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Item 7. Management’s Discussion and Analysis

2021-02-19 compared with 2020-02-19 · 410 added, 279 removed, 522 unchanged (57% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read together with Part I.

“Selected Financial Data,” Part I.

“Business” and the consolidated financial statements, including the notes thereto, that are included elsewhere in this Annual Report on Form 10-K.

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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.

With over 80,000 homes for lease in 16 markets across the country as of December 31, 2020, Invitation Homes is meeting changing lifestyle demands by providing residents access to updated homes with features they value, such as close proximity to jobs and access to good schools.

Our mission statement, “Together with you, we make a house a home,” reflects our commitment to high-touch service that continuously enhances residents’ living experiences and provides homes where individuals and families can thrive.

We 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.

Through disciplined market and asset selection, as well as through strategic mergers and acquisitions, we designed our portfolio to capture the operating benefits of local density as well as economies of scale that we believe cannot be readily replicated.

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

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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.

The in-fill locations and high quality of our homes and service further differentiate our resident experience, which we continue to refine.

The ongoing COVID-19 pandemic has had a significant adverse impact on global and United States economic activity and has contributed to significant volatility and disruption in financial markets.

The ultimate impacts remain unknown, but could include the potential worsening of global and United States economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending, and the market for acquisition and disposition of single-family homes, as well as other unanticipated consequences.

As such, we are closely monitoring the impact of the ongoing COVID-19 pandemic on all aspects of our business, including operating, investment management, and capital markets activities.

With the safety and well-being of our residents and associates being our highest priority, we continue to follow protocols that enable teams to safely continue providing outstanding service to residents.

The safety and service measures currently in place include:

(1) creating and implementing a safety training program for all associates;

(2) maintaining a three-month supply of masks, gloves, shoe covers, and hand sanitizer for field teams;

(3) continuing to leverage self-show and virtual-tour technology as both safety measures and competitive advantages;

(4) adhering to strict safety protocols for maintenance service trips;

and (5) adapting to offer virtual options for resident move-in orientations and pre-move-out visits.

Neither these procedural adjustments nor the overall impact of the COVID-19 pandemic created significant disruptions to our business model during the year ended December 31, 2020.

However, the pandemic did impact our business, including operating, investment management, and capital markets activities as more fully described below.

The direct impacts on our results of operations and key operating metrics from the effects of the COVID-19 pandemic include, but are not limited to:

(1) a decrease in gross rental revenues and other property income (before concessions and bad debt) due to jurisdictional restrictions on rent increases and late fees and/or forgiveness of late fees for residents who have requested leniency;

(2) an increase in occupancy due to lower turnover partially driven by residents’ decisions not to relocate during the pandemic, strong demand for homes that become vacant, and the impact of eviction moratoriums;

(3) an increase in uncollectible revenues (or decline in rent collections percentages) due to resident hardships and eviction moratoriums;

and (4) a decrease in property operating and maintenance expenses for turnover costs (lower turnover rates) and property administrative fees (eviction moratoriums).

In March 2020, to act on our core values of "Genuine Care" and "Standout Citizenship," we began to offer solutions for residents experiencing financial hardship when requested, including the ongoing creation of payment plans, without late fees, for residents requiring flexibility to meet rental obligations over time.

Additionally, we continue to adhere to federal, state, and local restrictions on items such as evictions, collections, rent increases, and late fees as appropriate.

The ongoing COVID-19 outbreak in the United States has led entities directed by, or notionally affiliated with, the Federal government as well as certain states and cities, including those in which we own properties and where our principal places of business are located, to impose and continue to implement measures intended to control the spread of COVID-19, including instituting quarantines, restrictions on travel, “shelter in place” rules, and restrictions on types of business that may continue to operate.

We depend on rental revenues and other property income from residents for substantially all of our revenues.

Overall revenue collections as a percentage of monthly billings was 96% for the period from April 2020 through December 2020, compared to a historical average of 99%.

While collection of revenues has remained near historical levels thus far through the pandemic, the COVID-19 outbreak, as well as continuing measures taken by governmental authorities and private actors to limit the spread of this virus or mitigate its impact, are interfering with the ability of some of our residents to meet their lease obligations and make their rent payments on time or at all.

In addition, entities directed by, or notionally affiliated with, the Federal government as well as some state and local jurisdictions across the United States, have imposed temporary eviction moratoriums if certain criteria are met by residents, are allowing residents to defer missed rent payments without incurring late fees, and are prohibiting rent increases.

Jurisdictions and other local and national authorities may expand or extend measures imposing restrictions on our ability to enforce residents’ contractual rental obligations and limiting our ability to increase rents.

We cannot predict if states, municipalities, local, and/or national authorities will expand existing restrictions, if additional states or municipalities will implement similar restrictions, or when restrictions currently in place will expire.

Such measures are likely to enable residents to stay in their homes despite an inability to pay because of financial or other hardship stemming from the pandemic.

Certain other restrictions imposed by jurisdictions across the United States are intended to limit operations by businesses not deemed “essential businesses.” While none of the current restrictions have materially impacted our ability to provide services to our residents or homes, future measures may negatively impact our ability to access our homes, complete service requests, or make our homes ready for new residents.

Unless the residents report symptoms of or exposure to COVID-19, we are completing all service calls.

In all cases, we work with the residents to ensure service requests are addressed in a timely and safe manner.

While COVID-19 and related containment measures may interfere with the ability of our associates, suppliers, and other business partners to carry out their assigned tasks or to supply materials and services at ordinary levels of performance relative to the conduct of our business in the future, to date we have not experienced significant disruptions of these types.

The majority of our office-based associates continue to work from home and will do so until we determine it is in our and their best interests to fully return to our offices.

Additionally, changes to the working environment have not had a material effect on our internal controls over financial reporting since the pandemic began (see Part II.

“Controls and Procedures” for additional information).

Investment Management

We continue to successfully source and effectuate compelling acquisition and disposition opportunities.

Since the pandemic began, we have continued to sell homes identified for disposition.

We are also now acquiring new homes at a pre-COVID-19 pace after pausing activity from mid-March through May and entered into a joint venture partnership with Rockpoint Group, L.L.C.

(“Rockpoint”).

Despite this recent activity, our ability to acquire or dispose of properties could be impaired by local rules and ordinances that could be put in place to mitigate the impact of the COVID-19 pandemic, and a general decline in economic and business activity could adversely affect the single-family residential housing market and our ability to acquire and dispose of homes.

Joint Venture with Rockpoint

On October 6, 2020, we entered into an agreement with Rockpoint to form a joint venture partnership to acquire single-family homes to operate as rental residences.

The joint venture will be capitalized with a total equity commitment of $375.0 million, of which $75.0 million (20%) has been committed by us and $300.0 million (80%) has been committed by Rockpoint.

A total of over $1.0 billion (including debt) is expected to be deployed by the joint venture to acquire and renovate single-family homes in attractive locations in markets within the Western United States, Southeast United States, Florida, and Texas, where we already own homes.

The homes are expected to be of similarly high quality and similar characteristics to the homes in our existing portfolio.

We will provide asset and property management services to the joint venture, for which we will earn asset management and property management fees, and we have the opportunity to earn a promoted interest subject to certain performance thresholds.

