Invitation Homes Annual Report 2019

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FY2019 Annual Report · Invitation Homes

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ANNUAL
REPORT
2019

Together with you, we make a house a home.

Seattle
5%

Northern
California
6%

Denver
3%

Las
Vegas
3%

Phoenix
7%

Southern
California
14%

Minn.
2%

Chicago
4%

Dallas
3%

Houston
2%

Carolinas
5%

Jacksonville
3%

Atlanta
13%

Tampa
10%

Orlando
7%

South
Florida
13%

Note: Home count and market count as of 12/31/2019.
Map bubble sizes and percentages based on 4Q19 Same Store revenues.
Map bubble sizes and percentages based on 4Q19 Same Store revenues.

Community Impact 2019

$365M

Home Updates

1,140

Full-Time Associates

2,171

Businesses Supported

$296M

Property Taxes

“We love leasing from Invitation Homes because they are
friendly, reliable, and insightful about their properties and to their
customers. My family is growing with Invitation Homes.”

- Crystal J. | Las Vegas Resident

4.3

Google & Yelp
Rating for 2019

Dear Fellow Stockholders:

2019 was a great year for Invitation Homes’ residents, communities, associates, and investors. The enhancements we made
to our people, processes, and portfolio have positioned us well, not only for the long run, but also to navigate the external
disruptions impacting the world in the near-term. By completing our merger integration, further reﬁning our best-in-class
ProCare service, and recycling capital to improve our portfolio in 2019, we enhanced both the ”Genuine Care” experience
we offer to residents and the efficiency with which we deliver it. These enhancements helped us achieve our highest-ever
resident satisfaction survey scores and Same Store NOI growth near the top of the REIT sector in 2019. More importantly,
these enhancements, in conjunction with the many structural differentiators of our business, are helping us today to
manage through volatility and uncertainty in the broader economy and to make a positive impact in our communities at a
time when they need it the most.

Highlights of 2019 Achievements
•
•

Increased net income per diluted common share to $0.27 per share.
Enhanced resident loyalty, as evidenced by a record-low Same Store resident turnover rate of 30.1% and an average
resident satisfaction survey score of 4.3 out of 5.
Grew Same Store NOI by 5.6%, among the leaders in the REIT sector.
Increased Same Store average occupancy by 50 bps to 96.3%.
Exceeded expectations with $58 million of synergies on an annualized run-rate basis after completing merger integration
in mid-2019.
Enhanced portfolio by selling $900 million of homes and using proceeds to buy $653 million of homes with higher
expected risk-adjusted returns and to repay debt.
Reduced net debt by $702 million, helping to drive a 1x reduction in net debt / annualized Adjusted EBITDAre, ande
opened a new ﬁnancing channel by completing our ﬁrst 12-year loan from a life insurance company.
Continued to focus on sustainability and corporate social responsibility by rewarding associates for genuine care in
resident service, engaging with communities through volunteerism and philanthropy, reducing energy consumption with
the increased installation and usage of Smart Home technology, and participating in GRESB’s Real Estate Pre-Assessment.

•
•
•

•

A Safe Place to Call Home
As we take into account recent developments in global health and the
macroeconomy that have injected uncertainty into the world around
us, the safety and comfort of home is something that we all appreciate
even more. Our mission, “Together with you, we make a house a home,”
resonates now more than ever. We are proud to provide safe homes and
a resident-centric service experience that brings comfort to the lives of
tens of thousands of families, especially in times like today. Our teams
have done an exceptional job adapting to challenges around them to
continue helping residents make a house a home.

Two of Invitation Homes’ core values are “Genuine Care” and “Standout
Citizenship.” I could not be prouder of the way our teams have
continued to embody these values in our response to the challenges
our communities are facing as a result of COVID-19 and its impact.
Always ﬁrst and foremost on our minds is the safety and wellbeing
of our residents and associates, and we have been proactive in taking as much worry out of people’s lives as possible as
they focus on their health and that of those around them. We have provided work-from-home ﬂexibility to our associates,
and we are working closely to assist our associates who are unable to work as a result of COVID-19. We are making sure
residents feel our genuine care, and we are continuing to make every effort to fulﬁll critical service needs of our residents
while taking precautions that put health and safety ﬁrst. We have also voluntarily placed a moratorium on evictions across
our entire portfolio. There is no doubt that COVID-19 has created disruption to the way all of us in the world live our lives,
but we are committed to communicating and working closely with our residents and associates, and continuing to ﬁnd
opportunities to bring smiles to faces in our community.

We recognize that investors are also looking for a safe place to call home in times of uncertainty, and we believe we are
well-prepared for a range of macroeconomic possibilities that may play out. For years we have demonstrated outsized
growth in favorable economic environments, and we believe our business beneﬁts from unique characteristics and
structural hedges that should help us navigate less favorable circumstances as well. We fulﬁll a fundamental human need
for our residents by providing housing. In 2019, residents renewed their leases with us 74% of the time, and we believe the
leasing experience we offer could become even more attractive versus other housing alternatives in times of uncertainty.
We have also been purposeful about assembling a portfolio of homes in in-ﬁll single-family neighborhoods within high-
growth markets where we expect greater resiliency to economic cycles, and we serve a resident base that, on average, has
two wage earners generating annual household income of over $100,000 that covers rent obligations by almost ﬁve times.

With respect to capital structure, we enjoy a strong balance sheet and liquidity position. Over the past several years, we
have not only reduced our overall leverage, but also reﬁnanced debt to push out maturities. As of December 31, 2019, we
had approximately $1.1 billion of liquidity through a combination of unrestricted cash and undrawn capacity on our credit
facility, and we have no debt reaching ﬁnal maturity prior to 2022.

In addition, our business beneﬁts from unique ﬂexibility and risk diversiﬁcation. With approximately 80,000 separate and
individual homes, an operational challenge in one of our homes does not necessarily create challenges for any of our other
homes. In our investment efforts, we can be nimble in adapting our acquisition strategy and volume targets to changes
in the opportunity set, without the burden of signiﬁcant acquisition or development pipeline commitments that require
funding. Furthermore, we have ﬂexibility to asset manage and make capital allocation decisions on a unit-by-unit basis, and
the optionality to transact with either owner-occupants or investors when selling homes.

We appreciate our investors’ support as we focus today on leading the way through uncertain times by bringing Genuine
Care and Standout Citizenship to our communities, providing safe homes and a comforting experience to our residents, and
promoting the wellbeing of our associates and all others.

Positioned for the Future
Looking further ahead, the enhancements we made to our platform, portfolio, and processes in 2019 have put us in an
excellent position for the long run. We have a strategically-located portfolio and scale, our reﬁned platform is better-
equipped than ever to serve residents efficiently, and our innovative team is committed to the resident experience. We
believe these factors will enhance a number of organic and external opportunities that should beneﬁt both the communities
we serve and our shareholders in the years ahead.

As demographics bring the large millennial cohort toward Invitation Homes’
average resident age of 40 years, we believe our portfolio is strategically
positioned in locations where many newly formed households will look to
lease. Invitation Homes makes the opportunity to lease more attractive by
curating a leasing lifestyle that includes 24/7 professional service, convenient
features like Smart Home technology, and family-friendly spaces in locations
where residents want to live.

We have also identiﬁed strategic initiatives to enhance our residents’
experience that can bring even more to the value proposition in years ahead.
For example, we plan to build an expanded suite of ancillary services over
time that will make residents’ lives more convenient. We will also work with residents to offer home ﬁt and ﬁnish upgrades
that they desire, beneﬁting resident satisfaction, asset durability, and risk-adjusted returns.

In addition, we will have the opportunity over time to expand the beneﬁt we bring to communities by adding more homes
to our portfolio from which residents can choose. We believe our multi-channel acquisition approach, whereby our central
and local in-house teams in each market work together to source homes from the MLS, iBuyers, homebuilder partners,
and other investors, is an important differentiator for us when the time is right to buy. By staying engaged locally in each
market and in each channel, we are able to see more opportunities and be selective about the homes we ultimately add to
our portfolio. In addition, we can be nimble in quickly adjusting capital deployment to match changing opportunities.

As we envision the future for Invitation Homes, our expectation is that our communities will beneﬁt alongside us as we
grow. We are honored to be part of the housing solution in America, making the opportunity to live in safe and attractive
neighborhoods available to more people. We pride ourselves on continuously enhancing the leasing lifestyle for our
residents, and we reward our associates for doing so by linking compensation to the quality of service they provide.
We also create jobs in the communities where we operate, not only by directly employing over one thousand full-time
employees, but also by supporting thousands of local small businesses that grow alongside us. Last, but not least, we are
pursuing all of this in a way that enhances sustainability by prioritizing things like environmentally friendly SmartHome
technology, standards that require the use of energy efficient lighting and appliances, and sustainable supply chain
management.

In Conclusion
I am grateful for the support of our shareholders, and ready to continue pursuing our mission with a best-in-class team by
my side. Our success in 2019 has positioned us well for both the near-term external factors that our business is facing and
the long-term opportunity ahead of us. We continue to believe that our in-ﬁll locations in high-growth markets, industry-
leading scale, and best-in-class platform with local expertise will differentiate us, and help us bring value to our residents,
associates, communities and shareholders, in both bright times and more trying times. I thank you all for your support.
Together with you, we will continue to make a house a home.

Dallas B. Tanner
President and Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019
OR

For the transition period from

Commission File Number 001-38004

Invitation Homes Inc.

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)

1717 Main Street, Suite 2000
Dallas, Texas
(Address of principal executive offices)

90-0939055
(I.R.S. Employer
Identification No.)

75201
(Zip Code)

(972) 421-3600
(Registrant’s telephone number, including area code)

Title of each class

Common stock, $0.01 par value

Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)

Name of each exchange on which registered

INVH
Securities registered pursuant to Section 12(g) of the Act: None

New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘ No È
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 È 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 È 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 È
Non-Accelerated Filer ‘

‘
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. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È
As of June 28, 2019, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately
$11.3 billion (based upon the closing sale price of the common stock on that date on the New York Stock Exchange).

As of February 14, 2020, there were 541,882,811 shares of common stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12, 13, and 14 of Part III incorporate information by reference from the registrant’s definitive proxy statement relating to its 2020
annual meeting of stockholders (the “2020 Proxy Statement”) to be filed with the Securities and Exchange Commission within 120 days after the
close of the registrant’s fiscal year to which this report relates.

INVITATION HOMES INC.

PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

4
15
46
46
46
46

47
48
50
77
77
77
78
80

81
81

81
81
81

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82
89

Exhibit Index
Signatures

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), which include, but are not limited to, statements related to our expectations regarding 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,” 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 inherent to the single-family rental industry and our business model, macroeconomic factors
beyond our control, competition in identifying and acquiring 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, and risks
related to our indebtedness. Accordingly, there are or will be important factors that could cause actual outcomes
or results to differ materially from those indicated in these statements. We believe these factors include but are
not limited to, those described under Part I. Item 1A. “Risk Factors” 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 in this Annual Report on Form 10-K and in
our other periodic filings. The forward-looking statements speak only as of the date of this Annual Report on
Form 10-K, 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.

DEFINED TERMS

On November 16, 2017 (the “Merger Date”), Invitation Homes Inc. (“INVH”), Invitation Homes Operating

Partnership LP (“INVH LP”), IH Merger Sub, LLC, a Delaware limited liability company and direct wholly
owned subsidiary of INVH, Starwood Waypoint Homes (“SWH”), and Starwood Waypoint Homes Partnership,
L.P., a Delaware limited partnership and a subsidiary of SWH (“SWH Partnership”), effectuated a series of
transactions which resulted in SWH and SWH Partnership being merged into INVH and INVH LP, respectively,
with INVH and INVH LP being the surviving entities (the “Mergers”). “Legacy SWH” and “SWH,” as the
context requires, refer to the business practices and operations of SWH prior to the Mergers, including the homes
owned by SWH. “Legacy IH” refers to the business practices and operations of INVH prior to the Mergers,
including the homes owned by INVH. THR Property Management L.P., a wholly owned subsidiary of INVH LP
(the “Manager”), provides all management and other administrative services with respect to the properties we
own.

Unless the context suggests otherwise, references in this Annual Report on Form 10-K to “Invitation
Homes,” the “Company,” “we,” “our,” and “us” refer (1) prior to the consummation of the reorganization
transactions described in Part I. Item 1. “Business” (the “Pre-IPO Transactions”), to the six holding entities that
owned our business prior to our initial public offering (the “IH Holding Entities”) and their consolidated
subsidiaries, including INVH LP, (2) after the consummation of the Pre-IPO Transactions, to INVH and its
consolidated subsidiaries (including INVH LP and the IH Holding Entities), and (3) after the consummation of
the Mergers, to INVH and its consolidated subsidiaries including those acquired in the Mergers.

In this Annual Report on Form 10-K:

•

“average monthly rent” represents average monthly rental income per home for occupied properties in an
identified population of homes over the measurement period and reflects the impact of non-service rent
concessions and contractual rent increases amortized over the life of the related 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 in such population were occupied during the measurement period, divided by (ii) the total number of
days that the homes in 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 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 the next resident’s contractual lease start date and the next resident’s move-in
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;

“Metropolitan Statistical Area” or “MSA” is defined by the 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, reflects the impact of
non-service rent concessions and contractual rent increases amortized 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. 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 Sacramento-Arden-Arcade-Roseville, CA, San Francisco-Oakland-Hayward,
CA, Stockton-Lodi, CA, Vallejo-Fairfield, CA, and Yuba City, CA;

“PSF” means per square 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;

“Same Store” or “Same Store portfolio” includes, for a given reporting period, homes that have been
stabilized and seasoned (whether under Invitation Homes ownership or Legacy SWH ownership), 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 initial renovation and (ii) entered into at least one post-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 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 15 months prior to January
1st of the year in which the Same Store portfolio was established. We believe 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 management 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 Miami-Fort Lauderdale-West Palm Beach, FL, and Port St. Lucie, FL;

“Southern California” includes Los Angeles-Long Beach-Anaheim, CA, Oxnard-Thousand Oaks-Ventura,
CA, Riverside-San Bernardino-Ontario, CA, and San 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 Annual Report on Form 10-K 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 may be reflected on an annualized
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, Las Vegas,
and Denver markets.

ITEM 1. BUSINESS

Overview

PART I

Invitation Homes is a leading owner and operator of single-family homes for lease, offering residents high-

quality homes in sought-after neighborhoods across America. With approximately 80,000 homes for lease in
16 markets across the country as of December 31, 2019, 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 operate in markets with strong demand drivers, high barriers to entry, and high rent growth potential,
primarily in the Western United States, Florida, and the Southeast United States. Through disciplined market and
asset selection, as well as through the Mergers, 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 enables 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 net operating income (“NOI”) growth relative to the broader United States housing and
rental market. Within our 16 markets, we target attractive neighborhoods in in-fill locations with multiple
demand drivers, such as proximity to major employment centers, desirable schools, and transportation corridors.
Our homes average approximately 1,870 square feet with three bedrooms and two bathrooms, appealing to a
resident base that we believe is less transitory than the typical multifamily resident. We invest in the upfront
renovation of homes in our portfolio in order to address capital needs, reduce ongoing maintenance costs, and
drive resident demand. As a result, our portfolio benefits from high occupancy and low turnover rates, and we are
well-positioned to drive strong rent growth, attractive margins, and predictable cash flows.

Our Platform

Our vertically integrated, scalable platform allows greater influence over the experience of our residents

while enabling us to better control operating costs and continuously share best practices across functional areas
of the business. Our differentiated platform is built upon:

• Resident-centric focus. Our high-touch business model enables us to continuously solicit and integrate
resident feedback into our operations and tailor our approach to address their preferences, providing a
superior living experience and fostering customer loyalty. We believe this, in turn, drives rent growth,
occupancy, and low turnover rates and will enable us to develop significant brand equity in the longer
term.

•

Local presence and expertise. In-market managers oversee the operations of local leasing management,
property management, and maintenance teams, enabling us to provide outstanding resident service,
leverage local expertise in managing rental, occupancy, and turnover rates, and improve cost and
oversight over renovations and ongoing maintenance. As a result of our concentrated footprint within
our markets, our regional managers and in-market teams are able to realize local-operator advantages,
while still benefiting from significant economies of scale.

Scalable, centralized infrastructure. We support local market operations with national strategy,
infrastructure, and standards to drive efficiency, consistency, and cost savings. We utilize our extensive
scale to ensure the consistent quality of our resident experience and maximize cost efficiencies and
purchasing power. On a national level we are also able to standardize resident leases, employ a
consistent approach to resident screening and leasing operations, and utilize dynamic, rules-based
pricing tools informed by local market conditions.

Our approach to investment and asset management similarly combines local presence and expertise with

national oversight. Our investment and asset management teams are located in-market and apply their local
market knowledge within the framework of a proprietary and consistent underwriting methodology, with support
from national leadership based in our corporate headquarters focused on investment and asset management
strategy. Through the integration of investment and asset management and property management functions, our
platform enables our teams to incorporate real-time information regarding leasing activity, property operations,
maintenance, and capital spending into asset selection. We believe the advantages of our integrated acquisition
platform and local market expertise have driven the quality of our existing portfolio of 79,505 homes as of
December 31, 2019. We believe that employing experienced, in-house acquisitions teams at the local level gives
us a competitive advantage in selectively acquiring homes that will maximize risk-adjusted total return.

Our Business Activities

Since our founding in 2012, we have built a proven, vertically integrated operating platform that allows us

to effectively and efficiently acquire, renovate, lease, maintain, and manage our homes. Our differentiated
approach, which combines a resident-centric focus, local market presence and expertise, and national strategy,
infrastructure, and standards, informs all areas of our operations.

Property Operations

Property operations encompasses the in-house local market management and execution of marketing,

leasing, resident relations, and maintenance functions. We have developed and employ a highly scalable,
vertically integrated, and resident-centric property management service platform, referred to as “ProCare.” All of
our property management functions have been internally managed since our founding in 2012, and we have
implemented an extensive property management infrastructure, including an online resident portal, Smart Home
technology, a technology suite to manage work orders and personnel, dedicated in-market personnel, and local
offices in each of our markets. All of our local market personnel are supported by our centralized national
infrastructure, which allows us to deploy best practices and standardization where appropriate. The combination
of our local market presence and national infrastructure enables us to exercise greater control over our property
management service platform, allowing us to enhance the experience of our residents, better manage operating
costs, and share best practices across various functional areas of our business.

We have organized our in-house property management personnel and operating structure whereby Vice
Presidents of Operations in each of our markets are responsible for the operations of local leasing management,
property management, and maintenance teams. We believe our operating model differentiates our approach to
local market operations and enables us to provide superior, high-touch resident service, maximize the
effectiveness of our in-market personnel in managing rental, occupancy, and turnover rates and improve our cost
management and oversight over both upfront renovations and ongoing maintenance.

Marketing and Leasing

Our in-house personnel are responsible for establishing rental rates, marketing and leasing properties, and

collecting and processing rent. We establish rental rates based on a dynamic, rules-based pricing tool that is
informed by local market conditions, including a competitive analysis of market rents for institutional single-
family rental properties, growth in single-family and multifamily market rents since a specific home’s last lease
commenced, the size, fit and finish, and location of the home, the number of applications received and/or
showings a property has experienced since becoming available, and the number of days a home has been
available on the market, as well as qualitative factors, such as neighborhood characteristics, community
amenities, and proximity to employment centers, desirable schools, transportation corridors, and local services.

We typically begin pre-marketing properties 30 to 60 days in advance of their becoming vacant to maintain

high occupancy rates and reduce vacancy losses. We advertise available properties through multiple channels,

including our proprietary website, internet listing services (such as Zillow, Trulia, HotPads, and Realtor.com),
MLS, yard signs, search engine marketing, social and other digital media, and local brokers. We own internal
brokerages to serve each state in which we operate and primarily utilize in-market leasing agents who work with
us to lease our homes. In some markets, we also utilize a network of local real estate agents to show homes to
prospective residents and offer those agents limited co-broker fees.

Prospective residents may submit an application through the application portal on our website or in person.

In order to maintain brand consistency and better track compliance with leasing requirements, we utilize
standardized online applications, national lease agreements, move-in and move-out documents, resident
communications, and other ancillary documents. We evaluate prospective residents in a standardized manner
through the use of a third party resident screening partner. Our resident screening process includes obtaining
appropriate identification, a thorough evaluation of credit history and household income, a review of the
applicant’s rental history, and a background check for criminal activity. Although we require a minimum income
to rent ratio, many additional factors are also taken into consideration during the resident evaluation process,
including eviction history, criminal history, and rental and other payment history.

Our disciplined investment strategy and local, in-market approach have given us scale and density of homes
in desirable neighborhoods, enabling us to execute demographic and geo-targeted digital advertising. We believe
this increases our likelihood of capturing and retaining qualified residents whose lifestyle and purchasing power
enhance our opportunity to develop and market other programs and services.

Digital Marketing Initiatives and Branding

We encourage meaningful community interaction across our digital platforms by continuously refreshing
the content of our website, blog, and social media accounts with articles, home maintenance advice, contests, and
incentives designed to enrich the lives of our residents and protect our homes. For example, we alert our residents
to prepare for storms, incentivize them to pay their rent online, offer “Lease Friendly” “Make It Home” design
tips, and hold an annual Resident Appreciation Day.

Resident Relations and Property Maintenance

Our in-house personnel in each of our markets are also responsible for property repairs and maintenance and

resident relations. In coordination with a third party vendor, we offer a 24/7 emergency telephone line to handle
after hours maintenance issues on an expedited basis as needed, and our residents can also contact us through our
online resident portal, our call centers, or our local property management offices. As part of our ongoing property
management process, we seek to conduct routine repairs and maintenance in a timely manner, as appropriate, by
appointment at the resident’s convenience. We seek to utilize quality materials to minimize the recurrence of
maintenance requests and maximize long-term rental income and cash flows from our portfolio.

We typically utilize our in-house maintenance personnel in each of our markets to provide ordinary course,

“handyman” services, and outsource more complex or extensive repairs, such as roofing, heating, ventilation, and
air conditioning (“HVAC”) systems, plumbing, and electrical work to vetted, pre-approved third party vendor
partners. We strive to maximize the number of maintenance calls that are addressed by our in-house maintenance
technicians. In cases where we outsource more complex or extensive repairs, our in-house maintenance personnel
provide oversight to ensure quality control and cost effectiveness. In addition, our in-house maintenance
personnel conduct periodic visits to our properties to help foster positive, long-term relationships with our
residents, track and report maintenance needs effectively, conduct preventative maintenance, and ensure
compliance with lease terms, local laws, and HOA rules and regulations.

ProCare service, our property management service platform, utilizes a number of policies and programs
designed to improve the efficiency of our property maintenance practices and maximize resident satisfaction with
our service model. When a new resident moves into one of our homes, our in-house personnel conduct a resident

orientation, during which we revisit the terms of the lease, outline what aspects of the home’s upkeep are the
resident’s responsibility, walk through all of the home’s major systems in order to familiarize the resident with
their safe and proper operation, and inform the resident that we will be conducting a post move-in maintenance
visit. Following the move-in orientation, each resident is encouraged to keep a record of any non-emergency
service items noted after moving into the home. At the time of the post move-in maintenance visit approximately
45 days after move-in, our in-house property maintenance personnel will address any non-emergency service
needs the resident has noted. We believe this process has a number of benefits. First, by conducting an in-person
move-in orientation, we are able to ensure that residents understand their obligations under the terms of their
lease, as well as how to safely and properly operate the home’s systems, reducing both the likelihood of
misaligned expectations and unnecessary wear and tear on the property. Second, by scheduling a post move-in
maintenance visit, we are able to address multiple service requests in a single visit, improving the resident
experience by avoiding the inconvenience of multiple service appointments and improving the efficiency and
productivity of our in-house property maintenance personnel. Finally, the post move-in maintenance visit allows
us to more quickly identify residents who may not be adhering to the terms of their lease or may be subjecting
the home to undue wear and tear and/or damages as a result of their treatment of the property.

Following the regularly scheduled post move-in maintenance visit described above, our in-house property

maintenance personnel in each of our markets also conduct mid-lease preventive maintenance visits. During
preventive maintenance visits, our in-house property maintenance personnel inspect the home’s systems, paying
particular attention to potential safety hazards as well as potential causes of damage that could result in us
incurring significant maintenance costs if left unaddressed. Examples of areas of focus for preventive
maintenance visits include smoke and carbon monoxide detectors, air filters, hot water heaters, toilet valves,
under-sink plumbing, and garbage disposals, among others.

We also conduct pre move-out visits 15 to 30 days prior to scheduled resident move-outs. These visits allow

us to notify residents of any repairs they may need to undertake prior to moving out of the property, such as
carpet cleaning or landscaping maintenance, in order to avoid forfeiture of part or all of their security deposit. In
addition, these visits allow our in-house property maintenance personnel to begin preparing a scope of work and
budget for the turnover work we undertake between residents to prepare our homes to be re-leased to a new
resident. These visits also increase our ability to pre-market our homes.

Regardless of the purpose or timing of the visit, our in-house property maintenance personnel are required

to conduct a general property condition assessment (“GPCA”) every time they visit one of our homes. The
GPCA requires our in-house property maintenance personnel to assess and document interior and exterior
condition, whether the resident is adhering to the terms of their lease, as well as any potential safety hazards or
potential causes of damage that could result in us incurring significant maintenance costs if left unaddressed. If a
deficiency is identified by our in-house property maintenance personnel we endeavor to take prompt action to
correct it.

Investment and Asset Management

Acquisition Strategy

We have a disciplined acquisition platform that is capable of deploying capital across multiple acquisition
channels and markets simultaneously. Our markets were generally selected through a robust process utilizing an
analysis of housing and rental market supply and demand fundamentals, macroeconomic and demographic
trends, and risk-adjusted total return potential. Specifically, the process we use to select and, on an ongoing basis,
evaluate our markets ranks these markets based on relative weightings of factors that include, but are not limited
to, forecast population and employment growth, household formation, historical and forecast deliveries of new
residential housing supply, discounts to replacement cost for single-family residential housing, size of the
addressable market, volume of new and existing home sales, potential yields implied by the relationship between
market rental rates and the price of single-family residential housing, forecast home price appreciation, and
forecast rental rate growth.

We have amassed significant scale within our 16 markets. In these markets, our acquisition strategy has
been, and will continue to be, focused on buying, renovating, and operating high quality single-family homes for
lease that we believe will appeal to and attract a high quality resident base, that will experience robust long-term
demand, and that will benefit from capital appreciation. In evaluating acquisitions, we analyze numerous factors,
including neighborhood desirability, proximity to employment centers, schools, and transportation corridors,
community amenities, construction type, and required ongoing capital needs, among others.

We target submarkets and neighborhoods in undersupplied high-growth markets and leverage our in-house
acquisition and operations teams’ local market expertise to acquire homes in in-fill locations that we believe will
experience above average rental rate growth and home price appreciation. Our in-house acquisition teams are
comprised of dedicated professionals located in our markets and at our corporate headquarters who provide
strategic direction and broad oversight. Our acquisition teams have significant local market experience and
expertise in single-family investments and sales, which enables us to target specific submarkets, neighborhoods,
individual streets, and homes that meet our selection and underwriting criteria. To date, we have underwritten
more than one million individual homes which gives us a substantial proprietary database on which we can draw
as we evaluate future acquisition opportunities in our markets. The number of homes underwritten represents the
total number of acquisition opportunities that we have considered and of which we have conducted preliminary
analysis, including acquisition opportunities that were ultimately not pursued or completed. As a result of our
selective and disciplined investment approach, we have analyzed and considered a far greater number of potential
acquisitions than the number of homes we have actually acquired. As a result of our large existing portfolio and
volume of acquisitions to date, we believe we have a high degree of visibility into rental rates and fixed and
controllable operating expenses, which allows us to more accurately underwrite expected net yields of homes
prior to acquisition. We also collaborate with local market real estate brokers and others, and leverage these
relationships to source off-market acquisition opportunities. Within our markets, our approach allows us to
screen broadly and rapidly to identify potential acquisitions in highly targeted submarkets at the neighborhood
and street levels. Our in-house team of acquisition professionals coordinates with our in-house renovation,
maintenance, and property management teams to ensure that feedback from historical acquisitions is shared
across functions so that our ongoing investment activities are informed by, and benefit from, insight from prior
experience.

Property Renovations

We have an in-house team of dedicated personnel located in our markets who oversee our upfront property

renovation process and the ongoing maintenance of our homes, with support from centralized construction
experts and infrastructure. This team works in collaboration with our in-house investment and property
management teams to maximize the total return of our upfront investment and minimize ongoing maintenance
costs. To this end, our professionals evaluate: the structural needs and major systems of a property (e.g.,
examining roofs, HVAC systems, and siding); other maintenance-reducing improvements and repairs (e.g.,
installing durable hard-surface flooring, removing carpet from high-traffic areas, and testing plumbing and pipes
both in the home and out to the street); and the level of fit and finish required to maintain consistency with our
brand standards and maximize rental demand (e.g., selecting cabinet and countertop finishes and appliances
designed to improve resident demand).

In general, before a home is acquired or when an acquired home first becomes vacant, our in-house teams

begin the renovation process by preparing a detailed renovation budget and scope of work based on an
assessment of each property’s major systems and structural features. These include HVAC, roofs, pools, and
plumbing and electrical systems. In addition, we also evaluate other features of our homes’ fit and finish,
including appliances, landscaping, decks and/or patios, and fixtures. During our initial assessment, we also
determine the potential for, and potential return on, any value-additive upgrades that may reduce future operating
costs or enhance rental demand and, by extension, our ability to realize more attractive rental, occupancy, or
turnover rates.

Through local oversight by in-house personnel of the entire process of renovating our homes, we are able to

drive cost efficiencies. Each property’s detailed budget and scope of work prepared by our in-house team of
renovation professionals is reviewed and vetted by our in-house asset management and operations teams, and in
the case of work we contract directly, presented for bid to one or more of our pre-approved vendor partners in
each of our markets. In the case of work for which we rely upon general contractors, we set prices based on the
scope of work involved. By establishing and enforcing best practices and quality consistency, and through a
constant process of evaluating and grading our vendor partners, we believe that we are able to reduce the costs of
both materials and labor. For example, we have negotiated discounts and extended warranties for products that
we regularly use during the renovation process, including appliances, HVAC systems and components, carpet
and flooring, and paint, among others. We are also able to reduce general contractor fees by working directly
with vendors. We believe this approach results in both a larger proportion of our upfront renovation expenditures
going toward actual investment in our homes as well as lower overall expenditures than if we were to outsource
all elements of vendor selection and oversight to third party general contractors.

Portfolio Optimization

We maintain a sophisticated process to identify and efficiently dispose of homes that no longer fit our
investment objectives. We believe we have a proven ability to optimize sales prices while reducing both time to
sale and selling costs by utilizing multiple distribution channels, including bulk portfolio sales, our “Resident
First Look” program (which facilitates home sales to our current residents), direct-to-market sales, and MLS. We
believe the significant local density of our portfolio, which averages approximately 5,000 homes per market as of
December 31, 2019, allows us to selectively sell properties without sacrificing the operating efficiency of our
concentrated scale.

Environmental, Social, and Governance Initiatives

At Invitation Homes, we believe that integrating environmental, social, and governance initiatives into our

strategic business objectives is critical to our long-term success. Through our integrated and ongoing approach to
sustainability and corporate responsibility, we seek to drive positive change and create value for our
stakeholders.

Corporate social responsibility is vitally important to who we are as a company. Our Corporate Social

Responsibility Policy is posted on our website and applies to all activities undertaken by or on behalf of
Invitation Homes anywhere we operate. This policy encompasses areas of community and associate engagement,
human rights, corporate governance and ethics, and environmental initiatives that reflect existing and emerging
standards of corporate social responsibility.

Our mission, vision, and values define our daily actions in delivering on our pledge to be a responsible
corporate citizen. Our mission statement “Together with you, we make a house a home” reflects our commitment
to a resident-centric business philosophy. The way we carry out that mission on a daily basis is reflected in our
company’s core values: Unshakable Integrity; Genuine Care; Continuous Excellence; and Standout Citizenship.
Our vision is to be the premier choice in home leasing by continuously enhancing our residents’ living
experiences and communities.

Every day, we strive to benefit our residents, our associates, our communities, and our shareholders by

deeply embedding our values, ethics, and integrity into all that we do.

Residents

By offering quality homes in attractive neighborhoods, we believe we give residents the choice to lease a

home in a community that may not have otherwise been attainable. We strive to provide our residents with a
worry-free leasing lifestyle through service that includes welcoming them with an in-person home orientation at

move-in, making their lives easier with our Smart Home technology offering, and providing 24/7 maintenance
combined with our best-in-class ProCare property management platform.

Associates

Our associates are our most precious resource. From our focus on health and safety to our support for a
diverse and inclusive culture, we treat each other fairly and act with honesty, integrity, and respect. We believe
passionately that diverse and inclusive companies make for more innovative, engaged, and happy teams. Our
organization makes it a priority to celebrate diversity and cultivate a culture of inclusion.

Everyone who works at or with Invitation Homes should feel confident about our high ethical standards, our

honesty, and our integrity. Our daily decisions are driven by our Code of Business Conduct and Ethics, which is
posted on our website and demonstrates our commitment to our stakeholders to be a responsible corporate citizen
and a good business partner. This code helps guide us as we collaborate to accomplish our goals together, while
holding ourselves individually responsible for our work and accountable for our actions. Our Vendor Code of
Conduct is an extension of our values to our vendors and serves to highlight our commitment to ethical business
practices and regulatory compliance.

Communities

We recognize that the vitality of our business is directly linked to the vitality of the communities in which
we operate. As of December 31, 2019, we and our predecessors have invested approximately $2.3 billion in the
upfront renovation of homes in our portfolio. We invested approximately $38,000 per home for upfront
renovations completed during the year ended December 31, 2019. Further, we maintain our homes to high
standards through timely maintenance services as well as through our proprietary ProCare service. ProCare is an
innovative maintenance program designed to provide regular opportunities for us to inspect our assets,
proactively address issues, and ensure each home continues to meet our standards. We believe that these
investments benefit our communities by creating jobs, enhancing neighborhood appearance and liveability, and
improving the overall quality of life for our residents and their neighbors. In addition, we believe such
investments improve our relationships with local communities and HOAs and enhance our brand recognition and
loyalty.

Our commitment to community includes efforts that make us more innovative and sustainable. Protecting
the environment is critically important to us, and our sustainability initiatives help limit the carbon footprints and
overall environmental impact of our homes. Those initiatives include: Smart Home technology that enables
maintenance technicians and residents to control thermostats remotely and reduce energy consumption; routing
and optimization technology designed to improve scheduling efficiencies for our maintenance technicians, which
may also result in a reduced vehicle emissions footprint; standards of performance that require the use of energy-
efficient lighting and appliances; and supply chain management that focuses on our vendors’ sustainability
practices and procedures. We believe that we can respond to local and global environmental challenges by
combining our strengths in sustainability, innovation, and partnership.

We also encourage our associates to be good neighbors in their local communities by partnering with local

organizations to provide support to those in need. In addition, each year Invitation Homes associates receive
20 hours of paid time off to volunteer in their communities and help their local neighbors. Together, associates in
our 16 markets used this time in 2019 to deliver food to veterans and elderly citizens, contribute and package
food and school supplies, collect and deliver toys, clean beaches, and provide other needed support in their
communities. We also offer an annual “There’s No Place Like Home” scholarship contest, awarding scholarships
for higher learning to residents, associates, and community members.

Shareholders

We take very seriously the responsibility that individuals and organizations have chosen to invest in our
company, and we strive every day to ensure that our actions result in value for these investors. In addition, we are
committed to sound corporate governance practices and adherence to the highest ethical standards. We have
structured our corporate governance in a manner we believe closely aligns our interests with those of our
shareholders.

Pre-IPO Transactions and Mergers

On January 31, 2017, certain Pre-IPO Transactions were effected that resulted in INVH LP holding, directly
or indirectly, all of the assets, liabilities, and results of operations of the Manager and the full portfolio of homes
held by the IH Holding Entities. As a result of the Pre-IPO Transactions, INVH LP became a consolidated
subsidiary of INVH. A wholly owned subsidiary of INVH, Invitation Homes OP GP LLC, serves as INVH LP’s
sole general partner.

The Pre-IPO Transactions have been accounted for as a reorganization of entities under common control

utilizing historical cost basis in our 2017 financial statements. Consolidated financial statements during this
period include the combined accounts of INVH LP and the IH Holding Entities and their wholly owned
subsidiaries. The Pre-IPO Transactions also included amendments to the Invitation Homes Inc. charter which
provide for the issuance of up to 9,000,000,000 shares of common stock.

On February 6, 2017, Invitation Homes Inc. changed its jurisdiction of incorporation to Maryland and
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 equity owners,
including directors, officers, and employees, as part of the Pre-IPO Transactions.

On November 16, 2017 , we completed the Mergers with SWH. The Mergers were accounted for as a
business combination in accordance with ASC Topic 805, Business Combinations, and INVH was designated as
the accounting acquirer. In connection therewith, SWH stockholders received an aggregate of 207,448,958 shares
of our common stock in exchange for all outstanding SWH common shares.

As of December 31, 2019, INVH owns a 99.4% partnership interest in INVH LP and has the full, exclusive,

and complete responsibility for and discretion over the day to day management and control of INVH LP.

Risk Management

We face various forms of risk in our business ranging from broad economic, housing market, and interest

rate risks, to more specific factors, such as credit risk related to our residents, re-leasing of properties, and
competition for properties. We believe that the systems and processes developed by our board of directors and
our experienced executive team allow us to monitor, manage, and ultimately mitigate these risks. For example,
we seek to maximize revenue collections through our robust, standardized resident screening process (which
includes credit checks, evaluations of household income, and criminal background checks), as well as by
utilizing Automated Clearing House, which includes an auto-pay feature, to facilitate the collection of a majority
of our rental payments. In addition, we track resident delinquency on a daily basis and assess any late fees
promptly in accordance with the terms of our lease (typically between the third and fifth calendar day of the
month).

