store portfolio was 38.1% and 39.6%, respectively. For our2019, total portfolio, an average home remained unoccupied for 42 and 38 days between residents for the three months ended September 30, 2017 and 2016, respectively.
Other Property Income
For the three months ended September 30, 2017 and 2016, other property income was $14.2expenses were $419.1 million and $12.0$429.0 million, respectively, an 18.1% increase. The primary drivers of the increase were pet rent and late fee income attributable to the implementation of our national lease for all leases written beginning in February 2016 and the automation and consistent application of these fees beginning in March 2017.
Operating Expenses
Operating expenses were $213.6 million and $188.5 million for the three months ended September 30, 2017 and 2016, respectively, a 13.3% increase. Of the $25.1 million increase in expenses, $7.3 million relates to share-based compensation expense and $4.9 million relates to merger and transaction-related expenses as more fully described below.respectively. Set forth below is a discussion of changes in the individual components of operatingtotal expenses.
PropertyFor the three months ended June 30, 2020, property operating and maintenance expense decreasedincreased to $93.3$167.0 million from $166.6 million for the three months ended SeptemberJune 30, 20172019. This 0.3% net increase resulted from $94.2 million foran overall increase in fixed expenses (e.g., property taxes), net of decreases in controllable expenses such as turnover and property administrative costs that declined to due lower turnover and eviction moratoriums. The 1,006 home decrease between periods in the three months ended September 30, 2016 primarily dueaverage number of homes owned also offset the increases in fixed expenses. The COVID-19 pandemic is likely to a decrease in personnelcontinue to impact our turnover rates, and thus turnover costs, and other servicesproperty operating and maintenance expense may continue to be affected by the ongoing impacts of $2.1 million due to operating efficiencies that resulted in lower personnel costs, which represents a 16.3% decrease in those costs. This decrease was partially offset by a $1.0 million increase in property taxes attributable to increased California property taxes resulting from our IPO, which represents a 2.4% increase in those costs.the pandemic.
Property management expense and general and administrative expense increaseddecreased to $38.3$29.0 million from $32.0 million for the three months ended SeptemberJune 30, 2017 from $26.52020 and 2019, respectively, primarily due to decreases in merger and transaction-related expenses of $1.6 million, share-based compensation expense of $1.5 million, and offering related expenses of $0.5 million for the three months ended SeptemberJune 30, 2016. The year over year increase is due2020 as compared to increases in share-based compensation expense of $7.3 million and incurrence of merger and transaction-related expenses of $4.9 million that did not occur in the three months ended SeptemberJune 30, 2016.2019. To date, the COVID-19 pandemic has not had a material impact on our property management and general and administrative expenses.
DepreciationInterest expense was $86.1 million and amortization expense increased slightly due to a higher average cost basis per home at September 30, 2017 compared to September 30, 2016.
Impairment and other expenses increased to $14.6$95.7 million for the three months ended SeptemberJune 30, 2017 from $1.3 million for the three months ended September 30, 2016 due to $16.0 million of accrued costs for losses/damages related to Hurricane Irma.
Interest Expense
Interest expense was $56.8 million2020 and $68.4 million for the three months ended September 30, 2017 and 2016, respectively, a 16.9% decrease.2019, respectively. The decrease in interest expense was due toprimarily driven by a reductiondecrease in the average debt balances outstanding. The decrease in interest expense was partially offset by an increase in our weighted average cost of debt by 90 bps forbalance outstanding during the three months ended SeptemberJune 30, 20172020 as compared to 2016the three months ended June 30, 2019 due to an increase in LIBOR,various prepayments and redemption of a fixed rate onportion of our IH 2017-1 mortgage loan which was at a higher rate than prior year variable rateconvertible debt and the impact of interest rate swaps. As of Septemberfor common equity subsequent to June 30, 2017, we had $5,644.3 million of debt2019. Debt outstanding, net of deferred financing costs and discounts, compareddecreased to $7,681.0$8,351.6 million as of SeptemberJune 30, 2016,2020 from $8,965.0 million as of June 30, 2019.
Depreciation and amortization expense increased to $137.3 million for the three months ended June 30, 2020 from $133.0 million for the three months ended June 30, 2019, due to an increase in cumulative capital expenditures. This was partially offset by a 26.3% decrease. The decrease in debt outstanding was attributablethe average number of homes owned during the three months ended three months ended June 30, 2020 compared to the $2,321.6three months ended June 30, 2019.


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Impairment and other expenses were $(0.2) million payoffand $1.7 million for the three months ended June 30, 2020 and 2019, respectively. During the three months ended June 30, 2020, impairment and other expenses were primarily comprised of impairment losses of $1.4 million on our single-family residential properties and net gains on casualty losses of $1.7 million. During the three months ended June 30, 2019, impairment and other expenses were primarily comprised of impairment losses of $4.1 million on our single-family residential properties, partially offset by net gains on casualty losses of $2.4 million. The impairment costs recognized during the three months ended June 30, 2020 were not a direct result of the COVID-19 pandemic.
Other, net
Other, net increased to $1.4 million for the three months ended June 30, 2020 from $0.6 million for the three months ended June 30, 2019, due to changes in the components of our credit facilities, as well as $2,086.6 million of prepayments on our mortgage loans from cash from IPO proceeds, operations,miscellaneous income and proceeds from home sales, net of borrowings of $1,500.0 million from the Term Loan Facility, and $996.4 million from the IH 2017-1 mortgage loan.


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expenses between periods.
Gain on Sale of Property, Netnet of Taxtax
Gain on sale of property, net of tax was $3.8$11.2 million and $3.0$26.2 million for the three months ended SeptemberJune 30, 20172020 and 2016,2019, respectively. The primary driver forof the differencedecrease was a decrease in the gain on sale between periods was the volume and compositionnumber of homes sold from 779 during the respective periods.three months ended June 30, 2019 to 416 during the three months ended June 30, 2020.
Results of Operations
NineSix Months Ended SeptemberJune 30, 20172020 Compared to NineSix Months Ended SeptemberJune 30, 20162019
The following table sets forth a comparison of the results of operations for the ninesix months ended SeptemberJune 30, 20172020 and 2016:2019:
  Nine Months Ended
September 30,		    
($ in thousands) 2017 2016 $ Change % Change
Revenues:        
Rental revenues $683,975
 $654,726
 $29,249
 4.5 %
Other property income 40,527
 33,310
 7,217
 21.7 %
Total revenues 724,502
 688,036
 36,466
 5.3 %
         
Operating expenses:        
Property operating and maintenance 274,275
 270,494
 3,781
 1.4 %
Property management expense 31,436
 22,638
 8,798
 38.9 %
General and administrative 104,154
 49,579
 54,575
 110.1 %
Depreciation and amortization 202,558
 198,261
 4,297
 2.2 %
Impairment and other 16,482
 1,642
 14,840
 N/M
Total operating expenses 628,905
 542,614
 86,291
 15.9 %
Operating income 95,597
 145,422
 (49,825) (34.3)%
         
Other income (expenses):        
Interest expense (182,726) (209,165) (26,439) (12.6)%
Other, net (482) (1,025) (543) (53.0)%
Total other income (expenses) (183,208) (210,190) (26,982) (12.8)%
         
Loss from continuing operations $(87,611) $(64,768) $22,843
 35.3 %
  
For the Six Months
Ended June 30,
    
($ in thousands) 2020 2019 $ Change % Change
Rental revenues and other property income $899,544
 $877,082
 $22,462
 2.6 %
         
Expenses:        
Property operating and maintenance 333,918
 326,920
 6,998
 2.1 %
Property management expense 28,901
 31,181
 (2,280) (7.3)%
General and administrative 28,654
 42,494
 (13,840) (32.6)%
Interest expense 170,828
 189,689
 (18,861) (9.9)%
Depreciation and amortization 272,293
 266,640
 5,653
 2.1 %
Impairment and other 2,947
 7,063
 (4,116) (58.3)%
Total expenses 837,541
 863,987
 (26,446) (3.1)%
         
Other, net 5,084
 3,735
 1,349
 36.1 %
Gain on sale of property, net of tax 26,367
 43,744
 (17,377) (39.7)%
         
Net income $93,454
 $60,574
 $32,880
 54.3 %
Rental Revenues and Other Property Income
As of SeptemberFor the six months ended June 30, 20172020 and 2016, we owned 47,8672019, total portfolio rental revenues and 48,431 single-family homes for lease, respectively, generating rental revenue of $684.0other property income totaled $899.5 million and $654.7$877.1 million, respectively, for the nine months then ended. Rental revenues increased 4.5% due toan increase of 2.6%, driven by an increase in both average occupancy, average monthly rent per occupied home, and utilities reimbursements, partially offset by an increase in bad debt, reduced fee income, and a 1,084 home decrease between periods in the average number of homes owned.
Average occupancy for the six months ended June 30, 2020 and 2019 for the total portfolio was 95.2% and 94.7%, respectively. Average monthly rent per occupied home for the total portfolio for the six months ended June 30, 2020 and 2019 was $1,860 and $1,791, respectively, a 3.9% increase. For our Same Store portfolio, average occupancy was 97.1% and 96.5% for the six months ended June 30, 2020 and 2019, respectively, and average monthly rent per occupied home despite a slight decrease in number of homes owned. Duringfor the ninesix months ended SeptemberJune 30, 20172020 and 2016, we acquired 6202019 was $1,860 and 1,135 homes,$1,792, respectively, and sold 1,051 and 842 homes, respectively.a 3.8% increase.
Average occupancy

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The annualized turnover rate for the totalSame Store portfolio was 94.8% and 94.6% for the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019 was 26.3% and 29.0%, respectively. For the Same Store portfolio, an average home remained unoccupied for 44 and 47 days between residents for the six months ended June 30, 2020 and 2019, respectively. The decreases in these two metrics contributed to our increase in average occupancy correlates withon a year over year basis. Furthermore, we believe the decrease in turnover is partially attributable to the numbereffects of homes acquiredthe COVID-19 pandemic (e.g., eviction moratoriums and residents who are not inclined to relocate during 2017 compared to 2016 as newly acquired homes are unoccupied for a longer periodthis period). We cannot predict how long eviction moratoriums will remain in place nor when the general effects of time during initial renovations than during a re-resident period. Average rent per occupied home in actual dollars for the nine months ended September 30, 2017 was $1,683, compared to $1,600 for the nine months ended September 30, 2016, a 5.2% increase.


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Forpandemic will subside and how those items may affect our Same Store portfolio, our averageturnover and occupancy was 95.8% and 96.1% for the nine months ended September 30, 2017 and 2016, respectively, and our average rent per occupied home in actual dollars for the nine months ended September 30, 2017, was $1,686, compared to $1,617 for the nine months ended September 30, 2016, a 4.3% increase.rates.
To monitor prospective changes in average monthly rent per occupied home, we compare the monthly rent from an expiring lease to the monthly rent from the next lease for the same home, in each case, net of any amortized concessions.non-service concessions, to calculate net effective rental rate growth. Leases are either renewal leases, where our current resident stays for a subsequent lease term, or a new lease,leases, where our previous resident moves out and a new resident signs a lease to occupy the same home. The following information regarding our renewal leases
Renewal lease net effective rental rate growth for the total portfolio averaged 3.9% and new leases is with respect to our total portfolio. For5.3% for the ninesix months ended SeptemberJune 30, 20172020 and 2016, the blended average between renewal lease2019, respectively, and new lease net effective rental rate growth for the total portfolio averaged 4.7%2.5% and 5.8%,4.5% for the six months ended June 30, 2020 and 2019, respectively. This totalFor our Same Store portfolio, blended rate is comprised of an average renewal lease net effective rental rate growth of 5.1%averaged 3.9% and 5.5%5.3% for the six months ended June 30, 2020 and an average2019, respectively, and new lease net effective rental rate growth of 4.1%averaged 2.3% and 6.2%4.6% for the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, respectively.
ForThe COVID-19 pandemic has negatively impacted our rental revenues and other property income in three notable ways: (1) lower collection rates, which caused our bad debt to increase from 0.5% of gross rental income for the ninesix months ended SeptemberJune 30, 2017 and 2016, the turnover rate for our Same Store portfolio was 36.2% and 37.2%, respectively. For our total portfolio, an average home remained unoccupied for 46 and 40 days between residents2019 to 1.1% of gross rental income for the ninesix months ended SeptemberJune 30, 20172020; (2) non-enforcement of late fees during the six months ended June 30, 2020, which was a primary driver of a decrease in fee income year over year; and 2016, respectively.(3) lower reimbursements of move out and other costs as a result of lower turnover and eviction moratoriums. The decreases in fee income and reimbursements were partially offset by continued increases in utilities reimbursements as more utilities remained in our name compared to the prior year.
Other Property IncomeThe COVID-19 pandemic is likely to continue to affect our collection rates and ability to raise rents and charge fees, and the impact of jurisdictional restrictions on rental rates, late fees, payment deferral programs, and eviction moratoriums is likely to affect our ability to increase rental revenues and other operating income.
Expenses
For the ninesix months ended SeptemberJune 30, 20172020 and 2016, other property income was $40.52019, total expenses were $837.5 million and $33.3$864.0 million, respectively, a 21.7% increase. The primary drivers of the increase were pet rent and late fee income attributable to the implementation of our national lease for all leases written beginning in February 2016 and the automation and consistent application of these fees beginning in March 2017.
Operating Expenses
Operating expenses were $628.9 million and $542.6 million for the nine months ended September 30, 2017 and 2016, respectively, a 15.9% increase. Of the $86.3 million increase in expenses, $51.4 million relates to share-based compensation expense, $8.3 million relates to IPO related costs, and $4.9 million relates to merger and transaction-related expenses as more fully described below.respectively. Set forth below is a discussion of changes in the individual components of operatingtotal expenses.
PropertyFor the six months ended June 30, 2020, property operating and maintenance expense increased to $274.3$333.9 million from $326.9 million for the ninesix months ended SeptemberJune 30, 20172019. This 2.1% net increase resulted from $270.5 million for the nine months ended September 30, 2016 primarily due to an increase in property taxes, of $8.2 million which represents a 7.2% increase in those costs, with $3.6 million of the increase being attributable to increased California property taxes resulting from our IPO. This increase wasrepairs and maintenance, and utilities, partially offset by a $6.5 million decreasedecreases in turnover and property administrative costs that declined to due lower turnover and eviction moratoriums and savings in personnel expenses dueand other costs. The 1,084 home decrease between periods in the average number of homes owned also offset the increases in expenses. The COVID-19 pandemic is likely to continue to impact our turnover rates, and thus turnover costs, and other property operating efficiencies that resulted in lower personnel costs, which represents a 17.0% decrease in those costs.and maintenance expense may continue to be affected by the ongoing impacts of the pandemic.
Property management expense and general and administrative expense increaseddecreased to $135.6$57.6 million from $73.7 million for the ninesix months ended SeptemberJune 30, 2017 from $72.22020 and 2019, respectively, due to decreases in severance expense of $7.1 million, for the nine months ended September 30, 2016. An increase inmerger and transaction-related expenses of $4.3 million, share-based compensation expense of $51.4$3.0 million, and offering related expenses of $2.0 million for the ninesix months ended SeptemberJune 30, 2017, was driven by $12.0 million of vesting of Class B Units and $45.9 million of awards issued in connection with2020 as compared to the IPO. Additionally, $8.3 million of IPO readiness costs and other IPO costs as well as $4.9 million of merger and transaction-related expenses were incurred during the ninesix months ended SeptemberJune 30, 2017.
Impairment2019. To date, the COVID-19 pandemic has not had a material impact on our property management and other expenses increased to $16.5 million for the nine months ended September 30, 2017 from $1.6 million for the nine months ended September 30, 2016 due to $16.0 million of accrued losses/damages related to Hurricane Irma.
Depreciationgeneral and amortization expense increased due to a higher average cost basis per home at September 30, 2017 compared to September 30, 2016 driven by improvements capitalized over the past 12 months.
Interest Expenseadministrative expenses.
Interest expense was $182.7$170.8 million and $209.2$189.7 million for the ninesix months ended SeptemberJune 30, 20172020 and 2016, respectively, a 12.6% decrease.2019, respectively. The decrease in interest expense was primarily driven by a decrease in the average debt balance outstanding during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 due to various prepayments and redemption of a reduction in averageportion of our convertible debt balances outstanding, which was offset by an increase in our weighted average cost of debt by 80 bps for the nine months ended Septembercommon equity subsequent to June 30,


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2017 compared to 2016 due to an increase in LIBOR, a fixed rate on our IH 2017-1 mortgage loan which was at a higher rate than prior year variable rate debt, and the impact of interest rate swaps. Additionally, there was an increase in the fair value mark to market adjustment of $3.7 million related to the interest rate swaps during 2017. As of September 30, 2017, we had $5,644.3 million of debt 2019. Debt outstanding, net of deferred financing costs and discounts, compareddecreased to $7,681.0$8,351.6 million as of SeptemberJune 30, 2016,2020 from $8,965.0 million as of June 30, 2019.