The joint venture is anticipated to have a five to eight year term, with certain sale rights in favor of each member, but has the flexibility to continue owning homes for an unlimited period of time if neither member triggers a sale.

Upon trigger of a sale by Rockpoint or us, the other member of the joint venture will have a right of first offer to acquire the homes proposed for sale.

We also maintain the ability in all markets to continue deploying capital from our own balance sheet to acquire homes for our portfolio, concurrent with the joint venture’s deployment of capital.

In markets where we and the joint venture are investing concurrently, our investment personnel will source acquisitions without knowledge of which entity will acquire the homes, and upon being approved for close, homes will be allocated on a rotational basis between us and the joint venture according to pre-determined ratios of investment between the two entities.

In addition, we maintain the right to enter into portfolio acquisitions of ten or more homes outside of the joint venture.

Capital Markets and Financing

To date, our access to capital markets has not been significantly impacted by the COVID-19 pandemic.

In June 2020, we successfully issued and sold 16.7 million shares of our common stock for net proceeds of $447.5 million to provide capital primarily for acquisition opportunities.

We also entered into an amended and restated revolving credit and term loan agreement that provides $3,500.0 million of borrowing capacity and consists of a $1,000.0 million revolving facility and a $2,500.0 million term loan facility (see “ — Liquidity and Capital Resources” for additional information regarding the new credit facility, including significant changes in terms and provisions from our prior credit facility and a description of the use of proceeds).

We continue to make scheduled debt service payments, including full repayment of the $270.0 million revolving credit facility balance that had been drawn in March and do not anticipate non-compliance with our key affirmative and negative debt covenants.

As of December 31, 2020, we have $1,213.4 million in available liquidity through a combination of unrestricted cash and undrawn capacity on our revolving credit facility (see “ — Liquidity and Capital Resources” for additional information).

That said, a severe disruption of, and/or instability in, the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations, including acquisitions, or address maturing liabilities on a timely basis.

Ongoing Considerations

The situation surrounding the ongoing COVID-19 pandemic remains fluid, and the ensuing impact of the COVID-19 pandemic on our rental revenues and other property income, in particular, cannot be fully be determined at present due to an inability to estimate actual collection rates, occupancy levels, and expiration of temporary restrictions on evictions, collections, rent increases, and late fees.

We will continue to actively manage our response in collaboration with our residents and business partners and to assess potential impacts to our financial position and operating results, as well as potential adverse developments in our business.

In addition to the foregoing uncertainties, we are unable to predict the impact that the COVID-19 pandemic will have on our future financial condition, results of operations, and cash flows due to numerous uncertainties regarding external factors.

These uncertainties include the scope, severity, and duration of the pandemic, the extent and duration of actions taken to contain the pandemic or mitigate its impact, the availability of an effective vaccine and therapeutic drugs and the effectiveness of the distribution of any such vaccines and therapeutic drugs, and the direct and indirect economic effects of the pandemic, containment measures, monetary and/or fiscal policies implemented to provide support or relief to businesses and/or residents, and other government, regulatory, and/or legislative changes precipitated by the COVID-19 pandemic, among others.

For further information regarding the impact of COVID-19 on our Company, see Part I.

“Risk Factors.”

Our Portfolio

The following table provides summary information regarding our total and Same Store portfolios as of and for the year ended December 31, 2020 as noted below:

Number of Homes (1)

Market Number of Homes (1)

Average Occupancy (2)

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Southern California

7,951 97.3% $2,524 $1.49 13.2 %

Northern California

4,247 97.0% 2,203 1.42 6.4 %

3,669 95.5% 2,299 1.20 5.6 %

8,172 95.8% 1,468 0.90 8.0 %

3,006 96.2% 1,697 0.85 3.5 %

2,348 93.9% 2,098 1.16 3.3 %

Western United States Subtotal

29,393 96.3% 2,045 1.19 40.0 %

South Florida

8,324 95.7% 2,227 1.19 12.5 %

8,192 96.3% 1,716 0.92 9.5 %

6,217 95.6% 1,720 0.93 7.1 %

1,868 96.9% 1,727 0.87 2.2 %

Florida Subtotal

24,601 96.0% 1,893 1.01 31.3 %

Southeast United States:

12,555 96.5% 1,561 0.76 13.1 %

4,934 96.0% 1,629 0.76 5.2 %

Southeast United States Subtotal

17,489 96.3% 1,579 0.76 18.3 %

2,155 95.1% 1,585 0.82 2.3 %

2,767 93.3% 1,835 0.88 3.0 %

Texas Subtotal

4,922 94.2% 1,716 0.85 5.3 %

Midwest United States:

2,630 95.9% 2,009 1.24 3.5 %

1,126 97.1% 1,940 0.99 1.5 %

Midwest United States Subtotal

3,756 96.3% 1,989 1.15 5.0 %

Announced Market-in-Exit:

Nashville (5)

16 67.4% 2,135 0.81 0.1 %

Total / Average

80,177 96.1% $1,875 $1.01 100.0 %

Same Store Total / Average

71,433 97.5% $1,874 $1.00 91.1 %

(1) As of December 31, 2020.

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(4) Represents the percentage of rental revenues and other property income generated in each market for the year ended December 31, 2020.

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.

(5) In December 2019, we announced a plan to fully exit the Nashville market.

As of December 31, 2020, we have 16 remaining homes in the market.

Factors That Affect Our Results of Operations and Financial Condition

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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.

Sensitivity to many of these factors has been heightened as a result of the ongoing and numerous adverse impacts of COVID-19.

Market Fundamentals:

Our results are impacted by housing market fundamentals and supply and demand conditions in our markets, particularly in the Western United States and Florida, which represented 71.3% of our rental revenues and other property income during the year ended December 31, 2020.

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.

We are actively monitoring the impact of the COVID-19 outbreak on market fundamentals and are quickly implementing changes in pricing as market fundamentals shift.

Rental Rates and Occupancy Levels:

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An important driver of rental rate growth is our ability to increase monthly rents from expiring leases, which typically have a term of one to two years.

The ongoing COVID-19 pandemic has negatively impacted our ability to increase rents and may impact our ability to maintain occupancy levels.

Collection Rates:

Our rental revenues and other property income is impacted by the rate at which we collect such revenues from our residents.

We routinely work with residents facing financial hardships who need flexibility to fulfill their lease obligations, but the ongoing COVID-19 pandemic has increased the number of such residents.

When requested, we work with these residents to create payment plans, without late fees, and then actively manage these receivables.

However, a portion of these amounts may not ultimately be collected.

Any amounts billed to residents that have been deemed uncollectible along with our estimate of amounts that may ultimately be uncollectible decrease our rental revenues and other property income.

Turnover Rates and Days to Re-Resident:

Other drivers of rental revenues and property operating and maintenance expense include 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.

Our operating results are also impacted by the amount of time it takes to market and lease a property, which is a component of the number of days a home is unoccupied between residents.

The period of time to market and lease a property can vary greatly and is impacted by local demand, our marketing techniques, the size of our available inventory, and both current economic conditions and future economic outlook, both of which are impacted by the ongoing COVID-19 pandemic.

Days to re-resident may be negatively affected by homes potentially remaining vacant while prospective residents remain in their current housing.

Our turnover rate may be affected by the current COVID-19 pandemic as a result of delayed eviction proceedings and/or move outs potentially being canceled by residents who have not secured their next housing plans.