Insurance

We maintain property, casualty, and corporate-level insurance coverage related to our business, including

general liability, business auto, umbrella, commercial crime, directors’ and officers’ liability, fiduciary liability,

cyber liability, employment practices liability, and workers’ compensation insurance. We believe the policy
specifications and insured limits under our insurance program are appropriate and adequate for our business and
properties given the relative risk of loss, the cost of the coverage and industry practice. However, our insurance
coverage is subject to deductibles and coverage exclusions, and we are self-insured up to the amount of such
deductibles and exclusions. See Part I. Item 1A. “Risk Factors — Risks Related to Our Business and Industry —
We may suffer losses that are not covered by insurance.”

Systems and Technology

Effective systems and technology are essential components of our business. We have made significant
investments in our lease management, construction management, property and corporate accounting, and asset
management systems. These systems have been designed to be scalable to accommodate continued growth in our
portfolio of single-family homes for lease. Our website is fully integrated into our resident accounting and
leasing system. From our website, which is accessible from mobile devices, prospective residents can browse
homes available for lease, request additional information, and apply to lease a specific home. Through online
resident portals and native mobile applications, existing residents can set up automatic payments and request
maintenance service. Our system is designed to handle the accounting requirements of residential property
accounting, including accounting for security deposits and paying property-level expenses. The system also
interfaces with our third party resident screening vendor partner to expedite evaluations of prospective residents’
rental applications. We have worked with a search engine optimization firm to ensure we place high in search
engine results and will continue to monitor our placement on search engines. In addition, sponsored key words
are generally purchased in selected markets as needed.

Competition

We face competition from different sources in each of our two primary activities: acquiring properties and

leasing our properties. We believe our competitors in acquiring properties for investment purposes are individual
investors, small private investment partnerships looking for one-off acquisitions of investment properties that can
either be leased or restored and sold, and larger investors, including private equity funds and other real estate
investment trusts (“REITs”), that are seeking to capitalize on the same market opportunity that we have
identified. Our primary competitors in acquiring portfolios include large and small private equity investors,
public and private REITs, and other sizable private institutional investors. These same competitors may also
compete with us for residents. Competition may increase the prices for properties that we would like to purchase,
reduce the amount of rent we may charge for our properties, reduce the occupancy of our portfolio, and adversely
impact our ability to achieve attractive total returns. However, we believe that our acquisition platform, our
extensive in-market property operations infrastructure, and local expertise in our markets provide us with
competitive advantages.

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 seasonally impacted in certain markets by increases in expenses such as HVAC
repairs and landscaping expenses during the summer season.

Regulation

General

Our business operations and properties are subject to various covenants, laws, ordinances, and rules. We
believe that we are in material compliance with such covenants, laws, ordinances, and rules, and we also require
that our residents agree to comply with such covenants, laws, ordinances, and rules in their leases with us.

Fair Housing Act

The Fair Housing Act (“FHA”) and its state law counterparts, and the regulations promulgated by the
United States Department of Housing and Urban Development and various state agencies, prohibit discrimination
in housing on the basis of race or color, national origin, religion, sex, familial status (including children under the
age of 18 living with parents or legal custodians, pregnant women, and people in the process of adopting a child
or securing custody of children under the age of 18), disability or, in some states, financial capability. We train
our associates on a regular basis regarding such laws and regulations and we believe that our properties are in
compliance with the FHA and other such regulations.

Municipal Regulations and Homeowners’ Associations

Our properties are subject to various municipal regulations and orders, and county and city ordinances,
including without limitation, use, operation and maintenance of our properties. Certain of our properties are
subject to the rules of the various HOAs where such properties are located. HOA rules and regulations are
commonly referred to as “covenants, conditions and restrictions,” or CC&Rs, and typically consist of various
restrictions or guidelines regarding use and maintenance of the property, including, among others, noise
restrictions or guidelines as to how many cars may be parked on the property.

Broker Licensure

We own internal brokerages to serve each state in which we operate, and primarily utilize in-market leasing
agents who work with us to lease our homes. Our internal brokerages are subject to numerous federal, state, and
local laws and regulations that govern the licensure of real estate brokers and affiliate brokers and set forth
standards for, and prohibitions on, the conduct of real estate brokers. Such standards and prohibitions include,
among others, those relating to fiduciary and agency duties, administration of trust funds, collection of
commissions, and advertising and consumer disclosures, as well as compliance with federal, state, and local laws
and programs for providing housing to low-income families. Under applicable state law, we generally have a
duty to supervise and are responsible for the conduct of our internal brokerages.

Environmental Matters

As a current or prior owner of real estate, we are subject to various federal, state, and local environmental

laws, regulations, and ordinances, and we could be liable to third parties as a result of environmental
contamination or noncompliance at our properties, even if we no longer own such properties. We are not aware
of any environmental matters that would have a material adverse effect on our financial position. See Part I.
Item 1A. “Risk Factors — Risks Related to Our Business and Industry — Contingent or unknown liabilities
could adversely affect our financial condition, cash flows, and operating results.”

Laws and Regulations Regarding Privacy and Data Protection

We are subject to a variety of laws and regulations that involve matters such as privacy, data protection,
content, consumer protection, and other matters. For example, the California Consumer Privacy Act and the
Nevada Privacy Law, which took effect in January 2020, establish certain transparency rules and create new data
privacy rights for users, including more ability to control how their data is shared with third parties. See Part I.
Item 1A. “Risk Factors — Risks Related to Our Business and Industry — Our business is subject to laws and
regulations regarding privacy, data protection, consumer protection, and other matters.” Many of these laws and
regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business
practices, monetary penalties, or otherwise harm our business.”

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”) 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. The
CODM evaluates operating performance and allocates resources on a total portfolio basis. The CODM utilizes
NOI 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 with a focus on growing accretively in high-growth locations where we have greater scale
and density.

Employees

As of December 31, 2019, we had 1,140 dedicated full-time personnel, which we supplement with
temporary and contract resources. None of our personnel are covered by a collective bargaining agreement.

REIT Qualification

We have elected to qualify as a REIT for United States federal income tax purposes. So long as we qualify

as a REIT, we generally will not be subject to United States federal income tax on net taxable income that we
distribute annually to our stockholders. In order to qualify as a REIT for United States federal income tax
purposes, we must continually satisfy tests concerning, among other things, the real estate qualification of
sources of our income, the composition and values of our assets, the amounts we distribute to our stockholders,
and the diversity of ownership of our stock. In order to comply with REIT requirements, we may need to forego
otherwise attractive opportunities and limit our expansion opportunities and the manner in which we conduct our
operations.

History

Invitation Homes Inc., a Maryland corporation, was incorporated in Delaware on October 4, 2016, and

changed its jurisdiction of incorporation to Maryland on February 6, 2017. Through certain of the IH Holding
Entities, we commenced operations in 2012. Our principal executive offices are located at 1717 Main Street,
Suite 2000, Dallas, Texas 75201 and our telephone number is (972) 421-3600.

Website and Availability of SEC filings

We file annual, quarterly, and current reports, proxy statements, and other information with the SEC. Our

SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov.

We maintain an internet site at IR.InvitationHomes.com, where we make our SEC filings available as soon

as reasonably practicable after they are filed with or furnished to the SEC. Our website and the information
contained on or through that site are not incorporated into this Annual Report on Form 10-K. We use our website
IR.InvitationHomes.com as a channel of distribution of material company information. For example, financial
and other material information regarding our company is routinely posted on and accessible at
IR.InvitationHomes.com. Accordingly, investors should monitor the website, in addition to following our press
releases, SEC filings, and public conference calls and webcasts. In addition, you may automatically receive email
alerts and other information about Invitation Homes when you enroll your email address by visiting the Email
Notification section at IR.InvitationHomes.com under the Investor Resources tab. The contents of our website
and social media channels are not, however, a part of this Annual Report on Form 10-K and are not incorporated
by reference herein.

ITEM 1A. RISK FACTORS

The risk factors noted in this section and other factors noted throughout this Annual Report on Form 10-K,

describe certain risks and uncertainties that could cause our actual results to differ materially from those
contained in any forward-looking statement and should be considered carefully in evaluating our company and
our business.

Risks Related to Our Business and Industry

Our operating results are subject to general economic conditions and risks associated with our real estate
assets.

Our operating results are subject to risks generally incident to the ownership and rental of residential real

estate, many of which are beyond our control, including, without limitation:

•

changes in national, regional, or local economic, demographic, or real estate market conditions;

changes in job markets and employment levels on a national, regional, and local basis;

declines in the value of residential real estate;

overall conditions in the housing market, including:

• macroeconomic shifts in demand for rental homes;

•

inability to lease or re-lease homes to residents on a timely basis, on attractive terms or at all;

failure of residents to pay rent when due or otherwise perform their lease obligations;

unanticipated repairs, capital expenditures, weather related damages, or other costs;

uninsured damages; and

increases in property taxes, HOA fees, and insurance costs;

level of competition for suitable rental homes;

terms and conditions of purchase contracts;

costs and time period required to convert acquisitions to rental homes;

changes in interest rates and availability of financing that may render the acquisition of any homes
difficult or unattractive;

the liquidity of real estate investments, generally;

the short-term nature of most residential leases and the costs and potential delays in re-leasing;

changes in laws, including those that increase operating expenses or limit our ability to increase rental
rates. See “— Tenant relief laws, including laws regulating evictions, rent control laws, and other
regulations that limit our ability to increase rental rates may negatively impact our rental income and
profitability”;

the impact of potential reforms relating to government-sponsored enterprises involved in the home
finance and mortgage markets;

rules, regulations and/or policy initiatives by government and private actors, including HOAs, to
discourage or deter the purchase of single-family properties by entities owned or controlled by
institutional investors;

disputes and potential negative publicity in connection with eviction proceedings;

construction of new supply;

•

costs resulting from the clean-up of, and liability to third parties for damages resulting from,
environmental problems, such as indoor mold;

fraud by borrowers, originators, and/or sellers of mortgage loans;

undetected deficiencies and/or inaccuracies in underlying mortgage loan documentation and
calculations;

casualty or condemnation losses;

the geographic mix of our properties;

the cost, quality, and condition of the properties we are able to acquire; and

our ability to provide adequate management, maintenance, and insurance.

Any one or more of these factors could adversely affect our business, financial condition, and results of

operations.

We are employing a business model with a limited track record, which may make our business difficult to
evaluate.

Until recently, the single-family rental business consisted primarily of private and individual investors in
local markets and was managed individually or by small, non-institutional owners and property managers. Our
business strategy involves purchasing, renovating, maintaining, and managing a large number of residential
properties and leasing them to qualified residents. Entry into this market by large, well-capitalized investors is a
relatively recent trend, so few peer companies exist and none have yet established long-term track records that
might assist us in predicting whether our business model and investment strategy can be implemented and
sustained over an extended period of time. It may be difficult for you to evaluate our potential future
performance without the benefit of established long-term track records from companies implementing a similar
business model. We may encounter unanticipated problems as we continue to refine our business model, which
may adversely affect our results of operations and ability to make distributions to our stockholders and cause our
stock price to decline significantly.

We have a limited operating history and may not be able to operate our business successfully or generate
sufficient cash flows to make or sustain distributions to our stockholders.

We have a limited operating history. As a result, an investment in our common stock may entail more risk
than an investment in the common stock of a real estate company with a substantial operating history. If we are
unable to operate our business successfully, we would not be able to generate sufficient cash flow to make or
sustain distributions to our stockholders, and you could lose all or a portion of the value of your ownership in our
common stock. Our ability to successfully operate our business and implement our operating policies and
investment strategy depends on many factors, including:

•

our ability to effectively manage renovation, maintenance, marketing, and other operating costs for our
properties;

economic conditions in our markets, including changes in employment and household earnings and
expenses, as well as the condition of the financial and real estate markets and the economy, in general;

our ability to maintain high occupancy rates and target rent levels;

the availability of, and our ability to identify, attractive acquisition opportunities consistent with our
investment strategy;

our ability to compete with other investors entering the single-family rental industry;

costs that are beyond our control, including title litigation, litigation with residents or tenant
organizations, legal compliance, property taxes, HOA fees, and insurance;

•

judicial and regulatory developments affecting landlord-tenant relations that may affect or delay our
ability to dispossess or evict occupants or increase rental rates;

reversal of population, employment, or homeownership trends in our markets; and

interest rate levels and volatility, which may affect the accessibility of short-term and long-term
financing on desirable terms.

In addition, we face significant competition in acquiring attractive properties on advantageous terms, and

the value of the properties that we acquire may decline substantially after we purchase them.

We may not be able to effectively manage our growth, and any failure to do so may have an adverse effect on
our business and operating results.

Since commencing operations in 2012, we have grown rapidly, assembling a portfolio of approximately
80,000 homes as of December 31, 2019. Our future operating results may depend on our ability to effectively
manage our growth, which is dependent, in part, upon our ability to:

•

stabilize and manage an increasing number of properties and resident relationships across our
geographically dispersed portfolio while maintaining a high level of resident satisfaction and building
and enhancing our brand;

identify and supervise a number of suitable third parties on which we rely to provide certain services
outside of property management to our properties;

attract, integrate, and retain new management and operations personnel; and

continue to improve our operational and financial controls and reporting procedures and systems.

We can provide no assurance that we will be able to manage our properties or grow our business efficiently

or effectively, or without incurring significant additional expenses. Any failure to do so may have an adverse
effect on our business and operating results.

A significant portion of our costs and expenses are fixed and we may not be able to adapt our cost structure to
offset declines in our revenue.

Many of the expenses associated with our business, such as property taxes, HOA fees, insurance, utilities,

acquisition, renovation and maintenance costs, and other general corporate expenses are relatively inflexible and
will not necessarily decrease with a reduction in revenue from our business. Some components of our fixed assets
depreciate more rapidly and require ongoing capital expenditures. Our expenses and ongoing capital expenditures
are also affected by inflationary increases, and certain of our cost increases may exceed the rate of inflation in
any given period or market. Our rental income is affected by many factors beyond our control, such as the
availability of alternative rental housing and economic conditions in our markets. In addition, state and local
regulations may require us to maintain properties that we own, even if the cost of maintenance is greater than the
value of the property or any potential benefit from renting the property, or pass regulations that limit our ability
to increase rental rates. As a result, we may not be able to fully offset rising costs and capital spending by
increasing rental rates, which could have a material adverse effect on our results of operations and cash available
for distribution.

Increasing property taxes, HOA fees, and insurance costs may negatively affect our financial results.

As a result of our substantial real estate holdings, the cost of property taxes and insuring our properties is a

significant component of our expenses. Our properties are subject to real and personal property taxes that may
increase as tax rates change and as the real properties are assessed or reassessed by taxing authorities. As the
owner of our properties, we are ultimately responsible for payment of the taxes to the applicable government

authorities. If real property taxes increase, our expenses will increase. If we fail to pay any such taxes, the
applicable taxing authority may place a lien on the real property and the real property may be subject to a tax
sale.

In addition, a significant portion of our properties are located within HOAs and we are subject to HOA rules

and regulations. HOAs have the power to increase monthly charges and make assessments for capital
improvements and common area repairs and maintenance. Property taxes, HOA fees, and insurance premiums
are subject to significant increases, which can be outside of our control. If the costs associated with property
taxes, HOA fees and assessments, or insurance rise significantly and we are unable to increase rental rates due to
rent control laws or other regulations to offset such increases, our results of operations would be negatively
affected.

We recorded net losses in the past and we may experience net losses in the future.

We recorded consolidated net losses for the years ended December 31, 2018 and 2017. These net losses

were inclusive in each period of significant non-cash charges, consisting primarily of depreciation and
amortization expense. We expect such non-cash charges to continue to be significant in future periods and, as a
result, we may record net losses in future periods.

We are dependent on our executive officers and dedicated personnel, and the departure of any of our key
personnel could materially and adversely affect us. We also face intense competition for the employment of
highly skilled managerial, investment, financial, and operational personnel.

We rely on a small number of persons to carry out our business and investment strategies, and the loss of the

services of any of our key management personnel, or our inability to recruit and retain qualified personnel in the
future, could have an adverse effect on our business and financial results.

In addition, the implementation of our business plan may require that we employ additional qualified
personnel. Competition for highly skilled managerial, investment, financial, and operational personnel is intense.
As additional large real estate investors enter into and expand their scale within the single-family rental business,
we have faced increased challenges in hiring and retaining personnel, and we cannot assure our stockholders that
we will be successful in attracting and retaining such skilled personnel. If we are unable to hire and retain
qualified personnel as required, our growth and operating results could be adversely affected.

Our ability to meet our labor needs while controlling our labor costs is subject to numerous external factors,

including unemployment levels, prevailing wage rates, changing demographics, and changes in employment
legislation. If we are unable to retain qualified personnel or our labor costs increase significantly, our business
operations and our financial performance could be adversely impacted.

Our investments are and will continue to be concentrated in our markets and in the single-family properties
sector of the real estate industry, which exposes us to seasonal fluctuations in rental demand and downturns
in our markets or in the single-family properties sector.

Our investments in real estate assets are and will continue to be concentrated in our markets and in the
single-family properties sector of the real estate industry. A downturn or slowdown in the rental demand for
single-family housing caused by adverse economic, regulatory, or environmental conditions, or other events, in
our markets may have a greater impact on the value of our properties or our operating results than if we had more
fully diversified our investments. We believe that there are seasonal fluctuations in rental demand with demand
higher in the spring and summer than in the late fall and winter. Such seasonal fluctuations may impact our
operating results.

In addition to general, regional, national, and international economic conditions, our operating performance

will be impacted by the economic conditions in our markets. We base a substantial part of our business plan on

our belief that property values and operating fundamentals for single-family properties in our markets will
continue to improve over the near to intermediate term. However, these markets have experienced substantial
economic downturns in recent years and could experience similar or worse economic downturns in the future.
We can provide no assurance as to the extent property values and operating fundamentals in these markets will
improve, if at all. If the recent economic downturn in these markets returns or if we fail to accurately predict the
timing of economic improvement in these markets, the value of our properties could decline and our ability to
execute our business plan may be adversely affected to a greater extent than if we owned a real estate portfolio
that was more geographically diversified, which could adversely affect our financial condition, operating results,
and ability to make distributions to our stockholders and cause the value of our common stock to decline.

We may not be able to effectively control the timing and costs relating to the renovation and maintenance of
our properties, which may adversely affect our operating results and ability to make distributions to our
stockholders.

Nearly all of our properties require some level of renovation either immediately upon their acquisition or in

the future following expiration of a lease or otherwise. We may acquire properties that we plan to extensively
renovate. We may also acquire properties that we expect to be in good condition only to discover unforeseen
defects and problems that require extensive renovation and capital expenditures. To the extent properties are
leased to existing residents, renovations may be postponed until the resident vacates the premises, and we will
pay the costs of renovating. In addition, from time to time, we may perform ongoing maintenance or make
ongoing capital improvements and replacements and perform significant renovations and repairs that resident
deposits and insurance may not cover. Because our portfolio consists of geographically dispersed properties, our
ability to adequately monitor or manage any such renovations or maintenance may be more limited or subject to
greater inefficiencies than if our properties were more geographically concentrated.

Our properties have infrastructure and appliances of varying ages and conditions. Consequently, we

routinely retain independent contractors and trade professionals to perform physical repair work and are exposed
to all of the risks inherent in property renovation and maintenance, including potential cost overruns, increases in
labor and materials costs, delays by contractors in completing work, delays in the timing of receiving necessary
work permits, certificates of occupancy, and poor workmanship. If our assumptions regarding the costs or timing
of renovation and maintenance across our properties prove to be materially inaccurate, our operating results and
ability to make distributions to our stockholders may be adversely affected.

We face significant competition in the leasing market for quality residents, which may limit our ability to lease
our single-family homes on favorable terms.

We depend on rental income from residents for substantially all of our revenues. As a result, our success

depends in large part upon our ability to attract and retain qualified residents for our properties. We face
competition for residents from other lessors of single-family properties, apartment buildings, and condominium
units. Competing properties may be newer, better located, and more attractive to residents. Potential competitors
may have lower rates of occupancy than we do or may have superior access to capital and other resources, which
may result in competing owners more easily locating residents and leasing available housing at lower rental rates
than we might offer at our homes. Many of these competitors may successfully attract residents with better
incentives and amenities, which could adversely affect our ability to obtain quality residents and lease our single-
family properties on favorable terms. Additionally, some competing housing options may qualify for government
subsidies that may make such options more accessible and therefore more attractive than our properties. This
competition may affect our ability to attract and retain residents and may reduce the rental rates we are able to
charge.

In addition, increases in unemployment levels and other adverse changes in economic conditions in our
markets may adversely affect the creditworthiness of potential residents, which may decrease the overall number
of qualified residents for our properties within such markets. We could also be adversely affected by

overbuilding or high vacancy rates of homes in our markets, which could result in an excess supply of homes and
reduce occupancy and rental rates. Continuing development of apartment buildings and condominium units in
many of our markets will increase the supply of housing and exacerbate competition for residents.

In addition, improving economic conditions, along with the availability of low residential mortgage interest

rates and government sponsored programs to promote home ownership, have made home ownership more
accessible for potential renters who have strong credit. These factors may encourage potential renters to purchase
residences rather than lease them, thereby causing a decline in the number and quality of potential residents
available to us.

No assurance can be given that we will be able to attract and retain suitable residents. If we are unable to

lease our homes to suitable residents, we would be adversely affected and the value of our common stock could
decline.

We intend to continue to acquire properties from time to time consistent with our investment strategy even if
the rental and housing markets are not as favorable as they have been in the recent past, which could
adversely impact anticipated yields.

We intend to continue to acquire properties from time to time consistent with our investment strategy, even
if the rental and housing markets are not as favorable as they have been in the recent past. Future acquisitions of
properties may be more costly than those we have acquired previously. The following factors, among others, may
make acquisitions more expensive:

•

improvements in the overall economy and employment levels;

greater availability of consumer credit;

improvements in the pricing and terms of mortgages;

the emergence of increased competition for single-family properties from private investors and entities
with similar investment objectives to ours; and

tax or other government incentives that encourage homeownership.

We plan to continue acquiring properties as long as we believe such properties offer an attractive total return

opportunity. Accordingly, future acquisitions may have lower yield characteristics than recent past and present
opportunities and, if such future acquisitions are funded through equity issuances, the yield and distributable cash
per share will be reduced, and the value of our common stock may decline.

Competition in identifying and acquiring our properties could adversely affect our ability to implement our
business and growth strategies, which could materially and adversely affect us.

In acquiring our properties, we compete with a variety of institutional investors, including other REITs,
specialty finance companies, public and private funds, savings and loan associations, banks, mortgage bankers,
insurance companies, institutional investors, investment banking firms, financial institutions, governmental
bodies, and other entities. We also compete with individual private home buyers and small scale investors.

Certain of our competitors may be larger in certain of our markets and may have greater financial or other
resources than we do. Some competitors may have a lower cost of funds and access to funding sources that may
not be available to us. In addition, any potential competitor may have higher risk tolerances or different risk
assessments and may not be subject to the operating constraints associated with qualification for taxation as a
REIT, which could allow them to consider a wider variety of investments. Competition may result in fewer
investments, higher prices, a broadly dispersed portfolio of properties that does not lend itself to efficiencies of
concentration, acceptance of greater risk, lower yields and a narrower spread of yields over our financing costs.

In addition, competition for desirable investments could delay the investment of our capital, which could
adversely affect our results of operations and cash flows. As a result, there can be no assurance that we will be
able to identify and finance investments that are consistent with our investment objectives or to achieve positive
investment results, and our failure to accomplish any of the foregoing could have a material adverse effect on us
and cause the value of our common stock to decline.

Compliance with governmental laws, regulations, and covenants that are applicable to our properties or that
may be passed in the future, including affordability covenants, permit, license, and zoning requirements, may
adversely affect our ability to make future acquisitions, renovations, or dispositions, result in significant costs,
delays, or losses, and adversely affect our growth strategy.

Rental homes are subject to various covenants and local laws and regulatory requirements, including

permitting, licensing, and zoning requirements. Local regulations, including municipal or local ordinances,
restrictions, and restrictive covenants imposed by community developers may restrict our use of our properties
and may require us to obtain approval from local officials or community standards organizations at any time with
respect to our properties, including prior to acquiring any of our properties or when undertaking renovations of
any of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic,
asbestos-cleanup, or hazardous material abatement requirements. Such local regulations may cause us to incur
additional costs to renovate or maintain our properties in accordance with the particular rules and regulations.
Additionally, state and local agencies may place affordability covenants on certain properties to ensure that they
are used to provide affordable housing for persons or families of lower income. If any of our properties contain
affordability covenants recorded in their chains of title, we will be forced to sell such properties at a maximum
price limit as calculated per the applicable affordable housing covenant, which will likely result in us having to
sell such properties below their market values. We cannot assure you that existing regulatory policies will not
adversely affect us or the timing or cost of any future acquisitions, renovations, or dispositions, or that additional
regulations will not be adopted that would increase such delays or result in additional costs or losses. Our
business and growth strategies may be materially and adversely affected by our ability to obtain permits, licenses
and approvals. Our failure to obtain such permits, licenses, and approvals could have a material adverse effect on
us and cause the value of our common stock to decline.

Tenant relief laws, including laws regulating evictions, rent control laws, and other regulations that limit our
ability to increase rental rates may negatively impact our rental income and profitability.

As the landlord of numerous properties, we are involved from time to time in evicting residents who are not
paying their rent or who are otherwise in material violation of the terms of their lease. Eviction activities impose
legal and managerial expenses that raise our costs and expose us to potential negative publicity. The eviction
process is typically subject to legal barriers, mandatory “cure” policies, our internal policies and procedures, and
other sources of expense and delay, each of which may delay our ability to gain possession and stabilize the
property. Additionally, state and local landlord-tenant laws may impose legal duties to assist residents in
relocating to new housing, or restrict the landlord’s ability to remove the resident on a timely basis or to recover
certain costs or charge residents for damage residents cause to the landlord’s premises. Because such laws vary
by state and locality, we must be familiar with and take all appropriate steps to comply with all applicable
landlord-tenant laws, and need to incur supervisory and legal expenses to ensure such compliance. To the extent
that we do not comply with state or local laws, we may be subjected to civil litigation filed by individuals, in
class actions or actions by state or local law enforcement and our reputation and financial results may suffer. We
may be required to pay our adversaries’ litigation fees and expenses if judgment is entered against us in such
litigation or if we settle such litigation.

Furthermore, state and local governmental agencies may introduce rent control laws or other regulations that
limit our ability to increase rental rates, which may affect our rental income. Especially in times of recession and
economic slowdown, rent control initiatives can acquire significant political support. If rent controls unexpectedly
became applicable to certain of our properties, our revenue from and the value of such properties could be adversely
affected.

In 2019, the state of California passed the Tenant Protection Act of 2019, a rent control law which limits our

ability to increase rental rates for existing residents and put into place protections for the terminations of
tenancies. We believe this law will negatively affect our rental income from certain of the 12,461 homes we own
in California as of December 31, 2019.

We may become a target of legal demands, litigation (including class actions), and negative publicity by tenant
and consumer rights organizations, which could directly limit and constrain our operations and may result in
significant litigation expenses and reputational harm.

Numerous tenant rights and consumer rights organizations exist throughout the country and operate in our
markets, and we may attract attention from some of these organizations and become a target of legal demands,
litigation, and negative publicity. Many such consumer organizations have become more active and better funded
in connection with mortgage foreclosure-related issues; and with the increased market for homes arising from
displaced homeownership, some of these organizations may shift their litigation, lobbying, fundraising, and grass
roots organizing activities to focus on landlord-resident issues. While we intend to conduct our business lawfully
and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in
conjunction with trial and pro bono lawyers in one or multiple states to attempt to bring claims against us on a
class action basis for damages or injunctive relief and to seek to publicize our activities in a negative light. We
cannot anticipate what form such legal actions might take or what remedies they may seek.

Additionally, such organizations may lobby local county and municipal attorneys or state attorneys general

to pursue enforcement or litigation against us, may lobby state and local legislatures to pass new laws and
regulations to constrain or limit our business operations, adversely impact our business, or may generate negative
publicity for our business and harm our reputation. If they are successful in any such endeavors, they could
directly limit and constrain our operations and may impose on us significant litigation expenses, including
settlements to avoid continued litigation or judgments for damages or injunctions.

Our business is subject to laws and regulations regarding privacy, data protection, consumer protection, and
other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and
could result in claims, changes to our business practices, monetary penalties, or otherwise harm our business.

We are subject to a variety of laws and regulations that involve matters such as: privacy; data protection;

personal information; rights of publicity; content; marketing; distribution; data security; data retention and
deletion; electronic contracts and other communications; consumer protection; and online payment services.
These laws and regulations are constantly evolving and can be subject to significant change. As a result, the
application, interpretation, and enforcement of these laws and regulations are often uncertain and may be
interpreted and applied inconsistently. Additionally, as we depend on third parties for key services (see “Our
dependence upon third parties for key services may have an adverse effect on our operating results or reputation
if the third parties fail to perform”), we rely on such third party service providers’ compliance with laws and
regulations regarding privacy, data protection, consumer protection, and other matters relating to our customers.

There are a number of legislative proposals at both the federal and state level, as well as other jurisdictions

that could impose new obligations in areas affecting our business. For example, the California Consumer Privacy
Act and Nevada Privacy Law, effective in 2020, create new data privacy rights for users, including more ability
to control how their data is shared with third parties. These laws and regulations, as well as any associated
inquiries or investigations or any other government actions, may be costly to comply with, result in negative
publicity, require significant management time and attention, and subject us to remedies that may harm our
business, including fines or demands or orders that we modify or cease existing business practices.

Our evaluation of properties involves a number of assumptions that may prove inaccurate, which could result
in us paying too much for properties we acquire and/or overvaluing our properties or our properties failing to
perform as we expect.

We are authorized to follow a broad investment policy established by our board of directors and subject to

implementation by our management. Our board of directors periodically reviews and updates the investment
policy and also reviews our portfolio of residential real estate, but it generally does not review or approve
specific property acquisitions. Our success depends on our ability to acquire properties that can be quickly
possessed, renovated, repaired, upgraded, and rented with minimal expense and maintained in quality condition.
In determining whether a particular property meets our investment criteria, we also make a number of
assumptions, including, among other things, assumptions related to estimated time of possession and estimated
renovation costs and time frames, annual operating costs, market rental rates and potential rent amounts, time
from purchase to leasing, and resident default rates. These assumptions may prove inaccurate, particularly since
the properties that we acquire vary materially in terms of time to possession, renovation, quality and type of
construction, geographic location, and hazards. As a result, we may pay too much for properties we acquire and/
or overvalue our properties, or our properties may fail to perform as anticipated. Adjustments to the assumptions
we make in evaluating potential purchases may result in fewer properties qualifying under our investment
criteria, including assumptions related to our ability to lease properties we have purchased.

Our dependence upon third parties for key services may have an adverse effect on our operating results or
reputation if the third parties fail to perform.

Though we are internally managed, we use local and national third party vendors and service providers to

provide certain services for our properties. For example, we typically engage third party home improvement
professionals with respect to certain maintenance and specialty services, such as HVAC, roofing, painting, and
floor installations. Selecting, managing, and supervising these third party service providers requires significant
resources and expertise, and because our portfolio consists of geographically dispersed properties, our ability to
adequately select, manage, and supervise such third parties may be more limited or subject to greater
inefficiencies than if our properties were more geographically concentrated.

We have entered into a three-year contract with a third party vendor to provide certain services for our
properties. Because of the large volume of services under this contract, only a limited number of companies are
capable of servicing our needs on this scale. Accordingly, the inability or unwillingness of this vendor to
continue to provide these services on acceptable terms or at all could have a material adverse effect on our
business.

We generally do not have exclusive or long-term contractual relationships with third party providers and we

can provide no assurance that we will have uninterrupted or unlimited access to their services. If we do not
select, manage, and supervise appropriate third parties to provide these services, our reputation and financial
results may suffer.

We rely on the systems of our third party service providers, their ability to perform key operations on our
behalf in a timely manner and in accordance with agreed levels of service, and their ability to attract and retain
sufficient qualified personnel to perform our work. A failure in the systems of one of our third party service
providers, or their inability to perform in accordance with the terms of our contracts or to retain sufficient
qualified personnel, could have a material adverse effect on our business, results of operations, and financial
condition.

Notwithstanding our efforts to implement and enforce strong policies and practices regarding service
providers, we may not successfully detect and prevent fraud, misconduct, incompetence, or theft by our third
party service providers. In addition, any removal or termination of third party service providers would require us
to seek new vendors or providers, which would create delays and adversely affect our operations. Poor

performance by such third party service providers may reflect poorly on us and could significantly damage our
reputation among desirable residents. In the event of fraud or misconduct by a third party, we could also be
exposed to material liability and be held responsible for damages, fines, or penalties and our reputation may
suffer. In the event of failure by our general contractors to pay their subcontractors, our properties may be subject
to filings of mechanics or materialmen liens, which we may need to resolve to remain in compliance with certain
debt covenants, and for which indemnification from the general contractors may not be available.

We have in the past and may from time to time in the future acquire some of our homes through the auction
process, which could subject us to significant risks that could adversely affect us.

We have in the past and may from time to time in the future acquire some of our homes through the auction

process, including auctions of homes that have been foreclosed upon by third party lenders. Such auctions may
occur simultaneously in a number of markets, including monthly auctions on the same day of the month in
certain markets. As a result, we may only be able to visually inspect properties from the street and will purchase
these homes without a contingency period and in “as is” condition with the risk that unknown defects in the
property may exist. Upon acquiring a new home, we may have to evict residents who are in unlawful possession
before we can secure possession and control of the home. The holdover occupants may be the former owners or
residents of a property or others who are illegally in possession. Securing control and possession from these
occupants can be both costly and time-consuming or generate negative publicity for our business and harm our
reputation.

Allegations of deficiencies in auction practices could result in claims challenging the validity of some
auctions, potentially placing our claim of ownership to the properties at risk. Since we may not have obtained
title insurance policies for properties we acquired through the auction process, such instances or such
proceedings may result in a complete loss without compensation.

Title defects could lead to material losses on our investments in our properties.

Our title to a property may be challenged for a variety of reasons, and in such instances title insurance may

not prove adequate. For example, while we do not lend to homeowners and accordingly do not foreclose on a
home, our title to properties we acquire at foreclosure auctions may be subject to challenge based on allegations
of defects in the foreclosure process undertaken by other parties. In addition, we have in the past, and may from
time to time in the future, acquire a number of our properties on an “as is” basis, at auctions or otherwise. When
acquiring properties on an “as is” basis, title commitments are often not available prior to purchase and title
reports or title information may not reflect all senior liens, which may increase the possibility of acquiring houses
outside predetermined acquisition and price parameters, purchasing residences with title defects and deed
restrictions, HOA restrictions on leasing, or purchasing the wrong residence without the benefit of title insurance
prior to closing. Although we use various policies, procedures, and practices to assess the state of title prior to
purchase and obtain title insurance if an acquired property is placed into a securitization facility in connection
with a mortgage loan financing, there can be no assurance that these policies and procedures will be effective,
which could lead to a material if not complete loss on our investment in such properties.

For properties we acquire at auction, we similarly may not obtain title insurance prior to purchase, and we
are not able to perform the type of title review that is customary in acquisitions of real property. As a result, our
knowledge of potential title issues will be limited, and title insurance protection may not be in place. This lack of
title knowledge and insurance protection may result in third parties having claims against our title to such
properties that may materially and adversely affect the values of the properties or call into question the validity of
our title to such properties. Without title insurance, we are fully exposed to, and would have to defend ourselves
against, such claims. Further, if any such claims are superior to our title to the property we acquired, we risk loss
of the property purchased.

Increased scrutiny of title matters could lead to legal challenges with respect to the validity of the sale. In
the absence of title insurance, the sale may be rescinded, and we may be unable to recover our purchase price,

resulting in a complete loss. Title insurance obtained subsequent to purchase offers little protection against
discoverable defects because they are typically excluded from such policies. In addition, any title insurance on a
property, even if acquired, may not cover all defects or the significant legal costs associated with obtaining clear
title.

Any of these risks could adversely affect our operating results, cash flows, and ability to make distributions

to our stockholders.

We are subject to certain risks associated with bulk portfolio acquisitions and dispositions.

We have acquired and disposed of, and may continue to acquire and dispose of, properties we acquire or sell
in bulk from or to other owners of single-family homes, banks, and loan servicers. When we purchase properties
in this manner, we often do not have the opportunity to conduct interior inspections or conduct more than cursory
exterior inspections on a portion of the properties. Such inspection processes may fail to reveal major defects
associated with such properties, which may cause the amount of time and cost required to renovate and/or
maintain such properties to substantially exceed our estimates. Bulk portfolio acquisitions are also more complex
than single-family home acquisitions, and we may not be able to implement this strategy successfully. The costs
involved in locating and performing due diligence (when feasible) on portfolios of homes as well as negotiating
and entering into transactions with potential portfolio sellers could be significant, and there is a risk that either
the seller may withdraw from the entire transaction for failure to come to an agreement or the seller may not be
willing to sell us the bulk portfolio on terms that we view as favorable. In addition, a seller may require that a
group of homes be purchased as a package even though we may not want to purchase certain individual assets in
the bulk portfolio.