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Depreciation and amortization expense increased to $272.3 million for the six months ended June 30, 2020 from $266.6 million for the six months ended June 30, 2019 due to an increase in cumulative capital expenditures. This was partially offset by a 26.3% decrease. The decrease in debt outstanding was attributablethe average number of homes owned during the six months ended June 30, 2020 compared to the $2,321.6six months ended June 30, 2019.
Impairment and other expenses were $2.9 million payoffand $7.1 million for the six months ended June 30, 2020 and 2019, respectively. During the six months ended June 30, 2020, impairment and other expenses was comprised of impairment losses of $3.9 million on our single-family residential properties and net gains on casualty losses of $1.0 million. During the six months ended June 30, 2019, impairment and other expenses was comprised of impairment losses of $7.3 million on our single-family residential properties, partially offset by net gains on casualty losses of $0.2 million. The impairment costs recognized during the six months ended June 30, 2020 were not a direct result of the COVID-19 pandemic.
Other, net
Other, net increased to $5.1 million for the six months ended June 30, 2020 from $3.7 million for the six months ended June 30, 2019, due to changes in the components of our credit facilities, as well as $2,086.6 million of prepayments on our mortgage loans from cash from IPO proceeds, operations,miscellaneous income and proceeds from home sales, net of borrowings of $1,500.0 million from the Term Loan Facility, and $996.4 million from the IH 2017-1 mortgage loan.expenses.
Gain on Sale of Property, Netnet of Taxtax
Gain on sale of property, net of tax was $28.2$26.4 million and $13.2$43.7 million for the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, respectively. Of the 1,051 homes sold during the nine months ended September 30, 2017, 454 were sold in two bulk transactions for a gain of $9.5 million. The additional 597 homes sold in the nine months ended September 30, 2017, sold for a net gain of $18.7 million. Of the 842 homes sold during the nine months ended September 30, 2016, 590 homes were sold in one bulk sale transaction for a gain of $9.4 million. The additional 252 homes sold in the nine months ended September 30, 2016 sold at a net gain of $3.8 million. The primary driver forof the differencedecrease was a decrease in the gain on sale between periods was the compositionnumber of homes sold from 1,433 during the respective periods.six months ended June 30, 2019 to 900 during the six months ended June 30, 2020.
Liquidity and Capital Resources
Our liquidity and capital resources as of SeptemberJune 30, 20172020 and December 31, 2016 included2019 include unrestricted cash and cash equivalents of $134.4$571.7 million and $198.1$92.3 million, respectively, a 32.1% decrease due primarily519.7% increase. In May 2020, we used cash on hand to repaymentsrepay $120.0 million of certainthe $270.0 million revolving facility (the “Revolving Facility”) that had previously been outstanding. In June 2020, we completed an underwritten public offering to sell 16,675,000 shares of our indebtedness which is discussed in further detail in “—Cash Flows.”common stock and generated net proceeds of $447.5 million, and $150.0 million of the proceeds were used to fully repay the balance outstanding on our Revolving Facility. The remaining proceeds are expected to be used primarily for acquisitions. As of SeptemberJune 30, 2017 and through the date of this filing, the total balance of2020, our $1,000.0 million Revolving Facility remains undrawn. Additionally, there are no restrictions on our ability to draw additional funds from the Revolving Facility, provided we remain in compliance with all covenants; and we have no debt maturing before 2022, provided all extension options are exercised.
Our ability to access capital as well as to use cash from operations to continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic, as detailed in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and in the risk factors identified in other reports we have filed with the SEC, including without limitation our Annual Report on Form 10-K for the year ended December 31, 2019.
Through June 30, 2020, disposition channels remained healthy in our markets, and we continued to sell homes that had been designated for disposition. Additionally, we have limited cash commitments outside of debt service as we do not engage in any development activity, and the pipeline of acquisitions to which we are committed is available for any liquidity requirements.$47.5 million as of June 30, 2020. However, the ongoing impact of the COVID-19 pandemic may impact the acquisition and disposition of single-family homes in ways that we are unable to predict.
Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, make distributions and dividend payments to our equity investorsstockholders, and meet other general requirements of our business. Our liquidity, to a certain extent, is subject to general economic, financial, competitive, and other factors beyond our control. Our near-term liquidity requirements consist primarily of: (i) renovating newly-acquired homes; (ii) funding HOA fees (as applicable), real estateproperty taxes, insurance premiums, and the ongoing maintenance forof our homes; (iii) interest expense; and (iv) payment of dividends to our equity investors. Our long-term liquidity requirements consist primarily of funds necessary to pay for the acquisition of and non-recurring capital expenditures for our homes and principal payments on our indebtedness.
We will seek to satisfy our long-term liquidity needs through cash provided by operations, long-term secured and unsecured borrowings, the issuance of debt and equity securities, and property dispositions. We have financed our operations and acquisitions to date through cash provided by operations, capital contributions from the Pre-IPO Owners, and financing arrangements. We believe our rental income, net of operatingtotal expenses, will generally provide cash flow sufficient to fund our operations and distributions and dividend payments on a near-term basis.


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However, the COVID-19 pandemic may negatively impact our operating cash flow such that we are unable to make required debt service payments, which would result in an event of default for any such loan agreement under which payments were not made. Specifically, the collateral within individual borrower entities may underperform, resulting in cash flow shortfalls for debt service while consolidated cash flows are sufficient to fund our operations. If an event of default occurs for a specific mortgage loan or for our secured term loan, our loan agreements provide certain remedies, including our ability to fund shortfalls from consolidated cash flow; and such an event of default would not result in an immediate acceleration of the loan.
Our real estate assets are illiquid in nature. A timely liquidation of assets may not be a viable source of short-term liquidity should a cash flow shortfall arise, and we may need to source liquidity from other financing alternatives,sources, such as the Revolving Facility.Facility, which had an undrawn balance of $1,000.0 million as of June 30, 2020.
Our long-term liquidity requirements consist primarily of funds necessary to pay for the acquisition of, and non-recurring capital expenditures for, our homes and principal payments on our indebtedness.
We intend to satisfy our long-term liquidity needs through cash provided by operations, long-term secured and unsecured borrowings, the issuance of debt and equity securities, and property dispositions. As a REIT, INVH iswe are required to distribute to its shareholdersour stockholders at least 90% of itsour taxable income, excluding net capital gain, on an annual basis. Therefore, as a general matter, it is unlikely that we will be able to retain substantial cash balances from our annual taxable income that could be used to meet our liquidity needs from our annual taxable income.needs. Instead, we will need to meet these needs from external sources of capital and amounts, if any, by which our cash flow generated from operations exceeds taxable income.
We have historically utilized credit facilities, mortgage loans and warehouse loans from our Sponsor to fund acquisitions and renovation improvements. As of September 30, 2017, we have repaid all outstanding borrowings under the credit facilities, the IH1 2013-1 mortgage loan, the IH1 2014-1 mortgage loan, and the warehouse loans. As further described and defined below,On August 22, 2019, we entered into distribution agreements with a New Credit Facility on February 6, 2017syndicate of banks (the “Agents”), pursuant to which includes a $1,000.0we may sell, from time to time, up to an aggregate sales price of $800.0 million revolving line of credit component that is currently undrawnour common stock through the Agents (the “ATM Equity Program”). During the three and a fully drawn $1,500.0 million term loan component. On April 28, 2017,six months ended June 30, 2020, we entered into a $1,000.0 million FNMA Loan (as defined in “—Securitization Transactions”)sold 15,400 and used1,887,466 shares of our common stock under our ATM Equity Program, respectively, generating net proceeds of $0.3 million and $56.3 million, respectively, after giving effect to repay


54


all obligations outstandingAgent commissions and other costs totaling $0.1 million and $1.0 million, respectively. As of June 30, 2020, $685.8 million remains available for future offerings under the existing IH1 2014-1 mortgageATM Equity Program.
Certain Securitizations, the Secured Term Loan, the Term Loan Facility (all defined below), and the Revolving Facility (collectively, the “LIBOR-Based Loans”) use London Interbank Offer Rate (“LIBOR”) as a benchmark for establishing interest rates. Our derivative instruments are also indexed to LIBOR. The Financial Conduct Authority in the United Kingdom, the governing body responsible for regulating LIBOR, announced that it will no longer compel or persuade financial institutions and panel banks to make LIBOR submissions after 2021. Once LIBOR is phased out, the interest rates for our LIBOR-Based Loans will be based on a comparable or successor rate as provided for in our loan agreements. We will work with the counterparties to our swap and cap agreements to adjust each floating rate to a comparable or successor rate. While we do not expect that the transition from LIBOR and risks related thereto will have a material adverse effect on our financing costs, the ultimate outcome of this change is uncertain at this time, and significant management time and attention may be required to transition to using the new benchmark rates and to make voluntary prepayments totaling $510.0 million onimplement necessary changes to our financial models.
The following describes the IH1 2014-3 mortgage loan.key terms of our current indebtedness.
Mortgage Loans
As of September 30, 2017, we have completed eightOur securitization transactions (the “Securitizations” or the “mortgage loans”) are collateralized by certain homes owned by wholly owned subsidiaries of INVH LP that were formed to facilitate certain of our financing arrangements (the “Borrower Entities”). We utilize the respective Invitation Homes Borrower Entities. The proceeds from the mortgage loans were usedour securitizations to fundfund: (i) repayments of then-outstanding indebtedness, including credit facilities and prior securitization transactions,indebtedness; (ii) initial deposits in theinto Securitization reserve accounts,accounts; (iii) closing costs in connection with the mortgage loans,loans; and (iv) general costs associated with our operations, and (v) distributions and dividends to the Pre-IPO Owners.operations.




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The following table sets forth a summary of theour mortgage loan indebtedness as of SeptemberJune 30, 20172020 and December 31, 2016:2019:
          
Outstanding Principal Balance(4)
($ in thousands) Maturity Date 
Maturity Date if Fully Extended(2)
 
Rate(3)
 Range of Spreads 
September 30,
2017(5)
 December 31,
2016
IH1 2013-1 N/A N/A N/A 115-365 bps $—
 $462,431
IH1 2014-1 N/A N/A N/A 100-375 bps —
 978,231
IH1 2014-2(1)(6)
 September 9, 2018 September 9, 2019 3.13% 110-400 bps 703,241
 710,664
IH1 2014-3(1)(7)
 December 9, 2017 December 9, 2019 3.56% 120-500 bps 147,323
 766,753
IH2 2015-1, net(1)(8)
 March 9, 2018 March 9, 2020 3.60% 145-430 bps 529,443
 531,318
IH2 2015-2(1)
 June 9, 2018 June 9, 2020 3.18% 135-370 bps 628,574
 630,283
IH2 2015-3(1)
 August 9, 2018 August 7, 2020 3.41% 130-475 bps 1,169,048
 1,184,314
IH 2017-1, net(9)
 June 9, 2027 N/A 4.17% N/A 996,365
 —
Total Securitizations 4,173,994

5,263,994
Less deferred financing costs, net (16,970) (9,256)
Total $4,157,024
 $5,254,738
          
Outstanding Principal Balance(5)
($ in thousands) 
Maturity
Date(1)
 
Maturity Date if
Fully Extended(2)
 
Interest
Rate(3)
 
Range of Spreads(4)
 June 30,
2020		 December 31, 2019
IH 2017-1(6)
 June 9, 2027 June 9, 2027 4.23% N/A $994,606
 $995,520
SWH 2017-1(7)
 October 9, 2020 January 9, 2023 1.73% 102-347 bps 736,208
 744,092
IH 2017-2(7)
 December 9, 2020 December 9, 2024 1.31% 91-186 bps 616,429
 624,475
IH 2018-1(7)
 March 9, 2021 March 9, 2025 1.28% 76-206 bps 780,718
 793,720
IH 2018-2(7)
 June 9, 2021 June 9, 2025 1.50% 95-230 bps 934,426
 957,135
IH 2018-3(7)(8)
 July 9, 2020 July 9, 2025 1.51% 105-230 bps 1,143,986
 1,213,035
IH 2018-4(7)
 January 9, 2021 January 9, 2026 1.58% 115-225 bps 928,533
 938,430
Total Securitizations 6,134,906
 6,266,407
Less: deferred financing costs, net (16,331) (27,946)
Total $6,118,575
 $6,238,461
 