Increases in turnover rates and the average number of days to re-resident reduce rental revenues as the homes are not generating income during this period of vacancy.

Property Improvements and Maintenance:

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Due to our size and scale both nationally and locally, we believe we are able to purchase goods and services at favorable prices.

While the COVID-19 outbreak has required us to modify our property improvement and maintenance procedures to accommodate resident preferences, as a currently designated “essential business” we are completing all maintenance work orders unless a resident reports symptoms of or exposure to COVID-19.

However, future potential governmental measures may restrict our ability to function as an “essential business.” Additionally, we have addressed a backlog of deferred work orders that resulted from our initial deferral of all non-emergency work orders at the onset of the pandemic.

Property Acquisitions and Renovations:

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Our ability to identify and acquire single-family homes that meet our investment criteria is impacted by home prices in targeted acquisition locations, the inventory of homes available for sale through our acquisition channels, and competition for our target assets.

All of these factors may be negatively impacted by the COVID-19 outbreak, potentially reducing the number of homes we acquire.

The acquisition of homes involves expenditures in addition to payment of the purchase price, including payments for acquisition fees, property inspections, closing costs, title insurance, transfer taxes, recording fees, broker commissions, property taxes, and HOA fees (when applicable).

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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, whether the property was vacant when acquired, and whether there are any state or local restrictions on our ability to complete renovations as an essential business function.

Additionally, COVID-19 and related containment measures may interfere with the ability of our suppliers and other business partners to carry out their assigned tasks and/or source labor or supply materials at ordinary levels of performance relative to the conduct of our business.

Due to our size and scale both nationally and locally, we believe we are able to purchase goods and services at favorable prices.

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Interest rates are impacted by market conditions and the terms of the underlying financing arrangements.

Inability by our residents to meet their lease obligations due to the COVID-19 pandemic could reduce our cash flows, which could impact our ability to make all required debt service payments.

Furthermore, the COVID-19 pandemic has resulted in a widespread health crisis adversely affecting the economy and financial markets of many countries resulting in an economic downturn that could negatively affect our ability to access financial markets as well as our business, results of operations, and financial condition.

“Quantitative and Qualitative Disclosures about Market Risk” for further discussion regarding interest rate risk.

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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.

Rental revenues, net of any concessions and bad debt (including write-offs, credit reserves, 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.

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(ii) rent and non-refundable deposits associated with pets;

and (iii) various other fees, including late fees and lease termination fees, among others.

(iii) revenues from ancillary services such as smart homes and HVAC replacement filters;

and (iv) various other fees, including late fees, lease termination fees, among others.

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.

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.

Once a property is “rent-ready,” expenditures for ordinary repairs and maintenance 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.

Property management expense represents personnel and other costs associated with the oversight and management of our portfolio of homes, including those within our unconsolidated joint ventures.

All of our homes are managed through our internal property manager.

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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.

General and administrative expense also includes merger and transaction-related expenses, among other things, 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.

We issue share-based awards to align the interests of our associates with those of our investors.

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.

Interest expense includes interest payable on our debt instruments, payments and receipts related to our interest rate swap agreements, amortization of discounts and deferred financing costs, unrealized gains (losses) on non-designated hedging instruments, and non-cash interest expense related to our interest rate swap agreements.

Depreciation and Amortization

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Impairment and Other

Impairment and other represents provisions for impairment when the carrying amount of our single-family residential properties is not recoverable and casualty losses, net of any insurance recoveries.

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.

Impairment and other represents provisions for impairment when the carrying amount of our single-family residential properties is not recoverable and casualty (gains) losses, net of any insurance recoveries.

Unrealized Gains on Investments in Equity Securities

Unrealized gains on investments in equity securities includes gains resulting from mark to market adjustments made for our equity securities.

Other, net includes interest income, asset and property management fee income, income (loss) from investments in unconsolidated joint ventures, and other miscellaneous income and expenses.

Gain on Sale of Property, net of tax

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For the Years Ended December 31,

($ in thousands)

($ in thousands) 2020 2019 $ Change % Change

Rental revenues and other property income

$ 1,822,828 $ 1,764,685 $ 58,143 3.3 %

Property operating and maintenance 680,543 669,987 10,556 1.6 %

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Total expenses 1,709,610 1,725,510 (15,900) (0.9) %

Unrealized gains on investments in equity securities 29,723 6,480 23,243 358.7 %

Other, net (86) 5,120 (5,206) (101.7) %

Gain on sale of property, net of tax 54,594 96,336 (41,742) (43.3) %

Net income (loss)

Net income $ 197,449 $ 147,111 $ 50,338 34.2 %

Portfolio Information

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During the years ended December 31, 2020, and 2019, we owned an average of 79,530 and 80,372 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.

We believe presenting information about the portion of our total portfolio that has been fully operational for the entirety of both a given reporting period and its prior year comparison period provides investors with meaningful information about the performance of our comparable homes across periods, and about trends in our organic business.

To do so, we provide information regarding the performance of our Same Store portfolio.

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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.

For the years ended December 31, 2020, and 2019, total portfolio rental revenues and other property income totaled $1,822.8 million and $1,764.7 million, respectively, an increase of 3.3%, driven by an increase in average occupancy, average monthly rent per occupied home, and utilities reimbursements, partially offset by an increase in bad debt, reduced fee income, and a 842 home decrease between periods in the average number of homes owned.

Average occupancy for the years ended December 31, 2020, and 2019 for the total portfolio was 96.1% and 94.2%, respectively.

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For our Same Store portfolio, average occupancy was 97.5% and 96.2% for the years ended December 31, 2020, and 2019, respectively, and average monthly rent per occupied home for the years ended December 31, 2020, and 2019 was $1,874 and $1,810, respectively, a 3.5% increase.

The annual turnover rate for the Same Store portfolio for the years ended December 31, 2020, and 2019 was 26.1% and 29.7%, respectively.

For the Same Store portfolio, an average home remained unoccupied for 36 and 46 days between residents for the years ended December 31, 2020, and 2019, respectively.

The decreases in these two metrics contributed to our increase in occupancy on a year over year basis.

Furthermore, we believe the decrease in turnover is partially attributable to the effects of the COVID-19 pandemic (e.g., eviction moratoriums and residents who are not inclined to relocate during this period).

We cannot predict how long eviction moratoriums will remain in place nor when the general effects of the pandemic will subside and how those items may affect our turnover and occupancy rates.

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.

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 3.7% and 5.0% for the years ended December 31, 2020, and 2019, respectively, and new lease net effective rental rate growth for the total portfolio averaged 4.4% and 3.8% for the years ended December 31, 2020, and 2019, respectively.

For our Same Store portfolio, renewal lease net effective rental rate growth averaged 3.7% and 5.0% for the years ended December 31, 2020, and 2019, respectively, and new lease net effective rental rate growth averaged 4.2% and 3.7% for the years ended December 31, 2020, and 2019, 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.

The COVID-19 pandemic has negatively impacted our rental revenues and other property income in three notable ways:

(1) lower collection rates, which caused our bad debt to increase from 0.5% of gross rental income for the year ended December 31, 2019 to 1.7% of gross rental income for the year ended December 31, 2020;

(2) voluntary non-enforcement of and jurisdictional restrictions on late fees during a portion of the year ended December 31, 2020, which was a primary driver of a decrease in fee income year over year;

and (3) lower reimbursements of move out and other costs as a result of lower turnover and eviction moratoriums.