Moreover, to the extent the management and leasing of such properties has not been consistent with our

property management and leasing standards, we may be subject to a variety of risks, including risks relating to
the condition of the properties, the credit quality and employment stability of the residents, and compliance with
applicable laws, among others. In addition, financial and other information provided to us regarding such
portfolios during our due diligence may be inaccurate, and we may not discover such inaccuracies until it is too
late to seek remedies against such sellers. To the extent we pursue such remedies, we may not be able to
successfully prevail against the seller in an action seeking damages for such inaccuracies. If we conclude that
certain individual properties purchased in bulk portfolio sales do not fit our target investment criteria, we may
decide to sell, rather than renovate and lease, such properties, which could take an extended period of time and
may not result in a sale at an attractive price.

From time to time we engage in bulk portfolio dispositions of properties consistent with our business and
investment strategy. With respect to any such disposition, the purchaser may default on payment or otherwise
breach the terms of the relevant purchase agreement, and it may be difficult for us to pursue remedies against
such purchaser or retain or resume possession of the relevant properties. To the extent we pursue such remedies,
we may not be able to successfully prevail against the purchaser.

Contingent or unknown liabilities could adversely affect our financial condition, cash flows, and operating
results.

Assets and entities that we have acquired or may acquire in the future may be subject to unknown or
contingent liabilities for which we may have limited or no recourse against the sellers. Unknown or contingent
liabilities might include liabilities for, or with respect to, liens attached to properties, unpaid property tax,
utilities, or HOA charges for which a subsequent owner remains liable, clean-up or remediation of environmental
conditions or code violations, claims of customers, vendors, or other persons dealing with the acquired entities,
and tax liabilities. Purchases of single-family properties acquired at auction, in short sales, from lenders, or in
portfolio purchases typically involve few or no representations or warranties with respect to the properties and
may allow us limited or no recourse against the sellers. Such properties also often have unpaid tax, utility, and

HOA liabilities which we may be obligated to pay but fail to anticipate. As a result, the total amount of costs and
expenses that we may incur with respect to liabilities associated with acquired properties and entities may exceed
our expectations, which may adversely affect our operating results and financial condition. Additionally, such
properties may be subject to covenants, conditions, or restrictions that restrict the use or ownership of such
properties, including prohibitions on leasing. We may not discover such restrictions during the acquisition
process and such restrictions may adversely affect our ability to operate such properties as we intend.

In particular, under a Florida statutory framework implemented by certain Florida jurisdictions, a violation
of the relevant building codes, zoning codes, or other similar regulations applicable to a property may result in a
lien on that property and all other properties owned by the same violator and located in the same county as the
property with the code violation, even though the other properties might not be in violation of any code. Until a
municipal inspector verifies that the violation has been remedied and any applicable fines have been paid,
additional fines accrue on the amount of the lien and the lien may not be released, in each case even at those
properties that are not in violation. As a practical matter, it might be possible to obtain a release of these liens
without remedying the property in violation through other methods, such as payment of an amount to the relevant
county, although no assurance can be given that this option will necessarily be available or how long such a
process would take.

A significant number of our residential properties are part of HOAs and we and our residents are subject to
the rules and regulations of such HOAs, which are subject to change and which may be arbitrary or
restrictive, and violations of such rules may subject us to additional fees and penalties and litigation with such
HOAs, which would be costly.

A significant number of our properties are located within HOAs, which are private entities that regulate the

activities of owners and occupants of, and levy assessments on, properties in a residential subdivision. The HOAs
in which we own our properties may have enacted or may from time to time enact onerous or arbitrary rules that
restrict our ability to restore, market, lease, or operate our properties in accordance with our investment strategy,
or require us to restore or maintain such properties at standards or costs that are in excess of our planned budgets.
Some HOAs impose limits on the number of property owners who may lease their homes, which, if met or
exceeded, would cause us to incur additional costs to sell the property and opportunity costs from lost rental
revenue. Furthermore, we may have residents who violate HOA rules and incur fines for which we may be liable
as the property owner and for which we may not be able to obtain reimbursement from the resident. Additionally,
the governing bodies of the HOAs in which we own property may not make important disclosures about the
properties or may block our access to HOA records, initiate litigation, restrict our ability to sell our properties,
impose assessments, or arbitrarily change the HOA rules. We may be unaware of or unable to review or comply
with HOA rules before purchasing a property, and any such excessively restrictive or arbitrary regulations may
cause us to sell such property at a loss, prevent us from leasing such property, or otherwise reduce our cash flow
from such property, which would have an adverse effect on our returns on these properties. Several states have
enacted laws that provide that a lien for unpaid monies owed to an HOA may be senior to or extinguish mortgage
liens on properties. Such actions, if not cured, may give rise to events of default under certain of our
indebtedness, which could have a material adverse impact on us.

Environmentally hazardous conditions may adversely affect us.

Under various federal, state, and local environmental laws, a current or previous owner or operator of real
property may be liable for the cost of removing or remediating hazardous or toxic substances on such property.
Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. Even if more than one person may have been responsible for the
contamination, each person covered by applicable environmental laws may be held responsible for all of the
clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages based on
personal injury, natural resources, or property damage or other costs, including investigation and clean-up costs,
resulting from the environmental contamination. The presence of hazardous or toxic substances on one of our

properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the
government for costs it may incur to address the contamination or otherwise adversely affect our ability to sell or
lease the property or borrow using the property as collateral. Environmental laws also may impose restrictions on
the manner in which property may be used or businesses may be operated. A property owner who violates
environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain
circumstances, private parties. In connection with the acquisition and ownership of our properties, we may be
exposed to such costs. The cost of defending against environmental claims, of compliance with environmental
regulatory requirements, or of remediating any contaminated property could materially and adversely affect us.

Compliance with new or more stringent environmental laws or regulations or stricter interpretation of
existing laws may require material expenditures by us. We are subject to environmental laws or regulations
relating to our properties, such as those concerning lead-based paint, mold, asbestos, proximity to power lines, or
other issues. We cannot assure you that future laws, ordinances, or regulations will not impose any material
environmental liability or that the current environmental condition of our properties will not be affected by the
activities of residents, existing conditions of the land, operations in the vicinity of the properties, or the activities
of unrelated third parties. In addition, we may be required to comply with various local, state, and federal fire,
health, life-safety, and similar regulations. Failure to comply with applicable laws and regulations could result in
fines and/or damages, suspension of personnel, civil liability, or other sanctions.

Vacant properties could be difficult to lease, which could adversely affect our revenues.

The properties we acquire may often be vacant at the time of closing, and we may acquire multiple vacant
properties in close geographic proximity to one another. We may not be successful in locating residents to lease the
individual properties that we acquire as quickly as we had expected, or at all. Even if we are able to place residents
as quickly as we had expected, we may incur vacancies in the future and may not be able to re-lease those properties
without longer than assumed delays, which may result in increased renovation and maintenance costs and
opportunity costs from lost revenues. Vacant homes may also be at risk for fraudulent activity which could impact
our ability to lease a home. As a result, if vacancies continue for a longer period of time than we expect or
indefinitely, we may suffer reduced revenues, incur additional operating expenses and capital expenditures, and our
homes could be substantially impaired, all of which may have a material adverse effect on us.

We rely on information supplied by prospective residents in managing our business.

We evaluate prospective residents in a standardized manner through the use of a third party resident
screening vendor partner. Our resident screening process includes obtaining appropriate identification, a
thorough evaluation of credit history and household income, a review of the applicant’s rental history, and a
background check for criminal activity. We make leasing decisions based on information in rental applications
completed by a prospective resident and screened by our third party partner, and we cannot be certain that this
information is accurate. Additionally, these applications are submitted to us at the time we evaluate a prospective
resident, and we do not require residents to provide us with updated information during the terms of their leases,
notwithstanding the fact that this information can, and frequently does, change over time. For example, increases
in unemployment levels or adverse economic conditions in certain of our markets may adversely affect the
creditworthiness of our residents in such markets. Even though this information is not updated, we will use it to
evaluate the characteristics of our portfolio over time. If resident-supplied information is inaccurate or our
residents’ creditworthiness declines over time, we may make poor or imperfect leasing decisions and our
portfolio may contain more risk than we believe.

We depend on our residents and their willingness to meet their lease obligations and renew their leases for
substantially all of our revenues. Poor resident selection, defaults, and nonrenewals by our residents may
adversely affect our reputation, financial performance, and ability to make distributions to our stockholders.

We depend on rental income from residents for substantially all of our revenues. As a result, our success

depends in large part upon our ability to attract and retain qualified residents for our properties. Our reputation,

financial performance, and ability to make distributions to our stockholders would be adversely affected if a
significant number of our residents fail to meet their lease obligations or fail to renew their leases. For example,
residents may default on rent payments, make unreasonable and repeated demands for service or improvements,
make unsupported or unjustified complaints to regulatory or political authorities, use our properties for illegal
purposes, damage or make unauthorized structural changes to our properties that are not covered by security
deposits, refuse to leave the property upon termination of the lease, engage in domestic violence or similar
disturbances, disturb nearby residents with noise, trash, odors, or eyesores, fail to comply with HOA regulations,
sublet to less desirable individuals in violation of our lease, or permit unauthorized persons to live with them.

Damage to our properties may delay re-leasing after eviction, necessitate expensive repairs, or impair the

rental income or value of the property resulting in a lower than expected rate of return. Increases in
unemployment levels and other adverse changes in economic conditions in our markets could result in substantial
resident defaults. In the event of a resident default or bankruptcy, we may experience delays in enforcing our
rights as landlord at that property and will incur costs in protecting our investment and re-leasing the property.

Our leases are relatively short-term, exposing us to the risk that we may have to re-lease our properties
frequently, which we may be unable to do on attractive terms, on a timely basis, or at all.

Substantially all of our new leases have a duration of one to two years. As such leases permit the residents to

leave at the end of the lease term, we anticipate our rental revenues may be affected by declines in market rental
rates more quickly than if our leases were for longer terms. Short-term leases may result in high turnover, which
involves costs such as restoring the properties, marketing costs, and lower occupancy levels. Our resident
turnover rate and related cost estimates may be less accurate than if we had more operating data upon which to
base such estimates. If the rental rates for our properties decrease or our residents do not renew their leases, our
operating results and ability to make distributions to our stockholders could be adversely affected. In addition,
most of our potential residents are represented by leasing agents and we may need to pay all or a portion of any
related agent commissions, which will reduce the revenue from a particular rental home. Alternatively, to the
extent that a lease term exceeds one year, we may lose the opportunity to raise rents in an appreciating market
and be locked into a lower rent until such lease expires.

Many factors impact the single-family rental market, and if rents in our markets do not increase sufficiently to
keep pace with rising costs of operations, our income and distributable cash could decline.

The success of our business model depends, in part, on conditions in the single-family rental market in
which we operate. Our investment strategy is based on assumptions about occupancy levels, rental rates, interest
rates, and other factors; and if those assumptions prove to be inaccurate, our cash flows and profitability may be
reduced. Recent strengthening of the United States economy and job growth, coupled with government programs
designed to keep homeowners in their homes, and/or other factors may contribute to an increase in
homeownership rather than renting. In addition, we expect that as investors like us increasingly seek to capitalize
on opportunities to purchase housing assets and convert them to productive uses, the supply of single-family
rental properties will decrease, which may increase competition for residents, limit our strategic opportunities,
and increase the cost to acquire those properties. A softening of the rental market in our core areas would reduce
our rental revenue and profitability.

We may not have control over timing and costs arising from renovating our properties, and the cost of
maintaining rental properties is generally higher than the cost of maintaining owner-occupied homes, which
will affect our results of operations and may adversely impact our ability to make distributions to our
stockholders.

Renters impose additional risks to owning real property. Renters do not have the same interest as an owner

in maintaining a property and its contents and generally do not participate in any appreciation of the property.
Accordingly, renters may damage a property and its contents, and may not be forthright in reporting damages or

amenable to repairing them completely, or at all. A rental property may need repairs and/or improvements after
each resident vacates the premises, the costs of which may exceed any security deposit provided to us by the
resident when the rental property was originally leased. Accordingly, the cost of maintaining rental properties
can be higher than the cost of maintaining owner-occupied homes, which will affect our results of operations and
may adversely impact our ability to make distributions to our stockholders.

Declining real estate valuations and impairment charges could adversely affect our financial condition and
operating results.

We periodically review the value of our properties to determine whether their value, based on market

factors, projected income, and generally accepted accounting principles in the United States (“GAAP”), has
permanently decreased such that it is necessary or appropriate to take an impairment loss in the relevant
accounting period. Such a loss would cause an immediate reduction of net income in the applicable accounting
period and would be reflected in a decrease in our balance sheet assets. The reduction of net income from
impairment losses could lead to a reduction in our dividends, both in the relevant accounting period and in future
periods. Even if we do not determine that it is necessary or appropriate to record an impairment loss, a reduction
in the intrinsic value of a property would become manifest over time through reduced income from the property
and would therefore affect our earnings and financial condition.

We are highly dependent on information systems, and systems failures could significantly disrupt our
business, which may, in turn, negatively affect us and the value of our common stock.

Our operations are dependent upon our information systems that support our business processes, including

marketing, leasing, vendor communications, finance, intercompany communications, our resident portals, and
property management service platforms, which include certain automated processes that require access to
telecommunications or the Internet, each of which is subject to system security risks. Certain critical components
of our platform are dependent upon third party service providers, and a significant portion of our business
operations are conducted over the Internet. As a result, we could be severely impacted by a catastrophic
occurrence, such as a natural disaster or a terrorist attack, or a circumstance that disrupted access to
telecommunications, the Internet, or operations at our third party service providers, including viruses that could
penetrate network security defenses and cause system failures and disruptions of operations. Even though we
believe we utilize appropriate duplication and back-up procedures, a significant outage in telecommunications,
the Internet, or at our third party service providers could negatively impact our operations.

Security breaches and other disruptions could compromise our information systems and expose us to liability,
which would cause our business and reputation to suffer.

Information security risks have generally increased in recent years due to the rise in new technologies and

the increased sophistication and activities of perpetrators of cyberattacks. In the ordinary course of our business,
we acquire and store sensitive data, including intellectual property, our proprietary business information, and
personally identifiable information of our prospective and current residents, employees, and third party service
providers. The secure processing and maintenance of such information is critical to our operations and business
strategy. Despite our security measures, our information technology and infrastructure are subject and may be
vulnerable to attacks by malicious third parties or breached due to employee error, malfeasance, or other
disruptions. Due to the nature of some of the attacks, there is a risk that they may remain undetected for a period
of time. While we have invested in the protection of data and information technology and implemented
processes, procedures, and internal controls that are designed to mitigate cybersecurity risks and cyber intrusions,
there can be no assurance that our efforts will prevent cyber incidents or security breaches. Any such breach
could compromise our networks and the information stored therein could be accessed, publicly disclosed,
misused, lost, or stolen. Any such access, disclosure or other loss of information could result in legal claims or
proceedings, misstated or unreliable financial data, liability under laws that protect the privacy of personal
information, regulatory penalties, disruption to our operations and the services we provide to customers, or

damage our reputation, any of which could adversely affect our results of operations, reputation, and competitive
position. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the
financial, legal, business, or reputational losses that may result from an interruption or breach of our systems.

Our participation in joint venture investments may limit our ability to invest in certain markets, and we may be
adversely affected by our lack of sole decision-making authority, our reliance on joint venture partners’
financial condition, and disputes between us and our joint venture partners.

We currently, and may in the future, co-invest with third parties through partnerships, joint ventures, or

other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a
property, partnership, joint venture, or other entity. These joint ventures may be subject to restrictions that
prohibit us from making other investments in certain markets until all of the funds in such partnership, joint
venture, or other entity are invested or committed. In addition, we may also not be in a position to exercise sole
decision-making authority regarding the property, partnership, joint venture, or other entity, and our joint venture
partners could take actions that are not within our control. Such actions could, among other things, impact our
ability to maintain our status as a REIT. Further, investments in partnerships, joint ventures, or other entities
may, under certain circumstances, involve risks not present were a third party not involved, including the
possibility that joint venture partners might become bankrupt or fail to fund their share of required capital
contributions. Joint venture partners may have economic or other business interests or goals that are inconsistent
with our business interests or goals, and may be in a position to take actions contrary to our policies or
objectives. Such investments also may have the potential risk of impasses on decisions, such as a sale, because
neither we nor our partners would have full control over the partnership or joint venture. Disputes between us and
our partners may result in litigation or arbitration that would increase our expenses and prevent our officers and/
or directors from focusing their time and effort on our business. Consequently, actions by, or disputes with, any
of our joint venture partners might result in subjecting properties owned by the partnership or joint venture to
additional risk. In addition, we may in certain circumstances be liable for the actions of any of our third party
partners or co-venturers.

We are subject to litigation and regulatory proceedings.

We are involved in a range of legal and regulatory proceedings, claims, actions, inquiries, and investigations

in the ordinary course of business. These legal and regulatory proceedings may include, among others, eviction
proceedings and other landlord-tenant disputes, challenges to title and ownership rights, disputes arising over
potential violations of HOA rules and regulations, issues with local housing officials arising from the condition
or maintenance of the property, outside vendor disputes, and trademark infringement and other intellectual
property claims. These actions can be time-consuming and expensive, and may adversely affect our reputation.
For example, eviction proceedings by owners and operators of single-family homes for lease have recently been
the focus of negative media attention. Although we are not involved in any legal or regulatory proceedings that
we expect would have a material adverse effect on our business, results of operations, or financial condition, such
proceedings may arise in the future.

We may suffer losses that are not covered by insurance.

We attempt to ensure that our properties are adequately insured to cover casualty losses. However, there are
certain losses, including losses from floods, fires, earthquakes, wind, hail, pollution, acts of war, acts of terrorism
or riots, certain environmental hazards, and security breaches for which we may self-insure or which may not
always or generally be insured against because it may not be deemed economically feasible or prudent to do so.
Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In particular, a
number of our properties are located in areas that are known to be subject to increased earthquake activity, fires,
or wind and/or flood risk. While we have multi-year policies for earthquakes, hurricane, and/or flood risk, our
properties may nonetheless incur casualty losses that are not fully covered by insurance. In such an event, the
value of the affected properties would be reduced by the amount of any such uninsured loss, and we could

experience a significant loss of capital invested and potential revenues in such properties and could potentially
remain obligated under any recourse debt associated with such properties. Inflation, changes in building codes
and ordinances, environmental considerations, and other factors might also keep us from using insurance
proceeds to replace or renovate a particular property after it has been damaged or destroyed. Under those
circumstances, the insurance proceeds we receive might be inadequate to restore our economic position in the
damaged or destroyed property. Any such losses could adversely affect us and cause the value of our common
stock to decline. In addition, we may have no source of funding to repair or reconstruct the damaged home, and
we cannot assure that any such sources of funding will be available to us for such purposes in the future.

We are subject to risks from natural disasters such as earthquakes and severe weather.

Natural disasters and severe weather such as earthquakes, tornadoes, wind, or floods may result in
significant damage to our properties. The extent of our casualty losses and loss of income in connection with
such events is a function of the severity of the event and the total amount of exposure in the affected area.

When we have geographic concentration of exposures, a single catastrophe (such as an earthquake,
especially in California) or destructive weather event (such as a hurricane) affecting a region may have a
significant negative effect on our financial condition and results of operations. As a result, our operating and
financial results may vary significantly from one period to the next. We have in the past and may in the future
incur losses arising from natural disasters or severe weather. For example, uninsured losses and damages related
to Hurricanes Irma and Harvey totaled $8.0 million and $21.5 million for the years ended December 31, 2018
and 2017, respectively.

Climate change may adversely affect our business.

To the extent that significant changes in the climate occur in areas where our communities are located, we

may experience extreme weather and/or changes in precipitation and temperature, all of which may result in
physical damage to, or a decrease in demand for, properties located in these areas or affected by these conditions.
Should the impact of climate change be material in nature, including significant property damage to or
destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations
may be adversely affected. In addition, changes in federal, state, and local legislation and regulation based on
concerns about climate change could result in increased capital expenditures on our existing properties (for
example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding
increase in revenue, resulting in adverse impacts to our results of operations.

Eminent domain could lead to material losses on our investments in our properties.

Governmental authorities may exercise eminent domain to acquire the land on which our properties are built

in order to build roads and other infrastructure. Any such exercise of eminent domain would allow us to recover
only the fair value of the affected properties. In addition, “fair value” could be substantially less than the real
market value of the property for a number of years, and we could effectively have no profit potential from
properties acquired by the government through eminent domain.

We may have difficulty selling our real estate investments and our ability to distribute all or a portion of the
net proceeds from any such sale to our stockholders may be limited.

Real estate investments are relatively illiquid and, as a result, we may have a limited ability to sell our
properties. When we sell any of our properties, we may recognize a loss on such sale. We may elect not to
distribute any proceeds from the sale of properties to our stockholders. Instead, we may use such proceeds for
other purposes, including:

•

purchasing additional properties;

repaying debt or buying back stock;

•

creating working capital reserves; or

• making repairs, maintenance or other capital improvements or expenditures to our remaining

properties.

Our ability to sell our properties may also be limited by our need to avoid the 100% prohibited transactions
tax that is imposed on gain recognized by a REIT from the sale of property characterized as dealer property. For
example, we may be required to hold our properties for a minimum period of time and comply with certain other
requirements in the Internal Revenue Code of 1986, as amended (the “Code”), or dispose of our properties
through a taxable REIT subsidiary (“TRS”), in which case we will incur corporate level tax on any net gains
from such dispositions.

We are subject to increasing scrutiny from investors with respect to the social and environmental impact of
our business, which may adversely impact our business and ability to raise capital from such investors.

In recent years, certain investors have placed increasing importance on the implications of our business with

respect to environmental, social, and governance (“ESG”) matters. Investors’ increased focus and activism
related to ESG and similar matters may constrain our business operations. In addition, investors may decide to
refrain from investing in us as a result of their assessment of our approach to and consideration of the ESG
factors.

We may have failed to uncover all liabilities of Legacy SWH business through the due diligence process prior
to the Mergers, exposing us to potentially large, unanticipated costs.

Prior to completing the Mergers, we performed certain due diligence reviews of the Legacy SWH business.
In view of timing and other considerations relevant to successfully achieving the closing of the Mergers, our due
diligence reviews were necessarily limited in nature and may not adequately have uncovered all of the contingent
or undisclosed liabilities we may incur as a consequence of the Mergers. Any such liabilities could cause us to
experience potentially significant losses, which could materially adversely affect our business, results of
operations and financial condition.

Risks Related to Our Indebtedness

Our cash flows and operating results could be adversely affected by required payments of debt or related
interest and other risks of our debt financing.

We are generally subject to risks associated with debt financing. These risks include: (1) our cash flow may

not be sufficient to satisfy required payments of principal and interest; (2) we may not be able to refinance
existing indebtedness or the terms of any refinancing may be less favorable to us than the terms of existing debt;
(3) required debt payments are not reduced if the economic performance of any property declines; (4) debt
service obligations could reduce funds available for distribution to our stockholders and funds available for
capital investment; (5) any default on our indebtedness could result in acceleration of those obligations and
possible loss of property to foreclosure; (6) the risk that necessary capital expenditures cannot be financed on
favorable terms; and (7) the value of the collateral securing our indebtedness may fluctuate and fall below the
amount of indebtedness it secures. If the income from a property is pledged to secure payment of indebtedness
and we cannot make the applicable debt payments, we may have to surrender the property to the lender with a
consequent loss of any prospective income and equity value from such property. Any of these risks could place
strains on our cash flows, reduce our ability to grow, and adversely affect our results of operations.

We utilize a significant amount of indebtedness in the operation of our business.

As of December 31, 2019, we had approximately $8,514.9 million aggregate principal amount of

indebtedness outstanding. Our leverage could have important consequences to us. For example, it could:

(1) result in the acceleration of a significant amount of debt for non-compliance with the terms of such debt or, if
such debt contains cross-default or cross-acceleration provisions, other debt; (2) result in the loss of assets,
including individual properties or portfolios, due to foreclosure or sale on unfavorable terms, which could create
taxable income without accompanying cash proceeds; (3) materially impair our ability to borrow unused amounts
under existing financing arrangements or to obtain additional financing or refinancing on favorable terms, or at
all; (4) require us to dedicate a substantial portion of our cash flow to paying principal and interest on our
indebtedness, reducing the cash flow available to fund our business, to pay dividends, including those necessary
to maintain our REIT qualification, or to use for other purposes; (5) increase our vulnerability to an economic
downturn; (6) limit our ability to withstand competitive pressures; or (7) reduce our flexibility to respond to
changing business and economic conditions.

If any of the foregoing occurs, our business, financial condition, liquidity, results of operations, and
prospects could be materially and adversely affected, and the trading price of our common stock could decline
significantly.

We may be unable to obtain financing through the debt and equity markets, which would have a material
adverse effect on our growth strategy and our financial condition and results of operations.

We cannot assure you that we will be able to access the capital and credit markets to obtain additional debt

or equity financing or that we will be able to obtain financing on terms favorable to us. Our inability to obtain
financing could have negative effects on our business. Among other things, we could have difficulty acquiring,
re-developing or maintaining, our properties, which would materially and adversely affect our business strategy
and portfolio, and may result in our: (1) liquidity being adversely affected; (2) inability to repay or refinance our
indebtedness on or before its maturity; (3) making higher interest and principal payments or selling some of our
assets on terms unfavorable to us to service our indebtedness; or (4) issuing additional capital stock, which could
further dilute the ownership of our existing stockholders.

Our access to additional third party sources of financing will depend, in part, on:

•

general market conditions;

the market’s perception of our growth potential;

• with respect to acquisition financing, the market’s perception of the value of the homes to be acquired;

•

our current debt levels;

our current and expected future earnings;

our cash flow and cash distributions; and

the market price of our common stock.

Potential lenders may be unwilling or unable to provide us with financing that is attractive to us or may

charge us prohibitively high fees in order to obtain financing. Consequently, there is uncertainty regarding our
ability to access the credit markets in order to attract financing on reasonable terms. Investment returns on our
assets and our ability to make acquisitions could be adversely affected by our inability to secure financing on
reasonable terms, if at all.

Secured indebtedness exposes us to the possibility of foreclosure on our ownership interests in our rental
homes.

Incurring mortgage and other secured indebtedness increases our risk of loss of our ownership interests in
our rental homes because defaults thereunder, and/or the inability to refinance such indebtedness, may result in
foreclosure action initiated by lenders. For tax purposes, a foreclosure of any of our rental homes would be

treated as a sale of the home for a purchase price equal to the outstanding balance of the indebtedness secured by
such rental home. If the outstanding balance of the indebtedness secured by such rental home exceeds our tax
basis in the rental home, we would recognize taxable income on foreclosure without receiving any cash proceeds.

Covenants in our debt agreements may restrict our operating activities and adversely affect our financial
condition.

Our existing debt agreements contain, and future debt agreements may contain, financial and/or operating

covenants including, among other things, certain coverage ratios, as well as limitations on the ability to incur
additional secured and unsecured debt, and/or otherwise affect our distribution and operating policies. These
covenants may limit our operational flexibility and acquisition and disposition activities. Moreover, if any of the
covenants in these debt agreements are breached and not cured within the applicable cure period, we could be
required to repay the debt immediately, even in the absence of a payment default. A default under one of our debt
agreements could result in a cross-default under other debt agreements, and our lenders could elect to declare
outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral,
and enforce their respective interests against existing collateral. As a result, a default under applicable debt
covenants could have an adverse effect on our financial condition or results of operations. Additionally,
borrowing base requirements associated with our financing arrangements may prevent us from drawing upon our
total maximum capacity under these financing arrangements if sufficient collateral, in accordance with our
facility agreements, is not available.

For example, our mortgage loans and Secured Term Loan (see definition in Part II, Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”)
require, among other things, that a cash management account controlled by the lender collect all rents and cash
generated by the properties securing the portfolio. Upon the occurrence of an event of default or failure to satisfy
the required minimum debt yield or debt service coverage ratio, the lender may apply any excess cash in such
cash management account as the lender elects, including prepayment of principal and amounts due under the
loans.

These covenants may restrict our ability to engage in transactions that we believe would otherwise be in the

best interests of our stockholders. Further, such restrictions could make it difficult for us to satisfy the
requirements necessary to maintain our qualification as a REIT for United States federal income tax purposes.

We have and expect to continue to utilize non-recourse long-term mortgage loans, and such structures may
expose us to certain risks not prevalent in other debt financings, which could affect the availability and
attractiveness of this financing option or otherwise result in losses to us.

We have and expect to continue to utilize non-recourse long-term mortgage loans relating to pools of homes
which we own, if and when they become available and to the extent consistent with the maintenance of our REIT
qualification, in order to generate cash for funding new investments. Mortgage loans may expose us to certain
risks not prevalent in other debt financings. For example, accounting rules for mortgage loans are complex and
involve significant judgment and assumptions. These complexities and possible changes in accounting rules,
interpretations or our assumptions could undermine our ability to prepare timely and accurate financial
statements. Moreover, we cannot be assured that we will be able to access the securitization market in the future,
or be able to do so at favorable rates. The global economy recently experienced a significant recession and recent
events in the real estate and securitization markets, as well as the debt markets and the economy generally, have
caused significant dislocations, illiquidity, and volatility in the market for asset-backed securities and mortgage-
backed securities, as well as a severe, ongoing disruption in the wider global financial markets, including a
significant reduction of investor demand for, and purchases of, asset-backed securities and structured financial
products. Disruptions of the securitization market could preclude our ability to use mortgage loans as a financing
source or could render it an inefficient source of financing, making us more dependent on alternative sourcing of
financing that might not be as favorable as mortgage loans in otherwise favorable markets. In addition, in the

United States and elsewhere, there is now increased political and regulatory scrutiny of the asset-backed
securities industry. This has resulted in a raft of measures for increased regulation which are currently at various
stages of implementation and which may have an adverse impact on the regulatory capital charge to certain
investors in securitization exposures or the incentives for certain investors to hold asset-backed securities, and
may thereby affect the liquidity of such securities. Any of these factors could limit our access to mortgage loans
as a source of financing. The inability to consummate mortgage loans to finance our investments on a long-term
basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an
inopportune time or price, which could adversely affect our performance and our ability to grow our business.

We may not have the ability to raise the funds necessary to settle conversions of the 2022 Convertible Notes or
to repurchase the 2022 Convertible Notes upon a fundamental change; our future debt may contain
limitations on our ability to pay cash upon conversion or repurchase of the 2022 Convertible Notes.

Holders of the 2022 Convertible Notes (see definition in Part II, Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”) have the right to
require us to repurchase their 2022 Convertible Notes upon the occurrence of a fundamental change, such as
certain change in control transactions or recapitalization transactions as defined in the indentures governing the
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, if any. Upon conversion of the
2022 Convertible Notes, unless we elect to deliver solely common stock to settle such conversion (other than
paying cash in lieu of delivering any fractional share of stock), we will be required to make cash payments in
respect of the 2022 Convertible Notes being converted. However, we may not have enough available cash or be
able to obtain financing at the time we are required to make repurchases of the 2022 Convertible Notes
surrendered therefor or to pay the cash amounts due upon conversion of the 2022 Convertible Notes. In addition,
our ability to repurchase the 2022 Convertible Notes or to pay cash upon conversion of the 2022 Convertible
Notes may be limited by law, by regulatory authority, or by future agreements governing our indebtedness. The
failure to repurchase the 2022 Convertible Notes at a time when the repurchase is required by the
2022 Convertible Notes indenture or to pay any cash due and payable on the 2022 Convertible Notes as required
by the 2022 Convertible Notes indentures would constitute a default under the indenture. A default under the
2022 Convertible Notes indenture or the fundamental change itself could also lead to a default under agreements
governing our existing and future indebtedness. If the repayment of the related indebtedness were to be
accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the
indebtedness and repurchase the 2022 Convertible Notes or make cash payments thereon.

The conditional conversion feature of the 2022 Convertible Notes, if triggered, may adversely affect our
financial condition and operating results.

In the event the conditional conversion feature of the 2022 Convertible Notes is triggered, holders will be
entitled to convert the 2022 Convertible Notes at any time during specified periods at their option. If one or more
holders elect to convert their 2022 Convertible Notes, unless we elect to satisfy our conversion obligation by
delivering solely common stock (other than paying cash in lieu of delivering any fractional share of stock), we
would be required to settle a portion or all of our conversion obligation through the payment of cash, which could
adversely affect our liquidity.

The accounting method for convertible debt securities that may be settled in cash could have a material effect
on our reported financial results.

Under GAAP, an entity must separately account for the debt component and the embedded conversion
option of convertible debt instruments that may be settled entirely or partially in cash upon conversion, such as
the 2022 Convertible Notes, in a manner that reflects the issuer’s economic interest cost. The effect of the
accounting treatment for such instruments is that the value of such embedded conversion option is recorded as a
fair value adjustment to the debt component of the 2022 Convertible Notes. The adjustment is treated like a

discount for accounting purposes and is amortized into interest expense over the term of the 2022 Convertible
Notes using an effective interest method. As a result, we will initially be required to record a greater amount of
non-cash interest expense because of the amortization of fair value adjustment to the 2022 Convertible Notes’
face amount over the term of the 2022 Convertible Notes. Accordingly, we will report lower net income in our
financial results because of the recognition of both the current period’s amortization of the fair value adjustment
and the 2022 Convertible Notes’ coupon interest, which could adversely affect our reported or future financial
results, the trading price of our common stock, and the trading price of the 2022 Convertible Notes.

Under certain circumstances, convertible debt instruments (such as the 2022 Convertible Notes) that may be

settled entirely or partially in cash are evaluated for their impact on earnings per share utilizing the
“if-converted” method, the effect of which is that the shares of common stock contingently issuable upon
conversion of convertible debt instruments are included in the calculation of diluted earnings per share to the
extent that the conversion value of convertible debt instruments exceeds their principal amount. Under the
“if-converted” method, for diluted earnings per share purposes, convertible debt instruments are accounted for as
if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle
such excess in stock, are issued if such calculation is dilutive to earnings per share for the relevant periods. This
could adversely affect our reported financial results, including our diluted earnings per share.

Offerings of additional debt securities or equity securities that rank senior to our common stock may adversely
affect the market price of our common stock.

If we decide to issue additional debt securities or equity securities that rank senior to our common stock in

the future, it is likely that they will be governed by an indenture or other instrument containing covenants
restricting our operating flexibility. Any additional debt or equity securities that we issue in the future may have
rights, preferences, and privileges more favorable than those of our common stock and, if such securities are
convertible or exchangeable, the issuance of such securities may result in dilution to owners of our common
stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because
our decision to issue debt or equity securities in any future offering will depend on market conditions and other
factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings.
Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our
common stock and diluting the value of their stockholdings in us.

Failure to hedge effectively against interest rate changes may adversely affect our results of operations and
our ability to make distributions to our stockholders.

Borrowings under our debt instruments totaling $6,770.9 million as of December 31, 2019 bear interest at
variable rates and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the
variable rate indebtedness would increase even though the amount borrowed remained the same, and our earnings
and cash flows will correspondingly decrease. After giving effect to our interest rate swap agreements (see Part II.
Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and
Capital Resources” for more information), each 100 bps change in interest rates on our floating rate indebtedness
would result in a $2.5 million change in annual interest expense.

In connection with our debt instruments, we have obtained interest rate caps and swaps, and subject to
complying with the requirements for REIT qualification, we may obtain in the future one or more additional
forms of interest rate protection (in the form of swap agreements, interest rate cap contracts, or similar
agreements) to hedge against the possible negative effects of interest rate fluctuations. However, we cannot
assure you that any hedging will adequately relieve the adverse effects of interest rate increases or that
counterparties under these agreements will honor their obligations thereunder. In addition, we may be subject to
risks of default by hedging counterparties. Adverse economic conditions could also cause the terms on which we
borrow to be unfavorable. We could be required to liquidate one or more of our investments at times which may
not permit us to receive an attractive return on our investments in order to meet our debt service obligations.

The REIT provisions of the Code may also limit our ability to hedge effectively. See “Risks Related to our
REIT Status and Certain Other Tax Items — Complying with REIT requirements may limit our ability to hedge
effectively and may cause us to incur tax liabilities.”

Expected phasing out of LIBOR after 2021 may adversely affect the capital markets and our ability to raise
capital. When LIBOR is discontinued, our variable rate debt agreements and financial instruments may be
calculated using another base rate.

As of December 31, 2019, we had outstanding $6,770.9 million of variable rate debt for which maturities

extend past 2021 (assuming all extensions are exercised) that references the London Interbank Offered Rate
(“LIBOR”) as the benchmark rate to determine the applicable interest rate or payment amount. If LIBOR is
discontinued after 2021 as expected, there will be uncertainty or differences in the calculation of the applicable
interest rate or payment amount, depending on the terms of the agreement, and significant management time and
attention may be required to transition to using the new benchmark rates and to implement necessary changes to
our financial models. This could result in different financial performance for previously recorded transactions
and may impact our existing transaction data, operations, and pricing processes. The calculation of interest rates
under the replacement benchmarks could also impact our net interest expense. LIBOR may perform differently
during the phase-out period than in the past which could result in an adverse impact on the market for or value of
any LIBOR-based securities, loans, derivatives, and other financial obligations or extensions of credit held by us
and on our overall financial condition or results of operations. Additionally, debt holders or governing bodies
may decide to transition to a successor rate prior to the expected LIBOR phase-out date.

Risks Related to Our Organization and Structure

If we are unable to maintain effective internal controls over financial reporting, investors may lose confidence
in the accuracy and completeness of our financial reports, and the market price of our common stock may be
negatively affected.

As a public company, we are subject to the requirements of the Sarbanes-Oxley Act of 2002, particularly
Section 404, and the applicable SEC rules and regulations that require an annual report of our management on
our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the
Exchange Act). Effective internal controls over financial reporting are necessary for us to provide reliable
financial reports in a timely manner.