(1)
The initial maturity term of each of these mortgage loans is two years, individually subject to three, one-year extension options at the borrower’s discretion (provided that there is no continuing event of default under the loan agreement and the borrower obtains a replacement interest rate cap agreement in a form reasonably acceptable to the lender). Our IH1 2014-3, IH2 2015-1, IH2 2015-2, and IH2 2015-3 mortgage loans have exercised the first extension options, and IH1 2014-2 has exercised the second option.The maturity dates above are reflective ofreflect all extensionsextension options that have been exercised.
(2)Represents the maturity date if we exercise each of the remaining one-yearone year extension options available, which are subject to certain conditions being met.
(3)
For each of our first seven mortgage loans,Except for IH 2017-1, interest rates are based on a weighted average spread to LIBOR;over LIBOR, plus applicable servicing fees; as of SeptemberJune 30, 20172020, LIBOR was 1.23%0.16%. Our IH 2017-1 mortgage loan bears interest at a fixed rate of 4.17%4.23% per annum, equal to the market determined pass-through rate payable on the certificates plusincluding applicable servicing fees.
(4)
Range of spreads is based on outstanding principal balances as of June 30, 2020.
(5)Outstanding Principal Balanceprincipal balance is net of discounts and does not include capitalized deferred financing costs, net.
(5)
From October 1, 2017 to November 2, 2017, we made prepayments of $2.6 million on our mortgage loans related to the disposition of properties.
(6)
On October 10, 2017, we submitted a notification to request an extensionNet of the maturityunamortized discount of the IH1 2014-3 mortgage loan from$2.5 million and $2.6 million as of June 30, 2020 and December 9, 2017 to December 9, 2018 upon approval. On November 9, 2017, the outstanding balance of IH1 2014-2 was repaid in full.31, 2019, respectively.
(7)
On November 9, 2017,The initial maturity term of each of these mortgage loans is two years, individually subject to three to five, one year extension options at the outstanding balanceBorrower Entity’s discretion (provided that there is no continuing event of IH1 2014-3 was repaid in fulldefault under the mortgage loan agreement and the Borrower Entity obtains and delivers a replacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender). Our SWH 2017-1, IH 2017-2, IH 2018-1 and IH 2018-2 mortgage loans have exercised the first extension option. The maturity dates above reflect all extensions that have been exercised.
(8)
NetOn July 9, 2020, the extension of unamortized discountthe maturity date of $0.0 million and $0.1 million as of September 30, 2017 and December 31, 2016, respectively.
(9)
Net of unamortized discount of $3.4 million as of September 30, 2017.
the IH 2018-3 mortgage loan from July 9, 2020 to July 9, 2021 was approved by the lender.
Securitization Transactions
IH1 2013-1: In November 2013, we completed our first securitizationFor each Securitization transaction, (“IH1 2013-1”), in which 2013-1 IHthe Borrower L.P. (“S1 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH1,Entity executed a loan agreement with a third-partythird party lender. Except for IH 2017-1, each outstanding mortgage loan originally consisted of six floating rate components. The third-party lender made a six component term loantwo year initial terms are individually subject to S1three to five, one year extension options at the Borrower inEntity’s discretion. Such extensions are available provided there is no continuing event of default under the amount of $479.1 million. All six components of the loan were sold at par. On February 6, 2017, the outstanding balance of IH1 2013-1 was repaid in full.
IH1 2014-1: In May 2014, we completed our second securitization transaction (“IH1 2014-1”), in which 2014-1 IH Borrower L.P. (“S2 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH1, executed arespective mortgage loan agreement withand the Borrower Entity obtains and delivers a third-partyreplacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender. The third party lender madeIH 2017-1 is a six component term loan to S2 Borrower in the amount of


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$993.7 million. All six components of the loan were sold at par. On February 6, 2017 and March 9, 2017, we made voluntary prepayments of $291.5 million and $260.0 million, respectively. On April 28, 2017, the outstanding balance of IH1 2014-1 was repaid in full.
IH1 2014-2: In August 2014, we completed our third securitization transaction (“IH1 2014-2”), in which 2014-2 IH Borrower L.P. (“S3 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH1, executed a loan agreement with a third-party lender. The third-party lender made a term10 year, fixed rate mortgage loan comprised of (1) six floating rate componentstwo components. Certificates issued by the trust in connection with Component A of IH 2017-1 benefit from the Federal National Mortgage Association’s guaranty of timely payment of principal and (2) one fixed rate component to S3 Borrowerinterest.


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Each mortgage loan is secured by a pledge of the equity in the amountassets of $719.9 million. Of the seven loan components,respective Borrower Entities, as well as first-priority mortgages on the Class A, B, C, Dunderlying properties and G certificates were sold at par; however,a grant of security interests in all of the Class Erelated personal property. As of June 30, 2020 and F certificates were sold atDecember 31, 2019, a total discount of $4.0 million.35,786 and 37,040 homes, respectively, with a net book value of $6,862.2 million and $7,137.6 million, respectively, are pledged pursuant to the mortgage loans. Each Borrower Entity has the right, subject to certain requirements and limitations outlined in the respective loan agreements, to substitute properties. We are obligated to make monthly payments of interest for each mortgage loan.
Transactions with the first payment being due upon the closing of the loan, and subsequent payments beginning October 9, 2014 and continuing monthly thereafter. On November 9, 2017, the outstanding balance of IH1 2014-2 was repaid in full.Trusts
IH1 2014-3: In November 2014, we completed our fourth securitization transaction (“IH1 2014-3”), in which 2014-3 IH Borrower L.P. (“S4 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH1, executed a loan agreement with a third-party lender. The third-party lender issued a term loan comprised of (1) six floating rate components and (2) one fixed rate component to S4 Borrower in the amount of $769.3 million. Of the seven components, the Class B and G certificates were sold at par; however, the Class A, C, D, E and F certificates were sold at a total discount of $7.2 million. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning December 9, 2014 and continuing monthly thereafter. On May 9, 2017 and June 9, 2017, we made voluntary prepayments of $510.0 million and $100.0 million, respectively, from the proceeds of IH 2017-1 securitization transaction and cash flows from operations. On November 9, 2017, the outstanding balance of IH1 2014-3 was repaid in full.
IH2 2015-1: In January 2015, we completed our fifth securitization transaction (“IH2 2015-1”), in which 2015-1 IH2 Borrower L.P. (“S5 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH2, executed a loan agreement with a third-party lender. The third-party lender made a seven component term loan to S5 Borrower in the amount of $540.9 million. Six of the seven components, the Class A, B, C, D, E, and G certificates were sold at par; however, the Class F certificates were sold at a total discount of $0.6 million. The unamortized balance of this discount is included in mortgage loans, net on our condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning March 9, 2015 and continuing monthly thereafter.
IH2 2015-2: In April 2015, we completed our sixth securitization transaction (“IH2 2015-2”), in which 2015-2 IH2 Borrower L.P. (“S6 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH2, executed a loan agreement with a third-party lender. The third-party lender made a seven component term loan to S6 Borrower in the amount of $636.7 million. All of the components of the loan were sold at par. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning June 9, 2015 and continuing monthly thereafter.
IH2 2015-3: In June 2015, we completed our seventh securitization transaction (“IH2 2015-3”), in which 2015-3 IH2 Borrower L.P. (“S7 Borrower”), a newly-formed special purpose entity and wholly owned subsidiary of IH2, executed a loan agreement with a third-party lender. The third-party lender made a seven component term loan to S7 Borrower in the amount of $1,194.0 million. All of the components of the loan were sold at par. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning August 7, 2015 and continuing monthly thereafter.
IH 2017-1: In April 2017, we completed our eighth securitization transaction (“IH 2017-1”), in which 2017-1 IH Borrower L.P. (“S9 Borrower”), a special purpose entity previously formed in connection with IH1 2014-1 and wholly owned subsidiary of IH1, entered into a loan agreement with Wells Fargo Bank, National Association (the “FNMA Loan”), providing for a ten-year, fixed rate mortgage loan comprised of two components with a total principal amount of $1,000.0 million, secured by first priority mortgages on a portfolio of 7,204 of our homes. The Class A certificates, which benefit from Fannie Mae’s guaranty of timely payment of principal and interest, were sold at par. The Class B certificates represent a beneficial interest in the most subordinate component of the FNMA Loan and were sold at a total discount of $3.6 million. The unamortized balance of this discount is included in mortgage loans, net on our condensed consolidated


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balance sheets as of September 30, 2017. We are obligated to make monthly payments of interest with the first payment being due upon the closing of the loan, and subsequent payments beginning June 9, 2017 and continuing monthly thereafter.
Concurrent with the execution of each mortgage loan agreement, the respective third-partythird party lender sold each loan it originated with us to individual depositor entities (the “Depositor Entities”) who subsequently transferred each loan to Securitization-specific trust entities (the “Trusts”). The Depositor Entities associated with the IH1 2014-2, IH1 2014-3 and IH 2017-1 securitizationsfor our currently outstanding Securitizations are wholly owned subsidiaries of IH1, the Depositor Entities associated with the IH2 2015-1, IH2 2015-2, and IH2 2015-3 securitizations are wholly owned subsidiaries of IH2, and the Depositor Entities associated with the IH1 2013-1 and IH1 2014-1 securitizations were wholly owned by unaffiliated third parties.subsidiaries.
As consideration for the transfer of each loan to the Trusts, the Trusts issued certificate classes of certificates which mirror the components of the individual loan agreementsloans (collectively, the “Certificates”) to the Depositor Entities, except that Class R certificates do not have related loan components as they represent residual interests in the Trusts. The Certificates represent the entire beneficial interest in the Trusts. Following receipt of the Certificates, the Depositor Entities sold the Certificates to investors usingand used the proceeds as consideration for the loans sold to the Depositor Entities by the lenders. These transactions had no effect on our condensed consolidated financial statements other than with respect to the Class B certificatesCertificates we retained in connection with Securitizations or purchased by INVH LP, and the Class G certificates purchased by IH1 and IH2.at a later date.
For IH1 2014-2, IH1 2014-3, IH2 2015-1, IH2 2015-2, and IH2 2015-3, the Trusts made the Class A through Class F certificates available for sale to both domestic and foreign investors. With the introduction of foreign investment, IH1 and IH2, as sponsors of the respective loans, are required to retain a portion of the risk that represents a material net economic interest in each loan. The Class G certificates for IH1 2014-2, IH1 2014-3, IH2 2015-1, IH2 2015-2, and IH2 2015-3 are equal to 5% of the original principal amount of the loans in accordance with the agreements. Per the terms of the Securitization agreements, the Class G certificates are restricted certificates and were made available exclusively to IH1 and IH2, as applicable. The Class G certificates are principal only and bear a stated annual interest rate of 0.0005%. The Class G certificates are classified as held to maturity investments and are recorded in other assets, net on the condensed consolidated balance sheets.
For IH 2017-1, the Trust made the Class A certificates available for sale to both domestic and foreign investors. In accordance with risk retention requirements of Regulation RR (the “Risk Retention Rules”) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”), INVH LP, as the loan sponsor, is required to retain a portion of the credit risk that represents not less than 5% of the aggregate fair value of the loan as of the closing date. Per the terms of the agreement, the Class B certificates are restricted certificates that were made available exclusively to INVH LP. The Class B certificates pay interest and bear a stated annual interest rate of 4.17% plus applicable servicing fees. The Class B certificates are classified as held to maturity investments and are recorded in other assets, net on the condensed consolidated balance sheets.
The Trusts are structured as pass throughpass-through entities that receive principal and interest payments from the Securitizations and distribute those payments to the holders of the Certificates. The assets held by the Trusts are restricted and can only be used to fulfill the obligations of those entities. The obligations of the Trusts do not have any recourse to the general credit of any entities in these condensed consolidated financial statements. We have evaluated our interests in the Class B and Gcertain certificates of the Trusts held by us (discussed below) and determined that they do not create a more than insignificant variable interest in the Trusts. Additionally, the Class B and Gretained certificates do not provide us with any ability to direct the activities that could impact the Trusts’ economic performance. Therefore, we do not consolidate the Trusts.
General Terms Retained Certificates
As the Trusts made Certificates available for sale to both domestic and foreign investors, sponsors of the mortgage loans are required to retain a portion of the risk that represents a material net economic interest in each loan pursuant to Regulation RR (the “Risk Retention Rules”) under the Securities Exchange Act of 1934, as amended. As such, loan sponsors are required to retain a portion of the credit risk that represents not less than 5% of the aggregate fair value of the loan as of the closing date.
IH 2017-1 issued Class B certificates, which are restricted certificates that were made available exclusively to INVH LP in order to comply with the Risk Retention Rules. The Class B certificates bear a stated annual interest rate of 4.23%, including applicable servicing fees.
For SWH 2017-1, IH 2017-2, IH 2018-1, IH 2018-2, IH 2018-3, and IH 2018-4, we retain 5% of each class of certificates to meet the Risk Retention Rules. These retained certificates accrue interest at a floating rate of LIBOR plus a spread ranging from 0.76% to 3.47%.
The retained certificates total $310.4 million and $317.0 million as of June 30, 2020 and December 31, 2019, respectively, and are classified as held to maturity investments and recorded in other assets, net on the condensed consolidated balance sheets.


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Loan Covenants
The general terms that apply to all of the mortgage loans require useach Borrower Entity to maintain compliance with certain affirmative and negative covenants. Affirmative covenants with which we must comply include our,each Borrower Entity’s, and certain of ourtheir respective affiliates’, compliance with (i) licensing, permitting and legal requirements specified in the mortgage loan agreement,agreements, (ii) organizational requirements of the jurisdictions in which we, and certain of our affiliates,they are organized, (iii) federal and state tax laws, and (iv) books and records requirements specified in the respective mortgage loan agreements. Negative covenants with which we must comply include our,each Borrower Entity’s, and certain of ourtheir affiliates’, compliance with limitations surrounding (i) the amount of oureach Borrower Entity’s indebtedness and the nature of ourtheir investments, (ii) the execution of transactions with affiliates, (iii) the Manager, and (iv) the nature of oureach Borrower Entity’s business activities. At Septemberactivities, and (v) the required maintenance of specified cash reserves. As of June 30, 2017,2020, and through the date our condensed consolidated financial statements were issued, we believe we wereeach Borrower Entity is in compliance with all affirmative and negative covenants.


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Prepayments
For the mortgage loans, prepayments of amounts owed by us are generally not permitted by us under the terms of the respective mortgage loan agreements unless such prepayments are made pursuant to the voluntary election andor mandatory provisions specified in such agreements. The specified mandatory provisions become effective to the extent that a property becomes characterized as a disqualified property, a property is sold, and/or upon the occurrence of a condemnation or casualty event associated with a property. To the extent either a voluntary election is made, or a mandatory prepayment condition exists, in addition to paying all interest and principal, we must also pay certain breakage costs as determined by the loan servicer and a spread maintenance premium if prepayment occurs before the month following the one or two year anniversary of the closing dates of each of the mortgage loans except for IH 2017-1. For IH 2017-1, prepayments on or before December 2026 will require a yield maintenance premium. For the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, we made voluntary and mandatory prepayments totaling $2,086.6of $131.7 million and $33.5$709.4 million, respectively, were made under the terms of the mortgage loan agreements. During the six months ended June 30, 2019, prepayments included the full repayment of the CSH 2016-2 mortgage loan.
New CreditSecured Term Loan
On June 7, 2019, 2019-1 IH Borrower LP, a consolidated subsidiary (“2019-1 IH Borrower” and one of our Borrower Entities), entered into a 12 year loan agreement with a life insurance company (the “Secured Term Loan”). The Secured Term Loan bears interest at a fixed rate of 3.59%, including applicable servicing fees, for the first 11 years and bears interest at a floating rate based on a spread of 147 bps, including applicable servicing fees, over one month LIBOR (subject to certain adjustments as outlined in the loan agreement) for the twelfth year. The Secured Term Loan is secured by first priority mortgages on a portfolio of single-family rental properties as well as a first priority pledge of the equity interests of 2019-1 IH Borrower. We utilized the proceeds from the Secured Term Loan to fund: (i) repayments of then-outstanding indebtedness; (ii) initial deposits into the Secured Term Loan’s reserve accounts; (iii) transaction costs related to the closing of the Secured Term Loan; and (iv) general corporate purposes.


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The following table sets forth a summary of our Secured Term Loan indebtedness as of June 30, 2020 and December 31, 2019:
($ in thousands) 
Maturity
Date
 
Interest
Rate(1)
 June 30,
2020		 December 31, 2019
Secured Term Loan June 9, 2031 3.59% $403,363
 $403,464
Deferred financing costs, net(2,377) (2,486)
Secured Term Loan, net$400,986
 $400,978

(1)
The Secured Term Loan bears interest at a fixed rate of 3.59% per annum including applicable servicing fees for the first 11 years and for the twelfth year bears interest at a floating rate based on a spread of 147 bps over one month LIBOR (or a comparable or successor rate as provided for in our loan agreement), including applicable servicing fees, subject to certain adjustments as outlined in the loan agreement. Interest payments are made monthly.
Collateral
The Secured Term Loan’s collateral pool contains 3,332 and 3,333 homes, respectively, as of June 30, 2020 and December 31, 2019, with a net book value of $727.5 million and $734.8 million, respectively. 2019-1 IH Borrower has the right, subject to certain requirements and limitations outlined in the loan agreement, to substitute properties representing up to 20% of the collateral pool annually, and to substitute properties representing up to 100% of the collateral pool over the life of the Secured Term Loan. In addition, four times after the first anniversary of the closing date, 2019-1 IH Borrower has the right, subject to certain requirements and limitations outlined in the loan agreement, to execute a special release of collateral representing up to 15% of the then-outstanding principal balance of the Secured Term Loan in order to bring the loan-to-value ratio back in line with the Secured Term Loan’s loan-to-value ratio as of the closing date. Any such special release of collateral would not change the then-outstanding principal balance of the Secured Term Loan, but rather would reduce the number of single-family rental homes included in the collateral pool.
Loan Covenants
The Secured Term Loan requires 2019-1 IH Borrower to maintain compliance with certain affirmative and negative covenants. Affirmative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with (i) licensing, permitting and legal requirements specified in the loan agreement, (ii) organizational requirements of the jurisdictions in which they are organized, (iii) federal and state tax laws, and (iv) books and records requirements specified in the loan agreement. Negative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with limitations surrounding (i) the amount of 2019-1 IH Borrower’s indebtedness and the nature of its investments, (ii) the execution of transactions with affiliates, (iii) the Manager, (iv) the nature of 2019-1 IH Borrower’s business activities, and (v) the required maintenance of specified cash reserves. As of June 30, 2020, and through the date our condensed consolidated financial statements were issued, we believe 2019-1 IH Borrower is in compliance with all affirmative and negative covenants.
Prepayments
Prepayments of the Secured Term Loan are generally not permitted unless such prepayments are made pursuant to the voluntary election or mandatory provisions specified in the loan agreement. The specified mandatory provisions become effective to the extent that a property becomes characterized as a disqualified property, a property is sold, and/or upon the occurrence of a condemnation or casualty event associated with a property. To the extent either a voluntary election is made, or a mandatory prepayment condition exists, in addition to paying all interest and principal, we must also pay certain breakage costs as determined by the loan servicer and a yield maintenance premium if prepayment occurs before June 9, 2030. For the six months ended June 30, 2020, we made mandatory prepayments of $0.1 million. No prepayments were made for the six months ended June 30, 2019.


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Term Loan Facility and Revolving Facility
On February 6, 2017, we entered into a loancredit agreement with a syndicate of banks, financial institutions, and institutional lenders for a new credit facility (the “New Credit“Credit Facility”)., which was amended on December 18, 2017 to include all entities and homes acquired in the Mergers. The New Credit Facility provides $2,500.0 million of borrowing capacity and consists of a $1,000.0 million revolving facility (the “Revolving Facility”),Revolving Facility, which will mature on February 6, 2021, with a one-yearone year extension option, and a $1,500.0 million term loan facility (the “Term Loan Facility”), which will mature on February 6, 2022. The Revolving Facility also includes borrowing capacity available for letters of credit and for short-term borrowings referred to as swing line borrowings, in each case subject to certain sublimits. The New Credit Facility provides us with the option to enter into additional incremental credit facilities (including an uncommitted incremental facility that provides us with the option to increase the size of the Revolving Facility and/or the Term Loan Facility by an aggregate amount of up to $1,500.0 million), subject to certain limitations. Proceeds from the Term Loan Facility were used to repay existingthen-outstanding indebtedness and for general corporate purposes. Proceeds from the Revolving Facility are used for general corporate purposes.
The following table sets forth a summary of the new credit facility indebtednessoutstanding principal amounts under the Credit Facility as of SeptemberJune 30, 2017:2020 and December 31, 2019:
      Outstanding Principle Balance
($ in thousands) Origination Date Maturity Date 
Interest Rate(1)
 September 30,
2017
Term loan facility February 6, 2017 February 6, 2022 3.03% $1,500,000
Revolving facility February 6, 2017 February 6, 2021 N/A —
Total 1,500,000
Less deferred financing costs, net (12,749)
Total $1,487,251
($ in thousands) Maturity
Date		 
Interest
Rate(1)
 June 30,
2020		 December 31, 2019
Term Loan Facility February 6, 2022 1.86% $1,500,000
 $1,500,000
Deferred financing costs, net(4,809) (6,253)
Term Loan Facility, net$1,495,191
 $1,493,747
    
Revolving FacilityFebruary 6, 2021 1.91% $—
 $—
 
(1)
Interest raterates for the Term Loan Facility isand the Revolving Facility are based on LIBOR plus an applicable marginmargin. As of 1.80%; as of SeptemberJune 30, 2017,2020, the applicable margins were 1.70% and 1.75%, respectively, and LIBOR was 1.23%0.16%.
(2)
If we exercise the one year extension option, the maturity date will be February 6, 2022.
Interest Rate and Fees
Borrowings under the New Credit Facility bear interest, at our option, at a rate equal to a margin over either (a) a LIBOR rate determined by reference to the Bloomberg LIBOR rate (or a comparable or successor rate)rate as provided for in our loan agreement) for the interest period relevant to such borrowing, or (b) a base rate determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 0.50%, and (3) the LIBOR rate that would be payable on such day for a LIBOR rate loan with a one-monthone month interest period plus 1.00%. The margin is based on a total leverage based grid. The margin for the Revolving Facility ranges from 0.75% to 1.30%, in the case of base rate loans, and 1.75% to 2.30%, in the case of LIBOR rate loans. The margin for the Term Loan Facility ranges from 0.70% to 1.30%, in the case of base rate loans, and 1.70% to


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2.30%, in the case of LIBOR rate loans. In addition, the New Credit Facility provides that, upon receiving an investment grade rating on its non-credit enhanced, senior unsecured long term debt of BBB- or better from Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., or Baa3 or better from Moody’s Investors Service, Inc. (an “Investment Grade Rating Event”), we may elect to convert to a credit rating based pricing grid.
In addition to paying interest on outstanding principal under the New Credit Facility, we are required to pay a facility fee to the lenders under the Revolving Facility in respect of the unused commitments thereunder. The facility fee rate is based on the daily unused amount of the Revolving Facility and is either 0.350%0.35% or 0.200%0.20% per annum based on the unused facility amount. Upon converting to a credit rating pricing based grid, the unused facility fee will no longer apply;apply and we will be required to pay a facility fee ranging from 0.125% to 0.300%. We are also required to pay customary letter of credit fees.


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Prepayments and Amortization
No prepayment or amortization isprincipal reductions are required under the New Credit Facility. We are permitted to voluntarily repay amounts outstanding under the Term Loan Facility at any time without premium or penalty, subject to certain minimum amounts and the payment of customary “breakage” costs with respect to LIBOR loans. Once repaid, no further borrowings will be permitted under the Term Loan Facility.
General TermsLoan Covenants
The New Credit Facility contains certain customary affirmative and negative covenants and events of default. Such covenants will, among other things, restrict, subject to certain exceptions, our ability and that of the Subsidiary Guarantors (as defined below) and their respective subsidiaries to (i) engage in certain mergers, consolidations or liquidations, (ii) sell, lease or transfer all or substantially all of their respective assets, (iii) engage in certain transactions with affiliates, (iv) make changes to the our fiscal year, (v) make changes in the nature of our business and our subsidiaries, and (vi) incur additional indebtedness that is secured on a pari passu basis with the New Credit Facility.
The New Credit Facility also requires us, on a consolidated basis with our subsidiaries, to maintain a (i) maximum total leverage ratio, (ii) maximum secured leverage ratio, (iii) maximum unencumbered leverage ratio, (iv) minimum fixed charge coverage ratio, (v) minimum unencumbered fixed charge coverage ratio, and (vi) minimum tangible net worth. If an event of default occurs, the lenders under the New Credit Facility are entitled to take various actions, including the acceleration of amounts due under the New Credit Facility and all actions permitted to be taken by a secured creditor. At SeptemberAs of June 30, 2017,2020, and through the date ourcondensed consolidated financial statements were issued, we believe we were in compliance with all affirmative and negative covenants.
Guarantees and Security
The obligations under the New Credit Facility are guaranteed on a joint and several basis by each of our direct and indirect domestic wholly owned subsidiaries that own, directly or indirectly, unencumbered assets (the “Subsidiary Guarantors”), subject to certain exceptions. The guarantee provided by any Subsidiary Guarantor will be automatically released upon the occurrence of certain events, including if it no longer has a direct or indirect interest in an unencumbered asset or as a result of certain non-recourse refinancing transactions pursuant to which such Subsidiary Guarantor becomes contractually prohibited from providing its guaranty of the New Credit Facility. In addition, INVH may be required to provide a guarantee of the New Credit Facility under certain circumstances, including if INVH does not maintain its qualification as a REIT.
The New Credit Facility is collateralized by first priority or equivalent security interests in all the capital stock of, or other equity interests in, any Subsidiary Guarantor held by us and each of the Subsidiary Guarantors. The security interests granted under the New Credit Facility will be automatically released upon the occurrence of certain events, including upon an Investment Grade Rating Event or if the total net leverage ratio is less than or equal to 8.00:1.00 for four consecutive fiscal quarters.

Convertible Senior Notes

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Credit Facilities
All of the then-existing credit facilities were paid in full on February 6, 2017 inIn connection with the closingMergers, we assumed SWH’s convertible senior notes. In July 2014, SWH issued $230.0 million in aggregate principal amount of 3.00% convertible senior notes due 2019 (the “2019 Convertible Notes”). Interest on the 2019 Convertible Notes was payable semiannually in arrears on January 1st and July 1st of each year. The notes matured on July 1, 2019, and we settled substantially all of the outstanding balance of the 2019 Convertible Notes through the issuance of 12,553,864 shares of our IPO. common stock.
In January 2017, SWH issued $345.0 million in aggregate principal amount of 3.50% convertible senior notes due 2022 (the “2022 Convertible Notes” and together with the 2019 Convertible Notes, the “Convertible Senior Notes”). Interest on the 2022 Convertible Notes is payable semiannually in arrears on January 15th and July 15th of each year. The 2022 Convertible Notes will mature on January 15, 2022.


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The following table sets forth a summarysummarizes the terms of the Convertible Senior Notes outstanding principal amounts of these credit facilities as of SeptemberJune 30, 20172020 and December 31, 2016:2019:
      
Outstanding Principal Balance(1)
($ in thousands) Origination
Date		 Range of Spreads September 30,
2017		 December 31,
2016
IH1 2015 April 3, 2015 325 bps $—
 $85,492
IH2 2015 September 29, 2015 275 bps —
 43,859
IH3 2013 December 19, 2013 300-425 bps —
 932,583
IH4 2014 May 5, 2014 300-425 bps —
 529,866
IH5 2014 December 5, 2014 275-400 bps —
 564,348
IH6 2016 April 13, 2016 250-375 bps —
 165,437
Total —
 2,321,585
Less deferred financing costs, net —
 (6,044)
Total $—
 $2,315,541
            Principal Amount
($ in thousands) Coupon
Rate		 
Effective
Rate(1)
 
Conversion
Rate(2)
 Maturity
Date		 Remaining Amortization
Period		 June 30,
2020		 December 31, 2019
2022 Convertible Notes 3.50% 5.12% 43.7694 January 15, 2022 1.54 years $345,000
 $345,000
Net unamortized fair value adjustment(8,180) (10,701)
Total$336,820
 $334,299
 
(1)Outstanding Principal Balance does
Effective rate includes the effect of the adjustment to the fair value of the debt as of the Merger Date, the value of which reduced the initial liability recorded to $324.3 million for the 2022 Convertible Notes.
(2)
The conversion rate as of June 30, 2020 represents the number of shares of common stock issuable per $1,000 principal amount (actual $) of the 2022 Convertible Notes converted on such date, as adjusted in accordance with the indenture as a result of cash dividend payments and the effects of previous mergers. As of June 30, 2020, the 2022 Convertible Notes do not include capitalized deferred financing costs, net.meet the criteria for conversion. We have the option to settle the 2022 Convertible Notes in cash, common stock, or a combination thereof.
Terms of Conversion
On July 1, 2019, we settled substantially all of the outstanding balance of the 2019 Convertible Notes with the issuance of 12,553,864 shares of our common stock. At the settlement date, the conversion rate applicable to the 2019 Convertible Notes was 54.5954 shares of our common stock per $1,000 principal amount (actual $) of the 2019 Convertible Notes (equivalent to a conversion price of approximately $18.32 per common share — actual $). For the three and six months ended June 30, 2019, interest expense for the 2019 Convertible Notes, including non-cash amortization of discounts, was $2.8 million and $5.6 million, respectively.
As of June 30, 2020, the conversion rate applicable to the 2022 Convertible Notes is 43.7694 shares of our common stock per $1,000 principal amount (actual $) of the 2022 Convertible Notes (equivalent to a conversion price of approximately $22.85 per common share — actual $). The conversion rate for the 2022 Convertible Notes is subject to adjustment in some events, but will not be adjusted for any accrued and unpaid interest. In addition, following certain events that occur prior to the maturity date, we will adjust the conversion rate for a holder who elects to convert its 2022 Convertible Notes in connection with such an event in certain circumstances. At any time prior to July 15, 2021, holders may convert the 2022 Convertible Notes at their option only under specific circumstances as defined in the indenture agreement, dated as of January 10, 2017, between us and our trustee, Wilmington Trust National Association (the “Convertible Notes Trustee”). On or after July 15, 2021 and until maturity, holders may convert all or any portion of the 2022 Convertible Notes at any time. Upon conversion, we will pay or deliver, as the case may be, cash, common stock, or a combination of cash and common stock, at our election. The “if-converted” value of the 2022 Convertible Notes exceeds the principal amount by $70.7 million as of June 30, 2020 as the closing market price of our common stock of $27.53 per common share (actual $) exceeds the implicit conversion price. For the three months ended June 30, 2020 and 2019, interest expense for the 2022 Convertible Notes, including non-cash amortization of discounts, was $4.3 million and $4.2 million, respectively. For the six months ended June 30, 2020 and 2019, interest expense for the 2022 Convertible Notes, including non-cash amortization of discounts, was $8.6 million and $8.4 million, respectively.
General Terms
We may not redeem the 2022 Convertible Notes prior to their maturity date except to the extent necessary to preserve our status as a REIT for United States federal income tax purposes, as further described in the indenture. If we undergo a fundamental change as defined in the indenture, holders may require us to repurchase for cash all or any portion of their 2022 Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.


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The indenture contains customary terms and covenants and events of default. If an event of default occurs and is continuing, the Convertible Notes Trustee, by notice to us, or the holders of at least 25% in aggregate principal amount of the outstanding 2022 Convertible Notes, by notice to us and the Convertible Notes Trustee, may, and the Convertible Notes Trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest on all the 2022 Convertible Notes to be due and payable. In the case of an event of default arising out of certain events of bankruptcy, insolvency or reorganization in respect to us (as set forth in the indenture), 100% of the principal of and accrued and unpaid interest on the 2022 Convertible Notes will automatically become due and payable.
Certain Hedging Arrangements
From time to time, we enter into derivative instruments to manage the economic risk of changes in interest rates. We do not enter into derivative transactions for speculative or trading purposes. Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we did not elect to designate as hedges.
Designated Hedges
We have entered into various interest rate swap agreements, as outlinedwhich are used to hedge the variable cash flows associated with variable-rate interest payments. Currently, each of our swap agreements is indexed to LIBOR and is designated for hedge accounting purposes. LIBOR is set to expire at the end of 2021, and we will work with the counterparties to our swap agreements to adjust each floating rate to a comparable or successor rate. Changes in the table below. Eachfair value of these swaps were accounted for as non-designated hedges until January 31, 2017, when the criteria for hedge accounting were met as a result of the Pre-IPO Transactions described in “—Overview.” At that time, we designated these swaps for hedge accounting purposes; and the effective portion thereof isare recorded in other comprehensive income subsequent to that date.and are subsequently reclassified into earnings in the period in which the hedged forecasted transactions affect earnings.
The table below summarizes our interest rate swap instruments as of SeptemberJune 30, 20172020 ($ in thousands):
Agreement Date Forward
Effective Date		 Maturity Date Strike Rate Index Notional Amount Forward
Effective Date		 Maturity
Date		 Strike
Rate		 Index Notional
Amount
December 21, 2016 February 28, 2017 January 31, 2022 1.97% One-month LIBOR $750,000
 February 28, 2017 January 31, 2022 1.97% One month LIBOR $750,000
December 21, 2016 February 28, 2017 January 31, 2022 1.97% One-month LIBOR 750,000
December 11, 2019 February 28, 2017 December 31, 2024 1.74% One month LIBOR 750,000
January 12, 2017 February 28, 2017 August 7, 2020 1.59% One-month LIBOR 1,100,000
 February 28, 2017 August 7, 2020 1.59% One month LIBOR 1,100,000
January 13, 2017 February 28, 2017 June 9, 2020 1.63% One-month LIBOR 595,000
January 20, 2017 February 28, 2017 March 9, 2020 1.60% One-month LIBOR 325,000
April 19, 2018 January 31, 2019 January 31, 2025 2.86% One month LIBOR 400,000
February 15, 2019 March 15, 2019 March 15, 2022 2.23% One month LIBOR 800,000
April 19, 2018 March 15, 2019 November 30, 2024 2.85% One month LIBOR 400,000
April 19, 2018 March 15, 2019 February 28, 2025 2.86% One month LIBOR 400,000
June 3, 2016 July 15, 2019 July 15, 2020 1.30% One month LIBOR 450,000
January 10, 2017 January 15, 2020 January 15, 2021 2.13% One month LIBOR 550,000
May 8, 2018 March 9, 2020 June 9, 2025 2.99% One month LIBOR 325,000
May 8, 2018 June 9, 2020 June 9, 2025 2.99% One month LIBOR 595,000
June 3, 2016 July 15, 2020 July 15, 2021 1.47% One month LIBOR 450,000
June 28, 2018 August 7, 2020 July 9, 2025 2.90% One month LIBOR 1,100,000
January 10, 2017 January 15, 2021 July 15, 2021 2.23% One month LIBOR 550,000
December 9, 2019 July 15, 2021 November 30, 2024 2.90% One month LIBOR 400,000
November 7, 2018 March 15, 2022 July 31, 2025 3.14% One month LIBOR 400,000
November 7, 2018 March 15, 2022 July 31, 2025 3.16% One month LIBOR 400,000
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income on the condensed consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
During the ninethree and six months ended SeptemberJune 30, 2017,2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate interest payments. The ineffective portion of the changeAmounts reported in fair value of the derivatives is recognized directly in earnings. Changes in fair valueaccumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the ineffective portion of our Designated Hedges resulted innext 12 months, we estimate that $153.2 million will be reclassified to earnings as an unrealized gain of less than $0.3 million for the nine months ended September 30, 2017, which is includedincrease in interest expense in our condensed consolidated statements of operations.expense.


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Non-Designated Hedges
Concurrent with entering into certain of the mortgage loan agreements and in connection with previous mergers, we entered into or acquired and maintain interest rate cap agreements with terms and notional amounts equivalent to the terms and amounts of the mortgage loans made by the third-party lenders


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and strike prices ranging from approximately 2.59%third party lenders. Currently, each of our cap agreements is indexed to 3.39% (collectively,LIBOR, which is set to expire at the “Strike Prices”).end of 2021. We will work with the counterparties to our cap agreements to adjust each floating rate to a comparable or successor rate. To the extent that the maturity date of one or more of the mortgage loans is extended through an exercise of one or more of the extension options, replacement or extension interest rate cap agreements must be executed with terms similar to those associated with the initial interest rate cap agreements and strike prices equal to the greater of the Strike Pricesinterest rate cap strike price and the interest rate at which the debt service coverage ratio (as defined) is not less than 1.2 to 1.0. The interest rate cap agreements, including all of our rights to payments owed by the counterpartycounterparties and all other rights, have been pledged as additional collateral for the mortgage loans. Additionally, in certain instances, in order to minimize the cash impact of purchasing required interest rate caps, we simultaneously sell interest rate caps (which have identical terms and notional amounts) such that the purchase price and sales proceeds of the related interest rate caps are intended to offset each other. The purchased and sold interest rate caps have strike prices ranging from approximately 3.24% to 5.31%.
Purchase of Outstanding Debt Securities or Loans
As market conditions warrant, we, and our equity investors, including our Sponsor, itsand their respective affiliates, and members of our management, may from time to time seek to purchase our outstanding debt, including borrowings under our credit facilities and mortgage loans or debt securities that we may issue in the future, in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any purchases made by us may be funded by the use of cash on our condensed consolidated balance sheet or the incurrence of new secured or unsecured debt, including borrowings under our credit facilitiesfacility and mortgage loans. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may be with respect to a substantial amount of a particular class or series of debt, with the attendant reduction in the trading liquidity of such class or series. In addition, any such purchases made at prices below the “adjusted issue price” (as defined for U.S.United States federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which amounts may be material, and in related adverse tax consequences to us.
Cash Flows
NineSix Months Ended SeptemberJune 30, 20172020 Compared to NineSix Months Ended SeptemberJune 30, 20162019
The following table summarizes our cash flows for the ninesix months ended SeptemberJune 30, 20172020 and 2016:2019:
 Nine Months Ended September 30,    
($ in thousands)2017 2016 $ Change % Change
Net cash provided by operating activities$267,267
 $247,709
 $19,558
 7.9%
Net cash used in investing activities(11,429) (298,785) 287,356
 96.2%
Net cash (used in) provided by financing activities(319,516) 50,398
 (369,914) N/M
Change in cash and cash equivalents$(63,678) $(678) $(63,000) N/M
  For the Six Months
Ended June 30,		    
($ in thousands) 2020 2019 $ Change % Change
Net cash provided by operating activities $395,935
 $375,342
 $20,593
 5.5 %
Net cash provided by (used in) investing activities (89,504) 39,191
 (128,695) (328.4)%
Net cash provided by (used in) financing activities 202,937
 (455,069) 658,006
 144.6 %
Change in cash, cash equivalents, and restricted cash $509,368

$(40,536)
$549,904
 N/M
Operating Activities
Net cash provided by operating activities was $267.3 million and $247.7 million for the nine months ended September 30, 2017 and 2016, respectively, an increase of 7.9%. The increase was primarily driven by an increase in net operating income from $417.5 million for the nine months ended September 30, 2016 to $450.2 million for the nine months ended September 30, 2017 due to revenue growth higher than operating expense growth. Our net loss increased from $(51.6) million for the nine months ended September 30, 2016 to $(59.4) million for the nine months ended September 30, 2017, which was offset by a $51.4 million increase in share-based compensation expense. Our cash flows provided by operating activities depend on numerous factors, including the occupancy level of our homes, the rental rates achieved on our leases, the collection of rent from our residents, and the amount of our operating and other expenses.Net cash provided by operating activities was $395.9 million and $375.3 million for the six months ended June 30, 2020 and 2019, respectively, an increase of 5.5%. The increase in cash provided by operating activities was driven by improved operational profitability, which was partially offset by changes in operating assets and liabilities.


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Investing Activities
Net cash used inprovided by (used in) investing activities consists primarily consists of the acquisition costs of homes, capital improvements, changes in restricted cash, and proceeds from property sales. Net cash used inprovided by (used in) investing activities was $11.4$(89.5) million and $298.8$39.2 million for the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, respectively, leadinga decrease of $128.7 million. The decrease in net cash provided by (used in) investing activities primarily resulted from the combined effect of the following changes in cash flows during the six months ended June 30, 2020 compared to the six months ended June 30, 2019: (1) a decrease in proceeds from the sale of homes; (2) an increase in cash used for the initial renovation of homes; (3) a decrease in cash provided by investing activitiesrepayment proceeds from retained debt securities; all offset by (4) a decrease in cash used for the acquisition of $287.4homes. More specifically, proceeds from sales of homes decreased $107.8 million betweenfrom the periods. The increase was partiallysix months ended June 30, 2019 to the six months ended June 30, 2020 due to the release of restricted cash in connection with the repayment of our credit facilities and the IH1 2013-1 and IH1 2014-1 mortgage loans during the


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nine months ended September 30, 2017 resulting in an increase of $120.1 million. Additionally, there was a significant decrease in the number of homes acquired,sold from 1,135 homes during1,433 to 900, respectively, partially offset by an increase in proceeds per home. Initial renovation spend increased $42.9 million from the ninesix months ended SeptemberJune 30, 20162019 compared to 620 homes during the ninesix months ended SeptemberJune 30, 2017, which resulted2020 due to a significant increase in $130.5 million less in acquisition, renovation and capital expenditure spend. The increase inthe number of homes sold during 2017 of 1,051 compared to 842 homes during the nine months ended September 30, 2016 resulted inundergoing their initial renovation and an increase in the amountcost per home. Proceeds from repayment of proceedsretained debt securities decreased $28.9 million from salethe six months ended June 30, 2019 to the six months ended June 30, 2020 due to a decrease in prepayments of residential propertiesmortgage loans. Acquisition spend decreased $66.4 million due to a significant decrease in the number of $45.6 million.homes acquired from 948 homes during the six months ended June 30, 2019 to 651 homes during the six months ended June 30, 2020.
Financing Activities
Net cash provided by (used in) provided by financing activities was $(319.5)$202.9 million and $50.4$(455.1) million for the ninesix months ended SeptemberJune 30, 20172020 and 2016, respectively, or a decrease2019, respectively. During the six months ended June 30, 2020, issuances and sales of $369.9 million.stock under our public offering and ATM Equity Program resulted in $503.8 million of proceeds, and we repaid $131.7 million of our mortgage loans, including partial repayments of IH 2018-2 and IH 2018-3, and funded $163.5 million of dividend and distribution payments. For the ninesix months ended SeptemberJune 30, 2017 we received $1,692.1 million in2019, proceeds net of underwriting discounts, from our IPO, while during the nine months ended September 30, 2016 equity investors contributed $138.0 million of capital. Proceeds from our IPO,Secured Term Loan Facility and the IH 2017-1 mortgage loan of $4,188.5$403.5 million, along with proceeds from home sales and operating cash flows were used to repay $2,321.6$709.4 million of then-outstanding credit facilities and $2,086.6 million ofour mortgage loans, including full repayment of the IH1 2013-1CSH 2016-2 and IH1 2014-1 mortgage loans, and $610.0 million on the IH1 2014-3 mortgage loan, and to fund $42.1 millionpartial repayments of deferred financing costs associated with the Term Loan FacilityIH 2017-2 and IH 2017-1 mortgage loan.2018-1, and for dividend payments which totaled $136.3 million.
Off-Balance Sheet Arrangements
We have no obligations, assets, or liabilities that would be consideredmaterial off-balance sheet arrangements.arrangements as defined in Item 303(a)(4) of Regulation S-K.


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Contractual Obligations
We have updated ourOur contractual obligations previously provided in our Annual Report on Form 10-K foras of June 30, 2020, consist of the year ended December 31, 2016 for material changes to our financing arrangements that occurred during the nine months ended September 30, 2017:following:
($ in thousands)Total 
2017(1)
 2018-2019 2020-2021 Thereafter
Mortgage loans(2)
$4,612,759
 $184,234
 $3,123,257
 $83,056
 $1,222,212
Term loan facility(2)
1,697,739
 11,456
 90,900
 90,900
 1,504,483
Interest rate swaps(3)
216,651
 15,486
 123,888
 74,814
 2,463
Totals$6,527,149
 $211,176
 $3,338,045
 $248,770
 $2,729,158
($ in thousands) Total 
2020(1)
 2021-2022 2023-2024 Thereafter
Mortgage loans, net(2)(3)
 $6,786,956
 $60,298
 $239,914
 $1,566,729
 $4,920,015
Secured Term Loan 561,661
 7,236
 28,944
 28,944
 496,537
Term Loan Facility, net(2)
 1,545,415
 14,260
 1,531,155
 —
 —
Revolving Facility(2)(3)(4)
 5,697
 1,789
 3,908
 —
 —
2022 Convertible Notes(5)
 369,151
 6,038
 363,113
 —
 —
Derivative instruments(6)
 674,299
 73,682
 283,588
 272,767
 44,262
Purchase commitments(7)
 47,482
 47,482
 —
 —
 —
Operating leases 15,716
 2,353
 7,963
 4,304
 1,096
Finance leases 10,088
 1,533
 5,465
 3,090
 —
Total $10,016,465
 $214,671
 $2,464,050
 $1,875,834
 $5,461,910
 
(1)Includes estimated payments for the remaining threesix months of 2017.2020.
(2)Includes estimated interest payments on the respective debt based on amounts outstanding as of SeptemberJune 30, 20172020 at rates in effect as of such date.date; as of June 30, 2020, LIBOR was 0.16%.
(3)GrossRepresents the maturity date if we exercise each of the remaining one year extension options available, which are subject to certain conditions being met. See Part I. Item 1. “Financial Statements — Note 6 of Notes to Condensed Consolidated Financial Statements” for a description of maturity dates without consideration of extension options.
(4)Includes the related unused commitment fee.
(5)Represents the principal amount and interest obligation of the 2022 Convertible Notes which is calculated using strike prices established by each instrument.the notes’ coupon rate.
(6)Includes interest rate swap and interest rate cap obligations calculated using LIBOR as of June 30, 2020, or 0.16%.
(7)Represents commitments to acquire 165 single-family rental homes as of June 30, 2020.
Critical Accounting Policies and Estimates
Critical accounting policies are those accounting policies that management believes are important to the portrayal of our financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. TheWe believe that our critical accounting policies pertain to the following: (i) our investments in single-family residential properties, including acquisition of real estate assets, related cost capitalization, provisions for impairment, and single-family residential properties held for sale; and (ii) derivative financial instruments. These critical policies and estimates are summarized in Management’sPart II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations” in our Annual Report on Form 10-K for the year ended December 31, 2016 with respect to cost capitalization, provisions for impairment, and revenue recognition and resident receivables. Material10-K. There were no material changes during the nine months ended September 30, 2017 to our critical accounting policies are presented below:


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Investments in Single-Family Residential Properties
Upon acquisition, we evaluate our acquired single-family residential properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. Upon adoption of ASU 2017-01, our purchases of homes are treated as acquisitions and are recorded at their purchase price which is allocated between land, building and improvements, and in-place lease intangibles (when a tenant is in place at the acquisition date) based upon their relative fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, bidding service and title fees, payments made to cure tax, utility, homeowners’ association (“HOA”), and other mechanic’s and miscellaneous liens, as well as other closing costs. The fair values of acquired in-place lease intangibles, if any, are based on the costs to execute similar leases, including commissions and other related costs. The origination value of in-place lease intangibles also includes an estimate of lost rent revenue at in-place rental rates during the estimated time required to lease the property. The in-place lease intangibles are amortized over the life of the leases and are recorded in other assets, net on our condensed consolidated balance sheets.six months ended June 30, 2020.
Prior to our adoption of ASU 2017-01 effective January 1, 2017, acquisition costs for transactions accounted for as business combinations were expensed in the period in which they were incurred and were reflected in other expenses in the accompanying condensed consolidated statements of operations.
Derivatives
We enter into interest rate swap and interest rate cap agreements (collectively, “Hedging Derivatives”) for interest rate risk management purposes. We do not enter into Hedging Derivatives for trading or other speculative purposes, and all of our Hedging Derivatives are carried at fair value on our condensed consolidated balance sheets. Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we have not elected to designate as hedges.
Pursuant to the terms of certain of our mortgage loans, we are required to maintain interest rate caps. We have elected not to designate these interest cap agreements for hedge accounting (collectively, the “Non-Designated Hedges”). We enter into interest rate swap agreements to hedge the risk arising from changes in our interest payments on variable-rate debt due to changes in the one-month London Interbank Offered Rate (“LIBOR”). In connection with the Pre-IPO Transactions, as of January 31, 2017, we have elected to account for our interest rate swap agreements as effective cash flow hedges (collectively, the “Designated Hedges”). We assess the effectiveness of these interest rate swap cash flow hedging relationships on an ongoing basis. The effect of these interest rate cap agreements and interest rate swap agreements is to reduce the variability of interest payments due to changes in LIBOR.
The fair value of Hedging Derivatives that are in an asset position are included in other assets, net and those inFor a liability position are included in other liabilities on our condensed consolidated balance sheets. For Non-Designated Hedges, the related changes in fair value are reflected within interest expense in the condensed consolidated statements of operations. For Designated Hedges, the effective portion of the related changes in fair value is reported as a component of other comprehensive income (loss) on our condensed consolidated balance sheets and reclassified into earnings as interest expense in our condensed consolidated statements of operations when the hedged transactions affect earnings; the ineffective portion of the changes in fair value is reflected directly within interest expense in the condensed consolidated statements of operations. See “—Liquidity and Capital Resources” for further discussion of derivative financial instruments.
Share-Based Compensation Expense
Priorrecently adopted accounting standards, see Part I. Item 1. “Financial Statements — Note 2 of Notes to the IPO, we recognized share-based compensation expense for incentive compensation units granted by the Invitation Homes Partnerships (the “Class B Units”). In connection with and subsequent to the IPO, we issued restricted stock units (“RSUs”) that settle in shares of common stock and restricted shares of common stock (“RSAs”) for which share-based compensation expense is recognized.
We recognized share-based compensation expense for the Class B Units based on the estimated fair value of the Class B Units and vesting conditions of the related incentive unit agreements. Since the Class B Units granted by IH1 were granted to employees of the Manager, a wholly owned subsidiary of IH1, the related share-based compensation expense was based on the grant-date fair value of the units and recognized in expense over the service period. Because units in IH2, IH3, IH4, IH5, and IH6 were granted to non-employees of those respective partnerships, fair value was remeasured for non-vested units at


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the end of each reporting period. The fair value of the Class B Units was determined based on a valuation model that took into account discounted cash flows and a market approach based on comparable companies and transactions.
We recognize share-based compensation expense for the RSUs and RSAs based on their grant-date fair value, net of expected forfeitures, over the service period from the grant date to vest date for each tranche or when any applicable performance conditions are met in accordance with the related RSU and RSA agreements. The grant-date fair value of RSUs and RSAs is generally based on the closing price of our common stock on the grant date except for market based RSU grant‑date fair values which are based on Monte-Carlo option pricing models.
Additional compensation expense is recognized if modifications to existing incentive compensation unit, RSU, or RSA agreements result in an increase in the post-modification fair value of the units that exceeds their pre-modification fair value.Condensed Consolidated Financial Statements.”
Segment Reporting
Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”)CODM in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer.
Under the provision of ASC 280, Segment Reporting, we have determined that we have one reportable segment related to acquiring, renovating, leasing, and operating single-family homes as rental properties, including single-family homes in planned unit developments.properties. The CODM evaluates operating


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performance and allocates resources on a total portfolio basis. The CODM utilizes net operating incomeNOI as the primary measure to evaluate performance of the total portfolio. The aggregation of individual homes constitutes the total portfolio. Decisions regarding acquisitions and dispositions of homes are made at the individual home level.level with a focus on growing accretively in high-growth locations where we have greater scale and density.
Non-GAAP Measures
EBITDA, EBITDAre, and Adjusted EBITDAre
EBITDA, EBITDAre, and Adjusted EBITDA
EBITDA and Adjusted EBITDAre are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. We define EBITDA as net income (loss)or loss computed in accordance with accounting principles generally accepted in the United States (“GAAP”)GAAP before the following items: interest expense; income tax expense; and depreciation and amortization. The National Association of Real Estate Investment Trusts (“Nareit”) recommends as a best practice that REITs that report an EBITDA performance measure also report EBITDAre. We define EBITDAre, consistent with the Nareit definition, as EBITDA, further adjusted for gain on sale of property, net of tax and impairment on depreciated real estate investments.
Adjusted EBITDAre is defined as EBITDAre before the following items: share-based compensation expense; IPO related expenses, impairmentmerger and other; acquisition costs; gain (loss) on sale of property, net of tax;transaction-related expenses; severance; casualty losses, net; and interest income and other miscellaneous income and expenses. EBITDA, EBITDAre, and Adjusted EBITDAre are used as supplemental financial performance measures by management and by external users of our financial statements, such as investors and commercial banks. Set forth below is additional detail on how management uses EBITDA, EBITDAre, and Adjusted EBITDAre as measures of performance.
Our management uses EBITDA, EBITDAre, and Adjusted EBITDAre in a number of ways to assess our condensed consolidated financial and operating performance, and we believe these measures are helpful to management and external users in identifying trends in our performance. EBITDA, EBITDAre, and Adjusted EBITDAre help management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance, while neutralizing the impact of capital structure on results. Accordingly, we believe these metrics measure our financial performance based on operational factors that management can impact in the short-term, namely our cost structure and expenses.
We believe that the presentation of EBITDA, EBITDAre, and Adjusted EBITDAre provides information useful to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to EBITDA, EBITDAre, and Adjusted EBITDAre is net income or loss. EBITDA, EBITDAre, and Adjusted EBITDAre are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our EBITDA, EBITDAre, and Adjusted EBITDAre may not be comparable to the EBITDA, EBITDAre, and Adjusted EBITDAre of other companies due to the fact that not all companies use the same definitions of EBITDA, EBITDAre, and Adjusted EBITDA.EBITDAre. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies.




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The following table presents a reconciliation of GAAP net income (loss)(as determined in accordance with GAAP) to EBITDA, EBITDAre, and Adjusted EBITDA on a historical basisre for each of the periods indicated:
 Three Months Ended September 30, Nine Months Ended September 30, For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
($ in thousands) 2017 2016 2017 2016 2020 2019 2020 2019
Net loss available to common shareholders $(22,745) $(21,949) $(59,716) $(51,590)
Net loss available to participating securities 235
 —
 344
 —
Net income available to common stockholders $42,784
 $38,833
 $92,638
 $59,549
Net income available to participating securities 119
 109
 221
 215
Non-controlling interests 275
 463
 595
 810
Interest expense 56,796
 68,365
 182,726
 209,165
 86,071
 95,706
 170,828
 189,689
Depreciation and amortization 67,466
 66,480
 202,558
 198,261
 137,266
 133,031
 272,293
 266,640
EBITDA 101,752

112,896

325,912

355,836
 266,515
 268,142
 536,575

516,903
Gain on sale of property, net of tax (11,167) (26,172) (26,367) (43,744)
Impairment on depreciated real estate investments 1,442
 4,076
 3,913
 7,329
EBITDAre
 256,790
 246,046
 514,121

480,488
Share-based compensation expense(1)
 12,004
 4,711
 64,464
 13,023
 2,106
 3,615
 6,207
 9,222
IPO related expenses —
 4,081
 8,287
 4,081
Merger and transaction-related 4,944
 —
 4,944
 —
Impairment and other(2)
 14,572
 1,279
 16,482
 1,642
Acquisition costs —
 —
 —
 42
Gain on sale of property, net of tax (3,756) (2,966) (28,239) (13,178)
Merger and transaction-related expenses(2)
 —
 1,552
 —
 4,347
Severance 255
 375
 255
 7,344
Casualty losses, net (1,622) (2,405) (966) (266)
Other, net(3)
 (613) 1,057
 482
 983
 (1,370) (610) (5,084) (3,735)
Adjusted EBITDA $128,903

$121,058

$392,332

$362,429
Adjusted EBITDAre
 $256,159
 $248,573
 $514,533

$497,400
 
(1)For the three months ended SeptemberJune 30, 20172020 and 2016, $9,3092019, $447 and $4,665$820 was recorded in property management expense, respectively, and $1,659 and $2,795 was recorded in general and administrative expense, respectively,respectively. For the six months ended June 30, 2020 and $2,6952019, $1,280 and $46$1,507 was recorded in property management expense, respectively. For the nine months ended September 30, 2017respectively, and 2016, $56,460$4,927 and $12,724$7,715 was recorded in general and administrative expense, respectively, and $8,004 and $299 was recorded in property management expense, respectively.
(2)
Includes accrual of $16,000 for losses/damages related to Hurricane Irma for the threemerger and nine months ended September 30, 2017.
transaction-related expenses included within general and administrative.
(3)Includes interest income, unrealized gains from investments in equity securities, and other miscellaneous income and expenses.
Net Operating Income (“NOI”)
NOI is a non-GAAP measure often used to evaluate the performance of real estate companies. We define NOI for an identified population of homes as rental revenues and other property income less property operating and maintenance expense (which consists primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel expenses, repairs and maintenance, leasing costs, and marketing)marketing expense). NOI excludes: interest expense; depreciation and amortization; property management expense; general and administrative expense; property management expense; impairment and other; acquisition costs; (gain) lossgain on sale of property, net of tax; and interest income and other miscellaneous income and expenses.
We consider NOI to be a meaningful supplemental financial measure of our performance when considered with the financial statements determined in accordance with GAAP. We believe NOI is helpful to investors in understanding the core performance of our real estate operations. The GAAP measure most directly comparable to NOI is net income or loss. NOI is not used as a measure of liquidity and should not be considered as an alternative to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our NOI may not be comparable to the NOI of other companies due to the fact that not all companies use the same definition of NOI. Accordingly, there can be no assurance that our basis for computing this non-GAAP measure is comparable with that of other companies.
We believe that Same Store NOI is also a meaningful supplemental measure of our operating performance for the same reasons as NOI and is further helpful to investors as it provides a more consistent measurement of our performance across reporting periods by reflecting NOI for homes in our Same Store portfolio.




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The following table presents a reconciliation of GAAP net income (loss)(as determined in accordance with GAAP) to NOI for our total portfolio and NOI for our Same Store portfolio on a historical basis for each of the periods indicated:
 Three Months Ended September 30, Nine Months Ended September 30, For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
($ in thousands) 2017 2016 2017 2016 2020 2019 2020 2019
Net loss available to common shareholders $(22,745) $(21,949) $(59,716) $(51,590)
Net loss available to participating securities 235
 —
 344
 —
Net income available to common stockholders $42,784
 $38,833
 $92,638
 $59,549
Net income available to participating securities 119
 109
 221
 215
Non-controlling interests 275
 463
 595
 810
Interest expense 56,796
 68,365
 182,726
 209,165
 86,071
 95,706
 170,828
 189,689
Depreciation and amortization 67,466
 66,480
 202,558
 198,261
 137,266
 133,031
 272,293
 266,640
General and administrative(1)
 27,462
 18,811
 104,154
 49,579
Property management expense(2)(1)
 10,852
 7,715
 31,436
 22,638
 14,529
 16,021
 28,901
 31,181
Impairment and other(3)
 14,572
 1,279
 16,482
 1,642
Acquisition costs —
 —
 —
 42
General and administrative(2)
 14,426
 15,956
 28,654
 42,494
Impairment and other (180) 1,671
 2,947
 7,063
Gain on sale of property, net of tax (3,756) (2,966) (28,239) (13,178) (11,167) (26,172) (26,367) (43,744)
Other, net(4)(3)
 (613) 1,057
 482
 983
 (1,370) (610) (5,084) (3,735)
NOI (total portfolio) 150,269
 138,792
 450,227
 417,542
 282,753
 275,008
 565,626

550,162
Non-Same Store NOI (14,500) (13,183) (42,562) (35,652) (21,233) (19,379) (38,556)
(39,422)
NOI (Same Store portfolio)(5)(4)
 $135,769
 $125,609
 $407,665
 $381,890
 $261,520
 $255,629
 $527,070
 $510,740
 
(1)Includes $9,309$447 and $4,665$820 of share-based compensation expense for the three months ended SeptemberJune 30, 20172020 and 2016,2019, respectively. Includes $56,460$1,280 and $12,724$1,507 of share-based compensation expense for the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, respectively.
(2)Includes $2,695$1,659 and $46$2,795 of share-based compensation expense for the three months ended SeptemberJune 30, 20172020 and 2016,2019, respectively. Includes $8,004$4,927 and $299$7,715 of share-based compensation expense for the ninesix months ended SeptemberJune 30, 20172020 and 2016,2019, respectively.
(3)
Includes accrual of $16,000 for losses/damages related to Hurricane Irma for the three and nine months ended September 30, 2017.
(4)Includes interest income, unrealized gains from investments in equity securities, and other miscellaneous income and expenses.
(5)(4)The Same Store (consisting ofportfolio totaled 72,261 homes which had commenced their initial post-renovation lease prior to October 3rd offor the year prior to the first year of the comparison period) homes are 42,795.six months ended June 30, 2020 and 2019.


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Funds from Operations, (“FFO”), Core Funds from Operations, and Adjusted Funds from Operations
FFO,Funds From Operations (“FFO”), Core FFO, and Adjusted FFO are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies. FFO is defined by the National Association of Real Estate Investment TrustsNareit as net income or loss (computed in accordance with GAAP) excluding net gains or losses from sales of previously depreciated real estate assets, plus depreciation, amortization and impairment of real estate assets, and adjustments for unconsolidated partnerships and joint ventures.
We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization. Because real estate values have historically risen or fallen with market conditions, management considers FFO an appropriate supplemental performance measure as it excludes historical cost depreciation and amortization, impairment on depreciated real estate investments, as well as gains or losses related to sales of previously depreciated homes, as well non-controlling interests, from GAAP net income or loss.loss (computed in accordance with GAAP). By excluding depreciation and amortization and gains or losses on sales of real estate, management uses FFO to measure returns on its investments in homes. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the homes that result from use or market conditions nor the level of capital expenditures to maintain the operating performance of the homes, all of which have real economic effect and could materially affect our results from operations, the utility of FFO as a measure of our performance is limited.


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Management also believes that FFO, combined with the required GAAP presentations, is useful to investors in providing more meaningful comparisons of the operating performance of a company’s real estate between periods or as compared to other companies. The GAAP measure most directly comparable to FFO is net income or loss. FFO is not used as a measure of our liquidity and should not be considered an alternative to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our FFO may not be comparable to the FFO of other companies due to the fact that not all companies use the same definition of FFO. Accordingly, there can be no assurance that our basis for computing this non-GAAP measures is comparable with that of other companies.
We believe that Core FFO and Adjusted FFO are also meaningful supplemental measures of our operating performance for the same reasons as FFO and are further helpful to investors as they providesprovide a more consistent measurement of our performance across reporting periods by removing the impact of certain items that are not comparable from period to period. We define Core FFO as FFO adjusted for noncashthe following: non-cash interest expense related to amortization of deferred financing costs, loan discounts, and discounts related to our financing arrangements, noncashnon-cash interest expense for derivatives,derivatives; share-based compensation expense, IPOexpense; offering related expenses,expenses; merger and transaction-related expenses; severance expenses,expense; unrealized gains on investments in equity securities; and casualty losses, net, and acquisition costs, as applicable. We define Adjusted FFO as Core FFO less recurring capital expenditures that are necessary to help preserve the value, of and maintain the functionality, of our homes. The GAAP measure most directly comparable to Core FFO and Adjusted FFO is net income or loss. Core FFO and Adjusted FFO are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our Core FFO and Adjusted FFO may not be comparable to the Core FFO and Adjusted FFO of other companies due to the fact that not all companies use the same definition of Core FFO and Adjusted FFO. No adjustments were made to the Core FFO and Adjusted FFO per common share — diluted computations for potential shares of common stock related to the Convertible Senior Notes. Accordingly, there can be no assurance that our basis for computing this non-GAAP measures is comparable with that of other companies.




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The following table presents a reconciliation of GAAP net income (loss)(as determined in accordance with GAAP) to FFO, Core FFO, and Adjusted FFO on a historical basis for each of the periods indicated:
  Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share and per share data) 2017 2016 2017 2016
Net loss available to common shareholders $(22,745) $(21,949) $(59,716) $(51,590)
Add (deduct) adjustments from net loss available to common shareholders to derive FFO:        
Net loss available to participating securities 235
 —
 344
 —
Depreciation and amortization on real estate assets 66,671
 65,446
 200,023
 194,630
Impairment on depreciated real estate investments 424
 1,076
 1,556
 1,595
Net gain on sale of previously depreciated investments in real estate (3,756) (2,966) (28,239) (13,178)
FFO 40,829
 41,607
 113,968
 131,457
Noncash interest expense related to amortization of deferred financing costs, mortgage loan discounts and noncash interest expense from derivatives 3,473
 11,665
 23,744
 41,481
Share-based compensation expense(1)
 12,004
 4,711
 64,464
 13,023
IPO related expenses —
 4,081
 8,287
 4,081
Merger and transaction-related 4,944
 —
 4,944
 —
Severance expense (20) 377
 417
 2,285
Casualty losses, net(2)
 14,148
 203
 14,926
 47
Acquisition costs —
 —
 —
 42
Core FFO 75,378
 62,644
 230,750
 192,416
Recurring capital expenditures (13,391) (14,324) (34,225) (37,231)
Adjusted FFO $61,987
 $48,320
 $196,525
 $155,185
         
         
  Three Months Ended September 30,
2017		   February 1, 2017
through
September 30,
2017		  
Weighted average common shares outstanding — diluted(3)
 311,559,780
   311,674,226
  
         
FFO per common share – diluted $0.13
   $0.37
  
Core FFO per common share – diluted $0.24
   $0.74
  
AFFO per common share – diluted $0.20
   $0.63
  
  For the Three Months
Ended June 30,		 For the Six Months
Ended June 30,
(in thousands, except shares and per share data) 2020 2019 2020 2019
Net income available to common stockholders $42,784
 $38,833
 $92,638
 $59,549
Add (deduct) adjustments from net income to derive FFO:        
Net income available to participating securities 119
 109
 221
 215
Non-controlling interests 275
 463
 595
 810
Depreciation and amortization on real estate assets 135,647
 131,782
 269,561
 264,302
Impairment on depreciated real estate investments 1,442
 4,076
 3,913
 7,329
Net gain on sale of previously depreciated investments in real estate (11,167) (26,172) (26,367) (43,744)
FFO 169,100
 149,091
 340,561

288,461
Non-cash interest expense related to amortization of deferred financing costs, loan discounts, and non-cash interest expense from derivatives 9,366
 12,172
 19,757
 27,037
Share-based compensation expense(1)
 2,106
 3,615
 6,207
 9,222
Offering related expenses(2)
 —
 476
 —
 2,019
Merger and transaction-related expenses(3)
 —
 1,552
 —
 4,347
Severance expense 255
 375
 255
 7,344
Unrealized gains on investments in equity securities(4)
 —
 —
 (34) —
Casualty losses, net (1,622) (2,405) (966) (266)
Core FFO 179,205
 164,876
 365,780

338,164
Recurring capital expenditures (27,617) (31,799) (53,605) (56,910)
Adjusted FFO $151,588
 $133,077
 $312,175

$281,254
         
Net income available to common stockholders        
Weighted average common shares outstanding — diluted(5)(6)(7)
 549,920,213
 525,933,643
 546,836,809
 524,190,469
         
Net income per common share — diluted(5)(6)(7)
 $0.08
 $0.07
 $0.17
 $0.11
         
FFO        
Numerator for FFO per common share — diluted(5)
 $173,379
 $151,874
 $349,119
 $294,047
Weighted average common shares and OP Units outstanding — diluted(4)(5)(6)
 568,769,738
 544,335,990
 565,753,742
 544,365,617
         
FFO per common share — diluted(5)(6)(7)
 $0.30
 $0.28
 $0.62
 $0.54
         
Core FFO and Adjusted FFO        
Weighted average common shares and OP Units outstanding — diluted(5)(6)(7)
 553,669,295
 531,782,126
 550,653,299
 531,811,753
         
Core FFO per common share — diluted(5)(6)(7)
 $0.32
 $0.31
 $0.66
 $0.64
AFFO per common share — diluted(5)(6)(7)
 $0.27
 $0.25
 $0.57
 $0.53
 
(1)For the three months ended SeptemberJune 30, 20172020 and 2016, $9,3092019, $447 and $4,665$820 was recorded in property management expense, respectively, and $1,659 and $2,795 was recorded in general and administrative expense, respectively,respectively. For the six months ended June 30, 2020 and $2,6952019, $1,280 and $46$1,507 was recorded in property management expense, respectively. For the nine months ended September 30, 2017respectively, and 2016, $56,460$4,927 and $12,724$7,715 was recorded in general and administrative expense, respectively, and $8,004 and $299 was recorded in property management expense, respectively.


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(2)
Includes accrualexpenses associated with secondary offerings of $16,000 for losses/damages related to Hurricane Irma for common stock completed during the three and ninesix months ended September June 30, 2017.
2019 included within other, net.
(3)Weighted averageIncludes merger and transaction-related expenses included within general and administrative.
(4)Includes unrealized gains on our investments in equity securities during the six months ended June 30, 2020 included within other, net. There were no unrealized gains or losses on our investments in equity securities in any other period.
(5)On July 1, 2019, we settled the full outstanding balance of the 2019 Convertible Notes with the issuance of 12,553,864 shares of common stock, and these shares outstanding – diluted was calculated using the two-class method and representsof common share equivalents thatstock are dilutive forincluded within all net income, FFO, Core FFO, and AFFO.AFFO per common share calculations subsequent to that date. The impact of the 2019 Convertible Notes in the period prior to conversion is reflected in the FFO per common share — diluted computation above in accordance with the “if-converted” method consistent with Nareit’s guidance for calculating FFO per share. For the three and six months ended June 30, 2019, the numerator for FFO per common share — diluted is adjusted for $2,783 and $5,586, respectively, of interest expense on the 2019 Convertible Notes, including non-cash amortization of discounts. The denominator is adjusted for 12,553,864 shares of common stock issued on July 1, 2019 upon the conversion of the 2019 Convertible Notes. No such adjustments were made to Core FFO and AFFO per common share — diluted.


With respect to the 2022 Convertible Notes, for the three and six months ended June 30, 2020, the numerator for FFO per common share — diluted is adjusted for $4,279 and $8,558, respectively, of interest expense, including non-cash amortization of discounts, and the denominator is adjusted for 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes. No such adjustments were made to Core FFO and AFFO per common share —diluted. For the three and six months ended June 30, 2019, 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes are excluded from the computation of net income or loss and FFO per common share — diluted as they are anti-dilutive, and are excluded from Core FFO and AFFO per common share — diluted.
(6)Incremental shares attributed to non-vested share-based awards totaling 1,108,245 and 863,607 shares for the three months ended June 30, 2020 and 2019, respectively, and 1,156,069 and 925,014 for the six months ended June 30, 2020 and 2019, respectively, are included in the denominator for net income per common share — diluted. For the computations of FFO, Core FFO, and AFFO per common share — diluted, common share equivalents of 1,394,042 and 1,248,805 for the three months ended June 30, 2020 and 2019, respectively, and 1,509,274 and 1,479,272 for the six months ended June 30, 2020 and 2019, respectively, related to incremental shares attributed to non-vested share-based awards are included in the denominator.
(7)Vested units of partnership interests in INVH LP (“OP Units”) have been excluded from the computation of net income per common share — diluted for the periods above because all net income attributable to the vested OP Units has been recorded as non-controlling interest and thus excluded from net income available to common stockholders. Weighted average vested OP Units of 3,463,285 and 5,463,285 for the three months ended June 30, 2020 and 2019, respectively, and 3,463,285 and 7,067,026 for the six months ended June 30, 2020 and 2019, respectively, are included in the denominator for the computations of FFO, Core FFO, and AFFO per common share — diluted.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows, and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in interest rates, seasonality, market prices, commodity prices, and inflation. The primary market risks to which we are exposed are interest rate risk and seasonality. We may in the future use derivative financial instruments to manage, or hedge, interest rate risks related to any borrowings we may have. We may enter into such contracts only with major financial institutions based on their credit ratings and other factors. Our exposure to market risk has not materially changed from what we previously disclosed in Part II. Item 7A. “Quantitative and Qualitative Disclosures about Market Risk" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 except as noted below.
Interest Rate Risk
A primary market risk to which we believe we are exposed is interest rate risk, which may result from many factors, including government monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control. We may incur additional variable rate debt in the future, including additional amounts that we may borrow under our credit facilities.the Credit Facility. In addition, decreases in interest rates may lead to additional competition for the acquisition of single-family homes, which may lead to future acquisitions being more costly and resulting in lower yields on single-family homes targeted for acquisition. Significant increases in interest rates may also have an adverse impact on our earnings if we are unable to increase rents on expired leases or acquire single-family homes with rental rates high enough to offset the increase in interest rates on our borrowings.
At December 31, 2016, the total outstanding balance of our variable-rate debt was comprised of borrowings on our mortgage loans of $5,264.0 million and our credit facilities of $2,321.6 million. As of SeptemberJune 30, 2017,2020, our outstanding variable-rate debt was comprised of borrowings on our mortgage loans of $3,177.6$5,140.3 million and Term Loan Facility of $1,500.0 million for a combined total of which 75.3% was$6,640.3 million. We effectively converted 98.2% of these borrowings to a fixed rate through interest rate swap agreements. Additionally, all borrowings bear interest at LIBOR plus the applicable spread. Assuming no change in the outstanding balance of our existing debt, the following table illustrates the projected effect of a 100 basis pointbps increase or decrease in the LIBOR rate on our annual interest expense aswould be an estimated increase of September 30, 2017$1.2 million or $11.4 million, respectively. This estimate considers the impact of our interest rate swap agreements, interest rate cap agreements, and December 31, 2016:
($ in thousands)
Change in Interest Expense(1)
Impact to future earnings due to variable rate debt:As of
September 30, 2017		 As of
December 31, 2016
Rate increase of 1%(2)
$11,576
 $75,856
Rate decrease of 1%(3)
(11,576) (52,323)
(1)The interest rate swap agreements were factored into the September 30, 2017 disclosure, but were not factored into the December 31, 2016 disclosure as the forward looking swaps did not begin until February 28, 2017.
(2)Calculation of additional projected annual interest expense as a result of a 100 basis point increase considers the potential impact of our interest rate cap agreements as of September 30, 2017.
(3)Calculation of projected decrease in annual interest expense as a result of a 100 basis point decrease is reflective of any LIBOR floors or minimum interest rates stated in the agreements of the respective borrowings.

This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, we may consider taking actions to further mitigate our exposure to the change. However, because of the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our capital structure.
Seasonality
Our business and related operating results have been, and we believe that they will continue to be, impacted by seasonal factors throughout the year. In particular, we have experienced higher levels of resident move-outs during the summer months, which impacts both our rental revenues and related turnover costs. Further, our property operating costs are


70


seasonally impacted in certain markets by increases in expenses such as HVAC repairs, costs to re-resident, and landscaping expenses during the summer season.

ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. The design of any disclosure controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial


70

Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of SeptemberJune 30, 2017.2020. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of SeptemberJune 30, 2017,2020, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There werehas been no changeschange in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during theour most recent fiscal quarter ended September 30, 2017 that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.




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PART II


ITEM 1. LEGAL PROCEEDINGS
Litigation RelatingThe Company currently is not subject to the Mergers
Two putative class actions have been filed by purported shareholders of SFR challenging the Mergers, one of which names us and certain affiliates as defendants. The first suit, styled as Berg v. Starwood Waypoint Homes, et al., No. 1:17-cv-02896 (the “Berg Lawsuit”), was filed in the United States District Court for the District of Maryland on September 29, 2017, andany material litigation nor, to management’s knowledge, is any material litigation currently threatened against SFR, SFR Partnership, SFR’s trustees, the Company INVH LP and REIT Merger Sub. The second suit, styled as Bushansky v. Starwood Waypoint Homes, et al., No. 1:17-cv-02936 (the “Bushansky Lawsuit” and, collectively with the Berg Lawsuit, the “Lawsuits”), was filed in the United States District Court for the District of Maryland on October 4, 2017, and is against SFR, SFR Partnership and SFR’s trustees. The Bushansky Lawsuit does not name the Company or any of its affiliates as defendants. The Lawsuits allege that SFR and its trustees violated Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14a-9 promulgated thereunder by allegedly disseminating a false and misleading Form S-4 containing a joint proxy statement/prospectus. The Lawsuits further allege that SFR’s trustees allegedly violated Section 20(a) of the Exchange Act by failing to exercise proper control over the person(s) who violated Section 14(a) of the Exchange Act. The Berg Lawsuit additionally alleges that the Company violated Section 20(a) of the Exchange Act. The Lawsuits seek, among other things, injunctive relief preventing consummation of the Mergers, rescission of the transactions contemplated by the Merger Agreement should they be consummated and litigation costs, including attorneys’ fees. The Berg Lawsuit also seeks injunctive relief directing SFR’s trustees to disseminate a registration statement that does not contain any untrue statements of material fact and declaratory relief that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act. The Bushansky Lawsuit also seeks rescissory damages in the event of a merger. The Company and SFR intend to defend vigorously against the Lawsuits.
SEC Investigation “In the Matter of Certain Single Family Rental Securitizations”
Radian Group Inc. (“Radian”), the indirect parent company of Green River Capital LLC (“GRC”), which is a service provider that provides certain broker price opinions (“BPO”) to us, disclosed in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 that GRC had received a letter in March 2017 from the staff of the SEC stating that it is conducting an investigation captioned “In the Matter of Certain Single Family Rental Securitizations” and requesting information from market participants. Radian disclosed that the letter asked GRC to provide information regarding BPOs that GRC provided on properties included in single family rental securitization transactions (“Securitizations”).
In September 2017, we received a letter from the staff of the SEC stating that it is conducting an investigation captioned “In the Matter of Certain Single Family Rental Securitizations.” The letter enclosed a subpoena that requests the production of certain documents and communications related to our Securitizations, including, without limitation: transaction documents and offering materials; agreements with providers of BPOs and/or due diligence services for Securitizations; identification of employees primarily responsible for handling BPOs; documents provided to rating agencies or third-party BPO providers regarding capital expenditures and/or renovation costs for properties underlying Securitizations; communications with certain transaction parties regarding BPOs in Securitizations; and documents regarding BPO orders and documents and communications with BPO providers regarding requests that a BPO be reviewed, re-done, analyzed, modified, corrected and/or adjusted. The SEC’s letter indicates that its investigation is a fact-finding inquiry and does not mean that the SEC has a negative opinion of any person or security. We are cooperating with the SEC. We understand that other transaction parties in securitizations have received requests in this matter. Please refer to the risk factor entitled, “SEC investigation “In the Matter of Certain Single Family Rental Securitizations” described in Exhibit 99.1 to this Quarterly Report on Form 10-Q.
The Company is also subject tothan routine litigation and administrative proceedings arising in the ordinary course of business.



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ITEM 1A. RISK FACTORS
For a discussion of our potential risks or uncertainties, you should carefully read and consider risk factors previously disclosed under (i) Part I. Item 1A. “Risk Factors” of our Annual Report on Form 10-K10-K. There have been no material changes from the risk factors previously disclosed except for the fiscal year ended December 31, 2016 and (ii) the caption “Risk Factors” in our Merger Proxy, which risk factors referencedlisted below. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Moreover, many risk factors set forth in clause (ii) are filed as Exhibit 99.1 to this Quarterlythe Annual Report on Form 10-Q10-K have been heightened as a result of the impact of the COVID-19 pandemic.
Our business, results of operations, financial condition, and incorporated hereincash flows may be adversely affected by reference.pandemic infectious diseases, particularly the ongoing COVID-19 pandemic.
Pandemic infectious diseases, such as the current COVID-19 strain, may adversely impact our business, results of operations, financial condition, and cash flows. The ongoing COVID-19 outbreak in the United States has led certain states and cities, including those in which we own properties and where our principal places of business are located, to impose and continue to implement measures intended to control the spread of COVID-19, including instituting quarantines, restrictions on travel, “shelter in place” rules, and restrictions on types of business that may continue to operate. We depend on rental revenues and other property income from residents for substantially all of our revenues. The COVID-19 outbreak, as well as continuing measures taken by governmental authorities and private actors to limit the spread of this virus or mitigate its impact, is interfering with the ability of some of our residents to meet their lease obligations and make their rent payments on time or at all. In addition, some jurisdictions across the United States have imposed temporary eviction moratoriums and are allowing residents to defer missed rent payments without incurring late fees, and such jurisdictions and other local and national authorities may expand or extend measures imposing restrictions on our ability to enforce residents’ contractual rental obligations and limiting our ability to increase rents. While such measures are likely to enable residents to stay in their homes despite an inability to pay because of financial or other hardship stemming from the pandemic, they are likely to continue to result in loss of rental income and other property income. We may not be able to promptly re-lease properties that are vacant or become vacant because residents decide not to renew their leases or for other reasons, and the rental rates or other terms under new leases may be less favorable than the terms of the current leases. We cannot predict if states, municipalities, and/or local authorities will expand existing restrictions, if additional states or municipalities will implement similar restrictions, or when restrictions currently in place will expire.
Additionally, COVID-19 and related containment measures may also continue to interfere with the ability of our associates, suppliers, and other business partners to carry out their assigned tasks or supply materials, services, or funding (in the case of our Revolving Facility) at ordinary levels of performance relative to the conduct of our business.
Business continuity and disaster recovery issues which may result from the current COVID-19 pandemic or any future pandemic could materially interrupt our business operations. In accordance with phased re-opening guidelines and the ongoing spread of COVID-19 cases in certain states where we operate, the majority of our associates based at our headquarters and local offices continue working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including, but not limited to cybersecurity risks, and impair our ability to manage our business.
A significant outbreak of pandemic infectious diseases in the human population may result, and the COVID-19 pandemic has resulted, in a widespread health crisis adversely affecting the economies and financial markets of many countries, resulting in an economic downturn that could negatively affect our business, results of operations, and financial condition.


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The COVID-19 pandemic, or a future pandemic, could also have material and adverse effects on our ability to successfully operate our business and on our financial condition, results of operations and cash flows due to, among other factors:
demand for single-family rental properties decreasing substantially and/or occupancy decreasing materially;
inability by our residents to meet their lease obligations has reduced and may continue to reduce our cash flows, and the resulting impact on rental and other property income could impact our ability to make all required debt service payments and to continue paying dividends to our stockholders at expected levels or at all. For example, our securitized financings require that monthly cash collections from their respective property collateral pools be controlled by the servicer until monthly debt service payments and property management fees are paid and escrow reserves are funded. So long as we remain in compliance with certain covenants contained in the underlying loan agreements, after such monthly payments are made the servicer releases all residual net cash flow to us. This residual net cash flow represents a material portion of our cash flows. If the property collateral pools experience higher rates of resident defaults or delinquencies these covenants may not be achieved. This would result in the servicer holding all residual net cash flow from any collateral pool that does not meet the covenant requirements, net of a monthly funding to us for budgeted operating expenses, in blocked collateral accounts for the benefit of the securitized lender rather than being made available to us. Our lack of access to the net cash flow from securitized collateral pools could have a material adverse effect on our business, results of operations and financial condition;
a general decline in business activity and demand for real estate transactions could adversely affect (1) our ability to acquire or dispose of single-family homes on terms that are attractive or at all and (2) the value of our homes and our business such that we may recognize impairment on the carrying value of our investments in single-family residential properties and other assets subject to impairment review, including, but not limited to, goodwill;
difficulty accessing debt and equity capital on attractive terms, or at all, impacts to our credit ratings, and a severe disruption of, and/or instability in, the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations, including acquisitions, or address maturing liabilities on a timely basis;
the financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our Credit Facility and other debt agreements and result in a default and potentially an acceleration of indebtedness, which non-compliance could negatively impact our ability to make additional borrowings under our Revolving Facility or to exercise extension options on our mortgage loans and the Revolving Facility;
a deterioration in our ability to operate in affected areas or delays in the supply of products or services by vendors that are needed for our efficient operations; and
the potential negative consequences for the health of our associates, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during this disruption.
The extent to which the COVID-19 pandemic ultimately impacts our operations depends on ongoing developments, which remain highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the extent and duration of actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic, containment measures, monetary and/or fiscal policies implemented to provide support or relief to businesses and/or residents, and other government, regulatory, and/or legislative changes precipitated by the COVID-19 pandemic, among others.
The ongoing development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows and performance. While we have taken steps to mitigate the impact of the pandemic on our results of operations, there can be no assurance that these efforts will be successful.



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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER INFORMATION
None.


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ITEM 6. EXHIBITS
Exhibit Numbernumber
 Description
2.1
Agreement and Plan of Merger, dated August 9, 2017, by and among Invitation Homes Inc., Invitation Homes Operating Partnership LP, IH Merger Sub, LLC, Starwood Waypoint Homes and Starwood Waypoint Homes Partnership, L.P. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017).
   
3.1
 
Charter of Invitation Homes Inc., dated as of February 6, 2017 (incorporated by reference to Exhibit 3.1 to the Company'sCompany’s Current Report on Form 8-K (File No. 1-38004) filed on February 6, 2017).
   
3.2
 
Amended and Restated Bylaws of Invitation Homes Inc., dated as of February 6, 2017 (incorporated by reference to Exhibit 3.2 to the Company'sCompany’s Current Report on Form 8-K (File No. 1-38004) filed on February 6, 2017).
   
10.1
31.1		 Amended and Restated Stockholders Agreement by and among Invitation Homes Inc., each of the parties from time to time party thereto and, solely for the purposes of Section 4.1, Blackstone Real Estate Advisors L.P. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017).
10.2
Amended and Restated Agreement of Limited Partnership of Invitation Homes Operating Partnership LP, dated as of August 9, 2017, by and among Invitation Homes OP GP LLC and Invitation Homes Inc. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017).


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10.3
Letter Agreement, dated August 9, 2017 by and between Invitation Homes Inc. and John Bartling (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). †
10.4
Letter Agreement, dated August 9, 2017 by and between Invitation Homes Inc. and Ernest Freedman (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). †
10.5
Letter Agreement, dated August 9, 2017 by and between Invitation Homes Inc. and Dallas Tanner (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). †
10.6
Term Sheet, dated September 19, 2017, between Invitation Homes Inc. and Frederick C. Tuomi (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 1-38004) filed on September 19, 2017). †
31.1
Certificate of JohnDallas B. Bartling Jr.,Tanner, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-­OxleySarbanes-Oxley Act of 2002.
   
31.2
 
Certificate of Ernest M. Freedman, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1
 
Certificate of JohnDallas B. Bartling Jr.,Tanner, President and Chief Executive Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
   
32.2
 
Certificate of Ernest M. Freedman, Executive Vice President and Chief Financial Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
99.1
The section entitled “Risk Factors” in the Company’s Joint Proxy Statement/Information Statement and Prospectus.
   
101.INS Inline XBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
   
101.SCH Inline XBRL Taxonomy Extension Schema Document.
   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
   
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
   
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
 Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
† This document has been identified as a management contract or compensatory plan or arrangement.
Certain agreements and other documents filed as exhibits to this Quarterly Report on Form 10-Q contain representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the



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benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties to such agreements and other documents and that may not be reflected in such agreements and other documents. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date of such agreements and other documents.




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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Invitation Homes Inc.
  
By:/s/ Ernest M. Freedman
 Name: Ernest M. Freedman
 Title: Executive Vice President and Chief Financial Officer
 (Principal Financial Officer)
 Date: August 4, 2020
 
By:/s/ Kimberly K. Norrell
 Name: Kimberly K. Norrell
 Title: SeniorExecutive Vice President and Chief Accounting Officer
 (Principal Accounting Officer)
Date: August 4, 2020


Date: November 9, 2017




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