The decreases in fee income and reimbursements were partially offset by continued increases in utilities reimbursements as more utilities remained in our name compared to the prior year.

The COVID-19 pandemic is likely to continue to affect our collection rates and ability to raise rents and charge fees, and the impact of jurisdictional restrictions on rental rates, late fees, collections, and eviction moratoriums is likely to affect our ability to increase rental revenues and other operating income.

For the years ended December 31, 2020, and 2019, total expenses were $1,709.6 million and $1,725.5 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 .

For the year ended December 31, 2020, property operating and maintenance expense increased to $680.5 million from $670.0 million for the year ended December 31, 2019.

This 1.6% net increase resulted from increases in utilities, property taxes, and repairs and maintenance, partially offset by decreases in turnover, property administrative costs that declined due to lower turnover and eviction moratoriums, and savings in personnel and other costs.

The 842 home decrease between periods in the average number of homes owned also offset the increases in certain expense categories.

The COVID-19 pandemic is likely to continue to impact our turnover rates, and thus turnover costs, and other property operating and maintenance expense may continue to be affected by the ongoing impacts of the pandemic.

Property management expense and general and administrative expense decreased to $121.9 million from $135.9 million for the years ended December 31, 2020, and 2019, respectively, due to decreases in severance expense of $7.9 million, merger and transaction-related expenses of $4.3 million, and share-based compensation expense of $1.1 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019.

To date, the COVID-19 pandemic has not had a material impact on our property management and general and administrative expenses.

Interest expense was $353.9 million and $367.2 million for the years ended December 31, 2020, and 2019, 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 .

The decrease in interest expense was primarily driven by a decrease in the average debt balance outstanding during the year ended December 31, 2020 as compared to the year ended December 31, 2019 due to various prepayments subsequent to December 31, 2019 and settlement of a portion of our convertible debt for common equity during the year ended

December 31, 2019.

Debt outstanding, net of deferred financing costs and discounts, decreased to $8,031.5 million as of December 31, 2020 from $8,467.5 million as of December 31, 2019.

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.

Depreciation and amortization expense increased to $552.5 million for the year ended December 31, 2020 from $533.7 million for the year ended December 31, 2019 due to an increase in cumulative capital expenditures.

This was partially offset by a decrease in the average number of homes owned during the year ended December 31, 2020 compared to the year ended December 31, 2019.

Impairment and other expenses were $0.7 million and $18.7 million for the years ended December 31, 2020, and 2019, respectively.

During the year ended December 31, 2020, impairment and other expenses was comprised of impairment losses of $4.6 million on our single-family residential properties, partially offset by net gains on casualty losses of $3.9 million.

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 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 u nrealized gains on investment in equity securities .

The impairment costs recognized during the year ended December 31, 2020 were not a direct result of the COVID-19 pandemic.

Unrealized Gains on Investments in Equity Securities

Unrealized gains on investments in equity securities increased to $29.7 million for the year ended December 31, 2020 from $6.5 million for the year ended December 31, 2019 due to the merger of one of our investments with a special purpose acquisition company during the year ended December 31, 2020.

Subsequent to this merger, the investment has a readily determinable fair value and has been marked to market.

Other, net decreased to a $0.1 million loss for the year ended December 31, 2020 from $5.1 million of income for the year ended December 31, 2019, primarily due to changes in the components of our miscellaneous income and expenses and a $1.8 million ROU lease asset impairment during the year ended December 31, 2020.

Gain on Sale of Property, net of tax

Gain on sale of property, net of tax was $96.3 million and $49.7 million f or 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.

Gain on sale of property, net of tax was $54.6 million and $96.3 million for the years ended December 31, 2020, and 2019, respectively.

The primary driver of the decrease was a decrease in the number of homes sold from 3,455 during the year ended December 31, 2019 to 1,580 during the year ended December 31, 2020.

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

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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.

Our liquidity and capital resources as of December 31, 2020 and 2019 include unrestricted cash and cash equivalents of $213.4 million and $92.3 million, respectively, a 131.3% increase.

The following significant activity occurred during the year ended December 31, 2020:

• In December 2020, we entered into a sustainability-linked senior unsecured credit facility (the “Credit Facility”) that provides $3,500.0 million of borrowing capacity and consists of a $1,000.0 million revolving facility (the “Revolving Facility”) and a $2,500.0 million term loan facility (the “Term Loan Facility”), both of which mature on January 31, 2025, with two six month extension options available.

The Credit Facility replaced a credit facility that consisted of a $1,000.0 million revolving facility (the “2017 Revolving Facility”) and a $1,500.0 million term loan facility (the “2017 Term Loan Facility” and together with the 2017 Revolving Facility, the “2017 Credit Facility”).

Proceeds from the Term Loan Facility were used (1) to fully repay the $1,500.0 million 2017 Term Loan Facility due to mature in February 2022;

(2) to fully repay the $731.0 million principal balance of the SWH 2017-1 securitization that was due to reach final maturity in January 2023;

and (3) to voluntarily prepay higher-cost classes of certificates of various securitizations due to reach final maturity, provided all extensions were exercised, between March 2025 and January 2026.

For both the Revolving Facility and the Term Loan Facility, spreads at closing, based on the Company's total leverage ratio, were 5 bps lower than the spreads most recently in effect for the 2017 Credit Facility.

• In March 2020, we drew $250.0 million on the 2017 Revolving Facility due to uncertainties about the impact of the COVID-19 pandemic on our cash provided by operations and our near-term acquisition and disposition activity.

• In May 2020, we used cash on hand to repay $120.0 million of the then-outstanding balance of the 2017 Revolving Facility.

• In June 2020, we completed an underwritten public offering to sell 16,675,000 shares of our common stock and generated net proceeds of $447.5 million.

Proceeds of $150.0 million were used to fully repay the then-outstanding balance on our 2017 Revolving Facility.

The remaining proceeds were used primarily for acquisitions.

As of December 31, 2020, our $1,000.0 million Revolving Facility remains undrawn, and there are no restrictions on our ability to draw additional funds thereunder provided we remain in compliance with all covenants.

We have no debt reaching final maturity until December 2024, provided all extensions are exercised, with the exception of $345.0 million of convertible notes maturing in January 2022.

Our ability to access capital as well as to use cash from operations to continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic, as detailed in Part I.

“Risk Factors.”

Through December 31, 2020, disposition channels remained healthy in our markets, and we continued to sell homes that were designated for disposition.

We have limited cash commitments outside of debt service as we do not engage in any development activity, and the pipeline of acquisitions to which we are committed is $30.9 million as of December 31, 2020.

However, the ongoing impact of the COVID-19 pandemic may impact the acquisition and disposition of single-family homes in ways that we are unable to predict.

Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, make dividend payments to our stockholders, and meet other general requirements of our business.

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(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.

(iv) payment of dividends to our equity investors;

and (v) required contributions to the Rockpoint joint venture.

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.

However, the COVID-19 pandemic may negatively impact our operating cash flow such that we are unable to make required debt service payments, which would result in an event of default for any such loan agreement under which payments were not made.

Specifically, the collateral within individual borrower entities may underperform, resulting in cash flow shortfalls for debt service while consolidated cash flows are sufficient to fund our operations.