If we identify material weaknesses in our internal controls over financial reporting, or if we are unable to

assert that our internal controls over financial reporting are effective, investors may lose confidence in the
accuracy and completeness of our financial reports and the market price of our common stock could be
negatively affected, and we could become subject to investigations by the New York Stock Exchange (“NYSE”),
the SEC, or other regulatory authorities, which could require additional financial and management resources.

Provisions of Maryland law may limit the ability of a third party to acquire control of us by requiring our
board of directors or stockholders to approve proposals to acquire our company or effect a change in control.

Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of

inhibiting a third party from making a proposal to acquire us or of impeding a change in control under
circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the
then-prevailing market price of their shares of common stock, including:

•

“business combination” provisions that, subject to certain exceptions and limitations, prohibit certain
business combinations between a Maryland corporation and an “interested stockholder” (defined
generally as any person who beneficially owns 10% or more of the voting power of our outstanding
voting stock or an affiliate or associate of ours who, at any time within the two-year period

immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power
of our then outstanding shares of stock) or an affiliate of any interested stockholder for five years after
the most recent date on which the stockholder becomes an interested stockholder, and thereafter
imposes two super-majority stockholder voting requirements on these combinations, unless, among
other conditions, our common stockholders receive a minimum price, as defined in the MGCL, for
their shares of stock and the consideration is received in cash or in the same form as previously paid by
the interested stockholder for its shares of stock; and

•

“control share” provisions that provide that, subject to certain exceptions, holders of “control shares”
(defined as voting shares that, when aggregated with all other shares controlled by the stockholder,
entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors)
acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or
control of issued and outstanding “control shares”) have no voting rights except to the extent approved
by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on
the matter, excluding shares owned by the acquirer, by our officers, or by our employees who are also
directors of our company.

We have opted out of the business combination provisions of the MGCL and any business combination
between us and any other person is exempt from the business combination provisions of the MGCL. In addition,
pursuant to a provision in our bylaws, we opted out of the control share provisions of the MGCL. Provisions of
our bylaws will prohibit our board of directors from revoking, altering, or amending its resolution exempting any
business combination from the business combination provisions of the MGCL or amending our bylaws to opt in
to the control share provisions of the MGCL, in each case, without the affirmative vote of a majority of the votes
cast on the matter by our stockholders entitled to vote generally in the election of directors.

In addition, the “unsolicited takeover” provisions of Title 3, Subtitle 8 of the MGCL permit our board of
directors, without stockholder approval and regardless of what is provided in our charter or bylaws, to implement
certain takeover defenses, including adopting a classified board or increasing the vote required to remove a
director. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition
proposal for us or of delaying, deferring, or preventing a change in control of us under the circumstances that
otherwise could provide our common stockholders with the opportunity to realize a premium over the then-
current market price. Our charter provides that, without the affirmative vote of a majority of the votes cast on the
matter by our stockholders entitled to vote generally in the election of directors, we may not elect to be subject to
certain provisions of Subtitle 8, including the provisions relating to adopting a classified board or increasing the
vote required to remove a director.

Our board of directors may approve the issuance of stock, including preferred stock, with terms that may
discourage a third party from acquiring us.

Our charter permits our board of directors, without any action by our stockholders, to authorize the issuance
of stock in one or more classes or series. Our board of directors may also classify or reclassify any unissued stock
and set or change the preferences, conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications, and terms and conditions of redemption of any such stock,
which rights may be superior to those of our common stock. Thus, our board of directors could authorize the
issuance of shares of a class or series of stock with terms and conditions which could have the effect of
discouraging a takeover or other transaction in which holders of some or a majority of our outstanding common
stock might receive a premium for their shares of stock over the then current market price of our common stock.

Certain provisions in the indenture governing the 2022 Convertible Notes could delay or prevent an otherwise
beneficial takeover or takeover attempt of us.

Certain provisions in the 2022 Convertible Notes and the related indenture could make it more difficult or
more expensive for a third party to acquire us. For example, if a takeover would constitute a fundamental change,

holders of the 2022 Convertible Notes will have the right to require us to repurchase their 2022 Convertible
Notes in cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to
increase the conversion rate for holders who convert their 2022 Convertible Notes in connection with such
takeover. In either case, and in other cases, our obligations under the 2022 Convertible Notes and the indenture
could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing
incumbent management.

Our board of directors may change significant corporate policies without stockholder approval.

Our investment, financing, borrowing, and dividend policies and our policies with respect to all other
activities, including growth, debt, capitalization, and operations, are determined by our board of directors. These
policies may be amended or revised at any time and from time to time at the discretion of our board of directors
without a vote of our stockholders. Our charter also provides that our board of directors may revoke or otherwise
terminate our REIT election without approval of our stockholders if it determines that it is no longer in our best
interests to attempt to qualify, or to continue to qualify, as a REIT. In addition, our board of directors may change
our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal
requirements. A change in these policies or the termination of our REIT election could have an adverse effect on
our financial condition, our results of operations, our cash flow, the per share trading price of our common stock,
and our ability to satisfy our debt service obligations and to pay dividends to our stockholders.

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

Our charter eliminates the liability of our directors and officers to us and our stockholders for money

damages to the maximum extent permitted under Maryland law. Under current Maryland law and our charter, our
directors and officers do not have any liability to us or our stockholders for money damages other than liability
resulting from:

•

actual receipt of an improper benefit or profit in money, property, or services; or

active and deliberate dishonesty by the director or officer that was established by a final judgment and
is material to the cause of action adjudicated.

Our charter authorizes us and our bylaws obligate us to indemnify each of our directors or officers who is or

is threatened to be made a party to or witness in a proceeding by reason of his or her service in those or certain
other capacities, to the maximum extent permitted by Maryland law, from and against any claim or liability to
which such person may become subject or which such person may incur by reason of his or her status as a
present or former director or officer of us or serving in such other capacities. In addition, we may be obligated to
pay or reimburse the expenses incurred by our present and former directors and officers without requiring a
preliminary determination of their ultimate entitlement to indemnification. As a result, we and our stockholders
may have more limited rights to recover money damages from our directors and officers than might otherwise
exist absent these provisions in our charter and bylaws or that might exist with other companies, which could
limit your recourse in the event of actions that are not in our best interests.

Our charter contains a provision that expressly permits our non-employee directors, certain of our pre-IPO
owners, and their affiliates to compete with us.

Our charter provides that, to the maximum extent permitted from time to time by Maryland law, we
renounce any interest or expectancy that we have in, or any right to be offered an opportunity to participate in,
any business opportunities that are from time to time presented to or developed by our directors or their affiliates,
other than to those directors who are employed by us or our subsidiaries, unless the business opportunity is
expressly offered or made known to such person in his or her capacity as our director, and none of our pre-IPO
owners, or any of their respective affiliates, or any director who is not employed by us or any of his or her
affiliates, will have any duty to refrain from engaging, directly or indirectly, in the same business activities or

similar business activities or lines of business in which we or our affiliates engage or propose to engage or to
refrain from otherwise competing with us or our affiliates.

Our charter provides that, to the maximum extent permitted from time to time by Maryland law, each of our

non-employee directors, and any of their affiliates, may:

•

acquire, hold, and dispose of interests in us and/or our subsidiaries, including shares of our stock or
common units of partnership interest in INVH LP for his, her or its own account or for the account of
others, and exercise all of the rights of a stockholder of Invitation Homes Inc., or a limited partner of
INVH LP, to the same extent and in the same manner as if he, she, or it were not our director or
stockholder; and

in his, her, or its personal capacity or in his, her, or its capacity, as applicable, as a director, officer,
trustee, stockholder, partner, member, equity owner, manager, advisor, or employee of any other
person, have business interests and engage, directly or indirectly, in business activities that are similar
to ours or compete with us, that involve a business opportunity that we could seize and develop or that
include the acquisition, syndication, holding, management, development, operation, or disposition of
interests in mortgages, real property or persons engaged in the real estate business.

Our charter also provides that, to the maximum extent permitted from time to time by Maryland law, in the

event that any of our non-employee directors, or any of their respective affiliates, acquires knowledge of a
potential transaction or other business opportunity, such person will have no duty to communicate or offer such
transaction or business opportunity to us or any of our affiliates and may take any such opportunity for itself,
himself, or herself or offer it to another person or entity unless the business opportunity is expressly offered to
such person in his or her capacity as our director. These provisions may limit our ability to pursue business or
investment opportunities that we might otherwise have had the opportunity to pursue, which could have an
adverse effect on our financial condition, our results of operations, our cash flow, the per share trading price of
our common stock, and our ability to satisfy our debt service obligations and to pay dividends to our
stockholders.

Risks Related to our REIT Status and Certain Other Tax Items

If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and could
face a substantial tax liability.

We expect to continue to operate so as to qualify as a REIT under the Code. However, qualification as a
REIT involves the application of highly technical and complex Code provisions for which only a limited number
of judicial or administrative interpretations exist. Notwithstanding the availability of cure provisions in the Code,
we could fail to meet various compliance requirements, which could jeopardize our REIT status. Furthermore,
new tax legislation, administrative guidance, or court decisions, in each instance potentially with retroactive
effect, could make it more difficult or impossible for us to qualify as a REIT. If we fail to qualify as a REIT in
any tax year, then:

• we would be taxed as a regular domestic corporation, which under current laws, among other things,
means being unable to deduct distributions to stockholders in computing taxable income and being
subject to United States federal income tax on our taxable income at regular corporate income tax rates;

•

any resulting tax liability could be substantial and could have a material adverse effect on our book
value;

unless we were entitled to relief under applicable statutory provisions, we would be required to pay
taxes, and thus, our cash available for distribution to stockholders would be reduced for each of the
years during which we did not qualify as a REIT and for which we had taxable income;

• we could be subject to increased state and local taxes; and

• we generally would not be eligible to requalify as a REIT for the subsequent four full taxable years.

REITs, in certain circumstances, may incur tax liabilities that would reduce our cash available for distribution
to you.

Even if we qualify and maintain our status as a REIT, we may become subject to United States federal
income taxes and related state and local taxes. For example, net income from the sale of properties that are
“dealer” properties sold by a REIT (a “prohibited transaction” under the Code) will be subject to a 100% tax. We
may not make sufficient distributions to avoid excise taxes applicable to REITs. Similarly, if we were to fail an
income test (and did not lose our REIT status because such failure was due to reasonable cause and not willful
neglect), we would be subject to tax on the income that does not meet the income test requirements. We also may
decide to retain net capital gain we earn from the sale or other disposition of our investments and pay income tax
directly on such income. In that event, our stockholders would be treated as if they earned that income and paid
the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans,
would have no benefit from their deemed payment of such tax liability unless they file United States federal
income tax returns and seek a refund of such tax. We also may be subject to state and local taxes on our income
or property, including income, franchise, payroll, mortgage recording, and transfer taxes, either directly or at the
level of the other companies through which we indirectly own our assets, such as our TRSs, which are subject to
full United States federal, state, local, and foreign corporate-level income taxes. Any taxes we pay directly or
indirectly will reduce our cash available for distribution to you.

Complying with REIT requirements may cause us to forgo otherwise attractive opportunities and limit our
expansion opportunities.

In order to qualify as a REIT for United States federal income tax purposes, we must continually satisfy
tests concerning, among other things, our sources of income, the nature of our investments in commercial real
estate and related assets, the amounts we distribute to our stockholders, and the ownership of our stock. We may
also be required to make distributions to stockholders at disadvantageous times or when we do not have funds
readily available for distribution. Thus, compliance with REIT requirements may hinder our ability to operate
solely on the basis of maximizing profits.

Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments.

In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least 75% of
the value of our assets consists of cash, cash items, government securities, and qualified REIT real estate assets.
The remainder of our investments in securities (other than qualified real estate assets and government securities)
generally cannot include more than 10% of the outstanding voting securities of any one issuer or 10% of the total
value of the outstanding securities of any one issuer unless we and such issuer jointly elect for such issuer to be
treated as a TRS under the Code. The total value of all of our investments in taxable REIT subsidiaries cannot
exceed 20% of the value of our total assets. In addition, no more than 5% of the value of our assets (other than
qualified real estate assets and government securities) can consist of the securities of any one issuer other than a
TRS. If we fail to comply with these requirements, we must dispose of a portion of our assets within 30 days
after the end of the calendar quarter in order to avoid losing our REIT status and suffering adverse tax
consequences. In addition to the quarterly asset test requirements, we must annually satisfy two income test
requirements (the “75% and 95% gross income tests”). As a result, we may be required to liquidate from our
portfolio, or contribute to a taxable REIT subsidiary, otherwise attractive investments in order to maintain our
qualification as a REIT. These actions could have the effect of reducing our income and amounts available for
distribution to its stockholders. We may be unable to pursue investments that would otherwise be advantageous
to it in order to satisfy the income or asset diversification requirements for qualifying as a REIT. Thus,
compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax
liabilities.

The REIT provisions of the Code substantially limit our ability to hedge our liabilities. Any income from a
hedging transaction we enter into to manage risk of interest rate changes with respect to borrowings made or to

be made to acquire or carry real estate assets (each such hedge, a “Borrowings Hedge”) or to manage risk of
foreign currency exchange rate fluctuations with respect to any item of qualifying income (each such hedge, a
“Currency Hedge”), if clearly identified under applicable United States Treasury (“Treasury”) regulations, does
not constitute “gross income” for purposes of the 75% or 95% gross income tests that we must satisfy to qualify
and to maintain our qualification as a REIT. This exclusion from the 95% and 75% gross income tests also will
apply if we previously entered into a Borrowings Hedge or a Currency Hedge, a portion of the hedged
indebtedness or property is disposed of and in connection with such extinguishment or disposition, we enter into
a new properly identified hedging transaction to offset the prior hedging position. To the extent that we enter into
other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying
income for purposes of both of the gross income tests. As a result of these rules, we intend to limit our use of
advantageous hedging techniques or, subject to the limitations on the value of and income from our TRSs,
implement those hedges through a domestic TRS. This could increase the cost of our hedging activities because
our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates
than we would otherwise want to bear. In addition, losses from hedges held in our TRS will generally not provide
any tax benefit, except for being carried forward against future taxable income in the TRS, provided, however,
losses in our TRS arising in taxable years beginning after December 31, 2017, may only be carried forward and
may only be deducted against 80% of future taxable income in the TRS.

Complying with REIT requirements may force us to borrow to make distributions to stockholders.

From time to time, our taxable income may be greater than our cash flow available for distribution to

stockholders. If we do not have other funds available in these situations, we may be unable to distribute
substantially all of our taxable income as required by the REIT provisions of the Code. Thus, we could be
required to borrow funds, sell a portion of our assets at disadvantageous prices, or find another alternative. These
options could increase our costs or reduce our equity.

Even if we qualify to be subject to United States federal income tax as a REIT, we could be subject to tax on
any unrealized net built-in gains in certain assets.

As part of our pre-IPO reorganization transactions, we acquired certain appreciated assets that were held
(directly or indirectly) in part by one or more C corporations in transactions in which the adjusted tax basis of the
assets in our hands is determined by reference to the adjusted basis of such assets in the hands of such C
corporations. If we dispose of any such appreciated assets during the five-year period following the date we
acquired those assets, we will be subject to United States federal income tax on the portion of such gain
attributable to such C corporations at the highest corporate tax rates to the extent of the excess of the fair market
value of such assets on the date that we acquired those assets over the adjusted tax basis of such assets on such
date, which are referred to as built-in gains. We would be subject to this tax liability even if we qualify and
maintain our status as a REIT. Any recognized built-in gain will retain its character as ordinary income or capital
gain and will be taken into account in determining REIT taxable income and our distribution requirement. Any
tax on the recognized built-in gain will reduce REIT taxable income. We may choose not to sell in a taxable
transaction appreciated assets we might otherwise sell during the five-year period in which the built-in gain tax
applies to avoid the built-in gain tax. However, there can be no assurances that such a taxable transaction will not
occur. If we sell such assets in a taxable transaction, the amount of corporate tax that we will pay will vary
depending on the actual amount of net built-in gain or loss present in those assets as of the time we acquired
those assets and the portion of such assets which were held by C corporations prior to their contribution to us.

Our charter does not permit any person to own more than 9.8% of our outstanding common stock or of our
outstanding stock of all classes or series, and attempts to acquire our common stock or our stock of all other
classes or series in excess of these 9.8% limits would not be effective without an exemption from these limits
by our board of directors.

For us to qualify as a REIT under the Code, not more than 50% of the value of our outstanding stock may be
owned directly or indirectly, by five or fewer individuals (including certain entities treated as individuals for this

purpose) during the last half of a taxable year. For the purpose of assisting our qualification as a REIT for
United States federal income tax purposes, among other purposes, our charter prohibits beneficial or constructive
ownership by any person of more than a certain percentage, currently 9.8%, in value or by number of shares of
stock, whichever is more restrictive, of the outstanding shares of our common stock or 9.8% in value of the
outstanding shares of our stock, which we refer to as the “ownership limit.” The constructive ownership rules
under the Code and our charter are complex and may cause shares of the outstanding common stock owned by a
group of related persons to be deemed to be constructively owned by one person. As a result, the acquisition of
less than 9.8% of our outstanding common stock or our stock by a person could cause a person to own
constructively in excess of 9.8% of our outstanding common stock or our stock, respectively, and thus violate the
ownership limit. There can be no assurance that our board of directors, as permitted in the charter, will not
decrease this ownership limit in the future, and any decision to grant a waiver from the ownership limit in any
particular instance is at the sole discretion of our board of directors. Any attempt to own or transfer shares of our
common stock in excess of the ownership limit without the consent of our board of directors will result either in
the shares of stock in excess of the limit being transferred by operation of the charter to a charitable trust, and the
person who attempted to acquire such excess shares of stock will not have any rights in such excess shares of
stock, or in the transfer being void. The ownership limit may have the effect of precluding a change in control of
us by a third party, even if such change in control would be in the best interests of our stockholders or would
result in receipt of a premium to the price of our common stock (and even if such change in control would not
reasonably jeopardize our REIT status).

We may choose to make distributions in our own stock, in which case you may be required to pay income taxes
without receiving any cash dividends.

In connection with our qualification as a REIT, we are required to annually distribute to our stockholders at

least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with
GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain. In order to
satisfy this requirement, we may make distributions that are payable in cash and/or shares of our common stock
(which could account for up to 90% of the aggregate amount of such distributions) at the election of each
stockholder. Taxable stockholders receiving such distributions will be required to include the full amount of such
distributions as ordinary dividend income to the extent of our current and accumulated earnings and profits, as
determined for United States federal income tax purposes. As a result, United States stockholders may be
required to pay income taxes with respect to such distributions in excess of the cash portion of the distribution
received. Accordingly, United States holders receiving a distribution of our stock may be required to sell stocks
received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be
disadvantageous, in order to satisfy any tax imposed on such distribution. If a United States stockholder sells the
stock that it receives as part of the distribution in order to pay this tax, the sales proceeds may be less than the
amount it must include in income with respect to the distribution, depending on the market price of our stock at
the time of the sale. Furthermore, with respect to certain non-United States holders, we may be required to
withhold United States tax with respect to such distribution, including in respect of all or a portion of such
distribution that is payable in stock, by withholding or disposing of part of the stock included in such distribution
and using the proceeds of such disposition to satisfy the withholding tax imposed. In addition, if a significant
number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividend
income, such sale may put downward pressure on the market price of our common stock.

No assurance can be given that the Internal Revenue Service (“IRS”) will not impose additional

requirements in the future with respect to taxable cash/stock distributions, including on a retroactive basis, or
assert that the requirements for such taxable cash/stock distributions have not been met.

Dividends payable by REITs do not generally qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to qualified dividend income payable by non-REIT “C” corporations to
certain non-corporate United States stockholders is currently 23.8% (taking into account the 3.8% Medicare tax

applicable to net investment income). Dividends payable by REITs, however, generally are not eligible for the
reduced rates. Effective for taxable years beginning after December 31, 2017, and before January 1, 2026, those
non-corporate United States stockholders may deduct 20% of their dividends from REITs (excluding qualified
dividend income and capital gains dividends). For those United States stockholders in the top marginal tax
bracket of 37%, the deduction for REIT dividends yields an effective income tax rate of 29.6% on REIT
dividends, which is higher than the 23.8% tax rate on qualified dividend income paid by non-REIT
“C” corporations. Although the legislation benefits the taxation of REITs and dividends payable by REITs, the
more favorable rates applicable to non-REIT corporate qualified dividends could cause certain non-corporate
investors to perceive investments in REITs to be relatively less attractive than investments in the stocks of
non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs,
including our common stock.

We are dependent on external sources of capital to finance our growth.

As with other REITs, but unlike corporations generally, our ability to finance our growth must largely be

funded by external sources of capital because we generally have to distribute to our stockholders 90% of our
REIT taxable income in order to qualify as a REIT, including taxable income where we do not receive
corresponding cash. Our access to external capital depends upon a number of factors, including general market
conditions, the market’s perception of our growth potential, our current and potential future earnings, cash
distributions, and the market price of our common stock.

We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce
our operating flexibility, and reduce the price of our common stock.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions

of United States federal income tax laws applicable to investments similar to an investment in shares of our
common stock. For example, the recently enacted Tax Cuts and Jobs Act (“TCJA”) has resulted in fundamental
changes to the Code. Among the numerous changes included in the TCJA is a deduction of 20% of ordinary
REIT dividends for non-corporate taxpayers for tax years beginning on or after January 1, 2018 through 2025.
We cannot assure you that the TCJA or any such changes in the future will not adversely affect the taxation of a
stockholder. Any such changes could have an adverse effect on an investment in our stock or on the market value
or the resale potential of our assets. You are urged to consult with your tax advisor with respect to the impact of
the TCJA on your investment in our stock and the status of legislative, regulatory, or administrative
developments and proposals and their potential effect on an investment in our stock. Although REITs generally
receive certain tax advantages compared to entities taxed as regular corporations, it is possible that future
legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a
company that invests in real estate to elect to be treated for United States federal income tax purposes as a
corporation. As a result, our charter provides our board of directors with the power, under certain circumstances,
to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the
approval of our stockholders.

Liquidation of assets may jeopardize our REIT qualification.

To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If

we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply
with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax
on any resultant gain if we sell assets that are treated as dealer property or inventory.

Our ownership of and relationship with any TRS will be restricted, and a failure to comply with the
restrictions would jeopardize our REIT status and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be

qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to

treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the
voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the
value of a REIT’s assets may consist of stock or securities of one or more TRSs. The value of our interests in and
thus the amount of assets held in a TRS may also be restricted by our need to qualify for an exclusion from
regulation as an investment company under the Investment Company Act of 1940, as amended. A TRS will pay
United States federal, state, and local income tax at regular corporate rates on any income that it earns. In
addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure
that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on
certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

Any TRS we own, as a domestic corporation, will pay United States federal, state, and local income tax on

its taxable income, and its after-tax net income is available for distribution to us but is not required to be
distributed to us. The aggregate value of the TRS stock and securities owned by us cannot exceed 20% of the
value of our total assets (including the TRS stock and securities). Although we plan to monitor our investments
in TRSs, there can be no assurance that we will be able to comply with the 20% limitation discussed above or to
avoid application of the 100% excise tax discussed above.

Re-characterization of leases as financing transactions may negatively affect us.

While we generally intend to use reasonable commercial efforts to structure any lease transaction so that the

lease will be characterized as a “true lease,” with us treated as the owner and lessor of the property for federal
income tax purposes, the IRS could challenge such characterization. In the event that any lease transaction is
challenged and re-characterized as a seller-financed conditional sale transaction for federal income tax purposes,
deductions for depreciation and cost recovery relating to such property would be disallowed. In addition, if we
enter such transactions at the REIT level, in the event of re-characterization, the REIT could be subject to
prohibited transaction taxes. Finally, the amount of our REIT taxable income could be recalculated, which might
cause us to fail to meet the distribution requirement for a taxable year and require us to pay deficiency dividends,
interest, and penalty taxes in order to maintain REIT status.

Risks Related to Ownership of Our Common Stock

The cash available for distribution to stockholders may not be sufficient to pay dividends at expected levels,
nor can we assure you of our ability to make distributions in the future. We may use borrowed funds to make
distributions.

We have elected to qualify as a REIT for United States federal income tax purposes. The Code generally
requires that a REIT annually distribute at least 90% of its REIT taxable income, determined without regard to
the deduction for dividends paid and excluding any net capital gain, and imposes tax on any REIT taxable
income retained by a REIT, including capital gains. We anticipate making quarterly distributions to our
stockholders. We expect that the cash required to fund our dividends will be covered by cash generated by
operations. However, our ability to make distributions to our stockholders will depend upon the performance of
our asset portfolio. If our operations do not generate sufficient cash flow to allow us to satisfy the REIT
distribution requirements, we may be required to fund distributions from working capital, borrow funds, raise
additional equity capital, sell assets, or reduce such distributions. If such cash available for distribution decreases
in future periods from expected levels, our inability to make the expected distributions could result in a decrease
in the market price of our common stock. In addition, our charter allows us to issue preferred stock that could
have a preference over our common stock as to distributions. All distributions will be made at the sole discretion
of our board of directors and will depend upon a number of factors, including our actual and projected results of
operations, financial condition, cash flows and liquidity, maintenance of our REIT qualification and other tax
considerations, capital expenditure and other obligations, debt covenants, contractual prohibitions or other
limitations, and applicable law and such other matters as our board of directors may deem relevant from time to
time. We may not be able to make distributions in the future. In addition, some of our distributions may include a

return of capital. To the extent that we decide to make distributions in excess of our current and accumulated
earnings and profits, such distributions would generally be considered a return of capital for United States federal
income tax purposes to the extent of the holder’s adjusted tax basis in their stock. A return of capital is not
taxable, but it has the effect of reducing the holder’s adjusted tax basis in its investment. To the extent that
distributions exceed the adjusted tax basis of a holder’s stock, they will be treated as gain from the sale or
exchange of such stock. If we borrow to fund distributions, our future interest costs would increase, thereby
reducing our earnings and cash available for distribution from what they otherwise would have been.

The market price of our common stock could be adversely affected by market conditions and by our actual and
expected future earnings and level of cash dividends.

Securities markets worldwide experience significant price and volume fluctuations. This market volatility,

as well as general economic, market, or political conditions, could reduce the market price of stock without
regard to our operating performance. For example, the trading prices of equity securities issued by REITs have
historically been affected by changes in market interest rates. One of the factors that may influence the market
price of our common stock is the annual yield from distributions on our common stock as compared to yields on
other financial instruments. An increase in market interest rates, or a decrease in our distributions to
stockholders, may lead prospective purchasers of shares of our common stock to demand a higher distribution
rate or seek alternative investments. As a result, if interest rates rise, it is possible that the market price of our
common stock will decrease as market rates on interest-bearing securities increase. In addition, our operating
results could be below the expectations of public market analysts and investors, and in response the market price
of our stock could decrease significantly. The market value of the equity securities of a REIT is also based upon
the market’s perception of the REIT’s growth potential and its current and potential future cash distributions,
whether from operations, sales, or refinancings, and is secondarily based upon the real estate market value of the
underlying assets. For that reason, our common stock may trade at prices that are higher or lower than our net
asset value per share of stock. To the extent we retain operating cash flow for investment purposes, working
capital reserves, or other purposes, these retained funds, while increasing the value of our underlying assets, may
not correspondingly increase the market price of our common stock. Our failure to meet the market’s
expectations with regard to future earnings and cash distributions likely would adversely affect the market price
of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters are located in Dallas, Texas at 1717 Main Street.

The information required by this Item is included in a separate section in this Annual Report on Form 10-K.
See Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Our Portfolio,” which is incorporated herein by reference.

ITEM 3. LEGAL PROCEEDINGS

The Company currently is not subject to any material litigation nor, to management’s knowledge, is any

material litigation currently threatened against the Company other than routine litigation and administrative
proceedings arising in the ordinary course of business.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on the NYSE under the symbol “INVH.”

Holders

As of February 14, 2020, there were 67 holders of record of 541,882,811 shares of common stock
outstanding. This does not include the number of stockholders who hold shares of our common stock through
banks, brokers, and other financial institutions.

Dividends

For income tax purposes, dividends paid to holders of common stock primarily consist of ordinary income,

capital gains, qualified dividends, unrecaptured Section 1250 gains, and return of capital, or a combination
thereof. For the years ended December 31, 2019 and 2018, dividends per share held for the entire year were
estimated to be taxable as follows:

2019

2018

Amount(1)

Percentage

Amount(1)

Percentage

Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Qualified dividends . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecaptured Section 1250 gain . . . . . . . . . . . . . . .
Return of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.23
0.22
0.01
0.06
—

0.52

45.4% $
42.7%
0.5%
11.4%
— %

100.0% $

0.32
0.08
0.01
0.03
—

0.44

74.0%
17.4%
2.0%
6.6%
— %

100.0%

(1) Amounts are displayed in actual dollars per share.

Stock Performance Graph

The following graph shows the total stockholder return of an investment of $100 cash on February 1, 2017

(the date our common stock began trading on the NYSE) for (1) our common stock, (2) the S&P 500 Total
Return Index, and (3) the MSCI US REIT (RMS) Total Return Index. All values assume reinvestment of the full
amount of all dividends. Stockholder returns over the indicated period are based on historical data and are not
necessarily indicative of future stockholder returns.

Comparison of Cumulative Total Returns

e
u
l
a
V
x
e
d
n
I

160

140

120

100

02/01/17

06/30/17

12/31/17

06/30/18

12/31/18

06/30/19

12/31/19

Invitation Homes Inc.

S&P 500 Index

MSCI US REIT Index

February 1,
2017

June 30,
2017

December 31,
2017

June 30,
2018

December 31,
2018

June 30,
2019

December 31,
2019

Cumulative Total Returns as of

Invitation Homes Inc.
. . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . .
MSCI US REIT Index . . . . . . . . .

$100.00 $108.45
107.25
103.99

100.00
100.00

$119.02
119.50
106.43

$117.61
122.67
107.70

$103.43
114.26
101.56

$139.19
135.44
119.61

$157.50
150.24
127.80

Repurchases of Equity Securities

We made no repurchases of our common stock during the three months ended December 31, 2019.

ITEM 6. SELECTED FINANCIAL DATA

The selected data set forth below under the captions “Selected Statement of Operations Data” and

“Summary Balance Sheet Data” for or as of each of the years in the five year period ended December 31, 2019
are derived from our audited consolidated financial statements. Our consolidated balance sheets as of
December 31, 2019 and 2018 and consolidated statements of operations for each of the years in the three year
period ended December 31, 2019 are included in Part IV. Item 15. “Exhibits and Financial Statement Schedules.”

On November 16, 2017, we added 34,670 homes to our portfolio and issued 207,448,958 shares of common
stock in connection with the Mergers. As a result, the Mergers have contributed to growth in results of operations
and increases in total assets and total liabilities and equity. The selected consolidated financial data should be

read in conjunction with Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our historical consolidated financial statements, including the related notes, included
in this Annual Report on Form 10-K.

($ in thousands, except per share data)

Selected Statement of Operations Data:

For the Years Ended December 31,

2019

2018

2017

2016

2015

Rental revenues and other property

income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Total expenses . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property, net of tax . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to

non-controlling interests . . . . . . . . . . . . . .

Net income (loss) attributable to common

1,764,685 $
1,725,510
11,600
96,336
147,111

1,722,962 $
1,784,615
6,958
49,682
(5,013)

1,054,456 $ 922,587 $ 836,049
995,408
1,017,858
1,193,219
(3,121)
(1,558)
(959)
2,272
18,590
33,896
(160,208)
(78,239)
(105,826)

(1,648)

489

—

stockholders . . . . . . . . . . . . . . . . . . . . . . . $

145,463 $

(4,927) $

(105,337) $ (78,239) $(160,208)

For the Year
Ended
December 31,
2019

For the Year
Ended
December 31,
2018

February 1,
2017
through
December 31,
2017(1)

Net income (loss) available to common

stockholders — basic and diluted . . . . . . . $

145,068 $

(5,744) $

(89,073)

Weighted average common shares

outstanding — basic . . . . . . . . . . . . . . . . . 531,235,962

520,376,929

339,423,442

Weighted average common shares

outstanding — diluted . . . . . . . . . . . . . . . . 532,499,787

520,376,929

339,423,442

Net income (loss) per common share —

basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.27 $

(0.01) $

(0.26)

Net income (loss) per common share —

diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Dividends declared per common share . . . . . $

0.27 $

0.52 $

(0.01) $

0.44 $

(0.26)

0.22

(1) Prior to the IPO, our business was conducted through the IH Holding Entities, which did not have a

common capital structure upon which to compute historical earnings per share. Accordingly, earnings per
shares has not been presented for historical periods prior to the IPO.

($ in thousands)

As of December 31,

Summary Balance Sheet Data:

2019

2018

2017

2016

2015

Investments in single-family
residential properties, net

. . . . . .
Cash and cash equivalents . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . .

$16,243,192
92,258
1,057,460

$16,686,060
144,940
1,232,428

$17,312,264
179,878
1,191,496

$9,002,515
198,119
531,717

$9,052,701
274,818
469,459

Total assets . . . . . . . . . . . . . . . . . . . . . . .

$17,392,910

$18,063,428

$18,683,638

$9,732,351

$9,796,978

Total debt . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . .

$ 8,467,485
659,347

$ 9,249,815
444,427

$ 9,651,662
382,101

$7,570,279
204,649

$7,725,957
183,990

Total liabilities . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . .

9,126,832
8,266,078

9,694,242
8,369,186

10,033,763
8,649,875

7,774,928
1,957,423

7,909,947
1,887,031

Total liabilities and equity . . . . . . . . . .

$17,392,910

$18,063,428

$18,683,638

$9,732,351

$9,796,978

ITEM 7. 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

together with Part I. Item 6. “Selected Financial Data,” Part I. Item 1. “Business,” and the consolidated
financial statements, including the notes thereto, that are included elsewhere in this Annual Report on
Form 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 forth under Part I. Item 1A.
“Risk Factors,” “Forward-Looking Statements,” or in other parts of this report

For similar operating and financial data and discussion of our year ended December 31, 2018 results
compared to our year ended December 31, 2017 results, refer to Part II. Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K which was filed
with the SEC on February 28, 2019 (the “2018 10-K”). The sections entitled “Result of Operations — Year
Ended December 31, 2018 Compared to Year Ended December 31, 2017” and “Cash Flows — Year Ended
December 31, 2018 Compared to Year Ended December 31, 2017” in Part II. Item 7. “Management’s
Discussion and Analysis of Financial Condition and Result of Operations” of our 2018 10-K are incorporated
herein by reference.

Capitalized terms used without definition have the meaning provided elsewhere in this Annual Report on

Form 10-K.

Overview

Invitation Homes is a leading owner and operator of single-family homes for lease, offering residents high-

We invest in markets that we expect will exhibit lower new supply, stronger job and household formation

growth, and superior NOI growth relative to the broader United States housing and rental market. Within our
16 markets, we target attractive neighborhoods in in-fill locations with multiple demand drivers, such as
proximity to major employment centers, desirable schools, and transportation corridors. Our homes average
approximately 1,870 square feet with three bedrooms and two bathrooms, appealing to a resident base that we
believe is less transitory than the typical multifamily resident. We invest in the upfront renovation of homes in
our portfolio in order to address capital needs, reduce ongoing maintenance costs, and drive resident demand. As
a result, our portfolio benefits from high occupancy and low turnover rates, and we are well-positioned to drive
strong rent growth, attractive margins, and predictable cash flows.

Our Portfolio

The following table provides summary information regarding our total and Same Store portfolios as of and

for the year ended December 31, 2019 as noted below:

Market

Western United States:

Number of
Homes(1)

Average
Occupancy(2)

Average
Monthly
Rent(3)

Average
Monthly
Rent PSF(3)

% of
Revenue(4)

Southern California . . . . . . . . . . . . . . . . . . . . . .
Northern California . . . . . . . . . . . . . . . . . . . . . .
Seattle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Phoenix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Las Vegas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,071
4,390
3,531
7,741
2,998
2,314

95.0% $2,411
2,087
95.1%
2,198
93.4%
1,362
94.8%
1,608
94.7%
1,989
90.7%

Western United States Subtotal

. . . . . . . .

29,045

94.4%

1,945

Florida:

South Florida . . . . . . . . . . . . . . . . . . . . . . . . . .
Tampa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Orlando . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jacksonville . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,567
8,121
6,082
1,865

Florida Subtotal

. . . . . . . . . . . . . . . . . . . .

24,635

Southeast United States:

Atlanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carolinas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Southeast United States Subtotal

. . . . . . .

Texas:

Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dallas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Texas Subtotal

. . . . . . . . . . . . . . . . . . . . .

Midwest United States:

Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minneapolis . . . . . . . . . . . . . . . . . . . . . . . . . . .

Midwest United States Subtotal . . . . . . . .

Announced Market-in-Exit:

12,494
4,702

17,196

2,229
2,323

4,552

2,848
1,142

3,990

93.7%
94.6%
93.8%
95.2%

94.1%

94.7%
94.7%

94.7%

92.7%
91.7%

92.2%

91.1%
95.9%

92.4%

2,186
1,668
1,654
1,672

1,847

1,504
1,583

1,526

1,556
1,786

1,668

1,983
1,885

1,955

$1.42
1.35
1.15
0.84
0.81
1.11

1.13

1.18
0.90
0.89
0.84

0.99

0.73
0.73

0.73

0.80
0.84

0.82

1.21
0.96

1.13

13.4%
6.6%
5.3%
7.4%
3.3%
3.1%

39.1%

12.9%
9.5%
6.8%
2.2%

31.4%

12.8%
5.1%

17.9%

2.4%
2.7%

5.1%

4.0%
1.5%

5.5%

Nashville(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

95.2%

1,835

Total / Average . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79,505

94.2% $1,809

Same Store Total / Average . . . . . . . . . . . . . . . . . .