If an event of default occurs for a specific mortgage loan or for our secured term loan, our loan agreements provide certain remedies, including our ability to

fund shortfalls from consolidated cash flow;

and such an event of default would not result in an immediate acceleration of the loan.

Our real estate assets are illiquid in nature.

A timely liquidation of assets may not be a viable source of short-term liquidity should a cash flow shortfall arise, and we may need to source liquidity from other financing alternatives, such as the Revolving Facility which had an undrawn balance of $1,000.0 million as of December 31, 2019 .

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 sources, such as the Revolving Facility, which had an undrawn balance of $1,000.0 million as of December 31, 2020.

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.

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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.

During the year ended December 31, 2020, we sold 8,413,224 shares of our common stock under our ATM Equity Program, generating net proceeds of $239.2 million after giving effect to Agent commissions and other costs totaling $3.9 million.

As of December 31, 2020, $500.0 million remains available for future offerings under the ATM Equity Program.

Certain Securitizations (defined below), the Secured Term Loan (defined below), the Term Loan Facility, and the Revolving Facility (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.

On November 30, 2020, the FCA, which has statutory powers to require panel banks to contribute to LIBOR, announced that subject to confirmation following its consultation with the administrator of LIBOR, it would cease publication of the one week and two month USD LIBOR immediately after December 31, 2021 and cease publication of the remaining tenors immediately after June 30, 2023.

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.

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Outstanding Principal Balance (5)

($ in thousands)

($ in thousands) Maturity

Maturity Date if

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Range of Spreads (4)

December 31, 2020 December 31, 2019

IH 2017-1 (6)

June 9, 2027 June 9, 2027 4.23% N/A $ 994,787 $ 995,520

SWH 2017-1 (7)

October 9, 2020

January 9, 2023

December 9, 2020 N/A —% N/A — 744,092

IH 2017-2 (7)

December 9, 2020

December 9, 2024

December 9, 2021 December 9, 2024 1.29% 91-186 bps 612,506 624,475

IH 2018-1 (7)(8)

March 9, 2020

March 9, 2025

March 9, 2021 March 9, 2025 1.09% 76-151 bps 646,021 793,720

IH 2018-2 (7)

June 9, 2021 June 9, 2025 1.23% 95-150 bps 693,988 957,135

IH 2018-3 (7)

July 9, 2021 July 9, 2025 1.42% 105-205 bps 1,036,561 1,213,035

IH 2018-4 (7)(9)

January 9, 2021

January 9, 2026

January 9, 2021 January 9, 2026 1.49% 115-200 bps 848,270 938,430

Total Securitizations 4,832,133 6,266,407

deferred financing costs, net (12,035) (27,946)

Total $ 4,820,098 $ 6,238,461

(1) Maturity date represents repayment date for mortgage loans which have been repaid in full prior to December 31, 2020.

For all other mortgage loans, the maturity dates above reflect all extensions that have been exercised.

For all other mortgage loans, the maturity dates above reflect all extension options that have been exercised.

(2) Represents the maturity date if we exercise each of the remaining one year extension options available, which are subject to certain conditions being met.

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(6) Net of unamortized discount of $2.3 million and $2.6 million as of December 31, 2020 and 2019, respectively.

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.

(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 IH 2018-1, IH 2018-2, and IH 2018-3 mortgage loans have exercised the first extension option, and our IH 2017-2 mortgage loan has exercised the second extension option.

The maturity dates above reflect all extensions that have been exercised.

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.

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 .

(8) On December 1, 2020, we submitted a notification to request an extension of the maturity date of the IH 2018-1 mortgage loan from March 9, 2021 to March 9, 2022.

(9) On January 9, 2021, the extension of the maturity date of the IH 2018-4 mortgage loan from January 9, 2021 to January 9, 2022 was approved by the lender.

Securitization Transactions

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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.

Additionally, the retained certificates do not provide us with any ability to direct activities that could impact the Trusts’ economic performance.

Therefore, we do not consolidate the Trusts.

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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.

IH 2017-1 issued Class B certificates, which are restricted certificates that were made available exclusively to INVH LP in order to comply with the Risk Retention Rules.

The Class B certificates bear a stated annual interest rate of 4.23%, including applicable servicing fees.

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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.

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, 2020, and through the date our consolidated financial statements were issued, we believe each Borrower Entity is in compliance with all affirmative and negative covenants.

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For IH 2017-1, prepayments on or before December 2026 will require a yield maintenance premium.

For the years ended December 31, 2019 and 2018 , we made voluntary and mandatory prepayments of $997.4 million and $4,579.6 million , respectively, under the terms of the mortgage loan agreements.

For the years ended December 31, 2020, 2019, and 2018, we made voluntary and mandatory prepayments of $1,434.6 million, $997.4 million, and $4,579.6 million, respectively, under the terms of the mortgage loan agreements.

During the year ended December 31, 2020 prepayments included the full repayment of the SWH 2017-1 mortgage loan.

During the year ended December 31, 2019, prepayments included the full repayment of the CSH 2016-2 mortgage loan.

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The following table sets forth a summary of our Secured Term Loan indebtedness as of December 31, 2020 and 2019:

($ in thousands)

($ in thousands) Maturity

December 31, 2020 December 31, 2019

Secured Term Loan

June 9, 2031 3.59% $ 403,363 $ 403,464

Deferred financing costs, net

(2,268) (2,486)

Secured Term Loan, net

$ 401,095 $ 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.

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.

The Secured Term Loan’s collateral pool contains 3,332 and 3,333 homes, respectively, as of December 31, 2020 and 2019, with a net book value of $719.8 million and $734.8 million, respectively.

2019-1 IH Borrower has the right, subject to certain requirements and limitations outlined in the loan agreement, to substitute properties representing up to 20% of the collateral pool annually, and to substitute properties representing up to 100% of the collateral pool over the life of the Secured Term Loan.

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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.

Affirmative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with (i) licensing, permitting and legal requirements specified in the loan agreement, (ii) organizational requirements of the jurisdictions in which they are organized, (iii) federal and state tax laws, and (iv) books and records requirements specified in the loan agreement.

Negative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with limitations surrounding (i) the amount of 2019-1 IH Borrower’s indebtedness and the nature of its investments, (ii) the execution of transactions with affiliates, (iii) the Manager, (iv) the nature of 2019-1 IH Borrower’s business activities, and (v) the required maintenance of specified cash reserves.

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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.

For the year ended December 31, 2020, we made mandatory prepayments of $0.1 million.

No prepayments were made for the year ended December 31, 2019.

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.

On December 8, 2020, we entered into an Amended and Restated Revolving Credit and Term Loan Agreement with a syndicate of banks, financial institutions, and institutional lenders for the Credit Facility.

The Credit Facility provides $3,500.0 million of borrowing capacity and consists of the $1,000.0 million Revolving Facility and the $2,500.0 million Term Loan Facility, both of which mature on January 31, 2025, with two six month extension options available.

The Revolving Facility also includes borrowing capacity for letters of credit.

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 such that the aggregate amount does not exceed at any time $4,000.0 million), subject to certain limitations.

The Credit Facility replaced the 2017 Credit Facility that consisted of the $1,000.0 million 2017 Revolving Facility and the $1,500.0 million 2017 Term Loan Facility.

The terms and conditions of the Credit Facility are consistent with those of the 2017 Credit Facility unless otherwise noted below.

Proceeds from the Term Loan Facility were used to repay then-outstanding indebtedness, including the 2017 Term Loan Facility.

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 :

The following table sets forth a summary of the outstanding principal amounts under the Credit Facility and 2017 Credit Facility as of December 31, 2020 and 2019, respectively:

($ in thousands)

Date Interest

December 31, 2020 December 31, 2019

Term Loan Facility (2)

February 6, 2022

January 31, 2025 1.79% $ 2,500,000 $ 1,500,000

Deferred financing costs, net

(29,093) (6,253)

Term Loan Facility, net

$ 2,470,907 $ 1,493,747

Revolving Facility (2)

February 6, 2021

January 31, 2025 1.84% $ — $ —

(1) Interest rates for the Term Loan Facility and the Revolving Facility are based on LIBOR plus an applicable margin.

As of December 31, 2020, the applicable margins were 1.65% and 1.70% respectively, and LIBOR was 0.14%.

(2) If we exercise the two six month extension options, the maturity date will be January 31, 2026.

Interest Rate and Fees

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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% .

The margins for the Term Loan Facility, Revolving Facility, 2017 Term Loan Facility, and 2017 Revolving Facility are as follows:

Base Rate Loans LIBOR Rate Loans

Term Loan Facility 0.45 % — 1.15% 1.45 % — 2.15%

Revolving Facility 0.50 % — 1.15% 1.50 % — 2.15%

2017 Term Loan Facility 0.70 % — 1.30% 1.70 % — 2.30%

2017 Revolving Facility 0.75 % — 1.30% 1.75 % — 2.30%

The margins for the Term Loan Facility and Revolving Facility under the credit rating based pricing grid are as follows:

Base Rate Loans LIBOR Rate Loans

Term Loan Facility — % — 0.65% 0.80 % — 1.65%

Revolving Facility — % — 0.45% 0.75 % — 1.45%

The Credit Facility also includes a sustainability component whereby the Revolving Facility pricing can improve upon the Company’s achievement of certain sustainability ratings, determined via an independent third party evaluation.

This sustainability feature was not included in the 2017 Revolving Facility.

In addition to paying interest on outstanding principal under the Credit Facility, we are required to pay an unused facility fee to the lenders under the Revolving Facility in respect of the unused commitments thereunder.

The unused facility fee rate is based on the daily unused amount of the Revolving Facility and is either 0.30% or 0.20% per annum based on the unused facility amount.

The unused facility fee rate for the 2017 Revolving Facility was 0.35% or .20% per annum based on the unused facility amount.

Upon conversion 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 0.10% to 0.30%.

We are also required to pay customary letter of credit fees.

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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.

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 unsecured interest coverage ratio, and (vi) maximum secured recourse leverage ratio.

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.

As of December 31, 2020, 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.

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 directly own unencumbered assets (the “Subsidiary Guarantors”), subject to certain exceptions.

These guarantees will be automatically released upon the occurrence of certain events, including if the applicable Subsidiary Guarantor is no longer a direct owner of an unencumbered asset.

In addition, INVH and each subsidiary of INVH that owns equity in the Borrower 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.

Although the 2017 Credit Facility was secured, such security interests have been released and the Credit Facility is unsecured.

Convertible Senior Notes

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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 o n 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 .

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”).

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Remaining Amortization

2019 Convertible Notes

December 31, 2020 December 31, 2019

2022 Convertible Notes

January 15, 2022

3.50% 5.12% 43.7694 January 15, 2022 1.04 years $ 345,000 $ 345,000

Net unamortized fair value adjustment

(5,596) (10,701)

$ 339,404 $ 334,299

(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 .

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.

(2) The conversion rate as of December 31, 2020 represents the number of shares of common stock issuable per $1,000 principal amount (actual $) of the 2022 Convertible Notes converted on such date, as adjusted in accordance with the indenture as a result of cash dividend payments and the effects of previous mergers.

As of December 31, 2020, the 2022 Convertible Notes do not meet the criteria for conversion.

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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.

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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.

The “if-converted” value of the 2022 Convertible Notes exceeds the principal amount by $103.5 million as of December 31, 2020 as the closing market price of our common stock of $29.70 per common share (actual $) exceeds the implicit conversion price.

For the years ended December 31, 2020, 2019, and 2018, interest expense for the 2022 Convertible Notes, including non-cash amortization of discounts, was $17.2 million, $16.9 million, and $16.7 million respectively.

General Terms

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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, 2020 ($ in thousands):

Agreement Date

Agreement Date Forward

Effective Date

December 21, 2016

February 28, 2017

January 31, 2022

One month LIBOR

December 11, 2019 (1)

February 28, 2017

December 31, 2024

One month LIBOR

January 12, 2017

February 28, 2017

August 7, 2020

One month LIBOR

January 13, 2017

February 28, 2017

One month LIBOR

January 20, 2017

February 28, 2017

March 9, 2020

One month LIBOR

January 10, 2017

January 15, 2019

January 15, 2020

One month LIBOR

April 19, 2018

January 31, 2019

January 31, 2025

One month LIBOR

February 15, 2019 (2)

March 15, 2019

March 15, 2022

One month LIBOR

April 19, 2018

March 15, 2019

November 30, 2024

One month LIBOR

April 19, 2018

March 15, 2019

February 28, 2025

One month LIBOR

July 15, 2019

July 15, 2020

One month LIBOR

January 10, 2017

January 15, 2020

January 15, 2021

One month LIBOR

March 9, 2020

One month LIBOR

July 15, 2020

July 15, 2021

One month LIBOR

June 28, 2018

August 7, 2020

One month LIBOR

January 10, 2017

January 15, 2021

July 15, 2021

One month LIBOR

December 9, 2019 (3)

July 15, 2021

November 30, 2024

One month LIBOR

November 7, 2018

March 15, 2022

July 31, 2025

One month LIBOR

November 7, 2018

March 15, 2022

July 31, 2025

One month LIBOR

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% .

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.

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.

Rate Index Notional

December 11, 2019 February 28, 2017 December 31, 2024 1.74% One month LIBOR $ 750,000

April 19, 2018 January 31, 2019 January 31, 2025 2.86% One month LIBOR 400,000

February 15, 2019 March 15, 2019 March 15, 2022 2.23% One month LIBOR 800,000

April 19, 2018 March 15, 2019 November 30, 2024 2.85% One month LIBOR 400,000

April 19, 2018 March 15, 2019 February 28, 2025 2.86% One month LIBOR 400,000

January 10, 2017 January 15, 2020 January 15, 2021 2.13% One month LIBOR 550,000

May 8, 2018 March 9, 2020 June 9, 2025 2.99% One month LIBOR 325,000

May 8, 2018 June 9, 2020 June 9, 2025 2.99% One month LIBOR 595,000

June 3, 2016 July 15, 2020 July 15, 2021 1.47% One month LIBOR 450,000

June 28, 2018 August 7, 2020 July 9, 2025 2.90% One month LIBOR 1,100,000

January 10, 2017 January 15, 2021 July 15, 2021 2.23% One month LIBOR 550,000

December 9, 2019 July 15, 2021 November 30, 2024 2.90% One month LIBOR 400,000

November 7, 2018 March 15, 2022 July 31, 2025 3.14% One month LIBOR 400,000

November 7, 2018 March 15, 2022 July 31, 2025 3.16% One month LIBOR 400,000

During the year ended December 31, 2020, we terminated an interest rate swap and paid the counterparty $15.2 million in connection with this termination.