70,799

96.3% $1,812

0.86

$0.97

1.0%

100.0%

90.1%

(1) As of December 31, 2019.
(2) Represents average occupancy for the year ended December 31, 2019.
(3) Represents average monthly rent for the year ended December 31, 2019.
(4) Represents the percentage of rental revenues and other property income generated in each market for the

(5)

year ended December 31, 2019.
In December 2019, we announced a plan to fully exit the Nashville market and sold 708 homes in Nashville
in a bulk transaction. We are pursuing the sale of the remaining 87 homes in the market.

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” 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, rental rates and occupancy levels, turnover rates
and days to re-resident homes, property improvements and maintenance, property acquisitions and renovations,
and financing arrangements.

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 70.5% of our
rental revenues and other property income during the year ended December 31, 2019. In recent periods, our
Western United States and Florida markets have experienced favorable demand fundamentals with employment
growth, strong 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.

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.

Turnover Rates and Days to Re-Resident: Other drivers of rental revenues and property operating and
maintenance expense include the length of stay of our residents, resident turnover rates, and the number of days a
home is unoccupied between residents. Our operating results are also impacted by the amount of time it takes to
market and lease a property. 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, economic conditions, and
economic outlook. Increases in turnover rates and the average number of days to re-resident reduce rental
revenues as the homes are not generating income during this period.

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.

Property Acquisitions and Renovations: Future growth in rental revenues and other 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. 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. The 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. 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, revolving facility, and convertible debt, as well as our ability to acquire and
renovate homes. We have historically utilized indebtedness to fund the acquisition and renovation of new homes.
Our current financing arrangements contain financial covenants, and certain financing arrangements contain
variable interest rate terms. Interest rates are impacted by market conditions, and the terms of the underlying
financing arrangements. See Part II. Item 7A. “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.

Components of Revenues and Expenses

The following is a description of the components of our revenues and expenses.

Revenues

Rental Revenues and Other Property Income

Rental revenues, net of any concessions and uncollectible amounts, consist of rents collected under lease
agreements related to our single-family homes for lease. We enter into leases directly with our residents, and the
leases typically have a term of one to two years.

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
late fees and lease termination 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 expenses, utility expenses, repairs and maintenance, leasing costs, marketing expenses,
and 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 maintenance and repairs
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-day activities. General and administrative expense also includes merger and transaction-related
expenses that are of a non-recurring nature.

Share-Based Compensation Expense

All share-based compensation expense is recognized in our consolidated statements of operations as
components of general and administrative expense and property management expense. We issue share-based

awards to align our employees’ interests with those of our investors. We also assumed share-based awards in
connection with the Mergers.

Interest Expense

Interest expense includes interest payable on our debt instruments, payments and receipts related to our

interest rate swap agreements, related amortization of discounts and deferred financing costs, unrealized gains
(losses) on non-designated hedging instruments, and noncash interest expense related to our interest rate swap
agreements.

Depreciation and Amortization

We recognize depreciation and amortization expense associated with our homes and other capital

expenditures over their expected useful lives.

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.

Other, net

Other, net includes interest income, third party management fee income, equity in earnings from an
unconsolidated joint venture, unrealized gains from an investment in equity securities, and other miscellaneous
income and expenses.

Gain on Sale of Property, net of tax

Gain on sale of property, net of tax consists of net gains and losses resulting from sales of our homes.

Results of Operations

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

The following table sets forth a comparison of the results of operations for the years ended December 31,

2019 and 2018:

For the Years Ended
December 31,

($ in thousands)

2019

2018

$ Change

% Change

Rental revenues and other property

income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,764,685

$1,722,962

$ 41,723

2.4%

Expenses:

Property operating and maintenance . . . . .
Property management expense . . . . . . . . .
General and administrative . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .
Impairment and other . . . . . . . . . . . . . . . . .

669,987
61,614
74,274
367,173
533,719
18,743

655,411
65,485
98,764
383,595
560,541
20,819

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . .

1,725,510

1,784,615

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property, net of tax . . . . . . . . . .

11,600
96,336

6,958
49,682

14,576
(3,871)
(24,490)
(16,422)
(26,822)
(2,076)

(59,105)

4,642
46,654

2.2%
(5.9)%
(24.8)%
(4.3)%
(4.8)%
(10.0)%

(3.3)%

66.7%
93.9%

Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . .

$ 147,111

(5,013)

$152,124

N/M

Portfolio Information

As of December 31, 2019 and 2018, we owned 79,505 and 80,807 single-family rental homes, respectively,

in our total portfolio. During the years ended December 31, 2019 and 2018, we acquired 2,153 and 938 homes,
respectively, and sold 3,455 and 2,701 homes, respectively. During the years ended December 31, 2019 and
2018, we owned an average of 80,372 and 82,171 single-family rental homes, respectively.

We believe presenting information about the portion of our total portfolio that has been fully operational for

the entirety of 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 December 31, 2019, our Same Store portfolio consisted of 70,799 single-family rental homes.

Rental Revenues and Other Property Income

For the years ended December 31, 2019 and 2018, total portfolio rental revenues and other property income
totaled $1,764.7 million and $1,723.0 million, respectively, an increase of 2.4%, driven by an increase in average
monthly rent per occupied home and an increase in utilities reimbursements, partially offset by a slight decrease
in average occupancy and a 1,799 home decrease between periods in the average number of homes owned.

Average occupancy for the years ended December 31, 2019 and 2018 for the total portfolio was 94.2% and

94.6%, respectively. Average monthly rent per occupied home for the total portfolio for the years ended
December 31, 2019 and 2018 was $1,809 and $1,735, respectively, a 4.3% increase. For our Same Store
portfolio, average occupancy was 96.3% and 95.8% for the years ended December 31, 2019 and 2018,
respectively, and average monthly rent per occupied home for the years ended December 31, 2019 and 2018 was
$1,812 and $1,741, respectively, a 4.1% increase.

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 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 new leases, where our previous resident moves
out and a new resident signs a lease to occupy the same home.

Renewal lease net effective rental rate growth for the total portfolio averaged 5.0% and 4.8% for the years

ended December 31, 2019 and 2018, respectively, and new lease net effective rental rate growth for the total
portfolio averaged 3.8% and 3.3% for the years ended December 31, 2019 and 2018, respectively. For our Same
Store portfolio, renewal lease net effective rental rate growth averaged 5.0% and 4.8% for the years ended
December 31, 2019 and 2018, respectively, and new lease net effective rental rate growth averaged 3.8% and
3.4% for the years ended December 31, 2019 and 2018, respectively.

The annual turnover rate for the Same Store portfolio for the years ended December 31, 2019 and 2018 was
30.1% and 32.5%, respectively. For the Same Store portfolio, an average home remained unoccupied for 46 days
between residents for each of the years ended December 31, 2019 and 2018.

The increase in other property income during the year ended December 31, 2019 was driven by utilities

reimbursements, which increased as more utilities remained in our name compared to prior year. Additionally,
the terms of new leases require residents to reimburse us for those costs. This increase was partially offset by a
decrease in the average number of homes owned during 2019.

Expenses

For the years ended December 31, 2019 and 2018, total expenses were $1,725.5 million and $1,784.6 million,

respectively. Set forth below is a discussion of changes in the individual components of total expenses.

Property operating and maintenance expense increased to $670.0 million for the year ended December 31,

2019 from $655.4 million for the year ended December 31, 2018, driven by increases related to utilities, property
taxes, HOA assessments and fines, and insurance premiums, partially offset by decreases in certain controllable
expenses created by continued process improvements, lower turnover, property-level synergies from the
Mergers, and a decrease in average home count.

Property management expense and general and administrative expense decreased to $135.9 million for the

year ended December 31, 2019 from $164.2 million for the year ended December 31, 2018, primarily due to
decreases in share-based compensation expense of $11.3 million and a decrease in merger and transaction-related
expenses of $12.5 million.

Interest expense was $367.2 million and $383.6 million for the years ended December 31, 2019 and 2018,

respectively. The decrease in interest expense was primarily due to a decrease in the average debt balance
outstanding due to prepayments made on the mortgage loans and redemption of convertible debt for common
equity during the year ended December 31, 2019 as compared to the year ended December 31, 2018. Debt
outstanding, net of deferred financing costs and discounts, decreased to $8,467.5 million as of December 31,
2019 from $9,249.8 million as of December 31, 2018. Additionally, the weighted average spread (inclusive of
servicing fees) over LIBOR decreased as a result of refinancing activity and prepayments made on the mortgage
loan during the year ended December 31, 2019. These items were partially offset by an increase in the average
one month LIBOR rate of 20 bps from 2.02% during the year ended December 31, 2018 to 2.22% during the year
ended December 31, 2019.

Depreciation and amortization expense decreased to $533.7 million for the year ended December 31, 2019

from $560.5 million for the year ended December 31, 2018, primarily due to $37.5 million of amortization of
in-place leases from the Mergers that were fully amortized during the year ended December 31, 2018.
Additionally, the average number of homes owned during the year ended December 31, 2019 decreased as
compared to the year ended December 31, 2018. These decreases were partially offset by an increase in
depreciation due to additional capital expenditures.

Impairment and other expenses were $18.7 million and $20.8 million for the years ended December 31,
2019 and 2018, respectively. During the year ended December 31, 2019, impairment and other expenses was
comprised of impairment losses of $14.2 million on our single-family residential properties and casualty losses of
$4.5 million. During the year ended December 31, 2018, impairment and other expenses was comprised of
impairment losses of $6.7 million on our single-family residential properties and casualty losses of $14.1 million,
including losses and damages related to Hurricanes Irma and Harvey of $8.0 million.

Other, net

Other, net increased to $11.6 million for the year ended December 31, 2019 from $7.0 million for the year

ended December 31, 2018, due to changes in the components of our miscellaneous income and expenses and
$6.5 million in unrealized gains on investment in equity securities.

Gain on Sale of Property, net of tax

Gain on sale of property, net of tax was $96.3 million and $49.7 million for the years ended December 31,
2019 and 2018, respectively. The increased gain on sale was driven by an increase in the number of homes sold
and an increase in the average gain per home during the year ended December 31, 2019 as compared to the year
ended December 31, 2018. For the years ended December 31, 2019 and 2018, the number of homes sold was
3,455 and 2,701, respectively.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Liquidity and Capital Resources

Our liquidity and capital resources as of December 31, 2019 and 2018 includes unrestricted cash and cash
equivalents of $92.3 million and $144.9 million, respectively, a 36.3% decrease. We use excess cash flows for
the repayment of outstanding indebtedness and strive to minimize the level of cash held for working capital
requirements. Additionally, our $1,000.0 million revolving credit facility (the “Revolving Facility”) remains
undrawn as of December 31, 2019.

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 $800.0 million of our
common stock through the Agents (the “ATM Equity Program”). The ATM Equity Program was established in
order to use the net proceeds from sales under the program for general corporate purposes, which may include,
without limitation, working capital, repayment of indebtedness, acquisitions and renovations of single-family
properties, and for related activities in accordance with our business strategy. During the year ended
December 31, 2019, we sold 1,957,139 shares of our common stock under our ATM Equity Program, generating
net proceeds of $55.3 million after giving effect to Agent commissions and other costs totaling $1.7 million. As
of December 31, 2019, $743.0 million remains available for future offerings under the ATM Equity Program.

Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our
operations, make dividend payments to our stockholders, 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), property taxes, insurance premiums, and the ongoing maintenance of 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 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. We believe our
rental income, net of total expenses, will generally provide cash flow sufficient to fund operations and dividend
payments on a near-term basis. 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, such as the Revolving Facility which had an undrawn balance of
$1,000.0 million as of December 31, 2019.

As a REIT, we are required to distribute to our stockholders at least 90% of our 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. 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.

Certain Securitizations, the Secured Term Loan, the Term Loan Facility, and the Revolving Credit Facility

(all defined below, and collectively the “LIBOR-Based Loans”) use 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 implement necessary changes to our financial models.

The following describes the key terms of our current indebtedness.

Mortgage Loans

Our 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 proceeds from our securitizations 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 December 31, 2019 and

2018:

($ in thousands)

MaturityDate(1)

Maturity Date if
Fully Extended(2)

Interest
Rate(3)

Range of
Spreads(4)

December 31,
2019

December 31,
2018

Outstanding Principal
Balance(5)

N/A
June 9, 2027
January 9, 2023

June 7, 2019
CSH 2016-2 . . . . .
June 9, 2027
IH 2017-1(6) . . . . . .
SWH 2017-1(7)
October 9, 2020
. . .
IH 2017-2(7) . . . . . . December 9, 2020 December 9, 2024
IH 2018-1(7)(8) . . . . March 9, 2020
June 9, 2020
IH 2018-2(7)(9) . . . .
July 9, 2020
IH 2018-3(7)(9) . . . .
January 9, 2021
IH 2018-4(7) . . . . . .

March 9, 2025
June 9, 2025
July 9, 2025
January 9, 2026

N/A
N/A

— %
4.23%
3.32% 102-347 bps
2.90% 91-186 bps
2.87% 76-206 bps
3.11% 95-230 bps
3.15% 105-230 bps
3.18% 115-225 bps

— $ 442,614
995,826
764,685
856,238
911,827
1,035,749
1,296,959
959,578

995,520
744,092
624,475
793,720
957,135
1,213,035
938,430

Total Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,266,407
(27,946)

7,263,476
(61,822)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,238,461

$7,201,654

(1) Maturity date represents repayment date for mortgage loans which have been repaid in full prior to

December 31, 2019. For all other mortgage loans, the maturity dates above reflect all extensions 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, plus applicable

servicing fees; as of December 31, 2019, LIBOR was 1.76%. 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 December 31, 2019.
(5) Outstanding principal balance is net of discounts and does not include deferred financing costs, net.
(6) Net of unamortized discount of $2.6 million and $3.0 million as of December 31, 2019 and 2018,

respectively.

(7) 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 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 and IH 2017-2 mortgage loans have exercised the first extension option. The maturity dates
above reflect all extensions that have been exercised.

(8) On December 3, 2019, we submitted a notification to request an extension of the maturity of the IH 2018-1

mortgage loan from March 9, 2020 to March 9, 2021 upon approval.

(9) On February 7, 2020, we made voluntary prepayments of $15.0 million and $60.0 million on outstanding
borrowings with unrestricted cash on hand against the outstanding balances of IH 2018-2 and IH 2018-3,
respectively.

Securitization Transactions

For each Securitization transaction, the Borrower Entity executed a loan agreement with a third party lender.

Except for IH 2017-1, each outstanding mortgage loan originally consisted of six floating rate components. The
two year initial terms are individually subject to three to five, 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 replacement 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 two 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 interest.

Each mortgage loan is secured by a pledge of the equity in the assets of the respective Borrower Entities, as
well as first-priority mortgages on the underlying properties and a grant of security interests in all of the related
personal property. As of December 31, 2019 and 2018, a total of 37,040 and 41,644 homes, respectively, with a
net book value of $7,137.6 million and $8,385.4 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 Trusts

Concurrent with the execution of each mortgage loan agreement, the respective third party lender sold each

As consideration for the transfer of each loan to the Trusts, the Trusts issued classes of certificates which

mirror the components of the individual loans (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 and used the proceeds as consideration for the loans sold to
the Depositor Entities by the lenders. These transactions had no effect on our consolidated financial statements
other than with respect to Certificates we retained in connection with Securitizations or purchased at a later date.

The Trusts are structured as pass-through entities that receive 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 consolidated financial statements. We have evaluated our interests in
certain 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 retained 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.

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.

To fulfill these requirements, Class G certificates for CSH 2016-2 were issued in an amount equal to 5% of

the original principal amount of the loans. Per the terms of the CSH 2016-2 mortgage loan agreement, the
Class G certificates were restricted certificates that were made available exclusively to the sponsor. We retained
these Class G certificates during the time the related Securitization was outstanding, and they were principal
only, bearing a stated interest rate of 0.0005%.

For IH 2017-1, the Class B certificates 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 $317.0 million and $366.6 million as of December 31, 2019 and 2018,

respectively, and are classified as held to maturity investments and recorded in other assets, net on the
consolidated balance sheets.

Loan Covenants

The general terms that apply to all of the mortgage loans require each Borrower Entity to maintain
compliance with certain affirmative and negative covenants. Affirmative covenants include each Borrower
Entity’s, and certain of their respective affiliates’, compliance with (i) licensing, permitting and legal
requirements specified in the mortgage loan agreements, (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
respective mortgage loan agreements. Negative covenants include each Borrower Entity’s, and certain of their
affiliates’, compliance with limitations surrounding (i) the amount of each Borrower Entity’s indebtedness and
the nature of their investments, (ii) the execution of transactions with affiliates, (iii) the Manager, (iv) the nature
of each Borrower Entity’s business activities, and (v) the required maintenance of specified cash reserves. As of
December 31, 2019, and through the date our consolidated financial statements were issued, we believe each
Borrower Entity is in compliance with all affirmative and negative covenants.

Prepayments

mandatory prepayments of $997.4 million and $4,579.6 million, respectively, under the terms of the mortgage
loan agreements. During the year ended December 31, 2019, prepayments included the full repayment of the
CSH 2016-2 mortgage loan. During the year ended December 31, 2018, prepayments included full repayment of
the CAH 2014-1, CAH 2014-2, CAH 2015-1, CSH 2016-1, IH 2015-1, IH 2015-2, and IH 2015-3 mortgage
loans.

Secured 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.

The following table sets forth a summary of our Secured Term Loan indebtedness as of December 31, 2019

and 2018:

($ in thousands)

Maturity
Date

Interest
Rate(1)

December 31,
2019

December 31,
2018

Secured Term Loan . . . . . . . . . . . . . . . . . . . .
Deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 9, 2031

3.59% $

403,464
(2,486)

Secured Term Loan, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

As of December 31, 2019, a total of 3,333 homes with a net book value of $734.8 million are included in the

Secured Term Loan’s collateral pool. 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 mortgage loan agreements,
(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 respective mortgage loan agreements. 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 December 31, 2019, and through the date our
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. As of December 31, 2019,
no such prepayments have been made.

Term Loan Facility and Revolving Facility

On February 6, 2017, we entered into a credit agreement with a syndicate of banks, financial institutions, and
institutional lenders for a credit facility (the “Credit Facility”), which was amended on December 18, 2017 to
include entities and homes acquired in the Mergers. The Credit Facility provides $2,500.0 million of borrowing
capacity and consists of a $1,000.0 million Revolving Facility, which will mature on February 6, 2021, with a
one 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 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 then-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 the Credit Facility as

of December 31, 2019 and 2018:

($ in thousands)

Maturity
Date

Interest
Rate(1)

December 31,
2019

December 31,
2018

Term Loan Facility . . . . . . . . . . . . . . . . .
Deferred financing costs, net . . . . . . . . . .

February 6, 2022

3.46% $1,500,000
(6,253)

$1,500,000
(9,140)

Term Loan Facility, net . . . . . . . . . .

$1,493,747

$1,490,860

Revolving Facility . . . . . . . . . . . . . . . . . .

February 6, 2021

3.51% $

—

(1)

Interest rates for the Term Loan Facility and the Revolving Facility are based on LIBOR plus an applicable
margin. As of December 31, 2019, the applicable margins were 1.70% and 1.75%, respectively, and LIBOR
was 1.76%.

Interest Rate and Fees

Borrowings under the 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 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 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 2.30% in the case of LIBOR rate loans. In addition, the 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 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 0.35% or 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 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.

Prepayments and Amortization

No principal reductions are required under the 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.

Loan Covenants

The 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 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 Credit Facility.

The 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 Credit Facility are entitled
to take various actions, including the acceleration of amounts due under the Credit Facility and all actions
permitted to be taken by a secured creditor. As of December 31, 2019, and through the date our consolidated
financial statements were issued, we believe we were in compliance with all affirmative and negative covenants.

Guarantees and Security

The obligations under the 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 Credit

Facility. In addition, INVH may be required to provide a guarantee of the Credit Facility under certain
circumstances, including if INVH does not maintain its qualification as a REIT.

The 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 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
$230.0 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. On December 28, 2018, we notified note holders of our intent to settle conversions of the 2019
Convertible Notes in shares of common stock. 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.

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.

The following table summarizes the terms of the Convertible Senior Notes outstanding as of December 31,

2019 and 2018:

($ in thousands)

Coupon
Rate

Effective
Rate(1)

Conversion
Rate(2)

Maturity
Date

Remaining
Amortization
Period

Principal Amount

December 31,
2019

December 31,
2018

2019 Convertible Notes . . . — % — %
2022 Convertible Notes . . . 3.50% 5.12% 43.7694 January 15, 2022 2.04 years

July 1, 2019

N/A

N/A $

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unamortized fair value adjustment

— $

345,000

345,000
(10,701)

229,993
345,000

574,993
(17,692)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

334,299 $

557,301

(1) 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. For
the 2019 Convertible Notes, the effective interest rate was 4.92%. This rate included the effect of the
adjustment to the fair value of the debt as of the Merger Date and reduced the initial liability recorded to
$223.2 million.

(2) The conversion rate as of December 31, 2019 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 the Mergers. As of
December 31, 2019, the 2022 Convertible Notes do not 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

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 $). 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. For the years ended December 31, 2019 and 2018, interest expense for the 2019
Convertible Notes, including non-cash amortization of discounts, was $5.6 million and $11.1 million,
respectively.

As of December 31, 2019, 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 their
principal amount by $107.6 million as of December 31, 2019 as the closing market price of our common stock of
$29.97 per common share (actual $) exceeds the implicit conversion price. For the years ended December 31,
2019 and 2018, interest expense for the 2022 Convertible Notes, including non-cash amortization of discounts,
was $16.9 million and $16.7 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.

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

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. Prior to January 31, 2017,
all swaps were accounted for as non-designated hedges as the criteria for designation had not been met at that
time.

In addition, in connection with the Mergers, we acquired various interest rate swap instruments, which we

designated for hedge accounting purposes. On the Merger Date, we recorded these interest rate swaps at their
aggregate estimated fair value of $21.1 million. Over the terms of each of these swaps, an amount equal to the
Merger Date fair value will be amortized and reclassified into earnings.

The table below summarizes our interest rate swap instruments as of December 31, 2019 ($ in thousands):

Agreement Date

Forward
Effective Date

Maturity
Date

Strike
Rate

Index

Notional
Amount

. . . . February 28, 2017 December 31, 2024

December 21, 2016 . . . . . . February 28, 2017
December 11, 2019(1)
January 12, 2017 . . . . . . . . February 28, 2017
January 13, 2017 . . . . . . . . February 28, 2017
January 20, 2017 . . . . . . . . February 28, 2017
January 15, 2019
January 10, 2017 . . . . . . . .
January 31, 2019
April 19, 2018 . . . . . . . . . .
February 15, 2019(2)
. . . . . March 15, 2019
April 19, 2018 . . . . . . . . . . March 15, 2019
April 19, 2018 . . . . . . . . . . March 15, 2019
July 15, 2019
June 3, 2016 . . . . . . . . . . .
January 10, 2017 . . . . . . . .
January 15, 2020
May 8, 2018 . . . . . . . . . . . March 9, 2020
June 9, 2020
May 8, 2018 . . . . . . . . . . .
July 15, 2020
June 3, 2016 . . . . . . . . . . .
August 7, 2020
June 28, 2018 . . . . . . . . . .
January 10, 2017 . . . . . . . .
January 15, 2021
July 15, 2021
. . . . .
December 9, 2019(3)
November 7, 2018 . . . . . . March 15, 2022
November 7, 2018 . . . . . . March 15, 2022

January 31, 2022

August 7, 2020
June 9, 2020
March 9, 2020
January 15, 2020
January 31, 2025
March 15, 2022
November 30, 2024
February 28, 2025
July 15, 2020
January 15, 2021
June 9, 2025
June 9, 2025
July 15, 2021
July 9, 2025
July 15, 2021
November 30, 2024
July 31, 2025
July 31, 2025

1.97% One month LIBOR $ 750,000
750,000
1.74% One month LIBOR
1,100,000
1.59% One month LIBOR
595,000
1.63% One month LIBOR
325,000
1.60% One month LIBOR
550,000
1.93% One month LIBOR
400,000
2.86% One month LIBOR
800,000
2.23% One month LIBOR
400,000
2.85% One month LIBOR
400,000
2.86% One month LIBOR
450,000
1.30% One month LIBOR
550,000
2.13% One month LIBOR
325,000
2.99% One month LIBOR
595,000
2.99% One month LIBOR
450,000
1.47% One month LIBOR
1,100,000
2.90% One month LIBOR
550,000
2.23% One month LIBOR
400,000
2.90% One month LIBOR
400,000
3.14% One month LIBOR
400,000
3.16% One month LIBOR

(1) On December 11, 2019, we modified an interest rate swap instrument to extend the maturity date from
January 31, 2022 to December 31, 2024 with a decrease in the strike rate from 1.97% to 1.74%.

(2) On February 15, 2019, we terminated an interest rate swap instrument and simultaneously entered into a

new interest rate swap instrument with identical economic terms, except that the strike rate increased 2 bps,
from 2.21% to 2.23%, and collateral posting requirements were removed.

(3) On December 9, 2019, we modified the start date of an interest rate swap instrument from January 31, 2020

to July 15, 2021. We paid the counterparty $8.2 million in connection with this modification.

During the years ended December 31, 2019 and 2018, such derivatives were used to hedge the variable cash

flows associated with existing variable-rate interest payments. 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 12 months, we estimate that $44.9 million will be reclassified to
earnings as a decrease in interest expense.

Non-Designated Hedges

Concurrent with entering into certain of the mortgage loan agreements and in connection with the 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. Currently, each of our
cap agreements is indexed to LIBOR, which is set to expire at the 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
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 interest
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 counterparties
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, our equity investors, our and 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
consolidated balance sheet or the incurrence of new secured or unsecured debt, including borrowings under our
credit facilities 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 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

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

The following table summarizes our cash flows for the years ended December 31, 2019 and 2018:

For the Years Ended
December 31,

($ in thousands)

2019

2018

$ Change

% Change

Net cash provided by operating activities . .
Net cash provided by investing activities . .
Net cash used in financing activities . . . . . .

$ 662,130
102,226
(838,102)

$ 561,241
62,993
(680,805)

$ 100,889
39,233
(157,297)

18.0%
62.3%
(23.1)%

Change in cash, cash equivalents, and

restricted cash . . . . . . . . . . . . . . . . . . . . . . . .

$ (73,746)

$ (56,571)

$ (17,175)

(30.4)%

Operating Activities

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 $662.1 million and
$561.2 million for the years ended December 31, 2019 and 2018, respectively, an increase of 18.0%. The
increase in cash provided by operating activities was driven by improved operational profitability and an increase
in net working capital created by changes in operating assets and liabilities.

Investing Activities

Net cash provided by investing activities consists primarily of the acquisition costs of homes, capital
improvements, proceeds from property sales, and purchases of and repayments proceeds from investments in
debt securities. Net cash provided by investing activities was $102.2 million and $63.0 million for the years
ended December 31, 2019 and 2018, respectively, an increase of $39.2 million. The increase in net cash provided
by investing activities primarily resulted from the combined effect of the following: (1) an increase in proceeds
from the sale of homes during the year ended December 31, 2019 compared to the year ended December 31,
2018; (2) an increase in net cash flows from our investments in debt securities from period to period; and (3) an
increase in cash used for the acquisition of homes during the year ended December 31, 2019 compared to the
year ended December 31, 2018. More specifically, proceeds from sales of homes increased $364.9 million from
the year ended December 31, 2018 to the year ended December 31, 2019 due to a significant increase in the
number of homes sold from 2,701 to 3,455, respectively, and an increase in the average proceeds per home sold.
Net cash flows from our purchases of/receipt of repayment proceeds from investments in debt securities
increased by $37.7 million from the year ended December 31, 2018 to the year ended December 31, 2019,
primarily due to entering into our IH 2018-1, IH 2018-2, IH 2018-3, and IH 2018-4 mortgage loans during the
year ended December 31, 2018, offset by the refinancing of our CSH 2016-2 mortgage loan and voluntary
mortgage loan prepayments made during the year ended December 31, 2019. Acquisition spend increased
$333.7 million due to a significant increase in the number of homes acquired from 938 homes during the year
ended December 31, 2018 to 2,153 homes during the year ended December 31, 2019.

Financing Activities

Net cash used in financing activities was $838.1 million and $680.8 million for the years ended
December 31, 2019 and 2018, respectively. During the year ended December 31, 2019, proceeds from our
Secured Term Loan of $403.5 million, proceeds from our ATM Equity Program, net of commissions, of
$55.3 million, along with proceeds from home sales and operating cash flows were used (1) to repay
$997.4 million of our mortgage loans, including full repayment of CSH 2016-2 and partial repayments of
IH 2017-2, IH 2018-1, IH 2018-2, and IH 2018-3, and (2) to fund $276.7 million of dividend and distribution
payments. For the year ended December 31, 2018, proceeds from our IH 2018-1, IH 2018-2, IH 2018-3, and
IH 2018-4 mortgage loans of $4,234.5 million, along with proceeds from home sales and operating cash flows,
were used (1) to repay $4,579.6 million of our mortgage loans, including full repayment of the CAH 2014-1,
CAH 2014-2, CAH 2015-1, CSH 2016-1, IH 2015-1, IH 2015-2, and IH 2015-3 mortgage loans and partial
repayments of CSH 2016-2, (2) to repay $35.0 million, net, of Revolving Facility borrowings, (3) to
fund $55.7 million of deferred financing costs associated with the IH 2018-1, IH 2018-2, IH 2018-3, and
IH 2018-4 mortgage loans, and (4) to fund $230.1 million of dividend and distribution payments.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Contractual Obligations

Our contractual obligations as of December 31, 2019, consist of the following:

($ in thousands)

Total

2020

2021-2022

2023-2024

Thereafter

Mortgage loans, net(1)(2) . . . . . . . . . . . .
Secured Term Loan . . . . . . . . . . . . . . .
. . . . . . . . . .
Term Loan Facility, net(1)
. . . . . . . . . . .
Revolving Facility(1)(2)(3)
2022 Convertible Notes(4)
. . . . . . . . . .
Derivative instruments(5) . . . . . . . . . . .
Purchase commitments(6) . . . . . . . . . . .
Operating leases(7) . . . . . . . . . . . . . . . .
Finance leases(8) . . . . . . . . . . . . . . . . . .

$ 7,431,161
569,158
1,610,720
7,467
375,188
257,287
38,197
17,982
11,265

208,580
14,515
52,765
3,558
12,075
33,324
38,197
4,632
3,048

416,020
28,951
1,557,955
3,909
363,113
98,447
—
7,969
5,415

$ 1,734,444
28,991
—
—
—
106,221
—
4,306
2,802

$ 5,072,117
496,701
—
—
—
19,295
—
1,075
—

Total

. . . . . . . . . . . . . . . . . . . . . .

$10,318,425

370,694

$ 2,481,779

$ 1,876,764

$ 5,589,188

(1)

Includes estimated interest payments on the respective debt based on amounts outstanding as of
December 31, 2019 at rates in effect as of such date; as of December 31, 2019, LIBOR was 1.76%.
(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. See Part IV. Item 15. “Exhibits and Financial Statement
Schedules — Note 6 of Notes to Consolidated Financial Statements” for a description of maturity dates
without consideration of extension options.
Includes the related unused commitment fee.

(3)
(4) Represents the principal amount of the 2022 Convertible Notes and interest obligation which is calculated

(5)

using the coupon rate of the 2022 Convertible Notes.
Includes interest rate swap and interest rate cap obligations calculated using LIBOR as of December 31,
2019, or 1.76%.

(6) Represents commitments to acquire 144 single-family rental homes as of December 31, 2019.
(7)

Includes approximately $3.1 million of operating leases for our office spaces which have been entered into
and are anticipated to commence during the next 12 months.
Includes approximately $10.0 million of finance leases for fleet vehicles which have been entered into and
are anticipated to commence during the next three months.

(8)

Critical Accounting Policies and Estimates

Our discussion and analysis of our historical financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with GAAP and in conjunction with
the rules and regulations of the SEC. The preparation of consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions about the effect of matters that are inherently
uncertain and that affect the amounts reported in the consolidated financial statements and accompanying notes.
Actual results could ultimately differ from those estimates. For a discussion of recently issued and adopted
accounting standards, see Part IV. Item 15. “Exhibits and Financial Statement Schedules — Note 2 of Notes to
Consolidated Financial Statements.”

Investments in Single-Family Residential Properties

The following significant accounting policies affect the acquisition, disposition, recognition, classification,

and fair value measurements (on a nonrecurring basis) related to our portfolio of approximately 80,000 single-
family residential properties in 16 markets across the United States. For a complete discussion of our accounting
policy and other factors related to each category below, see Part IV. Item 15. “Exhibits and Financial Statement
Schedules — Note 2 of Notes to Consolidated Financial Statements.”

• Acquisition of Real Estate Assets: Our purchases of homes are generally treated as asset acquisitions

unless acquired in connection with a business combination. For asset acquisitions, homes are recorded

at their purchase price, which is allocated between land, building and improvements, and in-place lease
intangibles (when a resident 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, HOA, and other mechanic’s and miscellaneous liens, as well as other closing costs. If the
percentage allocated to buildings and improvements versus land for the homes acquired during the year
ended December 31, 2019 was increased or decreased by 500 bps, our annualized depreciation expense
would have changed by approximately $1.0 million.

The capitalized costs are depreciated over their estimated useful lives on a straight-line basis. The
weighted average useful lives range from 7 years to 28.5 years. If the useful lives for costs capitalized
during the year ended December 31, 2019 were increased or decreased by 10%, our annualized
depreciation expense would have changed by approximately $5.0 million.

• Provisions for Impairment: We continuously evaluate, by property, whether there are any events or

changes in circumstances indicating that the carrying amount of our single-family residential properties
may not be recoverable. To the extent an event or change in circumstance is identified, a residential
property is considered to be impaired only if its carrying value cannot be recovered through estimated
future undiscounted cash flows from the use and eventual disposition of the property. To the extent an
impairment has occurred, the carrying amount of our investment in a property is adjusted to its
estimated fair value. The process whereby we assess our single-family residential properties for
impairment requires significant judgment and assessment of factors that are, at times, subject to
significant uncertainty. We evaluate multiple information sources and perform a number of internal
analyses, each of which are important components of our process with no one information source or
analysis being necessarily determinative. For those homes for which a change in an event or
circumstance was identified in the most recent impairment analysis, a 5% change in the estimated fair
value of those homes may have resulted in a decrease or increase in impairment expense of less than
$0.3 million.

•

Single-Family Residential Properties Held for Sale: From time to time, we may identify single-family
residential properties to be sold. Once we identify a property to be sold pursuant to GAAP
requirements, we discontinue depreciating the property, measure the property at the lower of its
carrying amount or its fair value less estimated costs to sell, and present the property separately within
other assets, net on our consolidated balance sheets. If market values less disposal costs for our
properties that were classified as held for sale as of December 31, 2019 were 10% lower, our
impairment expense related to those properties would have increased by approximately $5.0 million. If
the market values less disposal costs were 10% higher, our impairment expense would have been
approximately $2.0 million lower.

Derivatives

We enter into interest rate swap and interest rate cap agreements (collectively, “Hedging Derivatives”) for

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.

We utilize third party specialists who use modeling techniques and assumptions to estimate the fair value of
derivative instruments. Assumptions include forward yield curves and nonperformance risk. If interest rates had
increased or decreased by 50 bps, the termination value of our net derivative asset/liability would have changed
by approximately $150.0 million. As our interest rate swap agreements are designated as hedges, this change
would be reflected in other comprehensive income and subsequently reclassified into earnings in the period in
which the hedged forecasted transactions affect earnings. Our interest rates caps would not be materially
affected.

Segment Reporting

Operating segments are defined as components of an enterprise for which discrete financial information is

available that is evaluated regularly by the 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

Non-GAAP Measures

EBITDA, EBITDAre, and Adjusted EBITDAre

EBITDA, EBITDAre, and Adjusted EBITDAre are supplemental, non-GAAP measures often utilized to

evaluate the performance of real estate companies. We define EBITDA as net income or loss computed in
accordance with 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; merger and transaction-related expenses; severance; casualty losses, net; interest
income; unrealized gains from an investment in equity securities; 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
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 EBITDAre. Accordingly, there can be no assurance that our basis for
computing these non-GAAP measures is comparable with that of other companies.

The following table presents a reconciliation of net income (loss) (as determined in accordance with GAAP)

to EBITDA, EBITDAre, and Adjusted EBITDAre for each of the periods indicated:

($ in thousands)

Net income (loss) available to common stockholders . . . . .
Net income available to participating securities . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property, net of tax . . . . . . . . . . . . . . . . .
Impairment on depreciated real estate investments . . . . .

EBITDAre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Share-based compensation expense(1)
IPO related expenses(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger and transaction-related expenses(3)
. . . . . . . . . . .
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casualty losses, net(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended December 31,

2019

2018

2017

$ 145,068
395
1,648
367,173
533,719

1,048,003
(96,336)
14,210

965,877
18,158
—
4,347
8,465
4,533
(11,600)

$ (5,744)
817
(86)
383,595
560,541

$(105,952)
615
(489)
256,970
309,578

939,123
(49,682)
6,709

896,150
29,499
—
16,895
8,238
14,110
(6,958)

460,722
(33,896)
2,231

429,057
81,203
8,287
29,802
12,048
21,862
959

Adjusted EBITDAre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 989,780

$957,934

$ 583,218

(1) For the years ended December 31, 2019, 2018, and 2017, $3,075, $5,500, and $10,297 was recorded in

property management expense, respectively, and $15,083, $23,999, and $70,906 was recorded in general
and administrative expense, respectively.

(2) For the year ended December 31, 2017, IPO related expenses were recorded in general and administrative

(3)
(4)

(5)

expense.
Includes merger and transaction-related expenses included within general and administrative.
Includes $8,013 and $21,500 for losses/damages related to Hurricanes Irma and Harvey for the years ended
December 31, 2018 and 2017, respectively. There were no such losses during the year ended December 31,
2019.
Includes interest income, unrealized gains from an investment in equity securities, and other miscellaneous
income and expenses.

Net Operating Income

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 expense). NOI excludes:

interest expense; depreciation and amortization; property management expense; general and administrative
expense; impairment and other; gain 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.

The following table presents a reconciliation of net income (loss) (as determined in accordance with GAAP)

to NOI for our total portfolio and NOI for our Same Store portfolio for each of the periods indicated:

($ in thousands)

Net income (loss) available to common stockholders . . .
Net income available to participating securities . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Property management expense(1)
General and administrative(2)
. . . . . . . . . . . . . . . . . . . . . . . .
Impairment and other(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property, net of tax . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net(4)

For the Years Ended December 31,

2019

2018

2017

$ 145,068
395
1,648
367,173
533,719
61,614
74,274
18,743
(96,336)
(11,600)

(5,744)
817
(86)
383,595
560,541
65,485
98,764
20,819
(49,682)
(6,958)

$(105,952)
615
(489)
256,970
309,578
43,344
167,739
24,093
(33,896)
959

NOI (total portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,094,698

1,067,551

$ 662,961

Non-Same Store NOI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(97,590)

(123,138)

NOI (Same Store portfolio)(5) . . . . . . . . . . . . . . . . . . . . . . .

$ 997,108

$ 944,413

(1)

(2)

(3)

(4)

Includes $3,075, $5,500, and $10,297 of share-based compensation expense for the years ended
December 31, 2019, 2018, and 2017, respectively.
Includes $15,083, $23,999, and $70,906 of share-based compensation expense for the years ended
December 31, 2019, 2018, and 2017, respectively.
Includes $8,013 and $21,500 for losses/damages related to Hurricanes Irma and Harvey for the years ended
December 31, 2018 and 2017, respectively. There were no such losses during the year ended December 31,
2019.
Includes interest income, unrealized gains from an investment in equity securities, and other miscellaneous
income and expenses.

(5) The Same Store portfolio totaled 70,799 homes for the years ended December 31, 2019 and 2018.

Funds from Operations, Core Funds from Operations, and Adjusted Funds from Operations

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 Nareit as net income or

loss (computed in accordance with GAAP) excluding 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, gains or losses related to sales of previously depreciated homes, as well
non-controlling interests, from net income or 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.

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 provide 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 the following: noncash interest
expense related to amortization of deferred financing costs, loan discounts, and noncash interest expense for
derivatives; share-based compensation expense; IPO related expenses; offering related expenses; merger and
transaction-related expenses; severance expense; unrealized gains on investment in equity securities; and casualty
losses, net, as applicable. We define Adjusted FFO as Core FFO less recurring capital expenditures that are
necessary to help preserve the value, 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.

The following table presents a reconciliation of net income (loss) (as determined in accordance with GAAP)

to FFO, Core FFO, and Adjusted FFO for each of the periods indicated:

(in thousands, except shares and per share data)

For the Years Ended December 31,

2019

2018

2017

Net income (loss) available to common stockholders . . . . . . . .

145,068

(5,744) $

(105,952)

Add (deduct) adjustments from net income (loss) to derive

FFO:

Net income available to participating securities . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization on real estate assets . . .
Impairment on depreciated real estate investments . . .
Net gain on sale of previously depreciated investments
in real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Noncash interest expense related to amortization of

deferred financing costs, loan discounts, and noncash
interest expense from derivatives . . . . . . . . . . . . . . . . . . .
Share-based compensation expense(1) . . . . . . . . . . . . . . . . . .
IPO related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Offering related expenses(2) . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger and transaction-related expenses(3) . . . . . . . . . . . . . .
Severance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains on investment in equity securities(4)
. . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casualty losses, net(5)

395
1,648
529,205
14,210

(96,336)

594,190

48,515
18,158
—
2,267
4,347
8,465
(6,480)
4,533

817
(86)
549,505
6,709

(49,682)

501,519

48,354
29,499
—
—
22,962
8,238
—
14,110

615
(489)
305,851
2,231

(33,896)

168,360

29,506
81,203
8,287
—
29,802
12,048
—
21,862

Core FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . .

673,995
(118,988)

624,682
(122,733)

351,068
(54,423)

Adjusted FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

555,007

501,949

296,645

Net income (loss) available to common stockholders
Weighted average common shares outstanding —

diluted(6)(8)(9)(10)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

532,499,787

520,376,929

339,423,442

Net income (loss) per common share — diluted(7)(8)(9)(10) . . . . . . .

0.27

(0.01) $

(0.26)

FFO
Numerator for FFO per common share — diluted(8) . . . . . . . . . . .

Weighted average common shares and OP Units outstanding —

599,776

512,576

168,360

diluted(8)(9)(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

545,150,847

543,063,802

338,933,198

FFO per common share — diluted(8)(9)(10) . . . . . . . . . . . . . . . . . . .

1.10

0.94

0.50

Core FFO and Adjusted FFO
Weighted average common shares and OP Units outstanding —

diluted(8)(9)(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

538,925,506

530,643,789

338,933,198

Core FFO per common share — diluted(8)(9)(10) . . . . . . . . . . . . . . .

AFFO per common share — diluted(8)(9)(10) . . . . . . . . . . . . . . . . . .

1.25

1.03

1.18

0.95

1.04

0.88

(1) For the years ended December 31, 2019, 2018, and 2017, $3,075, $5,500, and $10,297 was recorded in

property management expense, respectively, and $15,083, $23,999, and $70,906 was recorded in general
and administrative expense, respectively.

(2)

(3)

(4)

(5)

Includes expenses associated with secondary offerings of common stock completed during the year ended
December 31, 2019 included within other, net.
Includes Merger and transaction-related expenses included within general and administrative. Additionally,
for the year ended December 31, 2018, includes accelerated depreciation and amortization of certain
corporate assets included in depreciation and amortization.
Includes unrealized gains on our investment in equity securities during the year ended December 31, 2019
included within other, net.
Includes $8,013 and $21,500 for losses/damages related to Hurricanes Irma and Harvey for the years ended
December 31, 2018 and 2017, respectively. There were no such losses during the year ended December 31,
2019.

(6) Weighted average common shares outstanding — diluted is calculated in accordance with GAAP and is

used in the calculation of net income (loss) per common share — diluted.

(7) Net income (loss) per common share — diluted is calculated based on net loss available to common

stockholders for only the period after February 1, 2017, the date on which our common stock began trading
on the NYSE. For the period from February 1, 2017 through December 31, 2017, we had a net loss available
to common stockholders of $89,073.

(8) 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 of common stock are included within all net income
(loss), FFO, Core FFO, and AFFO per common share calculations subsequent to that date. Using the
“if-converted” method, the 2019 Convertible Notes are anti-dilutive to net income per common share —
diluted and are excluded from such computation for the period prior to conversion included within the year
ended December 31, 2019.

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 years ended December 31, 2019 and 2018, the
numerator for FFO per common share — diluted is adjusted for $5,586 and $11,057, respectively, of interest
expense on the 2019 Convertible Notes, including non-cash amortization of discounts. For the years ended
December 31, 2019 and 2018, the denominator is adjusted for 6,225,341 and 12,420,013, respectively,
potential shares of common stock for the 2019 Convertible Notes for the period prior to conversion. No such
adjustments were made to Core FFO and AFFO per common share — diluted for the 2019 Convertible
Notes. For the years ended December 31, 2019 and 2018, 15,100,443 potential shares of common stock
issuable upon the conversion of the 2022 Convertible Notes are also 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. For the period from February 1, 2017 through December 31,
2017, we asserted our intent and ability to fully settle the Convertible Senior Notes in cash; and as a result,
the Convertible Senior Notes did not impact diluted EPS during that period.
Incremental shares attributed to non-vested share-based awards totaling 1,263,825 shares for the year ended
December 31, 2019 are included in the denominator for net income per common share — diluted. For the
years ended December 31, 2018 and 2017, we had a net loss, and inclusion of incremental shares attributed
to non-vested share-based awards would be anti-dilutive to net loss per common share — diluted. For the
computations of FFO, Core FFO, and AFFO per common share — diluted, common share equivalents of
1,748,787, 1,150,384, and 786,791 for the years ended December 31, 2019, 2018, and 2017, respectively,
related to incremental shares attributed to non-vested share-based awards are included in the denominator.
(10) Vested units of partnership interests in INVH LP (“OP Units”) have been excluded from the computation of

(9)

net income (loss) per common share — diluted for the periods above because all net income (loss) attributable
to the vested OP Units has been recorded as non-controlling interest and thus excluded from net income (loss)
available to common stockholders. Weighted average vested OP Units of 5,940,757, 9,116,476, and 1,189,902
for the years ended December 31, 2019, 2018, and 2017, respectively, are included in the denominator for the
computations of FFO, Core FFO, and AFFO per common share — diluted.

ITEM 7A. 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.

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 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.

As of December 31, 2019, our outstanding variable-rate debt was comprised of borrowings on our mortgage

loans of $5,270.9 million and Term Loan Facility of $1,500.0 million, for a combined total of $6,770.9 million.
We effectively converted 96.3% 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 projected effect of a 100 bps increase or decrease in LIBOR on our
annual interest expense would be an estimated increase or decrease of $2.5 million. This estimate considers the
impact of our interest rate swap agreements, interest rate cap agreements, and 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 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is included as a separate section in this Annual Report on Form 10-K.

See Part IV. Item 15. “Exhibits and Financial Statement Schedules,” which is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

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 Officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2019.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of
December 31, 2019, 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

There has been no change in our internal control over financial reporting during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of our financial reporting and the
preparation of our consolidated financial statements for external purposes in accordance with United States
generally accepted accounting principles. Our internal control over financial reporting includes those policies and
procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the Company; (2) provide reasonable assurance that transaction are recorded as
necessary to permit preparation of consolidated financial statements in accordance with United States generally
accepted accounting principles and that receipts and expenditures of the Company are being made only in
accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company
that could have a material effect on the consolidated financial statements. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Our management with the participation of our Chief Executive Officer and Chief Financial Officer

conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31,
2019. This evaluation was based on the framework established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
assessment under the framework in Internal Control — Integrated Framework (2013), our management
concluded that our internal control over financial reporting was effective as of December 31, 2019 to accomplish
their objectives at the reasonable assurance level.

Deloitte & Touche LLP, the independent registered public accounting firm that has audited the consolidated

financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the
Company’s internal control over financial reporting as of December 31, 2019. The report is included herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Invitation Homes Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Invitation Homes Inc. and subsidiaries (the
“Company”) as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the financial statements as of and for the year ended December 31, 2019 of the
Company and our report dated February 19, 2020 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Dallas, Texas
February 19, 2020

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference from the Company’s 2020 Proxy

Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from the Company’s 2020 Proxy

Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated from reference to the Company’s 2020 Proxy

Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this Item is incorporated by reference from the Company’s 2020 Proxy

Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from the Company’s 2020 Proxy

Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

The following documents are filed as part of this report:

(a) Financial Statements

Invitation Homes Inc. Consolidated Financial Statements as of December 31, 2019 and 2018 and for

the three years in the period ended December 31, 2019

F-1
Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm . . . . . . . . . . . . . .
F-4
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Other Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-7
Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10

(b) Financial Statement Schedule

Invitation Homes Inc. as of December 31, 2019 and for the three years in the period ended

December 31, 2019

Schedule III Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-51

Exhibit
number

2.1

3.1

3.2

4.1

4.2

4.3

4.4

10.1

10.2

10.3

10.4

10.5

10.6

10.7

EXHIBIT INDEX

Description

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).

Charter of Invitation Homes Inc., dated as of February 6, 2017 (incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on
February 6, 2017).

Amended and Restated Bylaws of Invitation Homes Inc., dated as of February 6, 2017
(incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File
No. 1-38004) filed on February 6, 2017).

Indenture, dated as of January 10, 2017, between Starwood Waypoint Homes and Wilmington
Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 of SWH’s Current
Report on Form 8-K (File No. 1-36163) filed January 10, 2017).

Form of 3.50% Convertible Senior Notes due 2022 (incorporated by reference to Exhibit 4.1 of
SWH’s Current Report on Form 8-K (File No. 1-36163) filed January 10, 2017).

First Supplemental Indenture between Invitation Homes Inc., IH Merger Sub LLC and Wilmington
Trust, National Association, as trustee dated as of November 16, 2017 (incorporated by reference
to Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No.1-38004) filed on
November 20, 2017).

Description of Securities.

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).

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).

Amended and Restated Registration Rights Agreement, dated as of October 4, 2016, among SWH
and the other parties named therein (incorporated by reference to Exhibit 10.1 of SWH’s Current
Report on Form 8-K (File No. 1- 36163) filed with the SEC on October 11, 2016).

Assignment and Assumption Agreement, dated as of November 16, 2017, between Invitation
Homes Inc. and IH Merger Sub, LLC (incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K (File No.1-38004) filed on November 20, 2017).

Invitation Homes Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to
the Company’s Current Report on Form 8-K (File No. 1-38004) filed on February 6, 2017). †

Form of Director and Officer Indemnification Agreement (incorporated by reference to
Exhibit 10.5 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on
January 6, 2017). †

Form of Indemnification Agreement of Colony Starwood Homes (incorporated by reference to
Exhibit 10.2 of the SWH’s Current Report on Form 8-K (File No. 1-36163) filed January 8,
2016). †

Exhibit
number

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

Description

Registration Rights Agreement, dated as of January 31, 2017, by and among the Company and the
equity holders named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K (File No.1-38004) filed on February 6, 2017).

Revolving Credit and Term Loan Agreement, dated as of February 6, 2017, by and among
Invitation Homes Operating Partnership LP, as borrower, the lenders party thereto, Bank of
America, N.A., as administrative agent and the other parties party thereto (incorporated by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed
on February 6, 2017).

Loan Agreement, between 2014-2 IH Borrower L.P. and German American Capital Corporation,
dated as of August 14, 2014 (incorporated by reference to Exhibit 10.6 to the Company’s
Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017).

Loan Agreement, between 2014-3 IH Borrower L.P. and German American Capital Corporation,
dated as of November 12, 2014 (incorporated by reference to Exhibit 10.7 to the Company’s
Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017).

Loan Agreement, between 2015-1 IH2 Borrower L.P. and JPMorgan Chase Bank, National
Association, dated as of January 29, 2015 (incorporated by reference to Exhibit 10.8 to the
Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017).

Loan Agreement, between 2015-2 IH2 Borrower L.P. and JPMorgan Chase Bank, National
Association, dated as of April 10, 2015 (incorporated by reference to Exhibit 10.9 to the
Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017).

Loan Agreement, between 2015-3 IH2 Borrower L.P. and JPMorgan Chase Bank, National
Association, dated as of June 25, 2015 (incorporated by reference to Exhibit 10.10 to the
Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017).

Loan Agreement, dated as of April 28, 2017, between IH 2017-1 Borrower, LP, as Borrower, and
Wells Fargo Bank, National Association, as Lender (incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K (File No. 1-38004) filed May 1, 2017).

Loan Agreement, dated as of November 9, 2017, between IH 2017-2 Borrower, LP, as Borrower,
and German American Capital Corporation, as Lender (incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on November 9, 2017).

Loan Agreement, dated as of February 8, 2018, between IH 2018-1 Borrower, LP, as Borrower,
and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on
February 12, 2018).

Loan Agreement, dated as of May 8, 2018, between IH 2018-2 Borrower, LP, as Borrower, and
JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to Exhibit 10.1
of the Company’s Current Report on Form 8-K (File No. 1-38004) filed on May 9, 2018).

Loan Agreement, dated as of June 28, 2018, between IH 2018-3 Borrower, LP, as Borrower, and
German American Capital Corporation, as Lender (incorporated by reference to Exhibit 10.1 of the
Company’s Current Report on Form 8-K (File No. 1-38004) filed on July 2, 2018).

Loan Agreement, dated as of November 7, 2018, between IH 2018-4 Borrower LP, as Borrower,
and German American Capital Corporation, as Lender (incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on November 8, 2018).

Loan Agreement, dated as of April 10, 2014, between CAH 2014-1 Borrower, LLC, as Borrower,
and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to
Exhibit 10.3 of SWH’s Quarterly Report on Form 10-Q (File No. 1-36163) filed August 9, 2016).

Exhibit
number

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

Description

Loan Agreement, dated as of June 30, 2014, between CAH 2014-2 Borrower, LLC, as Borrower,
and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to
Exhibit 10.4 of SWH’s Quarterly Report on Form 10-Q (File No. 1-36163) filed August 9, 2016).

Loan Agreement, dated as of June 11, 2015, between CAH 2015-1 Borrower, LLC, as Borrower,
and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to
Exhibit 10.5 of SWH’s Quarterly Report on Form 10-Q (File No. 1-36163) filed August 9, 2016).

Loan Agreement, dated as of June 7, 2016, between CSH 2016-1 Borrower, LLC, as Borrower,
and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to
Exhibit 10.1 of SWH’s Current Report on Form 8-K (File No. 1-36163) filed June 8, 2016).

Loan Agreement, dated as of November 3, 2016, between CSH 2016-2 Borrower, LLC, as
Borrower, and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference
to Exhibit 10.2 of SWH’s Quarterly Report on Form 10-Q (File No. 1-36163) filed November 7,
2016).

Loan Agreement, dated as of June 7, 2019, between 2019-1 IH Borrower LP, as Borrower, and
Rothesay Life PLC, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (File No. 1-38004) filed on June 10, 2019).

Employment Agreement with Dallas B. Tanner, dated November 9, 2015 (incorporated by
reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-11
(No. 333-215452) filed on January 6, 2017). †

Employment Agreement with Ernest M. Freedman, dated September 4, 2015 (incorporated by
reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-11
(No. 333-215452) filed on January 6, 2017). †

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). †

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). †

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). †

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). †

Award Notice and Restricted Stock Unit Agreement (Sign-On Award — Mr. Tuomi) (incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 1-38004)
filed on November 20, 2017). †

Form of Invitation Homes 6 L.P. Bonus Award Program Letter Agreement (incorporated by
reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-11
(No. 333-215452) filed on January 23, 2017). †

Form of Invitation Homes Inc. Restricted Stock Grant and Acknowledgment (Converted Incentive
Units) (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on
Form S-11 (No. 333-215452) filed on January 23, 2017). †

Exhibit
number

10.36

10.37

10.38

10.39

10.40

10.41

10.42

10.43

10.44

10.45

10.46

10.47

10.48

10.49

Description

Form of Award Notice and Restricted Stock Unit Agreement for Mr. John B. Bartling Jr.
(Supplemental Bonus Award (2 Tranche Vesting)) (incorporated by reference to Exhibit 10.16 to the
Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement for Mr. John B. Bartling Jr.
(Supplemental Bonus Award (3 Tranche Vesting)) (incorporated by reference to Exhibit 10.17 to the
Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement for Mr. Ernest M. Freedman
(Supplemental Bonus Award) (incorporated by reference to Exhibit 10.18 to the Company’s
Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement for Mr. Dallas B. Tanner
(Supplemental Bonus Award) (incorporated by reference to Exhibit 10.19 to the Company’s
Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement for Mr. Bryce Blair (Supplemental
Bonus Award) (incorporated by reference to Exhibit 10.20 to the Company’s Registration
Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement for Non-Employee Directors
(General Form) (Supplemental Bonus Award) (incorporated by reference to Exhibit 10.21 to the
Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement (2017 LTIP Equity Award)
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File
No. 1-38004) filed on June 29, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement (Retention Award — Messrs.
Freedman and Tanner) (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K (File No. 1-38004) filed on June 29, 2017). †

Form of Award Notice and Restricted Stock Unit Agreement (2018 LTIP Equity Award)
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File
No. 1-38004) filed on August 10, 2018). †

Form of Award Notice and Restricted Stock Unit Agreement (2019 LTIP Equity Award)
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File
No. 1-38004) filed on May 7, 2019). †

2019 Outperformance Award Agreement (LTIP Units) (incorporated by reference to Exhibit 10.2
to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed on July 31, 2019). †

Form of Award Notice and Restricted Stock Unit Agreement for Mr. Frederick C. Tuomi (2018
LTIP Equity Award) (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly
Report on Form 10-Q (File No. 1-38004) filed May 15, 2018). †

Form of Award Notice and Restricted Stock Unit Agreement for Mr. Frederick C. Tuomi (2018
Supplemental Bonus Award) (incorporated by reference to Exhibit 10.7 to the Company’s
Quarterly Report on Form 10-Q (File No. 1-38004) filed May 15, 2018). †

Letter Agreement by and between the Company and Mr. Frederick C. Tuomi relating to Award
Notice and Restricted Stock Unit Agreement (Sign-On Award — Mr. Tuomi) (incorporated by
reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004)
filed May 15, 2018). †

Exhibit
number

10.50

10.51

10.52

10.53

10.54

10.55

10.56

10.57

10.58

10.59

10.60

21.1

23.1

31.1

31.2

32.1

Description

Separation Agreement dated January 16, 2019, by and between the Company and Mr. Frederick C.
Tuomi. (incorporated by reference to Exhibit 10.48 to the Company’s Annual Report on
Form 10-K (File No. 1-38004) filed February 28, 2019). †

Form of Award Notice and Restricted Stock Unit Agreement (2018 Supplemental Bonus Award)
(incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K (File
No. 1-38004) filed March 29, 2018). †

Colony Starwood Homes Equity Plan (incorporated by reference to Exhibit 4.3 to the Company’s
Registration Statement on Form S-8 (File No. 333-221617) filed on November 16, 2017). †

Form of Restricted Share Award Agreement under the Starwood Waypoint Residential Trust
Equity Plan (incorporated by reference to Exhibit 10.10 of SWH’s Registration Statement on
Form 10 (File No. 1-36163) filed December 23, 2013). †

Form of Restricted Share Unit Award Agreement under the Starwood Waypoint Residential Trust
Equity Plan (incorporated by reference to Exhibit 10.11 of SWH’s Registration Statement on
Form 10 (File No. 1-36163) filed December 23, 2013). †

Invitation Homes Inc. Executive Severance Plan (incorporated by reference to Exhibit 10.47 to the
Company’s Annual Report on Form 10-K (File No. 1-38004) filed March 29, 2018). †

Master Repurchase Agreement, dated March 11, 2014, among Starwood Waypoint Residential
Trust, PrimeStar Fund I, L.P., Wilmington Savings Fund Society, FSB and Deutsche Bank AG,
Cayman Islands Branch (incorporated by reference to Exhibit 10.1 of SWH’s Current Report on
Form 8-K (File No. 1-36163) filed March 13, 2014).

Amendment No. 1, dated June 26, 2014, to the Master Repurchase Agreement, dated March 11,
2014, among Starwood Waypoint Residential Trust, PrimeStar Fund I, L.P., Wilmington Savings
Fund Society, FSB and Deutsche AG, Cayman Islands Branch (incorporated by reference to
Exhibit 10.1 of SWH’s Current Report on Form 8-K (File No. 1-36163) filed June 30, 2014).

Amendment No. 3, dated September 1, 2015, to the Master Repurchase Agreement, dated
March 11, 2014, among Starwood Waypoint Residential Trust, PrimeStar Fund I, L.P.,
Wilmington Savings Fund Society, FSB and Deutsche Bank AG, Cayman Islands Branch
(incorporated by reference to Exhibit 10.1 of SWH’s Current Report on Form 8-K (File
No. 1-36163) filed September 4, 2015).

Amended and Restated Limited Partnership Agreement of PrimeStar Fund I, L.P., dated as of
December 16, 2014 and Effective as of March 1, 2014 (incorporated by reference to Exhibit 10.1
of SWH’s Current Report on Form 8-K (File No. 1-36163) filed December 22, 2014).

Securities Purchase Agreement, dated as of June 5, 2017, between Waypoint/GI Venture, LLC and
CSH Property Three, LLC (incorporated by reference to Exhibit 10.1 of the SWH’s Current Report
on Form 8-K (File No. 1-36163) filed June 5, 2017).

Subsidiaries of the Registrant.

Consent of Deloitte & Touche LLP.

Certificate of Dallas B. Tanner, President and Chief Executive Officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

Certificate of Ernest M. Freedman, Executive Vice President and Chief Financial Officer, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.

Certificate of Dallas B. 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).

Exhibit
number

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).

Description

101.INS

Inline XBRL Instance 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 Annual Report on Form 10-K contain
representations and warranties that the parties thereto made to each other. These representations and warranties
have been made solely for the 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.

ITEM 16. FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in Dallas,
Texas, on the 19th day of February 2020.

Invitation Homes Inc.

By: /s/ Dallas B. Tanner

Name: Dallas B. Tanner
Title: President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following

persons in the capacities indicated on the 19th day of February 2020.

Signature

Title

/s/ Dallas B. Tanner
Dallas B. Tanner

/s/ Ernest M. Freedman

Ernest M. Freedman

/s/ Kimberly K. Norrell

Kimberly K. Norrell

/s/ Bryce Blair

Bryce Blair

/s/ Jana C. Barbe

Jana C. Barbe

/s/ Richard D. Bronson

Richard D. Bronson

/s/ Kenneth A. Caplan

Kenneth A. Caplan

/s/ Michael D. Fascitelli

Michael D. Fascitelli

/s/ Robert G. Harper

Robert G. Harper

/s/ Jeffrey E. Kelter

Jeffrey E. Kelter

/s/ John B. Rhea

John B. Rhea

/s/ Janice L. Sears

Janice L. Sears

President, Chief Executive Officer, and Director
(Principal Executive Officer)

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)

Chairman and Director

Director

Signature

/s/ William J. Stein

William J. Stein

/s/ Barry S. Sternlicht

Barry S. Sternlicht

Title

Director

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Invitation Homes Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Invitation Homes Inc. and subsidiaries (the
“Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, other
comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended
December 31, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting
principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2020, expressed an
unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Investments in Single-Family Residential Properties — Refer to Notes 2 and 3 to the financial statements

Critical Audit Matter Description

The Company owned approximately 80,000 individual single-family residential properties with a net book value
of $16.2 billion as of December 31, 2019. The Company capitalizes costs to acquire, stabilize, and prepare

F-1

single-family residential properties to be leased. The determination of which costs to capitalize, the useful life of
the respective capitalized cost, and the classification of assets as held for sale and held for use requires significant
management judgment. Furthermore, the Company evaluates investments in single-family residential properties
to determine whether there have been any changes in circumstances that may indicate that the carrying value of
individual properties may not be recoverable.

Given management’s (1) inputs and assumptions used to determine purchase price allocation based upon the
relative fair values of asset components, (2) determination of which costs improve or extend the life of a
property, (3) evaluation of single-family residential properties for impairment which requires significant
judgment and assessment of factors that are, at times, subject to significant uncertainty, and (4) application of
held for sale classification criteria, performing audit procedures to evaluate the accounting for investments in
single-family residential properties was challenging and required an increased extent of audit effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to whether the investments in single-family residential properties were accounted
for appropriately included the following, among others:

• We tested the effectiveness of relevant controls over investments in single-family residential properties.

• We selected a sample of properties acquired during the year and evaluated the accuracy of the amounts

recorded and appropriate transfer of title.

• We evaluated the appropriateness of management’s allocation of the initial purchase price for newly
acquired properties by developing independent estimates for the purchase price allocation for each
residential market in which the properties were acquired and comparing our estimates to the Company’s
actual allocation.

• We selected a sample of costs capitalized during the year and evaluated the accuracy and classification of
the recorded amounts. We also evaluated repairs and maintenance costs that were charged to expense.

• We evaluated management’s analysis of possible impairment indicators for properties by independently
assessing trends in the residential markets in which the Company has significant investments in single-
family residential properties, trends in gains or losses on sales of properties, and macroeconomic data to
identify any indicators that the carrying value of properties may not be recoverable.

• We selected a sample of properties classified as held for sale and evaluated whether the properties met the
criteria to be classified as held for sale as of December 31, 2019. We also selected a sample of properties
sold after December 31, 2019 and evaluated whether each property was properly classified as either held for
sale or held for use as of December 31, 2019.

• We selected a sample of properties disposed during the year and evaluated the terms and conditions of the
sales contracts to assess whether the sale was properly recorded, including the removal of assets from the
accounting records and related gain or loss on sale.

Derivative Instruments — Refer to Notes 2, 7, and 11 to the financial statements

Critical Audit Matter Description

The Company uses derivative instruments to manage the economic risk of changes in interest rates. As of
December 31, 2019, the Company had derivative instruments of $1.6 million recorded at fair value in other assets
and derivative instruments of $275.7 million recorded at fair value in other liabilities.

Given the judgment needed to estimate the fair value of derivative instruments, and the volatility of the fair value
based on market conditions, auditing the fair value and related inputs, such as forward yield curves and
nonperformance risk, involved especially subjective and complex judgment.

F-2

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assumptions used by management to estimate the fair value of derivative
instruments included the following, among others:

• We tested the effectiveness of relevant controls, including management’s evaluation of its third party fair

value specialist and the results of such specialist’s work.

• With the assistance of our fair value specialists, we evaluated the appropriateness of management’s
valuation of derivative instruments by developing independent fair value estimates for a sample of
instruments and comparing our estimates to the Company’s estimates.

/s/ Deloitte & Touche LLP

Dallas, Texas
February 19, 2020

We have served as the Company’s auditor since 2013.

F-3

INVITATION HOMES INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2019 and 2018
(in thousands, except shares and per share data)

2019

2018

Assets:

Investments in single-family residential properties:

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,499,346
13,747,818

$ 4,561,441
13,668,533

Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,247,164
(2,003,972)

18,229,974
(1,543,914)

Investments in single-family residential properties, net . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,243,192
92,258
193,987
258,207
605,266

16,686,060
144,940
215,051
258,207
759,170

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17,392,910

$18,063,428

Liabilities:

Mortgage loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured term loan, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan facility, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,238,461
400,978
1,493,747
—
334,299
186,110
147,787
325,450

$ 7,201,654

—

1,490,860

—
557,301
169,603
148,995
125,829

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,126,832

9,694,242

Commitments and contingencies (Note 14)

Equity:

Stockholders’ equity

Preferred stock, $0.01 par value per share, 900,000,000 shares

authorized, none outstanding as of December 31, 2019 and 2018 . . . . .

—

Common stock, $0.01 par value per share, 9,000,000,000 shares
authorized, 541,642,725 and 520,647,977 outstanding as of
December 31, 2019 and 2018, respectively . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Accumulated deficit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,416
9,010,194
(524,588)
(276,600)

8,214,422
51,656

5,206
8,629,462
(392,594)
(12,963)

8,229,111
140,075

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,266,078

8,369,186

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17,392,910

$18,063,428

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

F-4

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

For the Years Ended December 31,
2018

2017

2019

Rental revenues and other property income . . . . . . . . . . . . . . .

1,764,685

1,722,962

1,054,456

Expenses:

Property operating and maintenance . . . . . . . . . . . . . . . . . . .
Property management expense . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment and other

669,987
61,614
74,274
367,173
533,719
18,743

655,411
65,485
98,764
383,595
560,541
20,819

391,495
43,344
167,739
256,970
309,578
24,093

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,725,510

1,784,615

1,193,219

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property, net of tax . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net (income) loss attributable to non-controlling

11,600
96,336

147,111

6,958
49,682

(959)
33,896

(5,013)

(105,826)

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,648)

489

Net income (loss) attributable to common stockholders . . . . .

145,463

(4,927) $

(105,337)

For the Year
Ended
December 31,
2019

For the Year
Ended
December 31,
2018

February 1,
2017
through
December 31,
2017

Net income (loss) available to common stockholders — basic

and diluted (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

145,068

(5,744) $

(89,073)

Weighted average common shares outstanding — basic . . . . . . .

531,235,962

520,376,929

339,423,442

Weighted average common shares outstanding — diluted . . . . . .

532,499,787

520,376,929

339,423,442

Net income (loss) per common share — basic . . . . . . . . . . . . . . .

Net income (loss) per common share — diluted . . . . . . . . . . . . . .

0.27

(0.01) $

(0.26)

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

F-5

INVITATION HOMES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)

Unrealized gains (losses) on interest rate swaps . . . . . . . . . . . . . . . . . . .
(Gains) losses from interest rate swaps reclassified into earnings from

For the Years Ended December 31,
2017
2018
2019

$ 147,111

$ (5,013) $(105,826)

(244,126)

(43,211)

31,636

accumulated other comprehensive income (loss)

. . . . . . . . . . . . . . . .

(20,763)

(18,627)

Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(264,889)

(61,838)

16,708

48,344

Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss attributable to non-controlling interests . . . . . . . . .

(117,778)
1,884

(66,851)
1,150

(57,482)
30

Comprehensive loss attributable to common stockholders . . . . . . . . . . . .

$(115,894) $(65,701) $ (57,452)

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

F-6

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T

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

For the Years Ended December 31,
2017
2018

2019

Operating Activities:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by

$ 147,111

(5,013) $ (105,826)

operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred leasing costs . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . . . . . . . . . .
Amortization of debt discounts . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property, net of tax . . . . . . . . . . . . . . . . . . . . .
Change in fair value of derivative instruments . . . . . . . . . . . .
Other noncash amounts included in net income (loss) . . . . . . .
Changes in operating assets and liabilities: . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . .
Resident security deposits . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

533,719
18,158
10,621
39,259
7,343
14,210
(96,336)
1,913
(6,569)

(10,890)
5,207
(1,208)
(408)

560,541
29,499
11,258
27,191
9,124
6,709
(49,682)
12,039
6,342

(14,083)
(26,643)
2,306
(8,347)

309,578
81,203
12,143
22,271
1,390
2,231
(33,896)
5,845
(2,940)

(10,605)
(10,294)
3,281
(11,411)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .

662,130

561,241

262,970

Investing Activities:

Cash and restricted cash acquired in the Mergers (Note 15) . . . . . .
Amounts deposited and held by others . . . . . . . . . . . . . . . . . . . . . .
Acquisition of single-family residential properties . . . . . . . . . . . . .
Initial renovations to single-family residential properties . . . . . . . .
Other capital expenditures for single-family residential

properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of single-family residential properties . . . . . . .
Purchases of investments in debt securities . . . . . . . . . . . . . . . . . . .
Repayment proceeds from retained debt securities . . . . . . . . . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(395)
(586,075)
(57,437)

(164,244)
855,583
—
49,960
4,834

—
9,074
(252,391)
(45,733)

(141,688)
490,699
(211,737)
224,035
(9,266)

Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . .

102,226

62,993

203,508
2,513
(228,499)
(42,625)

(58,456)
205,980
(95,174)
79,292
(1,846)

64,693

Financing Activities:

Proceeds from IPO, net of underwriting discounts . . . . . . . . . . . . .
IPO costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dividends and dividend equivalents . . . . . . . . . . . . . . .
Distributions to non-controlling interests . . . . . . . . . . . . . . . . . . . . .
Payment of taxes related to net share settlement of RSUs . . . . . . . .
Payments on credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
—

(276,681)
(3,074)
(8,164)
—
—

(997,421)

(230,072)
(4,020)
(9,245)
—

4,234,483
(4,579,594)

1,692,058
(2,757)
(3,796)
(68,997)
(61)
(15,884)
(2,321,585)
1,861,447
(2,951,008)

F-8

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

For the Years Ended December 31,
2017
2018
2019

Proceeds from secured term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from term loan facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from revolving facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on revolving facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

403,464
—

485,000
(485,000)
55,263
(2,613)
(8,876)

—
—
285,000
(320,000)

—
(55,681)
(1,676)

—

1,500,000
135,000
(100,000)

—
(54,576)
(1,153)

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(838,102)

(680,805)

(331,312)

Change in cash, cash equivalents, and restricted cash . . . . . . . . . . . . . . . . .
Cash, cash equivalents, and restricted cash, beginning of period

(73,746)

(56,571)

(3,649)

(Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

359,991

416,562

420,211

Cash, cash equivalents, and restricted cash, end of period (Note 4) . . .

$ 286,245 $ 359,991

$ 416,562

Supplemental cash flow disclosures:

Interest paid, net of amounts capitalized . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for amounts included in the measurement of lease

$ 322,085
2,781

$ 335,973
2,069

$ 226,306
2,525

liabilities:

Operating cash flows from operating leases . . . . . . . . . . . . . . . . .

5,365

N/A

Noncash investing and financing activities:

Accrued renovation improvements at period end . . . . . . . . . . . . . . . . .
Accrued residential property capital improvements at period end . . . .
Transfer of residential property, net to other assets, net for held for

$ 13,382
11,520

7,189
7,189

8,715
7,282

sale assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

545,448

441,005

76,801

Reclassification of IPO costs from other assets to additional paid-in

capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

2,969

Change in other comprehensive income (loss) from cash flow

hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ROU assets obtained in exchange for operating lease liabilities . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net settlement of 2019 Convertible Notes in shares of common

(266,676)
1,721
N/A

(73,242)
N/A
2,209

46,624
N/A
—

stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

229,944

—

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

F-9

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

Note 1 — Organization and Formation

Invitation Homes Inc. (“INVH”), a real estate investment trust (“REIT”), 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. Through THR Property Management L.P.,
a wholly owned subsidiary of INVH LP (the “Manager”), we provide all management and other administrative
services with respect to the properties we own.

Prior to our initial public offering (“IPO”), we conducted our business through a combination of entities (the

“Invitation Homes Partnerships”) 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”). During this time, 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.

In preparation for our IPO, INVH was incorporated in the State of Delaware on October 4, 2016. From
inception through the date of the IPO, INVH did not engage in any business or activity. Additionally, INVH LP
and its general partner Invitation Homes OP GP LLC (the “OP General Partner”) were formed on December 14,
2016, and INVH LP began negotiating and entering into certain debt and hedge instruments upon its inception in
anticipation of our IPO.

On February 6, 2017, INVH completed the IPO, changed its jurisdiction of incorporation to Maryland, and
amended its charter to provide for the issuance of up to 9,000,000,000 shares of common stock and 900,000,000
shares of preferred stock, $0.01 par value per share. In connection with certain pre-IPO reorganization
transactions, INVH LP became (1) owned by INVH directly and through INVH’s wholly owned subsidiary, the
OP General Partner, and (2) the owner of all of the assets, liabilities, and operations of the Invitation Homes
Partnerships. These transactions were accounted for as a reorganization of entities under common control
utilizing historical cost basis.

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 certain of our debt instruments. Collateral for
certain of our individual debt instruments may 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,
INVH LP, and the consolidated subsidiaries of INVH LP. References to “SWH” refer to Starwood Waypoint
Homes and its subsidiaries.

Merger with Starwood Waypoint Homes

On November 16, 2017 (the “Merger Date”), INVH, INVH LP, IH Merger Sub, LLC, a Delaware limited

liability company and direct wholly owned subsidiary of INVH, SWH, and Starwood Waypoint Homes
Partnership, L.P., a Delaware limited partnership and a subsidiary of SWH, (“SWH Partnership”) effectuated a
series of transactions which resulted in SWH and SWH Partnership being merged into INVH and INVH LP,
respectively, with INVH and INVH LP being the surviving entities (the “Mergers”).

F-10

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

In connection with the Mergers, each outstanding SWH common share was converted into shares of our

common stock and each outstanding unit of SWH Partnership was converted into common units of limited
partnership interests in INVH LP. Our limited partnership interests consist of the aforementioned common units
and other classes of limited partnership interests that may be issued (the “OP Units”). As of December 31, 2019,
INVH owns a 99.4% partnership interest in INVH LP and has the full, exclusive, and complete responsibility for
and discretion over the day to day management and control of INVH LP.

Note 2 — Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements 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. Subsequent to the date of the pre-IPO reorganization transactions, these consolidated
financial statements include the accounts of INVH and its consolidated subsidiaries. Prior to the date of the
pre-IPO reorganization transactions, these 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 consolidated financial statements.

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”) 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.

As described in Note 5, as a result of the Mergers we acquired an investment in a joint venture with the

Federal National Mortgage Association (“FNMA”), which is a voting interest entity. We do not hold a
controlling financial interest in the joint venture but have significant influence over its operating and financial
policies. Additionally, FNMA holds certain substantive participating rights that preclude the presumption of
control by us; as such, we account for our investment using the equity method. In connection with the Mergers,
we initially recorded this investment at fair value in connection with purchase accounting as described in Note 15
and have subsequently adjusted for our proportionate share of net 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 in our consolidated statements of cash flows.

Non-controlling interests represent the OP Units held by a third party at the Merger Date and 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 consolidated balance sheets as of December 31, 2019 and
2018, and the consolidated statements of operations for the years ended December 31, 2019, 2018, and 2017

F-11

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

include an allocation of the net income (loss) 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 a reduction in non-controlling interests with an offset to
stockholders’ equity based on the pro rata number of OP Units redeemed.

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2016-02, Leases (Topic 842), (the “New Lease Standard”), which requires lessees to recognize
assets and liabilities on the balance sheets for the rights and obligations created by all leases with terms of more
than one year. Lessor accounting remains similar to previous GAAP, while aligning with ASC 606, Revenue
from Contracts with Customers (“ASC 606”).

We adopted the New Lease Standard using the optional transition approach as of January 1, 2019. As such,

previously reported financial information was not updated, and additional disclosures required under the New
Lease Standard are not provided for periods prior to January 1, 2019. Additionally, we elected the practical
expedient package related to lease identification, lease classification, and initial direct costs. As such, we have
not reassessed our existing contracts and leases for these items. We did not elect the hindsight practical
expedient, which permits entities to use hindsight in determining lease term and assessing impairment.

As a lessor, our leases with residents are classified as operating leases under the New Lease Standard, and

thus the pattern of recognition of rental revenue and other property income remains unchanged from previous
lease accounting guidance as adjusted by ASC 606. Rental revenues and other property income are recorded net
of any concessions and uncollectible amounts for all periods presented.

As a lessee, adoption of the New Lease Standard resulted in the recognition of right-of-use (“ROU”) assets
and lease liabilities for operating leases on our consolidated balance sheet; however, our accounting for finance
leases remains substantially unchanged. On January 1, 2019, we recorded the cumulative effect of adoption of the
New Lease Standard on our consolidated balance sheet which resulted in an increase in other assets and other
liabilities of $14,118 and $14,118, respectively.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair
value disclosure requirements for certain financial instruments. This guidance reduces the need for certain
disclosure language related to our Level 3 financial instruments and adds additional disclosure requirements for
significant unobservable inputs used in the calculation of fair values of Level 3 financial instruments. We
adopted this standard as of October 1, 2019, and it did not have a material impact on our consolidated financial
statements.

Use of Estimates

The preparation of the 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 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.

F-12

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

Investments in Single-Family Residential Properties

The following significant accounting policies affect the acquisition, disposition, recognition, classification,

• Acquisition of Real Estate Assets: 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, Business Combinations
(Topic 805): Clarifying the Definition of a Business, our purchases of homes are treated as asset
acquisitions and are recorded at their purchase price, which is allocated between land, building and
improvements, and in-place lease intangibles (when a resident 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. Properties acquired in the Mergers were recorded at
fair value. 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. In-place lease intangibles are amortized over the life of
the leases and are recorded in other assets, net in our consolidated balance sheets.

• Cost Capitalization: We incur costs to acquire, stabilize, and prepare our single-family residential
properties to be leased. We capitalize these costs as a component of our investment in each single-
family residential property, using specific identification and relative allocation methodologies,
including renovation costs and other costs associated with activities that are directly related to
preparing our properties for use as rental real estate. Other costs include interest costs, property taxes,
property insurance, utilities, HOA fees, and a portion of the salaries and benefits of the Manager’s
employees who are directly responsible for the execution of our stabilization activities. The
capitalization period associated with our stabilization activities begins at the time that such activities
commence and concludes at the time that a single-family residential property is available to be leased.

Once a property is ready for its intended use, expenditures for ordinary maintenance and repairs
thereafter are expensed to operations as incurred, and we capitalize expenditures that improve or extend
the life of a home, a portion of the salaries and benefits of the Manager’s employees who are directly
responsible for such improvements, and for certain furniture and fixtures additions. The determination
of which costs to capitalize requires significant judgment. Accordingly, many factors are considered as
part of our evaluation processes with no one factor necessarily determinative.

• Depreciation: Costs capitalized in connection with single-family residential property acquisitions,

stabilization activities, and on an ongoing basis are depreciated over their estimated useful lives on a
straight-line basis. The depreciation period commences upon the completion of stabilization-related
activities or upon the completion of improvements made on an ongoing basis. For those costs
capitalized in connection with residential property acquisitions and stabilization activities and those
capitalized on an ongoing basis, the weighted average useful lives range from 7 years to 28.5 years.

• Provisions for Impairment: We continuously evaluate, by property, whether there are any events or

changes in circumstances indicating that the carrying amount of our single-family residential properties
may not be recoverable. Examples of such events and changes in circumstances that we consider
include significant and persistent declines in an individual property’s net operating income, regional
changes in home price appreciation as measured by certain independently developed indices, change in

F-13

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

expected use of the property, significant adverse legal factors, substantive damage to the individual
property as a result of natural disasters and other risks inherent in our business not covered by
insurance proceeds, or a current expectation that a property will be disposed of prior to the end of its
estimated useful life.

To the extent an event or change in circumstance is identified, a residential property is considered to be
impaired only if its carrying value cannot be recovered through estimated future undiscounted cash
flows from the use and eventual disposition of the property. Cash flow projections are prepared using
internal analyses based on current rental, renewal, and occupancy rates, operating expenses, and inputs
from our annual planning process that give consideration to each property’s historical results, current
operating trends, and current market conditions. To the extent an impairment has occurred, the carrying
amount of our investment in a property is adjusted to its estimated fair value. To determine the
estimated fair value, we consider local broker price opinions (“BPOs”) and automated valuation model
(“AVM”) data, each of which are important components of our process with no one information source
being necessarily determinative. In order to validate the BPOs and AVM data received and used in our
assessment of fair value of real estate, we perform an internal review to determine if an acceptable
valuation approach was used to estimate fair value in compliance with guidance provided by ASC 820,
Fair Value Measurements. Additionally, we undertake an internal review to assess the relevance and
appropriateness of comparable transactions that have been used, and any adjustments to comparable
transactions made, in reaching the value opinions.

The process whereby we assess our single-family residential properties for impairment requires
significant judgment and assessment of factors that are, at times, subject to significant uncertainty. We
evaluate multiple information sources and perform a number of internal analyses, each of which are
important components of our process with no one information source or analysis being necessarily
determinative.

•

Single-Family Residential Properties Held for Sale: From time to time, we may identify single-family
residential properties to be sold. At the time that any such properties are identified, we perform an
evaluation to determine whether or not such properties should be classified as held for sale in
accordance with GAAP. Factors considered as part of our held for sale evaluation process include
whether the following conditions have been met: (i) we have committed to a plan to sell a property;
(ii) the property is immediately available for sale in its present condition; (iii) an active program to
locate a buyer and other actions required to complete the plan to sell a property have been initiated;
(iv) the sale of a property is probable within one year (generally determined based upon listing for
sale); (v) the property is being actively marketed for sale at a price that is reasonable in relation to its
current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that
significant changes to the plan will be made or that the plan will be withdrawn. To the extent that these
factors are all present, we cease depreciating the property, measure the property at the lower of its
carrying amount or its fair value less estimated costs to sell, and present the property separately within
other assets, net on our consolidated balance sheets. As of December 31, 2019 and 2018, we classified
$116,529 and $154,077, respectively, as held for sale assets in our consolidated balance sheets (see
Note 5).

Cash and Cash Equivalents

For purposes of presentation on both the consolidated balance sheets and statements of cash flows, we
consider financial instruments with an original maturity of three months or less to be cash and cash equivalents.
We maintain our cash and cash equivalents in multiple financial institutions and, at times, these balances exceed

F-14

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

federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. We
believe any risks are mitigated through the size of the financial institution at which our cash balances are held.

Restricted Cash

Restricted cash represents cash deposited in accounts related to certain rent deposits and collections,
security deposits, property taxes, insurance premiums and deductibles, and capital expenditures (see Note 4).
Amounts deposited in the reserve accounts associated with the mortgage loans and secured term loan can only be
used as provided for in the respective loan agreements (see Note 6), and security deposits held pursuant to lease
agreements are required to be segregated. Accordingly, these items are separately presented within our
consolidated balance sheets.

Held to Maturity Investments

Investments in debt securities that we have a positive intent and ability to hold to maturity are classified as

held to maturity and are presented within other assets, net on our consolidated balance sheets (see Note 5). These
investments are recorded at amortized cost. Investments are reviewed at each reporting period for declines in fair
value below the amortized cost basis that are other than temporary. Interest income, including amortization of
any premium or discount, is classified as other in the consolidated statements of operations. For purposes of
classification within the consolidated statements of cash flows, purchases of and repayments from these
securities are classified as investing activities.

Investments in Equity Securities

Investments in equity securities without a readily determinable fair value are presented within other assets,

net on our consolidated balance sheets (see Note 5). These investments are measured at cost, less any
impairment, plus or minus changes resulting from observable price changes for identical or similar investment in
the same issuer. Unrealized gains and losses are included in other, net in the consolidated statements of
operations.

Deferred Financing Costs

Costs incurred that are directly attributable to procuring external financing are deferred and amortized over

the term of the related financing arrangement as interest expense in the consolidated statements of operations.
Costs that are deferred for the procurement of such financing are presented either as an asset in other assets, net
when associated with a revolving debt instrument and prior to funding of a loan or as a liability in mortgage
loans, net, secured term loan, net, or term loan facility, net, when associated with other indebtedness.
Unamortized financing costs are charged to earnings when debt is retired before the maturity date.

Convertible Senior Notes

ASC 470-20, Debt with Conversion and Other Options, requires that the liability and equity components of

convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, be
separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial
proceeds from the issuance of convertible notes are allocated between a liability component and an equity
component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have
been issued at such time. The equity component represents the excess initial proceeds received over the fair value
of the liability component of the notes as of the date of issuance. We measure the fair value of the debt

F-15

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

component of our convertible senior notes as of the issuance date based on our nonconvertible debt borrowing
rate. In connection with Mergers, we assumed convertible senior notes that were recorded at their estimated fair
value based on our nonconvertible debt borrowing rate as of the Merger Date (see Note 6). The resulting discount
from the outstanding principal balance of the convertible senior notes is being amortized using the effective
interest rate method over the periods to maturity. Amortization of this discount is recorded as interest expense in
the consolidated statement of operations for the years ended December 31, 2019, 2018, and 2017.

Revenue Recognition and Resident Receivables

Rental revenues and other property income, net of any concessions and uncollectible amounts, consists
primarily of rents collected under lease agreements related to our single-family residential properties. We enter
into leases directly with our residents, and our leases typically have a term of one to two years. We elected the
practical expedient not to separate the lease and nonlease components of these operating leases with our
residents. Our lease components consist primarily of rental income, pet rent, and smart home system fees.
Nonlease components include resident reimbursements for utilities and various other fees, including late fees and
lease termination fees, among others. The lease component is the predominant component in these arrangements,
and as such, we recognize rental revenues and other property income in accordance with the New Lease Standard
for the year ended December 31, 2019, and in accordance with previous GAAP for the years ended December 31,
2018 and 2017.

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 year ended December 31, 2019, rental revenues and other
property income includes $92,759 of variable lease payments. Sales taxes and other similar taxes assessed by
governmental authorities that we collect from residents are excluded from our rental revenues and other property
income.

Leases Entered Into as a Lessee

We lease our corporate and regional offices, related office equipment, and a fleet of vehicles for use by our
field associates. As of January 1, 2019, these leases are accounted for pursuant to the New Lease Standard (see
Note 5 and Note 14).

We account for leases for our corporate and regional offices as operating leases. In addition to monthly rent

payments, we reimburse the lessors of our office spaces for our share of operating expenses as defined in the
leases. Such amounts are not included in the measurement of the lease liability but are recognized as a variable
lease expense when incurred. At this time, it is not reasonably certain that we will exercise any of the renewal or
termination options on these leases, and the measurement of the ROU asset and lease liability is calculated
accordingly.

We have elected the practical expedient under which the lease components of our office and vehicle fleet

leases are not separated from the nonlease components. ROU assets and lease liabilities are recognized based on
the present value of lease payments over the lease term at commencement date. We use our incremental
borrowing rate to calculate the present value of our lease payments.

We have elected the short-term lease recognition exemption for our office equipment leases and therefore
do not record these leases on our consolidated balance sheets. These office equipment leases are not material to
our consolidated financial statements.

F-16

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

Deferred Leasing Costs

Costs associated with leasing our single-family residential properties, which consist primarily of
commissions paid to leasing agents, are deferred in the period in which they are incurred as a component of
deferred leasing costs and are subsequently amortized over the lease term. Deferred leasing costs are included as
a component of other assets, net within our consolidated balance sheets and their amortization is classified as
property operating and maintenance within the consolidated statements of operations (see Note 5). Costs incurred
in connection with our leasing activities that do not result in the execution of a lease are expensed in the period
incurred.

Goodwill

In connection with the Mergers, we recorded goodwill, which is not amortized as it has an indefinite life.
We test goodwill for impairment annually, on October 31st, or more frequently if circumstances indicate that the
goodwill carrying value may exceed its fair value. As of December 31, 2019, no impairment of goodwill has
been recorded.

Fair Value Measurements

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an
orderly transaction between two willing parties. This amount is determined based on an exit price approach,
which contemplates the price that would be received to sell an asset (or paid to transfer a liability) in an orderly
transaction between market participants at the measurement date. GAAP has established a valuation hierarchy
based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A
financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. The three levels are defined as follows:

Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets;

Level 2 — Inputs to the valuation methodology include quoted prices for similar assets or liabilities in
active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument; and

Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.

See Note 11 for further information related to our fair value measurements.

Earnings Per Share

We present both basic and diluted earnings (loss) per common share (“EPS”) in our consolidated financial

statements. Basic EPS excludes dilution and is computed by dividing net income (loss) available to common
stockholders for the period by the weighted-average number of shares of common stock outstanding for the
period, excluding non-vested share-based awards. Our share-based awards consist of restricted stock units
(“RSUs”), including certain RSUs that contain performance and market based vesting conditions (“PRSUs”), and
Outperformance Awards (as defined in Note 10) (see Share-Based Compensation Expense below). Diluted EPS
reflects the maximum potential dilution that could occur from non-vested share-based awards and the convertible
senior notes using the “if-converted” method. For diluted EPS, the numerator is adjusted for any changes in net
income (loss) that would result from the assumed conversion of these potential shares of common stock.
Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

F-17

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

All outstanding non-vested share-based awards with nonforfeitable rights to dividends or dividend

equivalents that participate in undistributed earnings with common stock are considered participating securities,
as identified in Note 10. As such, the two-class method of computing EPS is required, unless another method is
determined to be more dilutive. 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 equivalents and
participation rights in undistributed earnings in periods when we have net income.

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 in our 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.
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 sale proceeds of the related interest rate caps are intended to offset each other. 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”) (or a
comparable or successor rate). 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 in our consolidated balance sheets. For Non-Designated
Hedges, changes in fair value are reflected within interest expense in the consolidated statements of operations.
For Designated Hedges, changes in fair value are reported as a component of other comprehensive income (loss)
in our consolidated balance sheets and reclassified into earnings as interest expense in our consolidated
statements of operations when the hedged transactions affect earnings. 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”), all of which were canceled or converted into other
interests in connection with the IPO (see Note 10). Subsequent to the IPO, we have issued shared-based awards
that settle in shares of common stock.

We recognize share-based compensation expense for share-based awards 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. The

F-18

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

grant-date fair value of RSUs and PRSUs with performance condition vesting criteria are generally based on the
closing price of our common stock on the grant date. However, the grant-date fair values for PRSUs and
Outperformance Awards with market condition vesting criteria are based on Monte-Carlo option pricing models.
Compensation expense for shared-based awards with performance conditions is adjusted based on the probable
outcome of the performance conditions as of each reporting period.

Additional compensation expense is recognized if modifications to existing share-based award 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 components of general and administrative expense and
property management expense in our consolidated statements of operations. See Note 10 for further discussion of
share-based compensation expense.

Income Taxes

As a result of the pre-IPO reorganization transactions, the following occurred: (1) the Invitation Homes

Partnerships transferred all assets, liabilities, and operations to INVH through certain mergers and related
transactions; and (2) INVH became subject to the REIT election made by one of the Invitation Homes
Partnerships (the “Predecessor REIT”) during the taxable year ended December 31, 2013. Following the Mergers
on November 16, 2017, the assets and income derived from the assets acquired from SWH became the assets and
income of INVH.

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 stockholders. This treatment substantially 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 United States federal income taxes at regular corporate rates (including,
for taxable years beginning prior to January 1, 2018, 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, for taxable years beginning prior to
January 1, 2018, 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 (excluding the Predecessor

REIT) 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 reorganization 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

F-19

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

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 (“TRSs”).

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 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 2016 to present.

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”) 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. The
CODM evaluates operating performance and allocates resources on a total portfolio basis. The CODM utilizes
net operating income 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 with a focus on growing accretively in high-growth locations where we have
greater scale and density.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments, which changes how companies will 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 financial asset. The new standard will be effective for annual

F-20

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

reporting periods beginning after December 15, 2019, and interim periods within that reporting period, with early
adoption permitted beginning after December 15, 2018 and interim periods within that reporting period. We do
not anticipate the adoption of this standard to have a material impact on our consolidated financial statements.

Note 3 — Investments in Single-Family Residential Properties

The following table sets forth the net carrying amount associated with our properties by component:

December 31,
2019

December 31,
2018

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Single-family residential property . . . . . . . . . . . . . .
Capital improvements . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,499,346
13,121,179
513,269
113,370

$ 4,561,441
13,026,317
525,670
116,546

Total gross investments in the properties . . . .
Less: accumulated depreciation . . . . . . . . . . . . . . .

18,247,164
(2,003,972)

18,229,974
(1,543,914)

Investments in single-family residential

properties, net

. . . . . . . . . . . . . . . . . . . . . . .

$16,243,192

$16,686,060

As of December 31, 2019 and 2018, the carrying amount of the residential properties above includes
$119,608 and $120,438, respectively, of capitalized acquisition costs (excluding purchase price), along with
$65,747 and $66,449, respectively, of capitalized interest, $25,565 and $25,670, respectively, of capitalized
property taxes, $4,616 and $4,694, respectively, of capitalized insurance, and $2,836 and $2,779, respectively, of
capitalized HOA fees.

During the years ended December 31, 2019, 2018, and 2017, we recognized $529,205, $511,988, and
$297,627, respectively, of depreciation expense related to the components of the properties, $0, $37,517, and
$8,223, respectively, of amortization related to in-place lease intangible assets, and $4,514, $11,036, and $3,728,
respectively, of depreciation and amortization related to corporate furniture and equipment. These amounts are
included in depreciation and amortization in the consolidated statements of operations. Further, during the years
ended December 31, 2019, 2018, and 2017, impairments totaling $14,210, $6,709, and $2,231, respectively, have
been recognized and are included in impairment and other in the consolidated statements of operations.

Note 4 — Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the
consolidated balance sheets that sum to the total of such amounts shown in the consolidated statements of cash
flows:

December 31,
2019

December 31,
2018

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92,258
193,987

144,940
215,051

Total cash, cash equivalents, and restricted

cash shown in the consolidated statements
of cash flows . . . . . . . . . . . . . . . . . . . . . . . .

286,245

359,991

F-21

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

Pursuant to the terms of the mortgage loans and Secured Term Loan (as defined in Note 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) property tax reserves; (ii) insurance reserves; (iii) capital expenditure reserves; and (iv) HOA
reserves. The reserve accounts associated with our mortgage loans and Secured Term Loan are under the sole
control of the loan servicer. Additionally, we hold security deposits pursuant to resident lease agreements that we
are required to segregate. We are also required to hold letters of credit by certain of our insurance policies.
Accordingly, amounts funded to these reserve accounts, security deposit accounts, and other restricted accounts
have been classified on our consolidated balance sheets as restricted cash.

The amounts funded, and to be funded, to the reserve accounts are subject to formulae included in the
mortgage loan and Secured Term Loan agreements and are to be released to us subject to certain conditions
specified in the loan agreements being met. To the extent that an event of default were to occur, the loan servicer
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.

The balances of our restricted cash accounts, as of December 31, 2019 and 2018, are set forth in the table

below. As of December 31, 2019 and 2018, no amounts were funded to the insurance accounts as the conditions
specified in the mortgage loan and Secured Term Loan agreements that require such funding did not exist.

December 31,
2019

December 31,
2018

Resident security deposits . . . . . . . . . . . . . . . . . . . . .
Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . .
Letters of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special and other reserves . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$148,186
24,034
10,443
5,627
3,459
2,238
$193,987

$150,346
26,677
26,163
5,269
3,444
3,152
$215,051

Note 5 — Other Assets

As of December 31, 2019 and 2018, the balances in other assets, net are as follows:

December 31,
2019

December 31,
2018

Investments in debt securities, net . . . . . . . . . . . . . . .
Held for sale assets(1) . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in unconsolidated joint venture . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Rent and other receivables, net
ROU lease assets — operating and finance, net
. . . .
Corporate fixed assets, net . . . . . . . . . . . . . . . . . . . . .
Deferred leasing costs, net . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs, net . . . . . . . . . . . . . . . . . . .
Derivative instruments (Note 7)
. . . . . . . . . . . . . . . .
Amounts deposited and held by others . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$316,991
116,529
54,778
32,106
25,244
13,768
9,825
7,427
2,765
1,643
1,348
22,842
$605,266

$366,599
154,077
56,622
30,970
33,117
N/A
11,792
6,316
5,134
75,405
1,010
18,128
$759,170

F-22

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

(1) As of December 31, 2019 and 2018, 478 and 738 properties, respectively, are classified as held for sale.

Investments in Debt Securities, net

In connection with certain of our Securitizations (as defined in Note 6), we have retained and purchased

certificates totaling $316,991, net of unamortized discounts of $2,641, as of December 31, 2019. These
investments in debt securities are classified as held to maturity investments. As of December 31, 2019 and 2018,
there were no gross unrecognized holding gains or losses, and there were no other than temporary impairments
recognized in accumulated other comprehensive loss. As of December 31, 2019, our retained certificates are
scheduled to mature over the next two months to eight 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 managing
member of the joint venture and is responsible for the operation and management of the properties, subject to
FNMA’s approval of major decisions. As of December 31, 2019 and 2018, the joint venture owned 641 and
754 properties, respectively.

Rent and Other Receivables

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.

ROU Lease Assets — Operating and Finance, net

The following table presents supplemental information related to leases into which we have entered as a

lessee as of December 31, 2019:

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average remaining lease term . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . .

December 31, 2019

Operating
Leases

$ 12,552
13,787
3.8 years
4.0%

Finance
Leases

1,216
1,210
2.0 years
4.0%

Deferred Financing Costs, net

In connection with our Revolving Facility (as defined in Note 6), we incurred $9,673 of financing costs
during the year ended December 31, 2017, which have been deferred as other assets, net on our consolidated
balance sheets. These deferred financing costs are being amortized as interest expense on a straight-line basis
over the term of the Revolving Facility. As of December 31, 2019 and 2018, the unamortized balances of these
deferred financing costs are $2,765 and $5,134, respectively.

Investment in Equity Securities

On May 15, 2018, a convertible promissory note that we acquired on March 12, 2018 converted into equity
securities without a readily determinable fair value. We have elected to measure the investment at cost, less any

F-23

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

impairment, plus or minus changes resulting from observable price changes for an identical or similar investment
in the same issuer. As of December 31, 2019 and 2018, the carrying amount of our investment in equity
securities was $16,650 and $10,170, respectively, and is included within other in the table above. During the year
ended December 31, 2019, we recorded $6,480 of unrealized gains on our investment in equity securities which
is included in other, net in the consolidated statement of operations. No unrealized gains or losses were recorded
during the year ended December 31, 2018.

Note 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 securitizations 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 December 31, 2019 and

2018:

Origination
Date

Maturity
Date(1)

Interest
Rate(2)

Range of
Spreads(3)

December 31,
2019

December 31,
2018

Outstanding Principal
Balance(4)

June 7, 2019
June 9, 2027

N/A
April 28, 2017

CSH 2016-2 . . . . . . . .
IH 2017-1(5) . . . . . . . .
. . . . . September 29, 2017 October 9, 2020
SWH 2017-1(6)
IH 2017-2(6) . . . . . . . . November 9, 2017 December 9, 2020
IH 2018-1(6)(7)
IH 2018-2(6)(8)
IH 2018-3(6)(8)
IH 2018-4(6) . . . . . . . . November 7, 2018

March 9, 2020
June 9, 2020
July 9, 2020
January 9, 2021

February 8, 2018
May 8, 2018
June 28, 2018

. . . . . .
. . . . . .
. . . . . .

N/A
N/A

— %
4.23%
3.32% 102-347 bps
2.90% 91-186 bps
2.87% 76-206 bps
3.11% 95-230 bps
3.15% 105-230 bps
3.18% 115-225 bps

— $ 442,614
995,826
764,685
856,238
911,827
1,035,749
1,296,959
959,578

995,520
744,092
624,475
793,720
957,135
1,213,035
938,430

Total Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,266,407
(27,946)

7,263,476
(61,822)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,238,461 $7,201,654

(1) Maturity date represents repayment date for mortgage loans which have been repaid in full prior to

December 31, 2019. For all other mortgage loans, the maturity dates above reflect all extensions that have
been exercised.

(2) 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 December 31,
2019, LIBOR was 1.76%. 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.

(3) Range of spreads is based on outstanding principal balances as of December 31, 2019.
(4) Outstanding principal balance is net of discounts and does not include deferred financing costs, net.
(5) Net of unamortized discount of $2,641 and $2,993 as of December 31, 2019 and 2018, respectively.
(6) 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 Borrower Entity’s discretion (provided that there is no continuing event of

F-24

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

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 and IH 2017-2 mortgage loans have exercised the first extension option. The maturity dates
above reflect all extensions that have been exercised.

(7) On December 3, 2019, we submitted a notification to request an extension of the maturity of the IH 2018-1

mortgage loan from March 9, 2020 to March 9, 2021 upon approval.

(8) On February 7, 2020, we made voluntary prepayments of $15,000 and $60,000 on outstanding borrowings
with unrestricted cash on hand against the outstanding balances of IH 2018-2 and IH 2018-3, respectively
(see Note 17).

Securitization Transactions

For each Securitization transaction, the Borrower Entity executed a loan agreement with a third party lender.

Except for IH 2017-1, each outstanding mortgage loan originally consisted of six floating rate components. The
two year initial terms are individually subject to three to five, 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 replacement 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 two 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 interest.

Each mortgage loan is secured by a pledge of the equity in the assets of the respective Borrower Entities, as
well as first-priority mortgages on the underlying properties and a grant of security interests in all of the related
personal property. As of December 31, 2019 and 2018, a total of 37,040 and 41,644 homes, respectively, with a
net book value of $7,137,576 and $8,385,430, 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 Trusts

Concurrent with the execution of each mortgage loan agreement, the respective third party lender sold each

loan it originated to individual depositor entities (the “Depositor Entities”) who subsequently transferred each
loan to Securitization-specific trust entities (the “Trusts”). The Depositor Entities for our currently outstanding
Securitizations are wholly owned subsidiaries. We accounted for the transfers of the individual Securitizations
from the wholly owned Depositor Entities to the respective Trusts as sales under ASC 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 classes of certificates which

The Trusts are structured as pass-through entities that receive 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

F-25

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

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 consolidated financial statements. We have evaluated our interests in
certain 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 retained 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.

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.

To fulfill these requirements, Class G certificates for CSH 2016-2 were issued in an amount equal to 5% of

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 $316,991 and $366,599 as of December 31, 2019 and 2018, respectively, and
are classified as held to maturity investments and recorded in other assets, net on the consolidated balance sheets
(see Note 5).

Loan Covenants

F-26

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

Prepayments

For the mortgage loans, prepayments of amounts owed by us are generally not permitted under the terms of
the respective mortgage loan agreements unless such prepayments are made pursuant to the voluntary election or
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 years ended December 31, 2019, 2018, and 2017, we made voluntary and
mandatory prepayments of $997,421, $4,579,594, and $2,951,008, respectively, under the terms of the mortgage
loan agreements. During the year ended December 31, 2019, prepayments included the full repayment of the
CSH 2016-2 mortgage loan. During the year ended December 31, 2018, prepayments included full repayment of
the CAH 2014-1, CAH 2014-2, CAH 2015-1, CSH 2016-1, IH 2015-1, IH 2015-2, and IH 2015-3 mortgage
loans. During the year ended December 31, 2017, prepayments included the full repayment of the IH 2013-1,
IH 2014-1, IH 2014-2, and IH 2014-3 mortgage loans.

Secured Term Loan

On June 7, 2019, 2019-1 IH Borrower LP, a consolidated subsidiary (“2019-1 IH Borrower” and one of our

The following table sets forth a summary of our Secured Term Loan indebtedness as of December 31, 2019

and 2018:

Secured Term Loan . . . . . . . . . . . . . . . . . . . .
Deferred financing costs, net . . . . . . . . . . . . .

June 9, 2031

3.59% $

403,464
(2,486)

Secured Term Loan, net . . . . . . . . . . . . .

400,978

—
—

—

Maturity
Date

Interest
Rate(1)

December 31,
2019

December 31,
2018

F-27

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

Collateral

As of December 31, 2019, a total of 3,333 homes with a net book value of $734,759 are included in the
Secured Term Loan’s collateral pool. 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 mortgage loan agreements, (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 respective mortgage loan agreements. 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 December 31, 2019, and through the date our 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

Term Loan Facility and Revolving Facility

F-28

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

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 then-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 the Credit Facility as

of December 31, 2019 and 2018:

Maturity
Date

Interest
Rate(1)

December 31,
2019

December 31,
2018

Term Loan Facility . . . . . . . . . . . . . . . . .
Deferred financing costs, net . . . . . . . . . .

February 6, 2022

3.46% $1,500,000
(6,253)

$1,500,000
(9,140)

Term Loan Facility, net . . . . . . . . . .

$1,493,747

$1,490,860

Revolving Facility . . . . . . . . . . . . . . . . . .

February 6, 2021

3.51% $

—

(1)

Interest Rate and Fees

Borrowings under the 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 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 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 2.30% in the case of LIBOR rate loans. In addition, the 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.

Prepayments and Amortization

F-29

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

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.

Loan Covenants

The Credit Facility contains certain customary affirmative and negative covenants and events of default.

The Credit Facility also requires us, on a consolidated basis with our subsidiaries, to maintain a

Guarantees and Security

The obligations under the Credit Facility are guaranteed on a joint and several basis by each of our direct

The Credit Facility is collateralized by first priority or equivalent security interests in all the capital stock of,

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. On December 28, 2018, we notified note holders of our intent to settle conversions of the 2019
Convertible Notes in shares of common stock. 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.

F-30

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

In 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.

The following table summarizes the terms of the Convertible Senior Notes outstanding as of December 31,

2019 and 2018:

Coupon
Rate

Effective
Rate(1)

Conversion
Rate(2)

Maturity
Date

Principal Amount

Remaining
Amortization
Period

December 31,
2019

December 31,
2018

2019 Convertible Notes . . . . — % — %
2022 Convertible Notes . . . . 3.50% 5.12% 43.7694 January 15, 2022 2.04 years

July 1, 2019

N/A

N/A $

— $ 229,993
345,000

345,000

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unamortized fair value adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

345,000
(10,701)

574,993
(17,692)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 334,299 $ 557,301

(1) 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. For the
2019 Convertible Notes, the effective interest rate was 4.92%. This rate included the effect of the
adjustment to the fair value of the debt as of the Merger Date and reduced the initial liability recorded to
$223,185.

Terms of Conversion

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 $). 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. For the years ended December 31, 2019, 2018, and 2017, interest expense for the 2019
Convertible Notes, including non-cash amortization of discounts, was $5,586, $11,057, and $1,384, respectively.

As of December 31, 2019, the conversion rate applicable to the 2022 Convertible Notes is 43.7694 shares of

F-31

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

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 their
principal amount by $107,560 as of December 31, 2019 as the closing market price of our common stock of
$29.97 per common share (actual $) exceeds the implicit conversion price. For the years ended December 31,
2019, 2018, and 2017, interest expense for the 2022 Convertible Notes, including non-cash amortization of
discounts, was $16,929, $16,690, and $2,088, respectively.

General Terms

The indenture contains customary terms and covenants and events of default. If an event of default occurs

Debt Maturities Schedule

The following table summarizes the contractual maturities of our debt as of December 31, 2019:

Year

Mortgage
Loans(1)

Secured
Term Loan

Term Loan
Facility

Revolving
Facility

Convertible
Senior Notes

Total

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,332,457 $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . .

938,430
—
—
—
995,520

— $
— $
—
—
— 1,500,000
—
—
—
—
—
403,464

Total . . . . . . . . . . . . . . . . . . . . . . . . 6,266,407
(27,946)

. . . .

Less: deferred financing costs, net
Less: unamortized fair value

403,464 1,500,000
(6,253)

(2,486)

adjustment

. . . . . . . . . . . . . . . . . . . . .

—

— $
—
—
—
—
—

— $4,332,457
938,430
—
345,000 1,845,000

—
—
—
—
— 1,398,984

—
—

—

345,000 8,514,871
(36,685)

—

(10,701)

Total . . . . . . . . . . . . . . . . . . . . . . . . $6,238,461 $ 400,978 $1,493,747 $

— $ 334,299 $8,467,485

(1) The maturity dates of the obligations are reflective of all extensions that have been exercised.

F-32

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

Note 7 — Derivative Instruments

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, 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. Prior to January 31, 2017,
all swaps were accounted for as non-designated hedges as the criteria for designation had not been met at that
time.

In addition, in connection with the Mergers, we acquired various interest rate swap instruments, which we

designated for hedge accounting purposes. On the Merger Date, we recorded these interest rate swaps at their
aggregate estimated fair value of $21,135. Over the terms of each of these swaps, an amount equal to the Merger
Date fair value will be amortized and reclassified into earnings.

The table below summarizes our interest rate swap instruments as of December 31, 2019:

Agreement Date

Forward
Effective Date

Maturity
Date

Strike
Rate

Index

Notional
Amount

December 21, 2016 . . . . . . . . . . . . . . February 28, 2017
January 31, 2022
December 11, 2019(1) . . . . . . . . . . . . . February 28, 2017 December 31, 2024
January 12, 2017 . . . . . . . . . . . . . . . . February 28, 2017
January 13, 2017 . . . . . . . . . . . . . . . . February 28, 2017
January 20, 2017 . . . . . . . . . . . . . . . . February 28, 2017
January 15, 2019
January 10, 2017 . . . . . . . . . . . . . . . .
January 31, 2019
April 19, 2018 . . . . . . . . . . . . . . . . . .
February 15, 2019(2) . . . . . . . . . . . . . . March 15, 2019
April 19, 2018 . . . . . . . . . . . . . . . . . . March 15, 2019
April 19, 2018 . . . . . . . . . . . . . . . . . . March 15, 2019
July 15, 2019
June 3, 2016 . . . . . . . . . . . . . . . . . . . .
January 15, 2020
January 10, 2017 . . . . . . . . . . . . . . . .
March 9, 2020
May 8, 2018 . . . . . . . . . . . . . . . . . . . .
June 9, 2020
May 8, 2018 . . . . . . . . . . . . . . . . . . . .
July 15, 2020
June 3, 2016 . . . . . . . . . . . . . . . . . . . .
August 7, 2020
June 28, 2018 . . . . . . . . . . . . . . . . . . .
January 15, 2021
January 10, 2017 . . . . . . . . . . . . . . . .
December 9, 2019(3) . . . . . . . . . . . . . .
July 15, 2021
November 7, 2018 . . . . . . . . . . . . . . . March 15, 2022
November 7, 2018 . . . . . . . . . . . . . . . March 15, 2022

(1) On December 11, 2019, we modified an interest rate swap instrument to extend the maturity date from January 31, 2022

to December 31, 2024 with a decrease in the strike rate from 1.97% to 1.74%.

F-33

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

(2) On February 15, 2019, we terminated an interest rate swap instrument and simultaneously entered into a new interest rate
swap instrument with identical economic terms, except that the strike rate increased 2 bps, from 2.21% to 2.23%, and
collateral posting requirements were removed.

(3) On December 9, 2019, we modified the start date of an interest rate swap instrument from January 31, 2020 to July 15,

2021. We paid the counterparty $8,239 in connection with this modification.

During the years ended December 31, 2019, 2018, and 2017, such derivatives were used to hedge the
variable cash flows associated with existing variable-rate interest payments. 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 12 months, we estimate that $44,887 will be reclassified to
earnings as a decrease in interest expense.

Non-Designated Hedges

Concurrent with entering into certain of the mortgage loan agreements and in connection with the Mergers,

Fair Values of Derivative Instruments on the Consolidated Balance Sheets

The table below presents the fair value of our derivative financial instruments as well as their classification

on the consolidated balance sheets as of December 31, 2019 and 2018:

Asset Derivatives

Fair Value as of

Liability Derivatives

Fair Value as of

Balance
Sheet
Location

December 31,
2019

December 31,
2018

Balance
Sheet Location

December 31,
2019

December 31,
2018

Derivatives designated as
hedging instruments:

Interest rate swaps . . . . . . Other assets $

1,643 $

74,929 Other liabilities $

275,679 $

90,527

Derivatives not designated as

hedging instruments:

Interest rate caps . . . . . . . Other assets

—

476 Other liabilities

—

440

Total . . . . . . . . . . . . .

1,643 $

75,405

275,679 $

90,967

F-34

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

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 December 31, 2019 and 2018:

December 31, 2019

Gross
Amounts
Offset in the
Statement of
Financial
Position

Net Amounts of
Assets/
Liabilities
Presented in
the Statement
of Financial
Position

Gross Amounts
of Recognized
Assets/
Liabilities

Gross Amounts Not Offset in the
Statement of Financial Position

Financial
Instruments

Cash
Collateral
Received

Net
Amount

Offsetting assets:

Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,643

Offsetting liabilities:

Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$275,679

$—

1,643

$(1,054)

$275,679

$(1,054)

$—

589

$274,625

December 31, 2018

Gross
Amounts
Offset in the
Statement of
Financial
Position

Net Amounts of
Assets/
Liabilities
Presented in
the Statement
of Financial
Position

Gross Amounts
of Recognized
Assets/
Liabilities

Gross Amounts Not Offset in the
Statement of Financial Position

Financial
Instruments

Cash
Collateral
Received

Offsetting assets:

Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$75,405

Offsetting liabilities:

Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$90,967

$—

$75,405

$(30,374)

$90,967

$(30,374)

$—

Net
Amount

$45,031

$60,593

Effect of Derivative Instruments on the Consolidated Statements of Comprehensive Loss and the Consolidated
Statements of Operations

The tables below present the effect of our derivative financial instruments in the consolidated statements of
comprehensive loss and the consolidated statements of operations for the years ended December 31, 2019, 2018,
and 2017:

Amount of Gain (Loss)
Recognized in OCI on Derivative

For the Years Ended
December 31,

2019

2018

2017

Location of
Gain (Loss)
Reclassified
from
Accumulated
OCI into Net
Income
(Loss)

Amount of Gain (Loss)
Reclassified from
Accumulated OCI into Net
Income (Loss)

Total Amount of Interest
Expense Presented in the
Consolidated Statements of
Operations

For the Years Ended
December 31,

2019

2018

2017

2019

2018

2017

Derivatives in cash flow
hedging relationships:

Interest rate

swaps . . . . . . . . . . . . . $(244,126) $(43,211) $31,636

Interest
expense

$20,763 $18,627 $(16,708) $367,173 $383,595 $256,970

F-35

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

Location of
Loss
Recognized in
Net Income (Loss)
on Derivative

Amount of Loss Recognized in Net
Income (Loss) on Derivative

For the Years Ended December 31,

2019

2018

2017

Derivatives not designated as hedging

instruments:

Interest rate swaps . . . . . . . . . . . . . . . . . . . .
Interest rate caps . . . . . . . . . . . . . . . . . . . . . .

Interest expense
Interest expense

$ —

(126)

(641)

$(3,674)
(364)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (126)

$ (641)

$(4,038)

Credit-Risk-Related Contingent Features

The agreements with our derivative counterparties which govern our interest rate swap agreements 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 December 31, 2019, the fair value of certain derivatives in a net liability position was $274,625. If we
had breached any of these provisions at December 31, 2019, we could have been required to settle the obligations
under the agreements at their termination value, which includes accrued interest and excludes the
nonperformance risk related to these agreements, of $289,228.

As of December 31, 2018, we had not posted any collateral for our interest rate swap agreements as the
conditions specified in the derivative agreements that require such funding did not exist. As of December 31,
2019, none of our derivative agreements contain provisions that require us to post collateral deposits.

Note 8 — Equity

Stockholders’ Equity

As of December 31, 2019, we have issued 541,642,725 shares of common stock to the public, the pre-IPO

owners, in settlement of RSUs (see Note 10), and in conversion of the 2019 Convertible Notes and vested
OP Units. In addition, we issue OP Units from time to time which, upon vesting, are redeemable for shares of our
common stock on a one-for-one basis or, in our sole discretion, cash and are reflected as non-controlling interests
on our consolidated balance sheets and statements of equity.

During the years ended December 31, 2019, 2018, and 2017, we issued 20,994,748, 1,474,835, and
519,173,142 shares of common stock, respectively. As of December 31, 2019, 3,463,285 outstanding OP Units
are redeemable.

Dividends

To qualify as a REIT, we are required to distribute annually to our stockholders 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 stockholders, which in the aggregate are approximately equal to or
exceed our net taxable income in the relevant year. The timing, form, and amount of distributions, if any, to our
stockholders, will be at the sole discretion of our board of directors.

F-36

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

The following table summarizes our dividends declared from January 1, 2018 through December 31, 2019:

Q4-2019 . . . . . . . . . . . . . . .
Q3-2019 . . . . . . . . . . . . . . .
Q2-2019 . . . . . . . . . . . . . . .
Q1-2019 . . . . . . . . . . . . . . .
Q4-2018 . . . . . . . . . . . . . . .
Q3-2018 . . . . . . . . . . . . . . .
Q2-2018 . . . . . . . . . . . . . . .
Q1-2018 . . . . . . . . . . . . . . .

Record Date

November 13, 2019
August 15, 2019
May 15, 2019
February 13, 2019
November 14, 2018
August 16, 2018
May 15, 2018
February 13, 2018

Amount
per Share

Pay Date

Total Amount
Declared

$0.13
0.13
0.13
0.13
0.11
0.11
0.11
0.11

November 27, 2019
August 30, 2019
May 31, 2019
February 28, 2019
November 30, 2018
August 31, 2018
May 31, 2018
February 28, 2018

$70,693
70,465
68,334
67,965
57,518
57,563
57,559
57,432

On January 30, 2020, our board of directors declared a dividend of $0.15 per share to stockholders of record

on February 12, 2020, which is payable on February 28, 2020 (see Note 17).

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 year ended December 31, 2019, we sold
1,957,139 shares of our common stock under our ATM Equity Program, generating net proceeds of $55,263 after
giving effect to Agent commissions and other costs totaling $1,696. As of December 31, 2019, $743,041 remains
available for future offerings under the ATM Equity Program.

Combined Equity

Prior to the IPO, our business was conducted through the Invitation Homes Partnerships, which did not have

a common capital structure. However, the same board of directors was responsible for directing the significant
activities of the Invitation Homes Partnerships and INVH LP on a combined basis. Profits and losses, and cash
distributions were allocated in accordance with the terms of each entity’s respective organizational documents.

As further described in Note 10, we granted certain individuals incentive compensation units in the

Invitation Homes Partnerships, the 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. As a result of the pre-IPO reorganization transactions, all
components of this combined equity were converted into shares of our common stock, and all Class B Units were
either canceled or converted into interests in other entities.

Note 9 — Related Party Transactions

Management Services

One of our 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 years ended December 31, 2019, 2018,
and 2017, we earned $2,823, $2,834, and $385, respectively, of management fees which are included in other, net
in the accompanying consolidated statements of operations.

Note 10 — Share-Based Compensation

Prior to completion of the IPO, our board of directors adopted, and our stockholders approved, the Invitation

Homes Inc. 2017 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) to provide a means through which to

F-37

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

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 to align their interests with
those of our stockholders. Under the Omnibus Incentive Plan, we may issue up to 16,000,000 shares. Our share-
based awards consist of time-vesting RSUs, PRSUs, and Outperformance Awards (defined below). Time-vesting
RSUs are participating securities for EPS purposes, and PRSUs and Outperformance Awards are not.

Share-Based Awards

The following summarizes our share-based award activity since the IPO, including annual and other award

activity, RSUs and restricted stock awards (“RSAs”) issued in connection with the IPO, RSUs issued and
assumed in connection with the Mergers, and the Outperformance Awards.

Annual Long Term Incentive Plan (“LTIP”):

• Annual LTIP Awards Granted: During the years ended December 31, 2019, 2018, and 2017, we

granted 534,547, 644,733, and 874,410 RSUs, respectively, pursuant to 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 LTIP awards issued during the year ended December 31, 2017 are
divided into three tranches (“Tranche 1,” “Tranche 2,” and “Tranche 3”), which vest over periods
ranging from one to four years.

The time-vesting RSUs granted during the years ended December 31, 2019 and 2018 vest in three
equal annual installments based on an anniversary date of March 1, 2019 and March 31, 2018,
respectively. The time-vesting RSUs granted during the year ended December 31, 2017 vest in
installments based on an anniversary date of March 1, 2017 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 PRSUs granted during the years ended December 31, 2019 and 2018 may be earned based on the
achievement of certain measures over a three year performance period. The PRSUs granted during the
year ended December 31, 2017 may be earned based on the achievement of certain measures over an
approximate one year, two year, or three year performance period, correlated to Tranche 1, Tranche 2,
and Tranche 3, respectively. 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 PRSUs are earned and vest after the end
of the performance period on the date on which the performance results are certified (a “Certification
Date”) by our compensation and management development committee (the “Compensation
Committee”), except for Tranche 3 of the 2017 LTIP Awards of which 50% vests at the Certification
Date and 50% on December 31, 2020.

All of the LTIP Awards are subject to certain change in control and retirement eligibility provisions
that may impact these vesting schedules.

• PRSU Results: During the years ended December 31, 2019 and 2018, certain PRSUs vested and

achieved performance in excess of the target level, resulting in the issuance of an additional 23,392 and
39,871 shares of common stock, respectively. 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 52,896 awards during the year ended December 31, 2019. Such
awards are reflected as an increase in the number of awards forfeited/canceled in the table below.

F-38

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

Other Awards

• Director Awards: During the year ended December 31, 2019, we granted 53,704 time-vesting RSUs to
members of our board of directors, which awards will fully vest on the date of INVH’s 2020 annual
stockholders meeting, subject to continued service on the board of directors through such date. During
the years ended December 31, 2018 and 2017, INVH issued 52,114 and 69,875 time-vesting RSUs,
which awards fully vested on the dates of INVH’s 2019 and 2018 annual stockholders meetings,
respectively.

• Merger-Related Awards: During the year ended December 31, 2018, the grant date was established for
168,184 PRSUs issued in connection with the Mergers. These Merger-related PRSUs may be earned
based on the achievement of certain measures over performance periods that began on the Merger Date
and end approximately one and a half to three years thereafter. The number of Merger-related 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. During the
year ended December 31, 2019, 77,926 of such PRSUs were forfeited, and 90,258 remain outstanding
as of December 31, 2019. In general, the remaining outstanding Merger-related PRSUs are earned on
the applicable Certification Date and will vest on the later of the Certification Date or the originally
scheduled vesting date. During the year ended December 31, 2017, in connection with the Mergers,
INVH issued 150,927 time-vesting awards which were scheduled to vest over a three year service
period beginning on the Merger Date. During the year ended December 31, 2019, vesting of all
remaining time-vesting merger-related awards was accelerated in accordance with the terms of the
award agreement; and no such time-vesting merger-related awards remain outstanding as of
December 31, 2019.

• Bonus and Retention Awards: During the year ended December 31, 2018, we granted 136,941 RSUs to
employees (the “2018 Bonus Awards”). Each of the 2018 Bonus Awards is a time-vesting award which
vests in three equal annual installments based on an anniversary date of March 1, 2018, subject to
continued employment through the applicable vesting date. During the year ended December 31, 2017,
we granted 307,327 RSUs (the “Retention Awards”) each of which award is a time-vesting award with
service periods, as amended, ranging from two years to four years.

IPO Related: In connection with the IPO, we issued the following RSAs and RSUs:

• Conversion of Pre-IPO Awards: In January 2017, as more fully described below, certain of the Class B
Units were converted into 62,529 RSAs, all of which have vested in accordance with the original terms
of the Class B Unit award agreements as of December 31, 2019.

Recipients of certain Class B Units were also granted bonus awards (the “IH Bonus Awards”) entitling
the recipients to receive bonus payments in connection with an IPO or exit event. Upon completion of
the INVH IPO, the $4,825 of IH Bonus Awards were settled in the form of 241,250 RSUs that were
fully vested upon issuance.

•

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. In January 2017, the $59,797 of awards were converted into 2,988,120 time-vesting RSUs that
generally vested in three equal annual installments, commencing on the completion of the INVH IPO
and on the first and second anniversaries thereafter, unless modified in connection with the Mergers or
the resulting integration. As of December 31, 2019, all Supplemental Bonus Plan awards have vested
or have been forfeited.

F-39

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

Assumed Awards

In connection with the Mergers, we assumed the terms of award agreements governing 949,698 (as
calculated in number of INVH shares of common stock) non-vested RSUs granted prior to the Mergers under
SWH’s equity incentive plans. Each assumed award is a time-vesting award that was issued with service periods
ranging from three years to four years, unless accelerated pursuant to the original agreement or otherwise
modified in connection with the Mergers or the resulting integration. As of December 31, 2019, 61,561 awards
remain outstanding and are scheduled to vest in March 2020.

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 Outperformance
Awards 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 $11,770 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 (including RSAs) and
PRSUs, other than Outperformance Awards, during the years ended December 31, 2019 and 2018 and the period
from January 31, 2017 through December 31, 2017:

Time-Vesting Awards

PRSUs

Total Share-Based Awards(1)

Weighted
Average Grant
Date Fair Value
(Actual $)

Number

Weighted
Average Grant
Date Fair Value
(Actual $)

Balance, January 31, 2017 . . . . .

—

$ —

Granted . . . . . . . . . . . . . . . . 4,042,601
Assumed in the Mergers . . .
949,698
. . . . . . . . . . . . . . . (2,147,554)
Vested(2)
(148,843)
Forfeited / canceled . . . . . .

Balance, December 31, 2017 . . . 2,695,902
387,746
. . . . . . . . . . . . . . . (1,351,019)
(136,985)

Granted . . . . . . . . . . . . . . . .
Vested(2)
Forfeited / canceled . . . . . .

Balance, December 31, 2018 . . . 1,595,644
242,224
. . . . . . . . . . . . . . . (1,076,025)
(76,774)

Granted . . . . . . . . . . . . . . . .
Vested(2)
Forfeited / canceled . . . . . .

20.28
23.01
(19.93)
(20.42)

21.51
21.94
(21.38)
(22.69)

21.63
23.44
(21.46)
(22.03)

—
651,837
—
(101,448)
(142,287)

408,102
654,137
(133,496)
(40,010)

888,733
369,419
(83,938)
(249,138)

$ —

—

$ —

22.25
—
(22.34)
(22.18)

22.25
22.22
(23.11)
(22.44)

22.09
24.27
(21.21)
(21.75)

4,694,438
949,698
(2,249,002)
(291,130)

3,104,004
1,041,883
(1,484,515)
(176,995)

2,484,377
611,643
(1,159,963)
(325,912)

20.56
23.01
(20.04)
(21.28)

20.79
22.12
(21.54)
(22.63)

21.79
23.94
(21.45)
(21.81)

Balance, December 31, 2019 . . .

685,069

$ 22.48

925,076

$ 23.13

1,610,145

$ 22.86

(1) Total share-based awards excludes Outperformance Awards.

F-40

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

(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 years ended December 31, 2019,
2018, and 2017 was $30,526, $33,106, and $45,528, respectively. During the years ended December 31,
2019, 2018, and 2017, vested awards include the acceleration of 295,459, 374,162, and 652,368 RSUs,
respectively, pursuant to the terms and conditions of the Omnibus Incentive Plan and related award
agreements.

Grant-Date Fair Values

The grant-date fair values of the RSAs, time-vesting RSUs and PRSUs with performance condition vesting
criteria are generally based on the closing price of our common stock on the grant date. However, the grant-date
fair values for share-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 for such awards
granted during the years ended December 31, 2019, 2018, and 2017:

For the Years Ended December 31,

2019

2018

2017

Expected volatility(1)
. . . . . . . . . . . . . .
Risk-free rate . . . . . . . . . . . . . . . . . . . .
Expected holding period (years) . . . . .

17.2% – 17.4% 14.5% – 17.3%
2.25% – 2.42%
2.84 – 2.92

2.38%
2.71 – 2.84

25.0%
1.40%
0.52 – 2.52

(1) Expected volatility for awards granted during the years ended December 31, 2019 and 2018 was estimated

based on the historical volatility of INVH’s realized returns and the applicable index. Expected volatility for
awards granted during the year ended December 31, 2017 was estimated based on the leverage adjusted
historical volatility of certain of our peer companies over a historical term commensurate with the remaining
expected holding period.

Profits Interests — Class B Units

Prior to the IPO, the Invitation Homes Partnerships granted incentive compensation units to certain key
employees and directors, 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 one of the Invitation Homes
Partnerships, 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: In January 2017, certain of the Invitation Homes Partnerships issued
certain individuals a total of 9,838 Class B Units that were expected to vest based on terms and conditions similar
to all other Class B Units.

2017 Class B Unit Conversion: The pre-IPO reorganization transactions resulted in accelerated vesting of
7,520 Class B Units held by certain unitholders which resulted in additional share-based compensation expense

F-41

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

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 and certain directors (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, certain directors, and the one employee unitholder
noted above that did not convert, were converted into similar fully vested units of newly formed subsidiaries of
the pre-IPO owners.

The following table summarizes the activity related to the Class B Units for the period from December 31,

2016 through January 31, 2017, the date at which they were all canceled or converted:

Employee

Class B Units

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 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Converted to RSAs . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Converted to units of affiliated entities . . . .

9,915
85
(245)
(555)
(9,200)

4.2
14.0
(3.4)
(8.2)
(4.0)

39,638
9,753
(485)
(17,114)
(31,792)

2.5
—
(0.8)
(0.4)
(2.9)

49,553
9,838
(730)
(17,669)
(40,992)

$ 2.9
0.1
(1.7)
(0.6)
(3.2)

Balance, January 31, 2017 . . . . . . . . . . . . . . . . . .

— $ —

As of January 31, 2017, no Class B Units were outstanding.

Summary of Total Share-Based Compensation Expense

During the years ended December 31, 2019, 2018, and 2017, we recognized share-based compensation

expense as follows:

General and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Property management expense . . . . . . . . . . . . . . . . . . . . . .

$15,083
3,075

$23,999
5,500

$70,906
10,297

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$18,158

$29,499

$81,203

For the Years Ended December 31,

2019

2018

2017

As of December 31, 2019, there is $22,550 of unrecognized share-based compensation expense related to
non-vested share-based awards which is expected to be recognized over a weighted average period of 2.19 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

F-42

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

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 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 balance sheet classification and the fair values for the interest rate caps and swaps.

The following table displays the carrying values and fair values of financial instruments as of December 31,

2019 and 2018:

December 31, 2019

December 31, 2018

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Assets carried at historical cost on the

consolidated balance sheets:

Investments in debt securities(1)
Liabilities carried at historical cost on
the consolidated balance sheets:

. . . . . Level 2 $ 316,991 $ 318,299 $ 366,599 $ 365,196

Mortgage loans(2) . . . . . . . . . . . . . . . . . Level 2 $6,266,407 $6,292,261 $7,263,476 $7,235,685
Secured Term Loan(3)
. . . . . . . . . . . . . Level 3
Term Loan Facility(4) . . . . . . . . . . . . . . Level 3
Convertible Senior Notes(5) . . . . . . . . . Level 3

403,464
1,500,000
334,299

411,213
1,500,444
346,489

1,500,000
557,301

1,500,773
544,249

—

(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 $27,946 and $61,822 of

deferred financing costs as of December 31, 2019 and 2018, respectively.

(3) The carrying value of the Secured Term Loan excludes $2,486 of deferred financing costs as of

December 31, 2019.

(4) The carrying value of the Term Loan Facility excludes $6,253 and $9,140 of deferred financing costs as of

December 31, 2019 and 2018, respectively.

(5) The carrying values of the Convertible Senior Notes include unamortized discounts of $10,701 and $17,692

as of December 31, 2019 and 2018, respectively.

The fair values of our investment in debt securities and 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 following table displays the significant unobserverable inputs used to develop our Level 3 fair value
measurements as of December 31, 2019:

Quantitative Information about Level 3 Fair Value Measurement(1)

Fair Value

Valuation Technique

Unobservable
Input

Rate

Secured Term Loan . . . . . . . . . . . . . . . .
Term Loan Facility . . . . . . . . . . . . . . . .
Convertible Senior Notes . . . . . . . . . . .

$ 411,213 Discounted Cash Flow Effective Rate
1,500,444 Discounted Cash Flow Effective Rate
346,489 Discounted Cash Flow Effective Rate

3.39%
3.16% – 3.50%
3.28%

(1) Our Level 3 fair value instruments require interest only monthly payments.

F-43

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

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:

Investments in single-family residential properties, net held

for use (Level 3):

Pre-impairment amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investments in single-family residential properties, net held

for sale (Level 3):

Pre-impairment amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended
December 31,

2019

2018

2017

9,255
(2,193)

7,062

2,179
(507)

1,672

2,942
(861)

2,081

For the Years Ended
December 31,

2019

2018

2017

61,061
(12,017)

49,044

33,609
(6,202)

27,407

13,112
(1,370)

11,742

For additional information related to our single-family residential properties as of December 31, 2019 and

2018, refer to Note 3.

Note 12 — Earnings per Share

We compute EPS only for the period after February 1, 2017, the date on which our common stock began

trading on the New York Stock Exchange. Basic and diluted EPS are calculated as follows:

For the Year
Ended
December 31,
2019

For the Year
Ended
December 31,
2018

February 1,
2017
through
December 31,
2017

(in thousands, except share and per share data)
Numerator:

Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss for the period January 1, 2017 through January 31,
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net (income) loss attributable to non-controlling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) attributable to common stockholders . . . .
Less: net income available to participating securities . . . . . .

Net income (loss) available to common stockholders —

147,111

(5,013) $

(105,826)

—

(1,648)

145,463
(395)

—

(4,927)
(817)

16,879

489

(88,458)
(615)

basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

145,068

(5,744) $

(89,073)

F-44

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

For the Year
Ended
December 31,
2019

For the Year
Ended
December 31,
2018

February 1,
2017
through
December 31,
2017

(in thousands, except share and per share data)
Denominator:

Weighted average common shares outstanding — basic . . .

531,235,962

520,376,929

339,423,442

Effect of dilutive securities:

Incremental shares attributed to non-vested share-

based awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,263,825

—

Weighted average common shares outstanding —

diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

532,499,787

520,376,929

339,423,442

Net income (loss) per common share — basic . . . . . . . . . . .

Net income (loss) per common share — diluted . . . . . . . . . .

0.27

(0.01) $

(0.26)

Incremental shares attributed to non-vested share-based awards are excluded from the computation of

diluted EPS when they are anti-dilutive. For the year ended December 31, 2019, 121 incremental shares
attributed to non-vested share-based awards are excluded from the denominator as their inclusion would have
been anti-dilutive. For the year ended December 31, 2018 and the period from February 1, 2017 through
December 31, 2017, 1,267,175, and 896,993 incremental shares attributed to non-vested share-based awards,
respectively, are excluded from the computation of diluted EPS because they are anti-dilutive.

For the years ended December 31, 2019, 2018, and 2017, the vested OP Units have been excluded from the
computation of EPS because all income (loss) attributable to the OP Units has been recorded as non-controlling
interest and thus excluded from net income (loss) available to common stockholders.

For the years ended December 31, 2019 and 2018, using the “if-converted” method, 6,225,341 and

12,420,013, respectively, potential shares of common stock for the 2019 Convertible Notes for the period prior to
conversion are excluded from the computation of diluted EPS as they are anti-dilutive. For the years ended
December 31, 2019 and 2018, 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 years ended December 31, 2019 and 2018. For the period from February 1, 2017 through
December 31, 2017, we asserted our intent and ability to fully settle the Convertible Senior Notes in cash; and as
a result, the Convertible Senior Notes did not impact diluted EPS during that period. 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 our 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.

F-45

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

As of December 31, 2019 and 2018, we have not recorded any deferred tax assets and liabilities or

unrecognized tax benefits. We do not anticipate a significant change in unrecognized tax benefits within the next
12 months.

We have sold assets that were either subject to Section 337(d) of the Internal Revenue Code of 1986, as
amended, or were held by TRSs. These transactions resulted in $2,490, $1,241, and $3,195 of current income tax
expense for the years ended December 31, 2019, 2018, and 2017, respectively, which has been recorded in gain
on sale of property, net of tax in the consolidated statements of operations.

Note 14 — Commitments and Contingencies

Leasing Commitments

The following table sets forth our fixed lease payment commitments as a lessee as of December 31, 2019,

for the periods below:

Operating
Leases

Finance
Leases

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

4,501
4,271
2,713
1,565
1,409
463

646
569
43
—
—
—

Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . .
Less: imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,922
(1,135)

1,258
(48)

Total lease liability . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13,787

1,210

As of December 31, 2019, approximately $10,000 of finance leases for fleet vehicles with a lease term of

50 months have been entered into and are anticipated to commence during the next three months, and
approximately $3,100 of operating leases for our office spaces with lease terms of 60 to 72 months have been
entered into and are anticipated to commence during the next 12 months.

The components of lease expense for the year ended December 31, 2019 are as follows:

Operating lease cost:

Fixed lease cost . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Variable lease cost

Total operating lease cost . . . . . . . . . . . . . . . . . . . . .

For the Year
Ended
December 31,
2019

4,059
1,294

5,353

F-46

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

Future minimum rental revenues under leases existing on our single-family residential properties as of

December 31, 2019 are as follows:

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

Lease
Payments to
be Received

$ 952,132
148,775
—
—
—
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,100,907

During the years ended December 31, 2018 and 2017, we incurred rent and other related occupancy
expenses of $6,306 and $5,203, respectively. In accordance with previously applicable lease accounting
guidance, ASC 840, Leases, the following table displays annual base rental commitments associated with our
operating lease commitments, excluding operating expense reimbursements, month-to-month lease payments,
and other related fees and expenses during the remaining lease terms as of December 31, 2018:

Year

Payments

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

4,251
4,463
4,237
2,747
1,583
1,803

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,084

Insurance Policies

Pursuant to the terms of certain of our 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. As of December 31, 2019, there are no material contingent liabilities related to
uninsured losses with respect to our 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 final outcome of these proceedings or
matters will have a material adverse effect on our consolidated financial statements.

Note 15 — Business Combinations

On November 16, 2017, we completed the Mergers with SWH. The Mergers were accounted for as a
business combination in accordance with ASC Topic 805, Business Combinations, and INVH was designated as

F-47

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

the accounting acquirer. Because INVH was designated as the accounting acquirer, our historical financial
statements for periods prior to November 16, 2017 represent only the historical financial information of INVH
and its consolidated subsidiaries.

Purchase Price Allocation

The total purchase price has been allocated based upon (1) the amounts reported in the SWH historical

financial statements for any assets that were reported at fair value in accordance with SWH’s historical
accounting policies or (2) management’s estimates of fair value.

Management’s estimates of fair value for SWH’s investments in real estate properties were based upon a
progressive method that incorporated three value sources: automated valuation model data, BPOs, and internal
desktop valuations (Level 3 measurements).

The fair value of our investment in the unconsolidated joint venture represents the estimated fair value of

our equity interest in the joint venture with FNMA. We determined the fair value based on the estimated fair
value of the underlying investments in single-family residential properties after giving consideration to the terms
and conditions of the related joint venture agreement (Level 3 measurement).

The fair value of other assets includes the estimated fair value of in-place leases in the amount of $45,740,

which was estimated based on lost rent and avoidable costs over an assumed vacancy period (Level 3
measurements). Also included in other assets is the estimated fair value of interest rate swap agreements in the
aggregate amount of $21,135.

The fair value of SWH’s debt was determined by comparison of contractual terms of SWH’s existing debt
obligations to the current market rates on a risk-adjusted basis as of the Merger Date. The associated future debt
cash flows were then discounted back to present value to arrive at an estimated fair value of SWH’s debt (Level 3
measurements).

The allocation of the total purchase price to SWH’s tangible and intangible assets and liabilities under this

methodology is as follows:

Consideration transferred . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,920,534

Assets acquired:

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities assumed:

Mortgage loans, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, net . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . .
Resident security deposits . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . .

1,920,400
6,487,505
84,952
118,556
389,449

(3,433,506)
(547,437)
(112,505)
(56,895)
(36,311)
(151,881)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,662,327

Goodwill

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

258,207

F-48

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

The goodwill recorded is primarily attributable to the value of synergies after the Mergers.

Merger and Transaction-Related Expenses

We incurred $4,347, $16,895, and $29,802 of merger and transaction-related expenses related to the

Mergers during the years ended December 31, 2019, 2018, and 2017, respectively, included in general and
administrative expenses in the consolidated statements of operations. Merger and transaction-related expenses
are expensed as incurred and are comprised primarily of transaction fees and direct acquisition costs, including
legal, finance, consulting, professional fees, and other third party costs. The costs that were obligations of SWH
and expensed by SWH prior to the Merger Date are not included in our consolidated financial statements.

In addition, and in connection with the Mergers and the resulting integration, we have incurred severance
costs for terminated and transitional employees, and such costs were accrued over the related remaining service
periods. More specifically, in August 2017, we entered into agreements with several of our executives, which
provided the executives, as applicable, with benefits upon the consummation of the Mergers and/or where the
executive experienced a qualifying termination within a specified period of time following such consummation.
After the consummation of the Mergers, if a severance plan participant experienced a qualifying termination,
such person was entitled to specified benefits. During the years ended December 31, 2019, 2018 and 2017, we
incurred $1,041, $8,238, and $11,631, respectively, of employee severance pursuant to severance plans and
executive agreements, and these costs are included in general and administrative expenses in the consolidated
statements of operations.

Pro Forma Information

SWH contributed rental revenues and other property income of $84,702 and net loss of $8,262 for the period

from November 16, 2017 to December 31, 2017. The following table provides the pro forma consolidated
operational data as if the Mergers had occurred on January 1, 2016 (unaudited):

For the Year
Ended
December 31,
2017

Rental revenues and other property income . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,608,574
(142,816)

The pro forma consolidated operational data is based on assumptions and estimates considered appropriate
by our management; however, these pro forma results are not necessarily indicative of the results of operations
that would have been obtained had the Mergers occurred on January 1, 2016, the beginning of the comparable
annual period that was presented when the Mergers occurred. The pro forma consolidated operational data does
not include the impact of any synergies that were achieved from the Mergers or any strategies that management
considered in order to continue to efficiently manage operations.

F-49

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

Note 16 — Summarized Quarterly Financial Data (Unaudited)

The following tables present summarized consolidated quarterly financial data for each of the eight quarters

in the two year period ended December 31, 2019:

(in thousands, except share and per share data)

Quarter

2019

First

Second

Third

Fourth

Rental revenues and other property

income . . . . . . . . . . . . . . . . . . . . . . . . . . $

Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Net income available to common

stockholders . . . . . . . . . . . . . . . . . . . . . .
Net income per share — basic . . . . . . . . . .
Net income per share — diluted . . . . . . . .
Dividends declared per common share . . .
Shares used in calculation — basic . . . . . .
Shares used in calculation — diluted . . . .

435,500 $
21,169

441,582 $
39,405

443,326 $
33,983

444,277
52,554

20,716
0.04
0.04
0.13
521,440,822
521,817,494

38,833
0.07
0.07
0.13
525,070,036
525,933,643

33,616
0.06
0.06
0.13
537,771,245
538,644,888

51,903
0.10
0.10
0.13
540,218,045
541,505,031

(in thousands, except share and per share data)

Quarter

2018

First

Second

Third

Fourth

Rental revenues and other property

income . . . . . . . . . . . . . . . . . . . . . . . . . . $

Net income (loss) . . . . . . . . . . . . . . . . . . . .
Net income (loss) available to common

stockholders . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share — basic . . . . .
Net income (loss) per share — diluted . . .
Dividends declared per common share . . .
Shares used in calculation — basic . . . . . .
Shares used in calculation — diluted . . . .

423,669 $
(17,580)

432,426 $
(14,188)

434,251 $
1,041

432,616
25,714

(17,491)
(0.03)
(0.03)
0.11
519,660,998
519,660,998

(14,155)
(0.03)
(0.03)
0.11
520,509,058
520,509,058

824
—
—
0.11
520,620,519
521,761,076

25,078
0.05
0.05
0.11
520,703,045
520,844,475

Note 17 — Subsequent Events

In connection with the preparation of the accompanying consolidated financial statements, we have
evaluated events and transactions occurring after December 31, 2019, for potential recognition or disclosure.

Dividend Declaration

On January 30, 2020, our board of directors declared a dividend of $0.15 per share to stockholders of record

on February 12, 2020, which is payable on February 28, 2020.

Voluntary Mortgage Loan Payments

On February 7, 2020, we made voluntary prepayments of $15,000 and $60,000 on outstanding borrowings

with unrestricted cash on hand against the outstanding balances of IH 2018-2 and IH 2018-3, respectively.

F-50

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INVITATION HOMES INC.
Schedule III Real Estate and Accumulated Depreciation
(dollar amounts in thousands)

For the Years Ended December 31,
2018

2017

2019

Residential Real Estate
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additions during the period

$18,229,974

$18,387,898

$ 9,794,845

Acquisitions related to the Mergers . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial renovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . .

—
586,075
63,630
168,575

—
252,391
44,207
141,595

8,407,905
228,499
44,371
59,111

Deductions during the period

Dispositions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(839,873)

(472,168)

(189,351)

Reclassifications

Properties held for sale, net of dispositions . . . . . . . . . . . .

38,783

(123,949)

42,518

Balance at close of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$18,247,164

$18,229,974

$18,387,898

Accumulated Depreciation
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dispositions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reclassifications

$ (1,543,914) $ (1,075,634) $ (792,330)
(297,627)
16,264

(511,988)
32,429

(529,205)
70,382

Properties held for sale, net of dispositions . . . . . . . . . . . .

(1,235)

11,279

(1,941)

Balance at close of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2,003,972) $ (1,543,914) $ (1,075,634)

F-52

Board of Directors

Bryce Blair
Director and
Chairperson of the Board of Directors

Michael D. Fascitelli
Director and Chairperson of the
Investment and Finance Committee

Janice L. Sears
Director and Chairperson of the
Audit Committee

Dallas B. Tanner
Director, President and
Chief Executive Officer

Jana Cohen Barbe
Director

Richard D. Bronson
Director

Kenneth A. Caplan
Director

Robert G. Harper
Director

Jeffrey E. Kelter
Director

John B. Rhea
Director and Chairperson of the
Compensation and Management
Development Committee

William J. Stein
Director and Chairperson of the
Nominating and Corporate
Governance Committee

Barry S. Sternlicht
Director

Executive Committee

Dallas B. Tanner
President and
Chief Executive Officer

Ernest M. Freedman
Executive Vice President and
Chief Financial Officer

Elizabeth A. Galloway
Executive Vice President and
Chief Human Resources Officer

John M. Gibson
Executive Vice President,
Portfolio Management

Timothy J. Lobner
Executive Vice President,
Operations Support

Kimberly K. Norrell
Executive Vice President and
Chief Accounting Officer

Jonathan S. Olsen
Executive Vice President,
Corporate Strategy and Finance

Mark A. Solls
Executive Vice President,
Chief Legal Officer and Secretary

Corporate Information

Transfer Agent, Registrar
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233
Phone: (866) 637-9460
www.computershare.com/investor

Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
2200 Ross Avenue, Suite 1600
Dallas, TX 75201

Virginia L. Suliman
Executive Vice President and
Chief Executive Officer

Charles D. Young
Executive Vice President and
Chief Operating Officer

Investor Relations
Invitation Homes Inc.
1717 Main Street, Suite 2000
Dallas, TX 75201
Phone: (844) 456-INVH (4684)
Email: ir@invitationhomes.com

Stock Information
New York Stock Exchange
“INVH”

invitationhomes.com