During the year ended December 31, 2019, we modified the start date of an interest rate swap and paid the counterparty $8.2 million in connection with the modification.

During the years ended December 31, 2020, 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.

During the next 12 months, we estimate that $147.0 million will be reclassified to earnings as an increase in interest expense.

During the year ended December 31, 2020, we accelerated the reclassification of certain amounts in other comprehensive income to earnings as a result of a portion of the hedged forecasted transactions becoming probable not to occur.

The accelerated amounts represented a loss of $3.1 million and were recorded as interest expense in the accompanying consolidated statement of operations for the year ended December 31, 2020.

We did not accelerate the reclassification of any amounts in other comprehensive income to earnings during the years ended December 31, 2019 and 2018.

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 .

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

Currently, each of our cap agreements is indexed to LIBOR, which is set to expire at the end of 2021.

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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.

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.

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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.

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 facility 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.

The amounts involved in any such purchase transactions, individually or in the aggregate, may be material.

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For the Years Ended December 31,

($ in thousands)

($ in thousands) 2020 2019 $ Change % Change

Net cash provided by operating activities $ 696,712 $ 662,130 $ 34,582 5.2 %

Net cash provided by investing activities

Net cash provided by (used in) investing activities (425,156) 102,226 (527,382) (515.9) %

Net cash used in financing activities (146,033) (838,102) 692,069 82.6 %

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Net cash provided by operating activities was $696.7 million and $662.1 million for the years ended December 31, 2020, and 2019, respectively, an increase of 5.2%.

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.

The increase in cash provided by operating activities was driven by improved operational profitability, which was partially offset by changes in operating assets and liabilities.

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 .

Net cash provided by (used in) investing activities consists primarily of the acquisition costs of homes, capital improvements, and proceeds from property sales.

Net cash provided by (used in) investing activities was $(425.2) million and $102.2 million for the years ended December 31, 2020, and 2019, respectively, a decrease of $527.4 million.

The decrease in net cash provided by (used in) investing activities primarily resulted from the combined effect of the following changes in cash flows during the year ended December 31, 2020 compared to the year ended December 31, 2019:

(1) a decrease in proceeds from the sale of homes;

(2) an increase in cash used for the initial renovation of homes;

(3) an increase in cash used for the acquisition of homes;

(4) an increase in cash used for investments in joint ventures;

partially offset by (5) an increase in cash provided by repayment proceeds from retained debt securities.

More specifically, proceeds from sales of homes decreased $440.7 million from the year ended December 31, 2019 to the year ended December 31, 2020 due to a significant decrease in the number of homes sold from 3,455 to 1,580, respectively, partially offset by an increase in proceeds per home.

Initial renovation spend increased $41.3 million from the year ended December 31, 2019 compared to the year ended December 31, 2020 due to a significant increase in the number of homes undergoing their initial renovation and an increase in the cost per home.

Acquisition spend increased $35.6 million due to an increase in the number of homes acquired from 2,153 homes during the year ended December 31, 2019 to 2,252 homes during the year ended December 31, 2020.

Investments in joint ventures spend increased $16.3 million due to entering into a joint venture with Rockpoint during the year ended December 31, 2020.

Proceeds from repayment of retained debt securities increased $22.1 million from the year ended December 31, 2019 to the year ended December 31, 2020 due to an increase in prepayments of mortgage loans, including the full repayment of SWH 2017-1 during the year ended December 31, 2020.

Financing Activities

Net cash used in financing activities was $146.0 million and $838.1 million for the years ended December 31, 2020, and 2019, 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.

During the year ended December 31, 2020, proceeds from our Term Loan Facility of $2,500.0 million, along with proceeds from issuances and sales of stock under our public offering and ATM Equity Program of $686.7 million, along with proceeds from home sales, were used (1) to repay $1,500.0 million of our 2017 Term Loan Facility;

(2) to repay $1,434.6 million of our mortgage loans, including full repayment of SWH 2017-1 and partial repayments of IH 2018-1, IH 2018-2, IH 2018-3, and IH 2018-4;

(3) to fund $334.3 million of dividend and distribution payments;

and (4) to fund $41.4 million of deferred financing costs associated with the Credit Facility.

For the year ended December 31, 2019, proceeds from our Secured Term Loan of $403.5 million, proceeds from our ATM Equity Program 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 $279.8 million of dividend and distribution payments.

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

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2019 10-K .

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, 2020, consist of the following:

($ in thousands)

($ in thousands) Total 2021 2022-2023 2024-2025 Thereafter

Mortgage loans, net (1)(2)

$ 5,337,454 $ 93,639 $ 187,277 $ 3,150,232 $ 1,906,306

Secured Term Loan (1)

554,425 14,472 28,944 28,944 482,065

Term Loan Facility, net (1)

2,730,835 45,372 90,743 90,867 2,503,853

Revolving Facility (1)(2)(3)

18,054 3,549 7,097 7,107 301

2022 Convertible Notes (4)

363,113 12,075 351,038 — —

Derivative instruments (5)

590,270 134,183 274,838 181,249 —

Purchase commitments (6)

30,894 30,894 — — —

Operating leases 17,144 5,108 7,384 4,269 383

Finance leases 8,947 3,174 5,042 731 —

Total $ 9,651,136 $ 342,466 $ 952,363 $ 3,463,399 $ 4,892,908

(1) Includes estimated interest payments on the respective debt based on amounts outstanding as of December 31, 2020 at rates in effect as of such date;

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(3) Includes the related unused commitment fee.

Represents the principal amount of the 2022 Convertible Notes and interest obligation which is calculated using the coupon rate of the 2022 Convertible Notes.

(4) Represents the principal amount and interest obligation of the 2022 Convertible Notes which is calculated using the notes’ coupon rate.

(5) Includes interest rate swap and interest rate cap obligations calculated using LIBOR as of December 31, 2020, or 0.14%.

(6) Represents commitments to acquire 99 single-family rental homes as of December 31, 2020.

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.

We have a commitment, which is not reflected in the table above, to make additional capital contributions to a joint venture.

As of December 31, 2020, we are committed to fund an additional $59.4 million to the joint venture.

Critical Accounting Policies and Estimates

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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 .

The following significant accounting policies affect the acquisition, disposition, recognition, classification, and fair value measurements (on a nonrecurring basis) related to our portfolio of over 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.

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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.

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, 2020 was increased or decreased by 500 bps, our annualized depreciation expense would have changed by approximately $1.1 million.

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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 .

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 an increase in impairment expense of less than $0.1 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.

Once we identify a property to be sold pursuant to GAAP requirements, 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.

If market values less disposal costs for our properties that were classified as held for sale as of December 31, 2020 were 10% lower, our impairment expense related to those properties would have increased by approximately $1.2 million.

If the market values less disposal costs were 10% higher, our impairment expense would have been approximately $0.2 million lower.

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.

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

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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.

Under the provisions 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.

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share-based compensation expense;

IPO related expenses;

merger and transaction-related expenses;

casualty losses, net;

interest income;

unrealized gains from an investment in equity securities;

and other miscellaneous income and expenses.

casualty (gains) losses, net;

unrealized gains on investments in equity securities;

and other income and expenses.

EBITDA, EBITDA re , and Adjusted EBITDA re are used as supplemental financial performance measures by management and by external users of our financial statements, such as investors and commercial banks.

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Depreciation and amortization 552,530 533,719 560,541

EBITDA 1,103,902 1,048,003 939,123

Gain on sale of property, net of tax (54,594) (96,336) (49,682)

Impairment on depreciated real estate investments 4,578 14,210 6,709

1,053,886 965,877 896,150

Share-based compensation expense (1)

IPO related expenses (2)

17,090 18,158 29,499

Merger and transaction-related expenses (2)

Casualty losses, net (4)

— 4,347 16,895

Severance 601 8,465 8,238

Casualty (gains) losses, net (3)

(3,882) 4,533 14,110

Unrealized gains on investments in equity securities (29,723) (6,480) —

Other, net (4)

86 (5,120) (6,958)

Adjusted EBITDA re

$ 1,038,058 $ 989,780 $ 957,934

(1) For the years ended December 31, 2020, 2019, and 2018, $3,511, $3,075, and $5,500 was recorded in property management expense, respectively, and $13,579, $15,083, and $23,999 was recorded in general and administrative expense, respectively.

For the year ended December 31, 2017 , IPO related expenses were recorded in general and administrative expense.

(2) 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.

(3) Includes $8,013 for losses/damages related to Hurricanes Irma and Harvey for the year ended December 31, 2018.

There were no such losses during the years ended December 31, 2020 and 2019.

(4) Includes interest income and other miscellaneous income and expenses.

Net Operating Income

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gain on sale of property, net of tax;

and interest income and other miscellaneous income and expenses.

unrealized gains on investments in equity securities;

and other 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.

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($ in thousands)

2020 2019 2018

Net income (loss) available to common stockholders $ 195,764 $ 145,068 $ (5,744)

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Property management expense (1)

58,613 61,614 65,485

General and administrative (2)

63,305 74,274 98,764

Impairment and other (3)

696 18,743 20,819

Gain on sale of property, net of tax (54,594) (96,336) (49,682)

Unrealized gains on investments in equity securities (29,723) (6,480) —

Other, net (4)

86 (5,120) (6,958)

NOI (total portfolio)

1,142,285 1,094,698 $ 1,067,551

Non-Same Store NOI (98,821) (88,018)

NOI (Same Store portfolio) (5)

$ 1,043,464 $ 1,006,680

(1) Includes $3,511, $3,075, and $5,500 of share-based compensation expense for the years ended December 31, 2020, 2019, and 2018, respectively.

(2) Includes $13,579, $15,083, and $23,999 of share-based compensation expense for the years ended December 31, 2020, 2019, and 2018, 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.

(3) Includes $8,013 for losses/damages related to Hurricanes Irma and Harvey for the year ended December 31, 2018.

There were no such losses during the years ended December 31, 2020 and 2019.

(4) Includes interest income and other miscellaneous income and expenses.

(5) The Same Store portfolio totaled 71,433 homes for the years ended December 31, 2020 and 2019.

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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;

non-cash interest expense related to amortization of deferred financing costs, loan discounts, and non-cash interest expense from derivatives;

share-based compensation expense;

IPO related expenses;

offering related expenses;

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severance expense;

unrealized gains on investment in equity securities ;

and casualty losses, net, as applicable.

unrealized gains on investments in equity securities;

and casualty (gains) 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.

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(in thousands, except shares and per share data)

2020 2019 2018

Net income (loss) available to common stockholders $ 195,764 $ 145,068 $ (5,744)

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Non-controlling interests

1,237 1,648 (86)

Depreciation and amortization on real estate assets

546,419 529,205 549,505

Impairment on depreciated real estate investments

4,578 14,210 6,709

Net gain on sale of previously depreciated investments in real estate

Noncash interest expense related to amortization of deferred financing costs, loan discounts, and noncash interest expense from derivatives

(54,594) (96,336) (49,682)

693,852 594,190 501,519

Non-cash interest expense related to amortization of deferred financing costs, loan discounts, and non-cash interest expense from derivatives 40,415 48,515 48,354

Share-based compensation expense (1)

IPO related expenses

17,090 18,158 29,499

Offering related expenses (2)

Merger and transaction-related expenses (3)

— 4,347 22,962

Severance expense 601 8,465 8,238

Unrealized gains on investment in equity securities (4)

Casualty losses, net (5)

Unrealized gains on investments in equity securities (29,723) (6,480) —

Casualty (gains) losses, net (4)

(3,882) 4,533 14,110

718,353 673,995 624,682

Recurring capital expenditures (115,951) (118,988) (122,733)

$ 602,402 $ 555,007 $ 501,949

Net income (loss) available to common stockholders

Weighted average common shares outstanding — diluted (5)(6)(7)

555,458,607 532,499,787 520,376,929

Net income (loss) per common share — diluted (5)(6)(7)

$ 0.35 $ 0.27 $ (0.01)

Numerator for FFO per common share — diluted (5)

$ 711,033 $ 599,776 $ 512,576

Weighted average common shares and OP Units outstanding — diluted (5)(6)(7)

574,408,346 545,150,847 543,063,802

FFO per common share — diluted (5)(6)(7)

$ 1.24 $ 1.10 $ 0.94

Core FFO and Adjusted FFO

Weighted average common shares and OP Units outstanding — diluted (5)(6)(7)

559,307,903 538,925,506 530,643,789

Core FFO per common share — diluted (5)(6)(7)

$ 1.28 $ 1.25 $ 1.18

AFFO per common share — diluted (5)(6)(7)

$ 1.08 $ 1.03 $ 0.95

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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 .

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.

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.

(4) Includes $8,013 for losses/damages related to Hurricanes Irma and Harvey for the year ended December 31, 2018.

There were no such losses during the years ended December 31, 2020 and 2019.

(5) On July 1, 2019, we settled the full outstanding balance of the 2019 Convertible Notes with the issuance of 12,553,864 shares of common stock, and these shares 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.

Using the “if-converted” method, in the period prior to conversion for the year ended December 31, 2019, the 2019 Convertible Notes are excluded from net income (loss) per common share — diluted as they are anti-dilutive and are reflected in the FFO per common share — diluted computation above, 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.

No such adjustments were made to Core FFO and AFFO per common share — diluted.

With respect to the 2022 Convertible Notes, for the year ended December 31, 2020, the numerator for FFO per common share — diluted is adjusted for $17,181 of interest expense, including non-cash amortization of discounts, and the denominator is adjusted for 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes.

Additionally, no such adjustments were made to Core FFO and AFFO per common share —diluted.

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 excluded from the computation of net income or loss and FFO per common share — diluted as they are anti-dilutive, and are excluded from Core FFO and AFFO per common share — diluted.

(6) Incremental shares attributed to non-vested share-based awards totaling 1,465,286 and 1,263,825 shares for the years ended December 31, 2020 and 2019, respectively.

For the year ended December 31, 2018, 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 1,851,297, 1,748,787, and 1,150,384 for the years ended December 31, 2020, 2019, and 2018, respectively, related to incremental shares attributed to non-vested share-based awards are included in the denominator.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis