Invitation Homes Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures We maintain a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such 86 information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. The design of any disclosure controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level. Changes in Internal Control There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management's Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with United States generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company; (2) provide reasonable assurance that transaction are recorded as necessary to permit preparation of consolidated financial statements in accordance with United States generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Our management with the participation of our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020. This evaluation was based on the framework established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework in Internal Control — Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2020 to accomplish their objectives at the reasonable assurance level. Deloitte & Touche LLP, the independent registered public accounting firm that has audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2020. The report is included herein. 87 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Invitation Homes Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Invitation Homes Inc. and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the financial statements as of and for the year ended December 31, 2020 of the Company and our report dated February 19, 2021 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Dallas, Texas February 19, 2021 88 ITEM 9B. OTHER INFORMATION None. 89 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE The information required by this Item is incorporated by reference from the Company’s 2021 Proxy Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from the Company’s 2021 Proxy Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated from reference to the Company’s 2021 Proxy Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference from the Company’s 2021 Proxy Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item is incorporated by reference from the Company’s 2021 Proxy Statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020. 90 PART IV Item 15. Exhibits and Financial Statement Schedules. The following documents are filed as part of this report: (a) Financial Statements Invitation Homes Inc. Consolidated Financial Statements as of December 31, 2020 and 2019 and for the three years in the period ended December 31, 2020 Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm F- 1 Consolidated Balance Sheets F- 3 Consolidated Statements of Operations F- 4 Consolidated Statements of Comprehensive Loss F- 5 Consolidated Statements of Equity F- 6 Consolidated Statements of Cash Flows F- 7 Notes to Consolidated Financial Statements F- 9 (b) Financial Statement Schedule Invitation Homes Inc. as of December 31, 2020 and for the three years in the period ended December 31, 2020 Schedule III Real Estate and Accumulated Depreciation F- 44 (c) Exhibits 91 EXHIBIT INDEX Exhibit number Description 2.1 Agreement and Plan of Merger, dated August 9, 2017, by and among Invitation Homes Inc., Invitation Homes Operating Partnership LP, IH Merger Sub, LLC, Starwood Waypoint Homes and Starwood Waypoint Homes Partnership, L.P. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). 3.1 Charter of Invitation Homes Inc., dated as of February 6, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on February 6, 2017). 3.2 Amended and Restated Bylaws of Invitation Homes Inc., dated as of February 6, 2017 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on February 6, 2017). 4.1 Indenture, dated as of January 10, 2017, between Starwood Waypoint Homes and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 of SWH’s Current Report on Form 8-K (File No. 1-36163) filed January 10, 2017). 4.2 Form of 3.50% Convertible Senior Notes due 2022 (incorporated by reference to Exhibit 4.1 of SWH’s Current Report on Form 8-K (File No. 1-36163) filed January 10, 2017). 4.3 First Supplemental Indenture between Invitation Homes Inc., IH Merger Sub LLC and Wilmington Trust, National Association, as trustee dated as of November 16, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No.1-38004) filed on November 20, 2017). 4.4 Description of Securities (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 10-K (File No. 1-38004) filed on February 19, 2020). 10.1 Amended and Restated Stockholders Agreement by and among Invitation Homes Inc., each of the parties from time to time party thereto and, solely for the purposes of Section 4.1, Blackstone Real Estate Advisors L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). 10.2 Amended and Restated Agreement of Limited Partnership of Invitation Homes Operating Partnership LP, dated as of August 9, 2017, by and among Invitation Homes OP GP LLC and Invitation Homes Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). 10.3 Amended and Restated Registration Rights Agreement, dated as of October 4, 2016, among SWH and the other parties named therein (incorporated by reference to Exhibit 10.1 of SWH’s Current Report on Form 8-K (File No. 1- 36163) filed with the SEC on October 11, 2016). 10.4 Assignment and Assumption Agreement, dated as of November 16, 2017, between Invitation Homes Inc. and IH Merger Sub, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.1-38004) filed on November 20, 2017). 10.5 Invitation Homes Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on February 6, 2017). † 10.6 Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017). † 92 Exhibit number Description 10.7 Form of Indemnification Agreement of Colony Starwood Homes (incorporated by reference to Exhibit 10.2 of the SWH’s Current Report on Form 8-K (File No. 1-36163) filed January 8, 2016). † 10.8 Registration Rights Agreement, dated as of January 31, 2017, by and among the Company and the equity holders named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.1-38004) filed on February 6, 2017). 10.9 Revolving Credit and Term Loan Agreement, dated as of February 6, 2017, by and among Invitation Homes Operating Partnership LP, as borrower, the lenders party thereto, Bank of America, N.A., as administrative agent and the other parties party thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on February 6, 2017). 10.10 Amended and Restated Revolving Credit and Term Loan Agreement, dated as of December 8, 2020, by and among Invitation Homes Operating Partnership LP, as borrower, the lenders party thereto, Bank of America, N.A., as administrative agent and the other parties party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on December 9, 2021). 10.11 Loan Agreement, dated as of April 28, 2017, between IH 2017-1 Borrower, LP, as Borrower, and Wells Fargo Bank, National Association, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed May 1, 2017). 10.12 Loan Agreement, dated as of November 9, 2017, between IH 2017-2 Borrower, LP, as Borrower, and German American Capital Corporation, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on November 9, 2017). 10.13 Loan Agreement, dated as of February 8, 2018, between IH 2018-1 Borrower, LP, as Borrower, and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on February 12, 2018). 10.14 Loan Agreement, dated as of May 8, 2018, between IH 2018-2 Borrower, LP, as Borrower, and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 1-38004) filed on May 9, 2018). 10.15 Loan Agreement, dated as of June 28, 2018, between IH 2018-3 Borrower, LP, as Borrower, and German American Capital Corporation, as Lender (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 1-38004) filed on July 2, 2018). 10.16 Loan Agreement, dated as of November 7, 2018, between IH 2018-4 Borrower LP, as Borrower, and German American Capital Corporation, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on November 8, 2018). 10.17 Loan Agreement, dated as of April 10, 2014, between CAH 2014-1 Borrower, LLC, as Borrower, and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to Exhibit 10.3 of SWH’s Quarterly Report on Form 10-Q (File No. 1-36163) filed August 9, 2016). 10.18 Loan Agreement, dated as of June 30, 2014, between CAH 2014-2 Borrower, LLC, as Borrower, and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to Exhibit 10.4 of SWH’s Quarterly Report on Form 10-Q (File No. 1-36163) filed August 9, 2016). 93 Exhibit number Description 10.19 Loan Agreement, dated as of June 11, 2015, between CAH 2015-1 Borrower, LLC, as Borrower, and JPMorgan Chase Bank, National Association, as Lender (incorporated by reference to Exhibit 10.5 of SWH’s Quarterly Report on Form 10-Q (File No. 1-36163) filed August 9, 2016). 10.20 Loan Agreement, dated as of June 7, 2019, between 2019-1 IH Borrower LP, as Borrower, and Rothesay Life PLC, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on June 10, 2019). 10.21 Employment Agreement with Dallas B. Tanner, dated November 9, 2015 (incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017). † 10.22 Employment Agreement with Ernest M. Freedman, dated September 4, 2015 (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 6, 2017). † 10.23 Letter Agreement, dated August 9, 2017 by and between Invitation Homes Inc. and Ernest Freedman (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). † 10.24 Letter Agreement, dated August 9, 2017 by and between Invitation Homes Inc. and Dallas Tanner (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on August 14, 2017). † 10.25 Term Sheet, dated September 19, 2017, between Invitation Homes Inc. and Frederick C. Tuomi (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on September 19, 2017). † 10.26 Award Notice and Restricted Stock Unit Agreement (Sign-On Award – Mr. Tuomi) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on November 20, 2017). † 10.27 Form of Award Notice and Restricted Stock Unit Agreement for Mr. Ernest M. Freedman (Supplemental Bonus Award) (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). † 10.28 Form of Award Notice and Restricted Stock Unit Agreement for Mr. Dallas B. Tanner (Supplemental Bonus Award) (incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). † 10.29 Form of Award Notice and Restricted Stock Unit Agreement for Mr. Bryce Blair (Supplemental Bonus Award) (incorporated by reference to Exhibit 10.20 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). † 10.30 Form of Award Notice and Restricted Stock Unit Agreement for Non-Employee Directors (General Form) (Supplemental Bonus Award) (incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement on Form S-11 (No. 333-215452) filed on January 23, 2017). † 10.31 Form of Award Notice and Restricted Stock Unit Agreement (2017 LTIP Equity Award) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on June 29, 2017). † 94 Exhibit number Description 10.32 Form of Award Notice and Restricted Stock Unit Agreement (Retention Award - Messrs. Freedman and Tanner) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on June 29, 2017). † 10.33 Form of Award Notice and Restricted Stock Unit Agreement (2018 LTIP Equity Award) (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed on August 10, 2018). † 10.34 Form of Award Notice and Restricted Stock Unit Agreement (2019 LTIP Equity Award) (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed on May 7, 2019). † 10.35 2019 Outperformance Award Agreement (LTIP Units) (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed on July 31, 2019). † 10.36 Form of Award Notice and Restricted Stock Unit Agreement for Mr. Frederick C. Tuomi (2018 LTIP Equity Award) (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed May 15, 2018). † 10.37 Form of Award Notice and Restricted Stock Unit Agreement for Mr. Frederick C. Tuomi (2018 Supplemental Bonus Award) (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed May 15, 2018). † 10.38 Letter Agreement by and between the Company and Mr. Frederick C. Tuomi relating to Award Notice and Restricted Stock Unit Agreement (Sign-On Award - Mr. Tuomi) (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed May 15, 2018). † 10.39 Separation Agreement dated January 16, 2019, by and between the Company and Mr. Frederick C. Tuomi. (incorporated by reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K (File No. 1-38004) filed February 28, 2019). † 10.40 Form of Award Notice and Restricted Stock Unit Agreement (2018 Supplemental Bonus Award) (incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K (File No. 1-38004) filed March 29, 2018). † 10.41 Colony Starwood Homes Equity Plan (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (File No. 333-221617) filed on November 16, 2017). † 10.42 Form of Restricted Share Award Agreement under the Starwood Waypoint Residential Trust Equity Plan (incorporated by reference to Exhibit 10.10 of SWH’s Registration Statement on Form 10 (File No. 1-36163) filed December 23, 2013). † 10.43 Form of Restricted Share Unit Award Agreement under the Starwood Waypoint Residential Trust Equity Plan (incorporated by reference to Exhibit 10.11 of SWH’s Registration Statement on Form 10 (File No. 1-36163) filed December 23, 2013). † 10.44 Invitation Homes Inc. Executive Severance Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 1-38004) filed on May 7, 2020. † 95 Exhibit number Description 10.45 Securities Purchase Agreement, dated as of June 5, 2017, between Waypoint/GI Venture, LLC and CSH Property Three, LLC (incorporated by reference to Exhibit 10.1 of the SWH’s Current Report on Form 8-K (File No. 1-36163) filed June 5, 2017). 10.46 Form of Award Notice and Restricted Stock Unit Agreement (2020 LTIP Equity Award) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-38004) filed on February 25, 2020).† 21.1 Subsidiaries of the Registrant. 23.1 Consent of Deloitte & Touche LLP. 31.1 Certificate of Dallas B. Tanner, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certificate of Ernest M. Freedman, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certificate of Dallas B. Tanner, President and Chief Executive Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.2 Certificate of Ernest M. Freedman, Executive Vice President and Chief Financial Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 96 † This document has been identified as a management contract or compensatory plan or arrangement. Certain agreements and other documents filed as exhibits to this Annual Report on Form 10-K contain representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties to such agreements and other documents and that may not be reflected in such agreements and other documents. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date of such agreements and other documents. 97 ITEM 16. FORM 10-K SUMMARY None. 98 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Dallas, Texas, on the 19th day of February 2021. Invitation Homes Inc. By: /s/ Dallas B. Tanner Name: Dallas B. Tanner Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities indicated on the 19th day of February 2021. Signature Title /s/ Dallas B. Tanner President, Chief Executive Officer, and Director Dallas B. Tanner (Principal Executive Officer) /s/ Ernest M. Freedman Executive Vice President and Chief Financial Officer Ernest M. Freedman (Principal Financial Officer) /s/ Kimberly K. Norrell Executive Vice President and Chief Accounting Officer Kimberly K. Norrell (Principal Accounting Officer) /s/ Bryce Blair Chairman and Director Bryce Blair /s/ Jana C. Barbe Director Jana C. Barbe /s/ Richard D. Bronson Director Richard D. Bronson /s/ Michael D. Fascitelli Director Michael D. Fascitelli /s/ Jeffrey E. Kelter Director Jeffrey E. Kelter 99 Signature Title /s/ Joseph D. Margolis Director Joseph D. Margolis /s/ John B. Rhea Director John B. Rhea /s/ J. Heidi Roizen Director J. Heidi Roizen /s/ Janice L. Sears Director Janice L. Sears /s/ William J. Stein Director William J. Stein 100 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Invitation Homes Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Invitation Homes Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, other comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Investments in Single-Family Residential Properties—Refer to Notes 2 and 3 to the financial statements Critical Audit Matter Description The Company owned approximately 80,000 individual single-family residential properties with a net book value of $16.3 billion as of December 31, 2020. The Company capitalizes costs to acquire, stabilize, and prepare single-family residential properties to be leased. The determination of which costs to capitalize requires significant management judgment. Costs capitalized in connection with single-family residential property acquisitions, stabilization activities, and on an ongoing basis are depreciated over their estimated useful lives on a straight-line basis. From time to time, the Company identifies single-family residential properties to be sold. At the time such properties are identified, the Company evaluates whether or F-1 not such properties should be classified as held for sale. Further, the Company evaluates investments in single-family residential properties to determine whether there have been any changes in circumstances that may indicate that the carrying value of individual properties may not be recoverable. Given management’s (1) inputs and assumptions used to determine purchase price allocation based upon the relative fair values of asset components, (2) determination of which costs improve or extend the life of a property, (3) evaluation of single-family residential properties for impairment which requires significant judgment and assessment of factors that are, at times, subject to significant uncertainty, and (4) application of held for sale classification criteria, performing audit procedures to evaluate the accounting for investments in single-family residential properties was challenging and required an increased extent of audit effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to whether the investments in single-family residential properties were accounted for appropriately included the following, among others: • We tested the effectiveness of relevant controls over investments in single-family residential properties. • We selected a sample of properties acquired during the year and evaluated the accuracy of the amounts recorded and appropriate transfer of title. • We evaluated the appropriateness of management’s allocation of the initial purchase price for newly acquired properties by developing independent estimates for the purchase price allocation for each residential market in which the properties were acquired and comparing our estimates to the Company’s actual allocation. • We selected a sample of costs capitalized during the year and evaluated the accuracy and classification of recorded amounts. We also developed an expectation of repairs and maintenance costs that were charged to expense based on the historical amounts recorded, taking into account changes in the portfolio of single-family residential properties and market conditions, and compared our expectation to the recorded balance. • We evaluated management’s analysis of possible impairment indicators for properties by independently assessing trends in the residential markets in which the Company has significant investments in single-family residential properties, trends in gains or losses from sales of properties, and macroeconomic data to identify any indicators that the carrying value of properties may not be recoverable. • We selected a sample of properties classified as held for sale and evaluated whether the properties met the criteria to be classified as held for sale as of December 31, 2020. We also selected a sample of properties sold after December 31, 2020 and evaluated whether each property was properly classified as either held for sale or held for use as of December 31, 2020. • We selected a sample of properties disposed during the year and evaluated the terms and conditions of the sales contracts to assess whether the sale was properly recorded, including the removal of assets from the accounting records and related gain or loss on sale. /s/ Deloitte & Touche LLP Dallas, Texas February 19, 2021 We have served as the Company’s auditor since 2013. F-2 INVITATION HOMES INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2020 and 2019 (in thousands, except shares and per share data) 2020 2019 Assets: Investments in single-family residential properties: Land $ 4,539,796 $ 4,499,346 Building and improvements 14,261,954 13,747,818 18,801,750 18,247,164 Less: accumulated depreciation ( 2,513,057 ) ( 2,003,972 ) Investments in single-family residential properties, net 16,288,693 16,243,192 Cash and cash equivalents 213,422 92,258 Restricted cash 198,346 193,987 Goodwill 258,207 258,207 Investments in unconsolidated joint ventures 69,267 54,778 Other assets, net 478,287 550,488 Total assets $ 17,506,222 $ 17,392,910 Liabilities: Mortgage loans, net $ 4,820,098 $ 6,238,461 Secured term loan, net 401,095 400,978 Term loan facility, net 2,470,907 1,493,747 Revolving facility — — Convertible senior notes, net 339,404 334,299 Accounts payable and accrued expenses 149,299 186,110 Resident security deposits 157,936 147,787 Other liabilities 611,410 325,450 Total liabilities 8,950,149 9,126,832 Commitments and contingencies (Note 14) Equity: Stockholders' equity Preferred stock, $0.01 par value per share, 900,000,000 shares authorized, none outstanding as of December 31, 2020 and December 31, 2019 — — Common stock, $0.01 par value per share, 9,000,000,000 shares authorized, 567,117,666 and 541,642,725 outstanding as of December 31, 2020 and December 31, 2019, respectively 5,671 5,416 Additional paid-in capital 9,707,258 9,010,194 Accumulated deficit ( 661,162 ) ( 524,588 ) Accumulated other comprehensive loss ( 546,942 ) ( 276,600 ) Total stockholders' equity 8,504,825 8,214,422 Non-controlling interests 51,248 51,656 Total equity 8,556,073 8,266,078 Total liabilities and equity $ 17,506,222 $ 17,392,910 The accompanying notes are an integral part of these consolidated financial statements. F-3 INVITATION HOMES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except shares and per share data) For the Years Ended December 31, 2020 2019 2018 Rental revenues and other property income $ 1,822,828 $ 1,764,685 $ 1,722,962 Expenses: Property operating and maintenance 680,543 669,987 655,411 Property management expense 58,613 61,614 65,485 General and administrative 63,305 74,274 98,764 Interest expense 353,923 367,173 383,595 Depreciation and amortization 552,530 533,719 560,541 Impairment and other 696 18,743 20,819 Total expenses 1,709,610 1,725,510 1,784,615 Unrealized gains on investments in equity securities 29,723 6,480 — Other, net ( 86 ) 5,120 6,958 Gain on sale of property, net of tax 54,594 96,336 49,682 Net income (loss) 197,449 147,111 ( 5,013 ) Net (income) loss attributable to non-controlling interests ( 1,237 ) ( 1,648 ) 86 Net income (loss) attributable to common stockholders 196,212 145,463 ( 4,927 ) Net income available to participating securities ( 448 ) ( 395 ) ( 817 ) Net income (loss) available to common stockholders — basic and diluted (Note 12) $ 195,764 $ 145,068 $ ( 5,744 ) Weighted average common shares outstanding — basic 553,993,321 531,235,962 520,376,929 Weighted average common shares outstanding — diluted 555,458,607 532,499,787 520,376,929 Net income (loss) per common share — basic $ 0.35 $ 0.27 $ ( 0.01 ) Net income (loss) per common share — diluted $ 0.35 $ 0.27 $ ( 0.01 ) The accompanying notes are an integral part of these consolidated financial statements. F-4 INVITATION HOMES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) For the Years Ended December 31, 2020 2019 2018 Net income (loss) $ 197,449 $ 147,111 $ ( 5,013 ) Other comprehensive loss Unrealized losses on interest rate swaps ( 388,466 ) ( 244,126 ) ( 43,211 ) (Gains) losses from interest rate swaps reclassified into earnings from accumulated other comprehensive loss 116,549 ( 20,763 ) ( 18,627 ) Other comprehensive loss ( 271,917 ) ( 264,889 ) ( 61,838 ) Comprehensive loss ( 74,468 ) ( 117,778 ) ( 66,851 ) Comprehensive loss attributable to non-controlling interests 338 1,884 1,150 Comprehensive loss attributable to common stockholders $ ( 74,130 ) $ ( 115,894 ) $ ( 65,701 ) The accompanying notes are an integral part of these consolidated financial statements. F-5 INVITATION HOMES INC. CONSOLIDATED STATEMENTS OF EQUITY For the Years Ended December 31, 2020, 2019, and 2018 (in thousands, except share and per share data) Common Stock Number of Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Non-Controlling Interests Total Equity Balance as of December 31, 2017 519,173,142 $ 5,192 $ 8,602,603 $ ( 157,595 ) $ 47,885 $ 8,498,085 $ 151,790 $ 8,649,875 Capital distributions — — — — — — ( 4,020 ) ( 4,020 ) Net loss — — — ( 4,927 ) — ( 4,927 ) ( 86 ) ( 5,013 ) Dividends and dividend equivalents declared ($0.44 per share) — — — ( 230,072 ) — ( 230,072 ) — ( 230,072 ) Issuance of common stock — settlement of RSUs, net of tax 1,069,798 10 ( 9,255 ) — — ( 9,245 ) — ( 9,245 ) Share-based compensation expense — — 29,499 — — 29,499 — 29,499 Total other comprehensive income — — — — ( 60,774 ) ( 60,774 ) ( 1,064 ) ( 61,838 ) Redemption of OP Units for common stock 405,037 4 6,615 — ( 74 ) 6,545 ( 6,545 ) — Balance as of December 31, 2018 520,647,977 5,206 8,629,462 ( 392,594 ) ( 12,963 ) 8,229,111 140,075 8,369,186 Capital distributions — — — — — — ( 3,074 ) ( 3,074 ) Net income — — — 145,463 — 145,463 1,648 147,111 Dividends and dividend equivalents declared ($0.52 per share) — — — ( 277,457 ) — ( 277,457 ) — ( 277,457 ) Issuance of common stock — settlement of RSUs, net of tax 910,452 9 ( 8,173 ) — — ( 8,164 ) — ( 8,164 ) Issuance of common stock — settlement of 2019 Convertible Notes 12,553,864 126 229,818 — — 229,944 — 229,944 Issuance of common stock, net 1,957,139 20 55,243 — — 55,263 — 55,263 Share-based compensation expense — — 16,724 — — 16,724 1,434 18,158 Total other comprehensive loss — — — — ( 261,357 ) ( 261,357 ) ( 3,532 ) ( 264,889 ) Redemption of OP Units for common stock 5,573,293 55 87,120 — ( 2,280 ) 84,895 ( 84,895 ) — Balance as of December 31, 2019 541,642,725 5,416 9,010,194 ( 524,588 ) ( 276,600 ) 8,214,422 51,656 8,266,078 Capital distributions — — — — — — ( 2,137 ) ( 2,137 ) Net income — — — 196,212 — 196,212 1,237 197,449 Dividends and dividend equivalents declared ($0.60 per share) — — — ( 332,786 ) — ( 332,786 ) — ( 332,786 ) Issuance of common stock — settlement of RSUs, net of tax 386,717 4 ( 4,431 ) — — ( 4,427 ) — ( 4,427 ) Issuance of common stock, net 25,088,224 251 686,472 — — 686,723 — 686,723 Share-based compensation expense — — 15,023 — — 15,023 2,067 17,090 Total other comprehensive loss — — — — ( 270,342 ) ( 270,342 ) ( 1,575 ) ( 271,917 ) Balance as of December 31, 2020 567,117,666 $ 5,671 $ 9,707,258 $ ( 661,162 ) $ ( 546,942 ) $ 8,504,825 $ 51,248 $ 8,556,073 The accompanying notes are an integral part of these consolidated financial statements. F-6 INVITATION HOMES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Years Ended December 31, 2020 2019 2018 Operating Activities: Net income (loss) $ 197,449 $ 147,111 $ ( 5,013 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 552,530 533,719 560,541 Share-based compensation expense 17,090 18,158 29,499 Amortization of deferred leasing costs 11,733 10,621 11,258 Amortization of deferred financing costs 25,828 39,259 27,191 Amortization of debt discounts 5,458 7,343 9,124 Provisions for impairment 4,578 14,210 6,709 Unrealized gains on investments in equity securities ( 29,723 ) ( 6,480 ) — Gain on sale of property, net of tax ( 54,594 ) ( 96,336 ) ( 49,682 ) Change in fair value of derivative instruments 9,129 1,913 12,039 Other non-cash amounts included in net income (loss) 3,288 ( 89 ) 6,342 Changes in operating assets and liabilities: Other assets, net ( 38,012 ) ( 10,890 ) ( 14,083 ) Accounts payable and accrued expenses ( 27,040 ) 5,207 ( 26,643 ) Resident security deposits 10,149 ( 1,208 ) 2,306 Other liabilities 8,849 ( 408 ) ( 8,347 ) Net cash provided by operating activities 696,712 662,130 561,241 Investing Activities: Amounts deposited and held by others ( 906 ) ( 395 ) 9,074 Acquisition of single-family residential properties ( 621,697 ) ( 586,075 ) ( 252,391 ) Initial renovations to single-family residential properties ( 98,769 ) ( 57,437 ) ( 45,733 ) Other capital expenditures for single-family residential properties ( 172,284 ) ( 164,244 ) ( 141,688 ) Proceeds from sale of single-family residential properties 414,927 855,583 490,699 Purchases of investments in debt securities — — ( 211,737 ) Repayment proceeds from retained debt securities 72,106 49,960 224,035 Investments in unconsolidated joint ventures ( 16,345 ) — — Other investing activities ( 2,188 ) 4,834 ( 9,266 ) Net cash provided by (used in) investing activities ( 425,156 ) 102,226 62,993 Financing Activities: Payment of dividends and dividend equivalents ( 332,151 ) ( 276,681 ) ( 230,072 ) Distributions to non-controlling interests ( 2,137 ) ( 3,074 ) ( 4,020 ) Payment of taxes related to net share settlement of RSUs ( 4,427 ) ( 8,164 ) ( 9,245 ) Proceeds from mortgage loans — — 4,234,483 Payments on mortgage loans ( 1,434,626 ) ( 997,421 ) ( 4,579,594 ) Proceeds from secured term loan — 403,464 — Payments on secured term loan ( 101 ) — — Proceeds from term loan facility 2,500,000 — — Payments on term loan facility ( 1,500,000 ) — — Proceeds from revolving facility 320,000 485,000 285,000 Payments on revolving facility ( 320,000 ) ( 485,000 ) ( 320,000 ) F-7 INVITATION HOMES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands) For the Years Ended December 31, 2020 2019 2018 Proceeds from issuance of common stock, net 686,723 55,263 — Deferred financing costs paid ( 41,411 ) ( 2,613 ) ( 55,681 ) Other financing activities ( 17,903 ) ( 8,876 ) ( 1,676 ) Net cash used in financing activities ( 146,033 ) ( 838,102 ) ( 680,805 ) Change in cash, cash equivalents, and restricted cash 125,523 ( 73,746 ) ( 56,571 ) Cash, cash equivalents, and restricted cash, beginning of period (Note 4) 286,245 359,991 416,562 Cash, cash equivalents, and restricted cash, end of period (Note 4) $ 411,768 $ 286,245 $ 359,991 Supplemental cash flow disclosures: Interest paid, net of amounts capitalized $ 313,076 $ 322,085 $ 335,973 Cash paid for income taxes 1,284 2,781 2,069 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases 5,560 5,365 N/A Financing cash flows from finance leases 2,382 498 N/A Non-cash investing and financing activities: Accrued renovation improvements at period end $ 7,709 $ 13,382 $ 7,189 Accrued residential property capital improvements at period end 6,785 11,520 7,189 Transfer of residential property, net to other assets, net for held for sale assets 168,533 545,448 441,005 Change in other comprehensive loss from cash flow hedges ( 280,773 ) ( 266,676 ) ( 73,242 ) ROU assets obtained in exchange for operating lease liabilities 6,427 1,721 N/A ROU assets obtained in exchange for finance lease liabilities 9,561 — N/A Capital leases N/A N/A 2,209 Net settlement of 2019 Convertible Notes in shares of common stock — 229,944 — The accompanying notes are an integral part of these consolidated financial statements. F-8 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Note 1—Organization and Formation Invitation Homes Inc. (“INVH”) is a real estate investment trust (“REIT”) that conducts its operations through Invitation Homes Operating Partnership LP (“INVH LP”). INVH LP was formed for the purpose of owning, renovating, leasing, and operating single-family residential properties. Through THR Property Management L.P., a wholly owned subsidiary of INVH LP (the “Manager”), we provide all management and other administrative services with respect to the properties we own. On February 6, 2017, INVH completed an initial public offering (“IPO”), changed its jurisdiction of incorporation to Maryland, and amended its charter to provide for the issuance of up to 9,000,000,000 shares of common stock and 900,000,000 shares of preferred stock, in each case $ 0.01 par value per share. In connection with certain pre-IPO reorganization transactions, INVH LP became (1) owned by INVH directly and through Invitation Homes OP LLC, a wholly owned subsidiary of INVH, and (2) the owner of all of the assets, liabilities, and operations of certain pre-IPO ownership entities. These transactions were accounted for as a reorganization of entities under common control utilizing historical cost basis. On November 16, 2017 (the “Merger Date”), INVH and certain of its affiliates entered into a series of transactions with Starwood Waypoint Homes (“SWH”) and certain SWH affiliates which resulted in SWH and its operating partnership being merged into INVH and INVH LP, respectively, with INVH and INVH LP being the surviving entities (the “Mergers”). The Mergers were accounted for as a business combination in accordance with ASC 805, Business Combinations , and INVH was designated as the accounting acquirer. The limited partnership interests of INVH LP consist of common units and other classes of limited partnership interests that may be issued (the “OP Units”). As of December 31, 2020, INVH owns 99.4 % of the common OP Units and has the full, exclusive, and complete responsibility for and discretion over the day to day management and control of INVH LP. Our organizational structure includes several wholly owned subsidiaries of INVH LP that were formed to facilitate certain of our financing arrangements (the “Borrower Entities”). These Borrower Entities are used to align the ownership of our single-family residential properties with certain of our debt instruments. Collateral for certain of our individual debt instruments may be in the form of equity interests in the Borrower Entities or in pools of single-family residential properties owned either directly by the Borrower Entities or indirectly by their wholly owned subsidiaries (see Note 7). References to “Invitation Homes,” the “Company,” “we,” “our,” and “us” refer, collectively, to INVH, INVH LP, and the consolidated subsidiaries of INVH LP. Note 2—Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements include the accounts of INVH and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidated financial statements. We consolidate entities when we own, directly or indirectly, a majority interest in the entity or are otherwise able to control the entity. We consolidate variable interest entities (“VIEs”) in accordance with ASC 810, Consolidation , if we are the primary beneficiary of the VIE as determined by our power to direct the VIE’s activities and the obligation to absorb its losses or the right to receive its benefits, which are potentially significant to the VIE. A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. F-9 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) As described in Note 5, we invested in joint ventures with Rockpoint Group, L.L.C. (“Rockpoint”) and the Federal National Mortgage Association (“FNMA”), both of which are voting interest entities. We do not hold a controlling financial interest in either joint venture but have significant influence over the operating and financial policies of each joint venture. Additionally, both Rockpoint and FNMA hold certain substantive participating rights that preclude the presumption of control by us of either joint venture; as such, we account for each investment using the equity method. Our investment in the Rockpoint joint venture is recorded at cost, and our investment in the FNMA joint venture was initially recorded at fair value in connection with purchase accounting for the Mergers. The investments in these joint ventures are subsequently adjusted for our proportionate share of net earnings or losses and other comprehensive income or loss, cash contributions made and distributions received, and other adjustments, as appropriate. Distributions of operating profit from the joint ventures are reported as part of operating cash flows while distributions related to a capital transaction, such as a refinancing transaction or sale, are reported as investing activities. Non-controlling interests represent the OP Units not owned by INVH, including any vested OP Units granted in connection with certain share-based compensation awards. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets as of December 31, 2020 and 2019, and the consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018 include an allocation of the net income (loss) attributable to the non-controlling interest holders. Vested OP Units are redeemable for shares of our common stock on a one -for-one basis or, in our sole discretion, cash, and redemptions of OP Units are accounted for as a reduction in non-controlling interests with an offset to stockholders’ equity based on the pro rata number of OP Units redeemed. Significant Risks and Uncertainties One of the most significant risks and uncertainties to our financial condition and results of operations is the potential adverse effect of the ongoing pandemic resulting from the coronavirus, or COVID-19. Since the outbreak, a number of our residents have requested rent deferral and/or late fee relief, and components of our rental revenues and other property income have been impacted by the pandemic. In addition, 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. 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. The COVID-19 pandemic could have material and adverse effects on our financial condition, results of operations, and cash flows in the near term due to, but not limited to, the following: (1) reduced economic activity that severely impacts the earnings or health of our residents, thereby causing them to be unable to fully meet their obligations to us and resulting in increases in uncollectible revenues and thus reductions in rental revenues and other property income; (2) governmental restrictions and moratoriums that negatively impact our ability to charge and collect rental revenues and other property income or impose restrictions on our ability to provide services to our residents and homes; (3) negative financial impact of the pandemic that could impact our ability to access funds available under our Revolving Facility (as defined in Note 7) or affect future compliance with financial covenants of our Credit Facility (as defined in Note 7) and other debt agreements; and (4) weaker economic conditions that could cause us to recognize impairments in value of our tangible assets or goodwill. The extent to which the COVID-19 pandemic ultimately impacts our operations depends on ongoing developments, which remain highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the extent and duration of actions taken to contain the pandemic or mitigate its impact, 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. While we have taken steps to mitigate the impact of the pandemic on our results of operations, there can be no assurance that these efforts will be successful. F-10 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Reclassification As of December 31, 2019, we reclassified the $ 54,778 carrying value of our investment in the FNMA joint venture from other assets, net on the consolidated balance sheet to a separate balance sheet line item, investments in unconsolidated joint ventures, to conform to our current presentation. Additionally, we reclassified $ 6,480 of unrealized gains on investments in equity securities from other, net into unrealized gains on investments in equity securities for the year ended December 31, 2019 to conform to our current presentation. This reclassification had no effect on the total reported net income on the consolidated statement of operations for the year ended December 31, 2019. Adoption of New Accounting Standards In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how companies measure credit losses for certain financial assets, excluding receivables arising from operating leases. This guidance requires an entity to estimate its expected credit loss and record an allowance based on this estimate so that it is presented at the net amount expected to be collected on the financial asset. We adopted this standard as of January 1, 2020, and it did not have a material impact on our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848 ) (“ASU 2020-04”), which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. We have elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Interbank Offer Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease accommodations resulting from the COVID-19 pandemic as many lessors have been asked to provide rent deferrals, rent abatements, late fee waivers, and other lease concessions to lessees (collectively, “lease accommodations”). While the lease modification guidance in ASC 842, Leases (“ASC 842”), addresses routine changes to lease terms resulting from negotiations between a lessee and lessor, it did not contemplate the rapid implementation of lease accommodations to address the sudden liquidity constraints of some lessees arising from the COVID-19 pandemic. Under existing lease guidance, we would have been required to determine, on a lease by lease basis, if each lease accommodation resulted from a new arrangement reached with the resident (treated within the lease modification accounting framework) or if each was contemplated under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). If certain criteria are met, the Lease Modification Q&A allows lessors to bypass the lease by lease analysis and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. We elected to apply the Lease Modification Q&A guidance not to perform a lease by lease analysis with respect to any lease accommodations and to account for such accommodations outside of the lease modification framework. The Lease Modification Q&A has not had a material impact on our consolidated financial statements for the year ended December 31, 2020. However, the extent of lease accommodations granted to residents as a result of the COVID-19 pandemic in future periods may materially affect our consolidated financial statements. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These estimates are inherently subjective in nature and actual results could differ from those estimates. F-11 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Investments in Single-Family Residential Properties The following significant accounting policies affect the acquisition, disposition, recognition, classification, 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 as of December 31, 2020: • Acquisition of Real Estate Assets: Upon acquisition, we evaluate our acquired single-family residential properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. Upon adoption of ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , our purchases of homes are treated as asset acquisitions and are recorded at their purchase price, which is allocated between land, building and improvements, and in-place lease intangibles (when a resident is in place at the acquisition date) based upon their relative fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, bidding service and title fees, payments made to cure tax, utility, homeowners’ association (“HOA”), and other mechanic’s and miscellaneous liens, as well as other closing costs. Properties acquired in the Mergers were recorded at fair value. The fair values of acquired in-place lease intangibles, if any, are based on the costs to execute similar leases, including commissions and other related costs. The origination value of in-place lease intangibles also includes an estimate of lost rent revenue at in-place rental rates during the estimated time required to lease the property. In-place lease intangibles are amortized over the life of the leases and are recorded in other assets, net in our consolidated balance sheets. • Cost Capitalization: We incur costs to acquire, stabilize, and prepare our single-family residential properties to be leased. We capitalize these costs as a component of our investment in each single-family residential property, using specific identification and relative allocation methodologies, including renovation costs and other costs associated with activities that are directly related to preparing our properties for use as rental real estate. Other costs include interest costs, property taxes, property insurance, utilities, HOA fees, and a portion of the salaries and benefits of the Manager’s employees who are directly responsible for the execution of our stabilization activities. The capitalization period associated with our stabilization activities begins at the time that such activities commence and concludes at the time that a single-family residential property is available to be leased. Once a property is ready for its intended use, expenditures for ordinary maintenance and repairs thereafter are expensed to operations as incurred, and we capitalize expenditures that improve or extend the life of a home, a portion of the salaries and benefits of the Manager’s employees who are directly responsible for such improvements, and for certain furniture and fixtures additions. The determination of which costs to capitalize requires significant judgment. Accordingly, many factors are considered as part of our evaluation processes with no one factor necessarily determinative. • Depreciation: Costs capitalized in connection with single-family residential property acquisitions, stabilization activities, and on an ongoing basis are depreciated over their estimated useful lives on a straight-line basis. The depreciation period commences upon the completion of stabilization-related activities or upon the completion of improvements made on an ongoing basis. For those costs capitalized in connection with residential property acquisitions and stabilization activities and those capitalized on an ongoing basis, the weighted average useful lives range from 7 years to 28.5 years. • Provisions for Impairment: We continuously evaluate, by property, whether there are any events or changes in circumstances indicating that the carrying amount of our single-family residential properties may not be recoverable. Examples of such events and changes in circumstances that we consider include significant and persistent declines in an individual property’s net operating income, regional changes in home price appreciation as measured by certain independently developed indices, change in expected use of the property, significant adverse legal factors, substantive damage to the individual property as a result of natural disasters and other risks inherent in our business not covered by insurance proceeds, or a current expectation that a property will be disposed of prior to the end of its estimated useful life. To the extent an event or change in circumstance is identified, a residential property is considered to be impaired only if its carrying value cannot be recovered through estimated future undiscounted cash flows from the use and eventual disposition of the property. Cash flow projections are prepared using internal analyses based on current rental, renewal, and occupancy rates, operating expenses, and inputs from our annual planning process that give F-12 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) consideration to each property’s historical results, current operating trends, and current market conditions. To the extent an impairment has occurred, the carrying amount of our investment in a property is adjusted to its estimated fair value. To determine the estimated fair value, we consider local broker price opinions (“BPOs”) and automated valuation model (“AVM”) data, each of which are important components of our process with no one information source being necessarily determinative. In order to validate the BPOs and AVM data received and used in our assessment of fair value of real estate, we perform an internal review to determine if an acceptable valuation approach was used to estimate fair value in compliance with guidance provided by ASC 820, Fair Value Measurements . Additionally, we undertake an internal review to assess the relevance and appropriateness of comparable transactions that have been used, and any adjustments to comparable transactions made, in reaching the value opinions. The process whereby we assess our single-family residential properties for impairment requires significant judgment and assessment of factors that are, at times, subject to significant uncertainty. We evaluate multiple information sources and perform a number of internal analyses, each of which are important components of our process with no one information source or analysis being necessarily determinative. • Single-Family Residential Properties Held for Sale: From time to time, we may identify single-family residential properties to be sold. At the time that any such properties are identified, we perform an evaluation to determine whether or not such properties should be classified as held for sale in accordance with GAAP. Factors considered as part of our held for sale evaluation process include whether the following conditions have been met: (i) we have committed to a plan to sell a property; (ii) the property is immediately available for sale in its present condition; (iii) an active program to locate a buyer and other actions required to complete the plan to sell a property have been initiated; (iv) the sale of a property is probable within one year (generally determined based upon listing for sale); (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. To the extent that these factors are all present, we cease depreciating the property, measure the property at the lower of its carrying amount or its fair value less estimated costs to sell, and present the property separately within other assets, net on our consolidated balance sheets. As of December 31, 2020 and 2019, we classified $ 44,163 and $ 116,529 , respectively, as held for sale assets in our consolidated balance sheets (see Note 6). Cash and Cash Equivalents For purposes of presentation on both the consolidated balance sheets and statements of cash flows, we consider financial instruments with an original maturity of three months or less to be cash and cash equivalents. We maintain our cash and cash equivalents in multiple financial institutions and, at times, these balances exceed federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. We believe any risks are mitigated through the size of the financial institution at which our cash balances are held. Restricted Cash Restricted cash represents cash deposited in accounts related to certain rent deposits and collections, security deposits, property taxes, insurance premiums and deductibles, and capital expenditures (see Note 4). Amounts deposited in the reserve accounts associated with the mortgage loans and secured term loan can only be used as provided for in the respective loan agreements (see Note 7), and security deposits held pursuant to lease agreements are required to be segregated. Accordingly, these items are separately presented within our consolidated balance sheets. Held to Maturity Investments Investments in debt securities that we have a positive intent and ability to hold to maturity are classified as held to maturity and are presented within other assets, net on our consolidated balance sheets (see Note 6). These investments are recorded at amortized cost net of the amount expected not to be collected. Interest income, including amortization of any premium or discount, is classified as other in the consolidated statements of operations. For purposes of classification within the consolidated statements of cash flows, purchases of and repayments from these securities are classified as investing activities. F-13 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Investments in Equity Securities Investments in equity securities consist of investments both with and without a readily determinable fair value. These are presented within other assets, net on our consolidated balance sheets (see Note 6). Investments with a readily determinable fair value are measured at fair value. Investments without a readily determinable fair value are measured at cost, less any impairment, plus or minus changes resulting from observable price changes for identical or similar investment in the same issuer. Unrealized gains and losses are included in other, net in the consolidated statements of operations. Deferred Financing Costs Costs incurred that are directly attributable to procuring external financing are deferred and amortized over the term of the related financing agreement as interest expense in the consolidated statements of operations, and we accelerate amortization if the debt is retired before the maturity date. Costs that are deferred for the procurement of such financing are presented either as an asset in other assets, net when associated with a revolving debt instrument and prior to funding of a loan or as a liability in mortgage loans, net, secured term loan, net, or term loan facility, net, when associated with other indebtedness. Convertible Senior Notes ASC 470-20, Debt with Conversion and Other Options , requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial proceeds from the issuance of convertible notes are allocated between a liability component and an equity component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have been issued at such time. The equity component represents the excess initial proceeds received over the fair value of the liability component of the notes as of the date of issuance. We measure the fair value of the debt component of our convertible senior notes as of the issuance date based on our nonconvertible debt borrowing rate. In connection with Mergers, we assumed convertible senior notes that were recorded at their estimated fair value based on our nonconvertible debt borrowing rate as of the Merger Date (see Note 7). The resulting discount from the outstanding principal balance of the convertible senior notes is being amortized using the effective interest rate method over the periods to maturity. Amortization of this discount is recorded as interest expense in the consolidated statement of operations for the years ended December 31, 2020 , 2019, and 2018. Revenue Recognition and Resident Receivables On January 1, 2019, we adopted ASC 842 which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than one year. Lessor accounting remains similar to previous GAAP, while aligning with ASC 606, Revenue from Contracts with Customers (“ASC 606”). We adopted ASC 842 using the optional transition approach. As such, previously reported financial information was not updated, and additional disclosures required under ASC 842 are not provided for periods prior to January 1, 2019. Additionally, we elected the practical expedient package related to lease identification, lease classification, and initial direct costs. As such, we did not reassess our existing contracts and leases for these items. We did not elect the hindsight practical expedient, which permits entities to use hindsight in determining lease term and assessing impairment. Rental revenues and other property income, net of any concessions and uncollectible amounts, consists primarily of rents collected under lease agreements related to our single-family residential properties. We enter into leases directly with our residents, and our leases typically have a term of one to two years. As a lessor, our leases with residents are classified as operating leases under ASC 842. We elected the practical expedient in ASC 842 not to separate the lease and nonlease components of these operating leases with our residents. Our lease components consist primarily of rental income, pet rent, and smart home system fees. Nonlease components include resident reimbursements for utilities and various other fees, including late fees and lease termination fees, among others. The lease component is the predominant component in these F-14 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) arrangements, and as such, we recognize rental revenues and other property income in accordance with ASC 842 for the years ended December 31, 2020 and 2019, and in accordance with previous GAAP for the year ended December 31, 2018. Variable lease payments consist of resident reimbursements for utilities, and various other fees, including late fees and lease termination fees, among others. Variable lease payments are charged based on the terms and conditions included in the resident leases. Sales taxes and other similar taxes assessed by governmental authorities that we collect from residents are excluded from our rental revenues and other property income. Leases Entered Into as a Lessee We lease our corporate and regional offices, related office equipment, and a fleet of vehicles for use by our field associates. As of January 1, 2019, these leases are accounted for pursuant to ASC 842 (see Note 6 and Note 14). Prior to adoption of ASC 842, these leases were accounted for in accordance with previous GAAP. We account for leases for our corporate and regional offices as operating leases. In addition to monthly rent payments, we reimburse the lessors of our office spaces for our share of operating expenses as defined in the leases. Such amounts are not included in the measurement of the lease liability but are recognized as a variable lease expense when incurred. At this time, it is not reasonably certain that we will exercise any of the future renewal or termination options on these leases, and the measurement of the right-of-use (“ROU”) asset and lease liability is calculated assuming we will not exercise any of the remaining renewal or termination options. We have elected the practical expedient under which the lease components of our office and vehicle fleet leases are not separated from the nonlease components. ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. We use our incremental borrowing rate to calculate the present value of our lease payments. We have elected the short-term lease recognition exemption for our office equipment leases and therefore do not record these leases on our consolidated balance sheets. These office equipment leases are not material to our consolidated financial statements. Deferred Leasing Costs Costs associated with leasing our single-family residential properties, which consist primarily of commissions paid to leasing agents, are deferred in the period in which they are incurred as a component of deferred leasing costs and are subsequently amortized over the lease term. Deferred leasing costs are included as a component of other assets, net within our consolidated balance sheets and their amortization is classified as property operating and maintenance within the consolidated statements of operations (see Note 6). Costs incurred in connection with our leasing activities that do not result in the execution of a lease are expensed in the period incurred. Goodwill In connection with the Mergers, we recorded goodwill, which is not amortized as it has an indefinite life. We test goodwill for impairment annually, on October 31st, or more frequently if circumstances indicate that the goodwill carrying value may exceed its fair value. As of December 31, 2020 , no impairment of goodwill has been recorded. Fair Value Measurements The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between two willing parties. This amount is determined based on an exit price approach, which contemplates the price that would be received to sell an asset (or paid to transfer a liability) in an orderly transaction between market participants at the measurement date. GAAP has established a valuation hierarchy based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows: Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; F-15 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Level 2—Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement. See Note 11 for further information related to our fair value measurements. Earnings Per Share We present both basic and diluted earnings (loss) per common share (“EPS”) in our consolidated financial statements. Basic EPS excludes dilution and is computed by dividing net income (loss) available to common stockholders for the period by the weighted average number of shares of common stock outstanding for the period, excluding non-vested share-based awards. Our share-based awards consist of restricted stock units (“RSUs”), including certain RSUs that contain performance and market based vesting conditions (“PRSUs”), and Outperformance Awards (as defined in Note 10) (see Share-Based Compensation Expense below). Diluted EPS reflects the maximum potential dilution that could occur from non-vested share-based awards and the convertible senior notes using the “if-converted” method. For diluted EPS, the numerator is adjusted for any changes in net income (loss) that would result from the assumed conversion of these potential shares of common stock. Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. All outstanding non-vested share-based awards with nonforfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities, as identified in Note 10. As such, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings in periods when we have net income. Derivatives We enter into interest rate swap and interest rate cap agreements (collectively, “Hedging Derivatives”) for interest rate risk management purposes. We do not enter into Hedging Derivatives for trading or other speculative purposes, and all of our Hedging Derivatives are carried at fair value in our consolidated balance sheets. Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we have not elected to designate as hedges. Pursuant to the terms of certain of our mortgage loans, we are required to maintain interest rate caps. Additionally, in certain instances, in order to minimize the cash impact of purchasing required interest rate caps, we simultaneously sell interest rate caps (which have identical terms and notional amounts) such that the purchase price and sale proceeds of the related interest rate caps are intended to offset each other. We have elected not to designate these interest cap agreements for hedge accounting (collectively, the “Non-Designated Hedges”). We enter into interest rate swap agreements to hedge the risk arising from changes in our interest payments on variable-rate debt due to changes in the one-month LIBOR (or a comparable or successor rate). We have elected to account for our interest rate swap agreements as effective cash flow hedges (collectively, the “Designated Hedges”). We assess the effectiveness of these interest rate swap cash flow hedging relationships on an ongoing basis. The effect of these interest rate cap agreements and interest rate swap agreements is to reduce the variability of interest payments due to changes in LIBOR. The fair value of Hedging Derivatives that are in an asset position are included in other assets, net and those in a liability position are included in other liabilities in our consolidated balance sheets. For Non-Designated Hedges, changes in fair value are reflected within interest expense in the consolidated statements of operations. For Designated Hedges, changes in fair value are reported as a component of other comprehensive income (loss) in our consolidated balance sheets and reclassified into earnings as interest expense in our consolidated statements of operations when the hedged transactions affect earnings. See Note 8 for further discussion of derivative financial instruments. F-16 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Share-Based Compensation Expense We recognize share-based compensation expense for share-based awards based on their grant-date fair value, net of expected forfeitures, over the service period from the grant date to vest date for each tranche. The grant-date fair value of RSUs and PRSUs with performance condition vesting criteria are generally based on the closing price of our common stock on the grant date. However, the grant-date fair values for PRSUs and Outperformance Awards with market condition vesting criteria are based on Monte-Carlo option pricing models. Compensation expense for share-based awards with performance conditions is adjusted based on the probable outcome of the performance conditions as of each reporting period. Additional compensation expense is recognized if modifications to existing share-based award agreements result in an increase in the post-modification fair value of the units that exceeds their pre-modification fair value. Share-based compensation expense is presented as components of general and administrative expense and property management expense in our consolidated statements of operations. See Note 10 for further discussion of share-based compensation expense. Income Taxes Prior to the IPO, we conducted our business through a group of six affiliated holding entities (the “Invitation Homes Partnerships”). As a result of the pre-IPO reorganization transactions, the following occurred: (1) the Invitation Homes Partnerships transferred all assets, liabilities, and operations to INVH through certain mergers and related transactions; and (2) INVH became subject to the REIT election made by one of the Invitation Homes Partnerships (the “Predecessor REIT”) during the taxable year ended December 31, 2013. Following the Mergers on November 16, 2017, the assets and income derived from the assets acquired from SWH became the assets and income of INVH. We intend to continue to operate as a REIT, and our current and continuing qualification as a REIT depends on our ability to meet the various requirements imposed by the Internal Revenue Code of 1986, as amended (the “Code”), which are related to organizational structure, distribution levels, diversity of stock ownership and certain restrictions with regard to owned assets and categories of income. While we qualify for taxation as a REIT, we will generally not be subject to United States federal corporate income tax on our taxable income that is currently distributed to stockholders. This treatment substantially eliminates the “double taxation” (at the corporate and stockholder levels) that generally results from an investment in a corporation. If we fail to qualify as a REIT in any taxable year, we will be subject to United States federal income taxes at regular corporate rates and may not be able to qualify as a REIT for subsequent taxable years. Even if we qualify as a REIT, we may be subject to United States federal income and excise taxes in various situations, such as on our undistributed income. We also will be required to pay a 100% tax on any net income on non-arm’s length transactions between us and a TRS, defined below, and on any net income from sales of assets that were held for sale to customers in the ordinary course. State and local tax laws may not conform to the United States federal income tax treatment, and we may be subject to state or local taxation in various state or local jurisdictions, including those in which we transact business. Any taxes imposed on us reduce our operating cash flow and net income. As part of the formation of INVH, each of the Invitation Homes Partnerships (excluding the Predecessor REIT) transferred assets into INVH solely in exchange for shares of common stock. Certain of the assets contributed contained built-in gains. Prior to the pre-IPO reorganization transactions, the contributing partnerships had indirect C corporation partners to which a portion of the built-in gain would be allocated. As a result, if we dispose of any such assets during the five-year period following the date the REIT acquired such assets, we will be subject to the regulations under Section 337(d) of the Code. In general terms, such regulations subject the REIT to the maximum corporate level tax rate on the lesser of (i) such built-in gains and (ii) the gain recognized by the REIT upon a taxable disposition of the contributed assets. We may, however, choose not to sell such assets during such five-year period or to sell them in a non-taxable transaction. As such, the potential taxes associated with these built-in gains are not estimable. Certain of our operations, or a portion thereof, are conducted through taxable REIT subsidiaries (“TRSs”). A TRS is a subsidiary C corporation that has not elected REIT status and as such is subject to United States federal and state corporate income tax. We use TRS entities to facilitate our ability to perform non-real estate related activities and/or perform non-customary services for residents that cannot be offered directly by a REIT. For our TRS entities, deferred income taxes result from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for United States federal income tax purposes and are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We reduce F-17 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) deferred tax assets by recording a valuation allowance when we determine, based on available evidence, that it is more likely than not that the assets will not be realized. We recognize the tax consequences associated with intercompany transfers between the REIT and TRS entities when the related assets affect our net income or loss, generally through depreciation, impairment losses, or sales to third party entities. Tax benefits associated with uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. We file income tax returns in the United States federal jurisdiction as well as various state and local jurisdictions. Our filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires, with open tax years varying based upon the date of incorporation of the specific entity. The years open to examination range from 2016 to present. Segment Reporting Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer. Under the 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. The CODM utilizes net operating income as the primary measure to evaluate performance of the total portfolio. The aggregation of individual homes constitutes the total portfolio. Decisions regarding acquisitions and dispositions of homes are made at the individual home level with a focus on growing accretively in high-growth locations where we have greater scale and density. Recent Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments and contracts in its own equity. The guidance reduces the number of accounting models for convertible instruments, requires entities to use the “if-converted” method in diluted EPS, and requires that the effect of potential share settlement be included in the diluted EPS calculation when an instrument may be settled in cash or shares. The new standard will be effective for annual reporting periods beginning after December 15, 2021, and interim periods within that reporting period, with early adoption permitted beginning after December 15, 2020 and interim periods within that reporting period. Our 2022 Convertible Notes (as defined in Note 7) are the only instruments we have that will be subject to ASU 2020-06, and these notes mature on January 15, 2022. As such, ASU 2020-06 will not materially affect our consolidated financial statements. Note 3—Investments in Single-Family Residential Properties The following table sets forth the net carrying amount associated with our properties by component: December 31, 2020 December 31, 2019 Land $ 4,539,796 $ 4,499,346 Single-family residential property 13,631,859 13,121,179 Capital improvements 515,479 513,269 Equipment 114,616 113,370 Total gross investments in the properties 18,801,750 18,247,164 Less: accumulated depreciation ( 2,513,057 ) ( 2,003,972 ) Investments in single-family residential properties, net $ 16,288,693 $ 16,243,192 F-18 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) As of December 31, 2020 and 2019, the carrying amount of the residential properties above includes $ 119,929 and $ 119,608 , respectively, of capitalized acquisition costs (excluding purchase price), along with $ 68,197 and $ 65,747 , respectively, of capitalized interest, $ 26,899 and $ 25,565 , respectively, of capitalized property taxes, $ 4,654 and $ 4,616 , respectively, of capitalized insurance, and $ 3,090 and $ 2,836 , respectively, of capitalized HOA fees. During the years ended December 31, 2020, 2019, and 2018, we recognized $ 546,419 , $ 529,205 , and $ 511,988 , respectively, of depreciation expense related to the components of the properties, $ 0 , $ 0 , and $ 37,517 , respectively, of amortization related to in-place lease intangible assets, and $ 6,111 , $ 4,514 , and $ 11,036 , respectively, of depreciation and amortization related to corporate furniture and equipment. These amounts are included in depreciation and amortization in the consolidated statements of operations. Further, during the years ended December 31, 2020, 2019, and 2018, impairments totaling $ 4,578 , $ 14,210 , and $ 6,709 , respectively, have been recognized and are included in impairment and other in the consolidated statements of operations. See Note 11 for additional information regarding these impairments. Note 4—Cash, Cash Equivalents, and Restricted Cash The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the consolidated balance sheets that sum to the total of such amounts shown in the consolidated statements of cash flows: December 31, 2020 December 31, 2019 Cash and cash equivalents $ 213,422 $ 92,258 Restricted cash 198,346 193,987 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 411,768 $ 286,245 Pursuant to the terms of the mortgage loans and Secured Term Loan (as defined in Note 7), we are required to establish, maintain, and fund from time to time (generally, either monthly or at the time borrowings are funded) certain specified reserve accounts. These reserve accounts include, but are not limited to, the following types of accounts: (i) property tax reserves; (ii) insurance reserves; (iii) capital expenditure reserves; and (iv) HOA reserves. The reserve accounts associated with our mortgage loans and Secured Term Loan are under the sole control of the loan servicer. Additionally, we hold security deposits pursuant to resident lease agreements that we are required to segregate. We are also required to hold letters of credit by certain of our insurance policies. Accordingly, amounts funded to these reserve accounts, security deposit accounts, and other restricted accounts have been classified on our consolidated balance sheets as restricted cash. The amounts funded, and to be funded, to the reserve accounts are subject to formulae included in the mortgage loan and Secured Term Loan agreements and are to be released to us subject to certain conditions specified in the loan agreements being met. To the extent that an event of default were to occur, the loan servicer has discretion to use such funds to either settle the applicable operating expenses to which such reserves relate or reduce the allocated loan amount associated with a residential property of ours. The balances of our restricted cash accounts, as of December 31, 2020 and 2019, are set forth in the table below. As of December 31, 2020 and 2019, no amounts were funded to the insurance accounts as the conditions specified in the mortgage loan and Secured Term Loan agreements that require such funding did not exist. December 31, 2020 December 31, 2019 Resident security deposits $ 158,244 $ 148,186 Collections 22,978 24,034 Property taxes 7,511 10,443 Capital expenditures 4,919 5,627 Letters of credit 3,320 3,459 Special and other reserves 1,374 2,238 Total $ 198,346 $ 193,987 F-19 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Note 5—Investments In Unconsolidated Joint Ventures We have invested in two joint ventures which are accounted for using the equity method model of accounting. The following table summarizes our investments in unconsolidated joint ventures as of December 31, 2020 and 2019: Number of Properties Carrying Value Ownership Percentage December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 FNMA (1) 10 % 571 641 $ 53,678 $ 54,778 Rockpoint (2) 20 % 140 — 15,589 — Total $ 69,267 $ 54,778 (1) Contains homes primarily located in Arizona, California, and Nevada. (2) Contains homes in markets within the Western United States, Southeast United States, Florida, and Texas. In October 2020, we entered into an agreement with Rockpoint to form a joint venture that will acquire homes in markets where we already own homes. As of December 31, 2020, we are committed to fund an additional $ 59,400 to the joint venture. For the years ended December 31, 2020, 2019, and 2018, we recorded of $ 599 , $ 1,668 , and $ 596 , respectively, of income from investments in unconsolidated joint ventures which is included in other, net in the accompanying consolidated statements of operations. The administrative manager of Rockpoint and the managing member of FNMA are wholly owned subsidiaries of INVH LP and are responsible for the operations and management of the properties, subject to Rockpoint and FNMA’s respective approval of major decisions. The subsidiaries earn asset and property management fees from our joint ventures, which are considered to be related parties. For the years ended December 31, 2020, 2019, and 2018, we earned $ 2,585 , $ 2,823 , and $ 2,834 , respectively, of management fees which are included in other, net in the accompanying consolidated statements of operations. F-20 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Note 6—Other Assets As of December 31, 2020 and 2019, the balances in other assets, net are as follows: December 31, 2020 December 31, 2019 Investments in debt securities, net $ 245,237 $ 316,991 Investments in equity securities 47,189 16,650 Held for sale assets (1) 44,163 116,529 Prepaid expenses 41,347 32,106 Rent and other receivables, net 35,256 25,244 ROU lease assets — operating and finance, net 21,705 13,768 Deferred financing costs, net 11,637 2,765 Corporate fixed assets, net 9,995 9,825 Deferred leasing costs, net 7,631 7,427 Amounts deposited and held by others 2,852 1,348 Derivative instruments (Note 8) 1 1,643 Other 11,274 6,192 Total $ 478,287 $ 550,488 (1) As of December 31, 2020 and 2019, 179 and 478 properties, respectively, are classified as held for sale. Investments in Debt Securities, net In connection with certain of our Securitizations (as defined in Note 7), we have retained and purchased certificates totaling $ 245,237 , net of unamortized discounts of $ 2,289 , as of December 31, 2020. These investments in debt securities are classified as held to maturity investments. As of December 31, 2020, we have not recognized any credit losses with respect to these investments in debt securities. As of December 31, 2019, there were no gross unrecognized holding gains or losses, and there were no other than temporary impairments recognized in accumulated other comprehensive loss. As of December 31, 2020, our retained certificates are scheduled to mature over the next one month to seven years . Investments in Equity Securities We hold investments in equity securities both with and without a readily determinable fair value. Investments with a readily determinable fair value are measured at fair value. Investments without a readily determinable fair value are measured at cost, less any impairment, plus or minus changes resulting from observable price changes for identical or similar investments in the same issuer. As of December 31, 2020 and 2019, the values of our investments in equity securities are as follows: December 31, 2020 December 31, 2019 Investments with a readily determinable fair value $ 46,339 $ — Investments without a readily determinable fair value 850 16,650 Total $ 47,189 $ 16,650 F-21 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) During the year ended December 31, 2020, we determined a readily determinable fair value became available for one of our investments in equity securities without a readily determinable fair value, and we began treating the investment as an investment with a readily determinable value. For the year ended December 31, 2020, we recognized $ 29,689 of unrealized gains on our investments in equity securities with a readily determinable fair value. For the years ended December 31, 2020 and 2019, we recorded $ 34 and $ 6,480 of unrealized gains on our investments in equity securities without a readily determinable fair value, respectively. No unrealized gains or losses were recorded during the year ended December 31, 2018. Rent and Other Receivables We lease our properties to residents pursuant to leases that generally have an initial contractual term of at least 12 months, provide for monthly payments, and are cancelable by the resident and us under certain conditions specified in the related lease agreements. Rental revenues and other property income and the corresponding rent and other receivables are recorded net of any concessions and bad debt (including actual write-offs, credit reserves, and uncollectible amounts) for all periods presented. Variable lease payments consist of resident reimbursements for utilities, and various other fees, including late fees and lease termination fees, among others. Variable lease payments are charged based on the terms and conditions included in the resident leases. For the years ended December 31, 2020 and 2019, rental revenues and other property income includes $ 91,573 and $ 92,759 of variable lease payments, respectively. Future minimum rental revenues and other property income under leases existing on our single-family residential properties as of December 31, 2020 are as follows: Year Lease Payments to be Received 2021 $ 1,028,387 2022 127,950 2023 — 2024 — 2025 — Thereafter — Total $ 1,156,337 ROU Lease Assets — Operating and Finance, net The following table presents supplemental information related to leases into which we have entered as a lessee as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Operating Leases Finance Leases Operating Leases Finance Leases Other assets $ 12,942 $ 8,763 $ 12,552 $ 1,216 Other liabilities (Note 14) 15,988 8,389 13,787 1,210 Weighted average remaining lease term 4.0 years 3.1 years 3.8 years 2.0 years Weighted average discount rate 3.5 % 4.0 % 4.0 % 4.0 % During the year ended December 31, 2020, we recorded $ 1,750 of impairment on one of our ROU lease assets in other, net in the consolidated statements of operations. We did not record any impairment on our ROU lease assets for the year ended December 31, 2019. See Note 11 for additional information regarding this impairment. F-22 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Deferred Financing Costs, net During the year ended December 31, 2020, we incurred $ 11,832 of financing costs which have been deferred as other assets, net on our consolidated balance sheets. These costs were incurred in connection with a new amended and restated Revolving Facility (see Note 7). We amortize deferred financing costs as interest expense on a straight-line basis over the term of the related financing agreement and accelerate amortization if the debt is retired before the maturity date. The $ 2,765 of deferred financing costs as of December 31, 2019 were related to a previous revolving facility that was repaid in full during the year ended December 31, 2020. As of December 31, 2020 and 2019, the unamortized balances of these deferred financing costs are $ 11,637 and $ 2,765 , respectively. Note 7—Debt Mortgage Loans Our securitization transactions (the “Securitizations” or the “mortgage loans”) are collateralized by certain homes owned by the respective Borrower Entities. We utilize the proceeds from our securitizations to fund: (i) repayments of then-outstanding indebtedness; (ii) initial deposits into Securitization reserve accounts; (iii) closing costs in connection with the mortgage loans; and (iv) general costs associated with our operations. The following table sets forth a summary of our mortgage loan indebtedness as of December 31, 2020 and 2019: Outstanding Principal Balance (5) Origination Date Maturity Date (1) Maturity Date if Fully Extended (2) Interest Rate (3) Range of Spreads (4) December 31, 2020 December 31, 2019 IH 2017-1 (6) April 28, 2017 June 9, 2027 June 9, 2027 4.23 % N/A $ 994,787 $ 995,520 SWH 2017-1 (7) September 29, 2017 December 9, 2020 N/A — % N/A — 744,092 IH 2017-2 (7) November 9, 2017 December 9, 2021 December 9, 2024 1.29 % 91-186 bps 612,506 624,475 IH 2018-1 (7)(8) February 8, 2018 March 9, 2021 March 9, 2025 1.09 % 76-151 bps 646,021 793,720 IH 2018-2 (7) May 8, 2018 June 9, 2021 June 9, 2025 1.23 % 95-150 bps 693,988 957,135 IH 2018-3 (7) June 28, 2018 July 9, 2021 July 9, 2025 1.42 % 105-205 bps 1,036,561 1,213,035 IH 2018-4 (7)(9) November 7, 2018 January 9, 2021 January 9, 2026 1.49 % 115-200 bps 848,270 938,430 Total Securitizations 4,832,133 6,266,407 Less: 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 extension options that have been exercised. (2) Represents the maturity date if we exercise each of the remaining one year extension options available, which are subject to certain conditions being met. (3) Except for IH 2017-1, interest rates are based on a weighted average spread over LIBOR (or a comparable or successor rate as provided for in our loan agreements), plus applicable servicing fees; as of December 31, 2020, LIBOR was 0.14 %. Our IH 2017-1 mortgage loan bears interest at a fixed rate of 4.23 % per annum, equal to the market determined pass-through rate payable on the certificates including applicable servicing fees. (4) Range of spreads is based on outstanding principal balances as of December 31, 2020. (5) Outstanding principal balance is net of discounts and does not include deferred financing costs, net. (6) Net of unamortized discount of $ 2,289 and $ 2,641 as of December 31, 2020 and 2019, respectively. F-23 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) (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. (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 (see Note 15). Securitization Transactions For each Securitization transaction, the Borrower Entity executed a loan agreement with a third party lender. Except for IH 2017-1, each outstanding mortgage loan originally consisted of six floating rate components. The two year initial terms are individually subject to three to five , one year extension options at the Borrower Entity’s discretion. Such extensions are available provided there is no continuing event of default under the respective mortgage loan agreement and the Borrower Entity obtains and delivers a replacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender. IH 2017-1 is a 10 year, fixed rate mortgage loan comprised of two components. Certificates issued by the trust in connection with Component A of IH 2017-1 benefit from FNMA’s guaranty of timely payment of principal and interest. Each mortgage loan is secured by a pledge of the equity in the assets of the respective Borrower Entities, as well as first-priority mortgages on the underlying properties and a grant of security interests in all of the related personal property. As of December 31, 2020 and 2019, a total of 31,316 and 37,040 homes, respectively, with a net book value of $ 5,761,551 and $ 7,137,576 , respectively, are pledged pursuant to the mortgage loans. Each Borrower Entity has the right, subject to certain requirements and limitations outlined in the respective loan agreements, to substitute properties. We are obligated to make monthly payments of interest for each mortgage loan. Transactions with Trusts Concurrent with the execution of each mortgage loan agreement, the respective third party lender sold each loan it originated to individual depositor entities (the “Depositor Entities”) who subsequently transferred each loan to Securitization-specific trust entities (the “Trusts”). The Depositor Entities for our currently outstanding Securitizations are wholly owned subsidiaries. We accounted for the transfers of the individual Securitizations from the wholly owned Depositor Entities to the respective Trusts as sales under ASC 860, Transfers and Servicing , with no resulting gain or loss as the Securitizations were both originated by the lender and immediately transferred at the same fair market value. As consideration for the transfer of each loan to the Trusts, the Trusts issued classes of certificates which mirror the components of the individual loans (collectively, the “Certificates”) to the Depositor Entities, except that Class R certificates do not have related loan components as they represent residual interests in the Trusts. The Certificates represent the entire beneficial interest in the Trusts. Following receipt of the Certificates, the Depositor Entities sold the Certificates to investors and used the proceeds as consideration for the loans sold to the Depositor Entities by the lenders. These transactions had no effect on our consolidated financial statements other than with respect to Certificates we retained in connection with Securitizations or purchased at a later date. The Trusts are structured as pass-through entities that receive interest payments from the Securitizations and distribute those payments to the holders of the Certificates. The assets held by the Trusts are restricted and can only be used to fulfill the obligations of those entities. The obligations of the Trusts do not have any recourse to the general credit of any entities in these consolidated financial statements. We have evaluated our interests in certain certificates of the Trusts held by us (discussed below) and determined that they do not create a more than insignificant variable interest in the Trusts. Additionally, the retained certificates do not provide us with any ability to direct activities that could impact the Trusts’ economic performance. Therefore, we do not consolidate the Trusts. F-24 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Retained Certificates As the Trusts made Certificates available for sale to both domestic and foreign investors, sponsors of the mortgage loans are required to retain a portion of the risk that represents a material net economic interest in each loan pursuant to Regulation RR (the “Risk Retention Rules”) under the Securities Exchange Act of 1934, as amended. As such, loan sponsors are required to retain a portion of the credit risk that represents not less than 5 % of the aggregate fair value of the loan as of the closing date. IH 2017-1 issued Class B certificates, which are restricted certificates that were made available exclusively to INVH LP in order to comply with the Risk Retention Rules. The Class B certificates bear a stated annual interest rate of 4.23 %, including applicable servicing fees. For SWH 2017-1, IH 2017-2, IH 2018-1, IH 2018-2, IH 2018-3, and IH 2018-4, we retain 5 % of each class of certificates to meet the Risk Retention Rules. These retained certificates accrue interest at a floating rate of LIBOR plus a spread ranging from 0.76 % to 2.05 %. The retained certificates total $ 245,237 and $ 316,991 as of December 31, 2020 and 2019, respectively, and are classified as held to maturity investments and recorded in other assets, net on the consolidated balance sheets (see Note 6). Loan Covenants The general terms that apply to all of the mortgage loans require each Borrower Entity to maintain compliance with certain affirmative and negative covenants. Affirmative covenants include each Borrower Entity’s, and certain of their respective affiliates’, compliance with (i) licensing, permitting and legal requirements specified in the mortgage loan agreements, (ii) organizational requirements of the jurisdictions in which they are organized, (iii) federal and state tax laws, and (iv) books and records requirements specified in the respective mortgage loan agreements. Negative covenants include each Borrower Entity’s, and certain of their affiliates’, compliance with limitations surrounding (i) the amount of each Borrower Entity’s indebtedness and the nature of their investments, (ii) the execution of transactions with affiliates, (iii) the Manager, (iv) the nature of each Borrower Entity’s business activities, and (v) the required maintenance of specified cash reserves. As of December 31, 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. Prepayments For the mortgage loans, prepayments of amounts owed by us are generally not permitted under the terms of the respective mortgage loan agreements unless such prepayments are made pursuant to the voluntary election or mandatory provisions specified in such agreements. The specified mandatory provisions become effective to the extent that a property becomes characterized as a disqualified property, a property is sold, and/or upon the occurrence of a condemnation or casualty event associated with a property. To the extent either a voluntary election is made, or a mandatory prepayment condition exists, in addition to paying all interest and principal, we must also pay certain breakage costs as determined by the loan servicer and a spread maintenance premium if prepayment occurs before the month following the one or two year anniversary of the closing dates of each of the mortgage loans except for IH 2017-1. For IH 2017-1, prepayments on or before December 2026 will require a yield maintenance premium. For the years ended December 31, 2020, 2019, and 2018, we made voluntary and mandatory prepayments of $ 1,434,626 , $ 997,421 , and $ 4,579,594 , 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. During the year ended December 31, 2018, prepayments included full repayment of the CAH 2014-1, CAH 2014-2, CAH 2015-1, CSH 2016-1, IH 2015-1, IH 2015-2, and IH 2015-3 mortgage loans. F-25 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Secured Term Loan On June 7, 2019, 2019-1 IH Borrower LP, a consolidated subsidiary (“2019-1 IH Borrower” and one of our Borrower Entities), entered into a 12 year loan agreement with a life insurance company (the “Secured Term Loan”). The Secured Term Loan bears interest at a fixed rate of 3.59 %, including applicable servicing fees, for the first 11 years and bears interest at a floating rate based on a spread of 147 bps, including applicable servicing fees, over one month LIBOR (subject to certain adjustments as outlined in the loan agreement) for the twelfth year. The Secured Term Loan is secured by first priority mortgages on a portfolio of single-family rental properties as well as a first priority pledge of the equity interests of 2019-1 IH Borrower. We utilized the proceeds from the Secured Term Loan to fund: (i) repayments of then-outstanding indebtedness; (ii) initial deposits into the Secured Term Loan’s reserve accounts; (iii) transaction costs related to the closing of the Secured Term Loan; and (iv) general corporate purposes. The following table sets forth a summary of our Secured Term Loan indebtedness as of December 31, 2020 and 2019: Maturity Date Interest Rate (1) 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. Collateral 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 $ 719,762 and $ 734,759 , respectively. 2019-1 IH Borrower has the right, subject to certain requirements and limitations outlined in the loan agreement, to substitute properties representing up to 20 % of the collateral pool annually, and to substitute properties representing up to 100 % of the collateral pool over the life of the Secured Term Loan. In addition, four times after the first anniversary of the closing date, 2019-1 IH Borrower has the right, subject to certain requirements and limitations outlined in the loan agreement, to execute a special release of collateral representing up to 15 % of the then-outstanding principal balance of the Secured Term Loan in order to bring the loan-to-value ratio back in line with the Secured Term Loan’s loan-to-value ratio as of the closing date. Any such special release of collateral would not change the then-outstanding principal balance of the Secured Term Loan, but rather would reduce the number of single-family rental homes included in the collateral pool. Loan Covenants The Secured Term Loan requires 2019-1 IH Borrower to maintain compliance with certain affirmative and negative covenants. Affirmative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with (i) licensing, permitting and legal requirements specified in the loan agreement, (ii) organizational requirements of the jurisdictions in which they are organized, (iii) federal and state tax laws, and (iv) books and records requirements specified in the loan agreement. Negative covenants include 2019-1 IH Borrower’s, and certain of its affiliates’, compliance with limitations surrounding (i) the amount of 2019-1 IH Borrower’s indebtedness and the nature of its investments, (ii) the execution of transactions with affiliates, (iii) the Manager, (iv) the nature of 2019-1 IH Borrower’s business activities, and (v) the required maintenance of specified cash reserves. As of December 31, 2020, and through the date our consolidated financial statements were issued, we believe 2019-1 IH Borrower is in compliance with all affirmative and negative covenants. F-26 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Prepayments Prepayments of the Secured Term Loan are generally not permitted unless such prepayments are made pursuant to the voluntary election or mandatory provisions specified in the loan agreement. The specified mandatory provisions become effective to the extent that a property becomes characterized as a disqualified property, a property is sold, and/or upon the occurrence of a condemnation or casualty event associated with a property. To the extent either a voluntary election is made, or a mandatory prepayment condition exists, in addition to paying all interest and principal, we must also pay certain breakage costs as determined by the loan servicer and a yield maintenance premium if prepayment occurs before June 9, 2030. For the year ended December 31, 2020, we made mandatory prepayments of $ 101 . No prepayments were made for the year ended December 31, 2019. Term Loan Facility and Revolving Facility 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 a new credit facility (the “Credit Facility”). The Credit Facility provides $ 3,500,000 of borrowing capacity and consists of a $ 1,000,000 revolving facility (the “Revolving Facility”) and a $ 2,500,000 term loan facility (the “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 $ 4,000,000 ), subject to certain limitations. The Credit Facility replaced a credit facility that consisted of a $ 1,000,000 revolving facility (the “2017 Revolving Facility”) and a $ 1,500,000 term loan facility (the “2017 Term Loan Facility” and together with the 2017 Revolving Facility, the “2017 Credit 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 and 2017 Credit Facility as of December 31, 2020 and 2019, respectively: Maturity Date Interest Rate (1) December 31, 2020 December 31, 2019 Term Loan Facility (2) 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) 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 Borrowings under the Credit Facility bear interest, at our option, at a rate equal to a margin over either (a) a LIBOR rate determined by reference to the Bloomberg LIBOR rate (or a comparable or successor rate as provided for in our loan agreement) for the interest period relevant to such borrowing, or (b) a base rate determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 0.50 %, and (3) the LIBOR rate that would be payable on such day for a LIBOR rate loan with a one month interest period plus 1.00 %. The margin is based on a F-27 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) total leverage based grid. 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 % 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., we may elect to convert to a credit rating based pricing grid. 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. Prepayments and Amortization No principal reductions are required under the Credit Facility. We are permitted to voluntarily repay amounts outstanding under the Term Loan Facility at any time without premium or penalty, subject to certain minimum amounts and the payment of customary “breakage” costs with respect to LIBOR loans. Once repaid, no further borrowings will be permitted under the Term Loan Facility. Loan Covenants The Credit Facility contains certain customary affirmative and negative covenants and events of default. Such covenants will, among other things, restrict, subject to certain exceptions, our ability and that of the Subsidiary Guarantors (as defined below) and their respective subsidiaries to (i) engage in certain mergers, consolidations or liquidations, (ii) sell, lease or transfer all or substantially all of their respective assets, (iii) engage in certain transactions with affiliates, (iv) make changes to our fiscal year, (v) make changes in the nature of our business and our subsidiaries, and (vi) enter into certain burdensome agreements. 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. F-28 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) 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 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 In connection with the Mergers, we assumed SWH’s convertible senior notes. In July 2014, SWH issued $ 230,000 in aggregate principal amount of 3.00 % convertible senior notes due 2019 (the “2019 Convertible Notes”). Interest on the 2019 Convertible Notes was payable semiannually in arrears on January 1st and July 1st of each year. The notes matured on July 1, 2019, and we settled substantially all of the outstanding balance of the 2019 Convertible Notes through the issuance of 12,553,864 shares of our common stock. In January 2017, SWH issued $ 345,000 in aggregate principal amount of 3.50 % convertible senior notes due 2022 (the “2022 Convertible Notes” and together with the 2019 Convertible Notes, the “Convertible Senior Notes”). Interest on the 2022 Convertible Notes is payable semiannually in arrears on January 15th and July 15th of each year. The 2022 Convertible Notes will mature on January 15, 2022. The following table summarizes the terms of the Convertible Senior Notes outstanding as of December 31, 2020 and 2019: Principal Amount Coupon Rate Effective Rate (1) Conversion Rate (2) Maturity Date Remaining Amortization Period December 31, 2020 December 31, 2019 2022 Convertible Notes 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 ) Total $ 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 $ 324,252 for the 2022 Convertible Notes. (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. We have the option to settle the 2022 Convertible Notes in cash, common stock, or a combination thereof. Terms of Conversion On July 1, 2019, we settled substantially all of the outstanding balance of the 2019 Convertible Notes with the issuance of 12,553,864 shares of our common stock. At the settlement date, the conversion rate applicable to the 2019 Convertible Notes was 54.5954 shares of our common stock per $ 1,000 principal amount (actual $) of the 2019 Convertible Notes (equivalent to a conversion price of approximately $ 18.32 per common share — actual $). For the years ended December 31, 2019 and 2018, interest expense for the 2019 Convertible Notes, including non-cash amortization of discounts, was $ 5,586 and $ 11,057 , respectively. F-29 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) As of December 31, 2020, the conversion rate applicable to the 2022 Convertible Notes is 43.7694 shares of our common stock per $ 1,000 principal amount (actual $) of the 2022 Convertible Notes (equivalent to a conversion price of approximately $ 22.85 per common share — actual $). The conversion rate for the 2022 Convertible Notes is subject to adjustment in some events, but will not be adjusted for any accrued and unpaid interest. In addition, following certain events that occur prior to the maturity date, we will adjust the conversion rate for a holder who elects to convert its 2022 Convertible Notes in connection with such an event in certain circumstances. At any time prior to July 15, 2021, holders may convert the 2022 Convertible Notes at their option only under specific circumstances as defined in the indenture agreement, dated as of January 10, 2017, between us and our trustee, Wilmington Trust National Association (the “Convertible Notes Trustee”). On or after July 15, 2021 and until maturity, holders may convert all or any portion of the 2022 Convertible Notes at any time. Upon conversion, we will pay or deliver, as the case may be, cash, common stock, or a combination of cash and common stock, at our election. The “if-converted” value of the 2022 Convertible Notes exceeds the principal amount by $ 103,483 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 $ 17,181 , $ 16,929 , and $ 16,690 respectively. General Terms We may not redeem the 2022 Convertible Notes prior to their maturity date except to the extent necessary to preserve our status as a REIT for United States federal income tax purposes, as further described in the indenture. If we undergo a fundamental change as defined in the indenture, holders may require us to repurchase for cash all or any portion of their 2022 Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date. The indenture contains customary terms and covenants and events of default. If an event of default occurs and is continuing, the Convertible Notes Trustee, by notice to us, or the holders of at least 25 % in aggregate principal amount of the outstanding 2022 Convertible Notes, by notice to us and the Convertible Notes Trustee, may, and the Convertible Notes Trustee at the request of such holders shall, declare 100 % of the principal of and accrued and unpaid interest on all the 2022 Convertible Notes to be due and payable. In the case of an event of default arising out of certain events of bankruptcy, insolvency or reorganization in respect to us (as set forth in the indenture), 100 % of the principal of and accrued and unpaid interest on the 2022 Convertible Notes will automatically become due and payable. Debt Maturities Schedule The following table summarizes the contractual maturities of our debt as of December 31, 2020: Year Mortgage Loans (1)(2) Secured Term Loan Term Loan Facility (3) Revolving Facility (3) Convertible Senior Notes Total 2021 $ 3,837,346 $ — $ — $ — $ — $ 3,837,346 2022 — — — — 345,000 345,000 2023 — — — — — — 2024 — — — — — — 2025 — — 2,500,000 — — 2,500,000 Thereafter 994,787 403,363 — — — 1,398,150 Total 4,832,133 403,363 2,500,000 — 345,000 8,080,496 Less: deferred financing costs, net ( 12,035 ) ( 2,268 ) ( 29,093 ) — — ( 43,396 ) Less: unamortized fair value adjustment — — — — ( 5,596 ) ( 5,596 ) Total $ 4,820,098 $ 401,095 $ 2,470,907 $ — $ 339,404 $ 8,031,504 (1) The maturity dates of the obligations are reflective of all extensions that have been exercised as of December 31, 2020. If fully extended, we would have no mortgage loans maturing before 2024. Such extensions are available provided there is no continuing event of default under the respective mortgage loan agreement and the Borrower Entity obtains and F-30 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) delivers a replacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender. (2) 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. Additionally, 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 (see Note 15). (3) If we exercise the two six month extension options, the maturity date will be in 2026. Note 8—Derivative Instruments From time to time, we enter into derivative instruments to manage the economic risk of changes in interest rates. We do not enter into derivative transactions for speculative or trading purposes. Designated Hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-Designated Hedges are derivatives that do not meet the criteria for hedge accounting or that we did not elect to designate as hedges. Designated Hedges We have entered into various interest rate swap agreements, which are used to hedge the variable cash flows associated with variable-rate interest payments. Currently, each of our swap agreements is indexed to LIBOR and is designated for hedge accounting purposes. LIBOR is set to expire at the end of 2021, and we will work with the counterparties to our swap agreements to adjust each floating rate to a comparable or successor rate. Changes in the fair value of these swaps are recorded in other comprehensive income and are subsequently reclassified into earnings in the period in which the hedged forecasted transactions affect earnings. The table below summarizes our interest rate swap instruments as of December 31, 2020: Agreement Date Forward Effective Date Maturity Date Strike Rate Index Notional Amount 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 $ 15,249 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 $ 8,239 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 $ 147,020 will be reclassified to earnings as an increase in interest expense. INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) 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 $ 3,111 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 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. We will work with the counterparties to our cap agreements to adjust each floating rate to a comparable or successor rate. To the extent that the maturity date of one or more of the mortgage loans is extended through an exercise of one or more extension options, replacement or extension interest rate cap agreements must be executed with terms similar to those associated with the initial interest rate cap agreements and strike prices equal to the greater of the interest rate cap strike price and the interest rate at which the debt service coverage ratio (as defined) is not less than 1.2 to 1.0. The interest rate cap agreements, including all of our rights to payments owed by the counterparties and all other rights, have been pledged as additional collateral for the mortgage loans. Additionally, in certain instances, in order to minimize the cash impact of purchasing required interest rate caps, we simultaneously sell interest rate caps (which have identical terms and notional amounts) such that the purchase price and sales proceeds of the related interest rate caps are intended to offset each other. The purchased and sold interest rate caps have strike prices ranging from approximately 3.75 % to 6.32 %. Fair Values of Derivative Instruments on the Consolidated Balance Sheets The table below presents the fair value of our derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2020 and 2019: Asset Derivatives Liability Derivatives Fair Value as of Fair Value as of Balance Sheet Location December 31, 2020 December 31, 2019 Balance Sheet Location December 31, 2020 December 31, 2019 Derivatives designated as hedging instruments: Interest rate swaps Other assets $ — $ 1,643 Other liabilities $ 539,560 $ 275,679 Derivatives not designated as hedging instruments: Interest rate caps Other assets 1 — Other liabilities — — Total $ 1 $ 1,643 $ 539,560 $ 275,679 F-32 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Offsetting Derivatives We enter into master netting arrangements, which reduce risk by permitting net settlement of transactions with the same counterparty. The tables below present a gross presentation, the effects of offsetting, and a net presentation of our derivatives as of December 31, 2020 and 2019: December 31, 2020 Gross Amounts Not Offset in the Statement of Financial Position Gross Amounts of Recognized Assets/ Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position Financial Instruments Cash Collateral Received Net Amount Offsetting assets: Derivatives $ 1 $ — $ 1 $ — $ — $ 1 Offsetting liabilities: Derivatives $ 539,560 $ — $ 539,560 $ — $ — $ 539,560 December 31, 2019 Gross Amounts Not Offset in the Statement of Financial Position Gross Amounts of Recognized Assets/ Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position Financial Instruments Cash Collateral Received Net Amount Offsetting assets: Derivatives $ 1,643 $ — $ 1,643 $ ( 1,054 ) $ — $ 589 Offsetting liabilities: Derivatives $ 275,679 $ — $ 275,679 $ ( 1,054 ) $ — $ 274,625 F-33 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Effect of Derivative Instruments on the Consolidated Statements of Comprehensive Loss and the Consolidated Statements of Operations The tables below present the effect of our derivative financial instruments in the consolidated statements of comprehensive loss and the consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018: Amount of Loss Recognized in OCI on Derivative Location of Gain (Loss) Reclassified from Accumulated OCI into Net Income (Loss) Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Income (Loss) Total Amount of Interest Expense Presented in the Consolidated Statements of Operations For the Years Ended December 31, For the Years Ended December 31, For the Years Ended December 31, 2020 2019 2018 2020 2019 2018 2020 2019 2018 Derivatives in cash flow hedging relationships: Interest rate swaps $ ( 388,466 ) $ ( 244,126 ) $ ( 43,211 ) Interest expense $ ( 116,549 ) $ 20,763 $ 18,627 $ 353,923 $ 367,173 $ 383,595 Location of Loss Recognized in Net Income (Loss) on Derivative Amount of Loss Recognized in Net Income (Loss) on Derivative For the Years Ended December 31, 2020 2019 2018 Derivatives not designated as hedging instruments: Interest rate caps Interest expense $ 273 $ 126 $ 641 Credit-Risk-Related Contingent Features The agreements with our derivative counterparties which govern our interest rate swap agreements contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of December 31, 2020, the fair value of certain derivatives in a net liability position was $ 539,560 . If we had breached any of these provisions at December 31, 2020, we could have been required to settle the obligations under the agreements at their termination value, which includes accrued interest and excludes the nonperformance risk related to these agreements, of $ 564,623 . Note 9—Stockholders' Equity As of December 31, 2020, we have issued 567,117,666 shares of common stock. In addition, we issue OP Units from time to time which, upon vesting, are redeemable for shares of our common stock on a one -for-one basis or, in our sole discretion, cash and are reflected as non-controlling interests on our consolidated balance sheets and statements of equity. As of December 31, 2020, 3,463,285 outstanding OP Units are redeemable. During the years ended December 31, 2020, 2019, and 2018, we issued 25,474,941 , 20,994,748 , and 1,474,835 shares of common stock, respectively. Public Offering On June 4, 2020, we completed an underwritten public offering of 16,675,000 shares of our common stock, including 2,175,000 shares sold pursuant to the underwriters’ full exercise of the option to purchase additional shares. During the year ended December 31, 2020, this offering generated net proceeds of $ 447,533 , after giving effect to commissions and other costs totaling $ 6,861 . F-34 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) At the Market Equity Program On August 22, 2019, we entered into distribution agreements with a syndicate of banks (the “Agents”), pursuant to which we may sell, from time to time, up to an aggregate sales price of $ 800,000 of our common stock through the Agents (the “ATM Equity Program”). During the years ended December 31, 2020 and 2019, we sold 8,413,224 and 1,957,139 , respectively, shares of our common stock under our ATM Equity Program, generating net proceeds of $ 239,190 and $ 55,263 , respectively, after giving effect to Agent commissions and other costs totaling $ 3,851 and $ 1,696 , respectively. As of December 31, 2020, $ 500,000 remains available for future offerings under the ATM Equity Program. Dividends To qualify as a REIT, we are required to distribute annually to our stockholders at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We intend to pay quarterly dividends to our stockholders, which in the aggregate are approximately equal to or exceed our net taxable income in the relevant year. The timing, form, and amount of distributions, if any, to our stockholders, will be at the sole discretion of our board of directors. The following table summarizes our dividends declared from January 1, 2019 through December 31, 2020: Record Date Amount per Share Pay Date Total Amount Declared Q4-2020 November 10, 2020 $ 0.15 November 25, 2020 $ 84,911 Q3-2020 August 12, 2020 0.15 August 28, 2020 84,286 Q2-2020 May 13, 2020 0.15 May 29, 2020 81,916 Q1-2020 February 12, 2020 0.15 February 28, 2020 81,673 Q4-2019 November 13, 2019 0.13 November 27, 2019 70,693 Q3-2019 August 15, 2019 0.13 August 30, 2019 70,465 Q2-2019 May 15, 2019 0.13 May 31, 2019 68,334 Q1-2019 February 13, 2019 0.13 February 28, 2019 67,965 On January 28, 2021, our board of directors declared a dividend of $ 0.17 per share to stockholders of record on February 10, 2021, which is payable on February 26, 2021. Note 10—Share-Based Compensation Prior to completion of the IPO, our board of directors adopted, and our stockholders approved, the Invitation Homes Inc. 2017 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants, and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, and to align their interests with those of our stockholders. Under the Omnibus Incentive Plan, we may issue up to 16,000,000 shares of common stock. Our share-based awards consist of time-vesting RSUs, PRSUs, and Outperformance Awards (defined below). Time-vesting RSUs are participating securities for EPS purposes, and PRSUs and Outperformance Awards are not. Share-Based Awards The following summarizes our share-based award activity during the years ended December 31, 2020, 2019, and 2018. Annual Long Term Incentive Plan (“LTIP”): • Annual LTIP Awards Granted: During the years ended December 31, 2020, 2019, and 2018, we granted 499,228 , 534,547 , and 644,733 RSUs, respectively, pursuant to LTIP awards. Each award includes components which vest based on time-vesting conditions, market based vesting conditions, and performance based vesting conditions, each of which is subject to continued employment through the applicable vesting date. F-35 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) LTIP time-vesting RSUs vest in three equal annual installments based on an anniversary date of March 1st. LTIP PRSUs may be earned based on the achievement of certain measures over a three year performance period. The number of PRSUs earned will be determined based on performance achieved during the performance period for each measure at certain threshold, target, or maximum levels and corresponding payout ranges. In general, the LTIP PRSUs are earned after the end of the performance period on the date on which the performance results are certified by our compensation and management development committee (the “Compensation Committee”). All of the LTIP Awards are subject to certain change in control and retirement eligibility provisions that may impact these vesting schedules. • PRSU Results: During the years ended December 31, 2020, 2019, and 2018, certain LTIP PRSUs vested and achieved performance in excess of the target level, resulting in the issuance of an additional 91,200 , 23,392 , and 39,871 shares of common stock, respectively. Such awards are reflected as an increase in the number of awards granted and vested in the table below. Certain other LTIP PRSUs did not achieve performance criteria, resulting in the cancellation of 5,348 and 52,896 awards during the years ended years ended December 31, 2020 and 2019, respectively. Such awards are reflected as an increase in the number of awards forfeited/canceled in the table below. As of December 31, 2020, all PRSU awards issued as part of the 2017 LTIP have fully vested. Other Awards • Director Awards: During the year ended December 31, 2020, we granted 58,690 time-vesting RSUs to members of our board of directors, which awards will fully vest on the date of INVH’s 2021 annual stockholders meeting, subject to continued service on the board of directors through such date. During the years ended December 31, 2019 and 2018, INVH issued 53,704 and 52,114 time-vesting RSUs, which awards fully vested on the dates of INVH’s 2020 and 2019 annual stockholders meetings, respectively. • Supplemental Bonus Plan: Upon the completion of our IPO, $ 59,797 of supplemental bonus awards were converted into 2,988,120 time-vesting RSUs that generally vested in three equal installments unless modified in connection with the Mergers or the resulting integration. During the year ended December 31, 2019, the final supplemental bonus awards were fully vested. • Merger-Related Awards: During the year ended December 31, 2018, the grant date was established for 168,184 PRSUs issued in connection with the Mergers. These merger-related PRSUs were eligible to be earned based on the achievement of certain measures over performance periods that began on the Merger Date and ended approximately one and a half to three years thereafter. The number of merger-related PRSUs earned was determined based on performance achieved during the performance period for each measure at certain threshold, target, or maximum levels and corresponding payout ranges. During the year ended December 31, 2019, vesting of all remaining time-vesting merger-related awards was accelerated in accordance with the terms of the award agreement. During the year ended December 31, 2019, 77,926 of such PRSUs were forfeited; and during the year ended December 31, 2020, all outstanding merger-related PRSUs vested. Certain of these PRSUs achieved performance in excess of the target level, resulting in the issuance of an additional 4,756 shares of common stock which are reflected as an increase in the number of awards granted and vested in the table below. • Bonus and Retention Awards: During the year ended December 31, 2018, we granted 136,941 RSUs to employees (the “2018 Bonus Awards”). Each of the 2018 Bonus Awards is a time-vesting award which vests in three equal annual installments based on an anniversary date of March 1, 2018, subject to continued employment through the applicable vesting date. As of December 31, 2020, 138,122 retention awards issued during the year ended December 31, 2017 remain outstanding and are scheduled to vest in June 2021. Assumed Awards In connection with the Mergers, we assumed the terms of award agreements governing 949,698 (as calculated in number of INVH shares of common stock) non-vested RSUs granted prior to the Mergers under SWH’s equity incentive plans. Each assumed award was a time-vesting award that was issued with service periods ranging from three years to four years, unless accelerated pursuant to the original agreement or otherwise modified in connection with the Mergers or the resulting integration. During the year ended December 31, 2020 , the final SWH equity awards were fully vested. F-36 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Outperformance Awards On May 1, 2019, the Compensation Committee approved one-time equity based awards with market based vesting conditions in the form of PRSUs and OP Units (the “Outperformance Awards”). The Outperformance Awards may be earned based on the achievement of rigorous absolute total shareholder return and relative total shareholder return thresholds over a three year performance period ending on March 31, 2022. Upon completion of the performance period, the dollar value of the awards earned under the absolute and relative total shareholder return components will be separately calculated, and the number of earned Outperformance Awards will be determined based on the earned dollar value of the awards and the stock price at the performance certification date. Earned awards will vest 50 % on March 31, 2022 and 25 % on each of the first and second anniversaries of such date, subject to continued employment. The current aggregate $ 12,390 grant-date fair value of the Outperformance Awards still outstanding was determined based on Monte-Carlo option pricing models which estimate the probability of the vesting conditions being satisfied. Summary of Total Share-Based Awards The following table summarizes activity related to non-vested time-vesting RSUs and PRSUs, other than Outperformance Awards, during the years ended December 31, 2020, 2019, and 2018: Time-Vesting Awards PRSUs Total Share-Based Awards (1) Number Weighted Average Grant Date Fair Value (Actual $) Number Weighted Average Grant Date Fair Value (Actual $) Number Weighted Average Grant Date Fair Value (Actual $) Balance, December 31, 2017 2,695,902 $ 21.51 408,102 $ 22.25 3,104,004 $ 20.79 Granted 387,746 21.94 654,137 22.22 1,041,883 22.12 Vested (2) ( 1,351,019 ) ( 21.38 ) ( 133,496 ) ( 23.11 ) ( 1,484,515 ) ( 21.54 ) Forfeited / canceled ( 136,985 ) ( 22.69 ) ( 40,010 ) ( 22.44 ) ( 176,995 ) ( 22.63 ) Balance, December 31, 2018 1,595,644 21.63 888,733 22.09 2,484,377 21.79 Granted 242,224 23.44 369,419 24.27 611,643 23.94 Vested (2) ( 1,076,025 ) ( 21.46 ) ( 83,938 ) ( 21.21 ) ( 1,159,963 ) ( 21.45 ) Forfeited / canceled ( 76,774 ) ( 22.03 ) ( 249,138 ) ( 21.75 ) ( 325,912 ) ( 21.81 ) Balance, December 31, 2019 685,069 22.48 925,076 23.13 1,610,145 22.86 Granted 225,760 28.25 428,114 29.61 653,874 29.14 Vested (2) ( 339,448 ) ( 22.81 ) ( 353,156 ) ( 22.04 ) ( 692,604 ) ( 22.42 ) Forfeited / canceled ( 11,258 ) ( 25.59 ) ( 24,223 ) ( 23.56 ) ( 35,481 ) ( 24.20 ) Balance, December 31, 2020 560,123 $ 24.54 975,811 $ 26.36 1,535,934 $ 25.70 (1) Total share-based awards excludes Outperformance Awards. (2) All vested share-based awards are included in basic EPS for the periods after each award’s vesting date. The estimated fair value of share-based awards that fully vested during the years ended December 31, 2020, 2019, and 2018 was $ 12,625 , $ 30,526 , and $ 33,106 , respectively. During the years ended December 31, 2020, 2019, and 2018, 2,109 , 295,459 , and 374,162 RSUs, respectively, were accelerated pursuant to the terms and conditions of the Omnibus Incentive Plan and related award agreements. F-37 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Grant-Date Fair Values The grant-date fair values of the time-vesting RSUs and PRSUs with performance condition vesting criteria are generally based on the closing price of our common stock on the grant date. However, the grant-date fair values for share-based awards with market condition vesting criteria are based on Monte-Carlo option pricing models. The following table summarizes the significant inputs utilized in these models for such awards granted during the years ended December 31, 2020, 2019, and 2018: For the Years Ended December 31, 2020 2019 2018 Expected volatility (1) 17.2 % — 17.3 % 17.2 % — 17.4 % 14.5 % — 17.3 % Risk-free rate 0.85 % 2.25 % — 2.42 % 2.38 % Expected holding period (years) 2.09 — 2.84 2.84 — 2.92 2.71 — 2.84 (1) Expected volatility was estimated based on the historical volatility of INVH’s realized returns and the applicable index. Summary of Total Share-Based Compensation Expense During the years ended December 31, 2020, 2019, and 2018, we recognized share-based compensation expense as follows: For the Years Ended December 31, 2020 2019 2018 General and administrative $ 13,579 $ 15,083 $ 23,999 Property management expense 3,511 3,075 5,500 Total $ 17,090 $ 18,158 $ 29,499 As of December 31, 2020, there is $ 18,827 of unrecognized share-based compensation expense related to non-vested share-based awards which is expected to be recognized over a weighted average period of 1.77 years. Note 11—Fair Value Measurements The carrying amounts of restricted cash, certain components of other assets, accounts payable and accrued expenses, resident security deposits, and certain components of other liabilities approximate fair value due to the short maturity of these amounts. Our interest rate swap agreements, interest rate cap agreements, and investments in equity securities with a readily determinable fair value are recorded at fair value on a recurring basis within our consolidated financial statements. The fair values of our interest rate caps and swaps, which are classified as Level 2 in the fair value hierarchy, are estimated using market values of instruments with similar attributes and maturities. See Note 8 for the details of the consolidated balance sheet classification and the fair values for the interest rate caps and swaps. The fair values of our investments in equity securities with a readily determinable fair value are classified as Level 1 in the fair value hierarchy. For additional information related to our investments in equity securities as of December 31, 2020 and 2019, refer to Note 6. F-38 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Recurring Fair Value Measurements The following table displays the carrying values and fair values of financial instruments as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Carrying Value Fair Value Carrying Value Fair Value Assets carried at historical cost on the consolidated balance sheets: Investments in debt securities (1) Level 2 $ 245,237 $ 249,736 $ 316,991 $ 318,299 Liabilities carried at historical cost on the consolidated balance sheets: Mortgage loans (2) Level 2 $ 4,832,133 $ 4,923,107 $ 6,266,407 $ 6,292,261 Secured Term Loan (3) Level 3 403,363 447,190 403,464 411,213 Term Loan Facility (4) Level 3 2,500,000 2,514,623 1,500,000 1,500,444 Convertible Senior Notes (5) Level 3 339,404 351,166 334,299 346,489 (1) The carrying values of investments in debt securities are shown net of discount. (2) The carrying values of the mortgage loans are shown net of discount and exclude $ 12,035 and $ 27,946 of deferred financing costs as of December 31, 2020 and 2019, respectively. (3) The carrying value of the Secured Term Loan excludes $ 2,268 and $ 2,486 of deferred financing costs as of December 31, 2020 and 2019, respectively. (4) The carrying value of the Term Loan Facility excludes $ 29,093 and $ 6,253 of deferred financing costs as of December 31, 2020 and 2019, respectively. (5) The carrying values of the Convertible Senior Notes include unamortized discounts of $ 5,596 and $ 10,701 as of December 31, 2020 and 2019, respectively. The fair values of our investment in debt securities and mortgage loans, which are classified as Level 2 in the fair value hierarchy, are estimated based on market bid prices of comparable instruments at the end of the period. The following table displays the significant unobserverable inputs used to develop our Level 3 fair value measurements as of December 31, 2020: Quantitative Information about Level 3 Fair Value Measurement (1) Fair Value Valuation Technique Unobservable Input Rate Secured Term Loan $ 447,190 Discounted Cash Flow Effective Rate 2.41 % Term Loan Facility 2,514,623 Discounted Cash Flow Effective Rate 1.77 % — 2.55 % Convertible Senior Notes 351,166 Discounted Cash Flow Effective Rate 1.76 % (1) Our Level 3 fair value instruments require interest only monthly payments. F-39 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Nonrecurring Fair Value Measurements Our assets measured at fair value on a nonrecurring basis are those assets for which we have recorded impairments. Single-Family Residential Properties The single-family residential properties for which we have recorded impairments, measured at fair value on a nonrecurring basis, are summarized below: For the Years Ended December 31, 2020 2019 2018 Investments in single-family residential properties, net held for use (Level 3): Pre-impairment amount $ 451 $ 9,255 $ 2,179 Total impairments ( 89 ) ( 2,193 ) ( 507 ) Fair value $ 362 $ 7,062 $ 1,672 For the Years Ended December 31, 2020 2019 2018 Investments in single-family residential properties, net held for sale (Level 3): Pre-impairment amount $ 21,427 $ 61,061 $ 33,609 Total impairments ( 4,489 ) ( 12,017 ) ( 6,202 ) Fair value $ 16,938 $ 49,044 $ 27,407 For additional information related to our single-family residential properties as of December 31, 2020 and 2019, refer to Note 3. ROU Lease Assets During the year ended December 31, 2020, we relocated one of our corporate offices and vacated the former location. As the expected undiscounted sublease payments through the remaining original lease term of the vacated office space no longer exceed the carrying value of the related ROU lease asset, we concluded that the ROU lease asset was not fully recoverable. During the year ended December 31, 2020, we recorded impairment of $ 1,750 in other, net in the consolidated statements of operations. The fair value of the ROU lease asset measured at fair value on a nonrecurring basis, which is classified as Level 3 in the fair value hierarchy, was determined based on a discounted cash flow analysis reflective of the income expected from a sublease. For additional information related to our ROU lease assets as of December 31, 2020 and 2019, refer to Note 6. F-40 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Note 12—Earnings per Share Basic and diluted EPS are calculated as follows: For the Years Ended December 31, 2020 2019 2018 (in thousands, except share and per share data) Numerator: Net income (loss) available to common stockholders — basic and diluted $ 195,764 $ 145,068 $ ( 5,744 ) Denominator: Weighted average common shares outstanding — basic 553,993,321 531,235,962 520,376,929 Effect of dilutive securities: Incremental shares attributed to non-vested share-based awards 1,465,286 1,263,825 — Weighted average common shares outstanding — diluted 555,458,607 532,499,787 520,376,929 Net income (loss) per common share — basic $ 0.35 $ 0.27 $ ( 0.01 ) Net income (loss) per common share — diluted $ 0.35 $ 0.27 $ ( 0.01 ) Incremental shares attributed to non-vested share-based awards are excluded from the computation of diluted EPS when they are anti-dilutive. For the years ended December 31, 2020, 2019, and 2018, 467 , 121 , and 1,267,175 incremental shares attributed to non-vested share-based awards, respectively, are excluded from the denominator as their inclusion would have been anti-dilutive. For the years ended December 31, 2020, 2019, and 2018, the vested OP Units have been excluded from the computation of EPS because all income attributable to the OP Units has been recorded as non-controlling interest and thus excluded from net income (loss) available to common stockholders. For the years ended December 31, 2019 and 2018, using the “if-converted” method, 6,225,341 and 12,420,013 , respectively, potential shares of common stock for the 2019 Convertible Notes for the period prior to conversion are excluded from the computation of diluted EPS as they are anti-dilutive. For the years ended December 31, 2020, 2019, and 2018, 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes are also excluded from the computation of diluted EPS as they are anti-dilutive. Additionally, no adjustment to the numerator is required for interest expense related to the Convertible Senior Notes for the years ended December 31, 2020, 2019, and 2018. See Note 7 for further discussion about the Convertible Senior Notes. Note 13—Income Tax We account for income taxes under the asset and liability method. For our TRSs, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. We provide a valuation allowance, from time to time, for deferred tax assets for which we do not consider realization of such assets to be more likely than not. As of December 31, 2020 and 2019, we have not recorded any deferred tax assets and liabilities or unrecognized tax benefits. We do not anticipate a significant change in unrecognized tax benefits within the next 12 months. We have sold assets that were either subject to Section 337(d) of the Internal Revenue Code of 1986, as amended, or were held by TRSs. These transactions resulted in $ 870 , $ 2,490 , and $ 1,241 of current income tax expense for the years ended December 31, 2020, 2019, and 2018, respectively, which has been recorded in gain on sale of property, net of tax in the consolidated statements of operations. F-41 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Note 14—Commitments and Contingencies Lease Commitments The following table sets forth our fixed lease payment commitments as a lessee as of December 31, 2020, for the periods below: Year Operating Leases Finance Leases 2021 $ 5,108 $ 3,174 2022 4,182 2,547 2023 3,202 2,495 2024 2,854 731 2025 1,415 — Thereafter 383 — Total lease payments 17,144 8,947 Less: imputed interest ( 1,156 ) ( 558 ) Total lease liability $ 15,988 $ 8,389 The components of lease expense for the years ended December 31, 2020 and 2019 are as follows: For the Years Ended December 31, 2020 2019 Operating lease cost: Fixed lease cost $ 4,324 $ 4,059 Variable lease cost 1,155 1,294 Total operating lease cost $ 5,479 $ 5,353 Finance lease cost: Amortization of ROU assets $ 2,341 $ 491 Interest on lease liabilities 456 59 Total finance lease cost $ 2,797 $ 550 During the year ended December 31, 2018, we incurred rent and other related occupancy expenses of $ 6,306 . Insurance Policies Pursuant to the terms of certain of our loan agreements (see Note 7), laws and regulations of the jurisdictions in which our properties are located, and general business practices, we are required to procure insurance on our properties. As of December 31, 2020, there are no material contingent liabilities related to uninsured losses with respect to our properties. Legal Matters We are subject to various legal proceedings and claims that arise in the ordinary course of our business. We accrue a liability when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. We do not believe that the final outcome of these proceedings or matters will have a material adverse effect on our consolidated financial statements. Note 15—Subsequent Events In connection with the preparation of the accompanying consolidated financial statements, we have evaluated events and transactions occurring after December 31, 2020, for potential recognition or disclosure. F-42 INVITATION HOMES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollar amounts in thousands) Extensions of Existing Mortgage Loans 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. Dividend Declaration On January 28, 2021, our board of directors declared a dividend of $ 0.17 per share to stockholders of record on February 10, 2021, which is payable on February 26, 2021. F-43 INVITATION HOMES INC. Schedule III Real Estate and Accumulated Depreciation As of December 31, 2020 (dollar amounts in thousands) Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Close of Period Market Number of Properties (1) Number of Encumbered Properties (2) Encumbrances (2) Land Depreciable Properties Land Depreciable Properties Land Depreciable Properties Total (3) Accumulated Depreciation Date of Construction Date Acquired Depreciable Period Atlanta 12,541 5,940 $ 659,381 $ 325,364 $ 1,616,121 $ — $ 270,280 $ 325,364 $ 1,886,401 $ 2,211,765 $ ( 337,664 ) 1920-2020 2012-2020 7 - 28.5 years Carolinas 4,930 2,124 271,492 174,664 744,465 — 98,108 174,664 842,573 1,017,237 ( 131,602 ) 1900-2019 2012-2020 7 - 28.5 years Chicago 2,614 44 5,531 132,559 325,761 — 109,616 132,559 435,377 567,936 ( 97,398 ) 1877-2015 2012-2017 7 - 28.5 years Dallas 2,753 974 127,497 126,191 475,510 — 30,770 126,191 506,280 632,471 ( 46,228 ) 1952-2020 2017-2020 7 - 28.5 years Denver 2,340 1,198 209,518 194,229 544,952 — 38,882 194,229 583,834 778,063 ( 58,186 ) 1885-2020 2017-2020 7 - 28.5 years Houston 2,148 584 58,464 63,695 310,875 — 16,078 63,695 326,953 390,648 ( 37,156 ) 1954-2014 2017 7 - 28.5 years Jacksonville 1,867 970 130,498 86,725 219,973 — 56,090 86,725 276,063 362,788 ( 70,311 ) 1955-2015 2012-2020 7 - 28.5 years Las Vegas 3,005 1,971 314,258 130,262 571,699 — 47,499 130,262 619,198 749,460 ( 83,554 ) 1953-2019 2012-2020 7 - 28.5 years Minneapolis 1,126 68 9,766 66,782 138,038 — 52,414 66,782 190,452 257,234 ( 48,897 ) 1886-2015 2013-2015 7 - 28.5 years Northern California 4,238 2,172 421,548 339,823 723,068 — 112,546 339,823 835,614 1,175,437 ( 163,004 ) 1900-2012 2012-2020 7 - 28.5 years Orlando 6,207 2,977 363,492 215,256 868,491 — 151,140 215,256 1,019,631 1,234,887 ( 178,849 ) 1947-2018 2012-2020 7 - 28.5 years Phoenix 8,168 4,298 535,818 316,002 1,005,748 — 184,084 316,002 1,189,832 1,505,834 ( 210,648 ) 1925-2020 2012-2020 7 - 28.5 years Seattle 3,664 1,352 257,013 292,920 587,833 — 153,551 292,920 741,384 1,034,304 ( 135,373 ) 1890-2020 2012-2020 7 - 28.5 years South Florida 8,286 2,073 377,633 718,446 1,484,121 — 216,393 718,446 1,700,514 2,418,960 ( 332,716 ) 1922-2020 2012-2020 7 - 28.5 years Southern California 7,931 4,367 1,050,923 1,027,310 1,519,586 — 224,449 1,027,310 1,744,035 2,771,345 ( 327,411 ) 1900-2014 2012-2020 7 - 28.5 years Tampa 8,180 3,487 435,577 329,568 1,179,327 — 184,486 329,568 1,363,813 1,693,381 ( 254,060 ) 1923-2020 2012-2020 7 - 28.5 years Total 79,998 34,599 $ 5,228,409 $ 4,539,796 $ 12,315,568 $ — $ 1,946,386 $ 4,539,796 $ 14,261,954 $ 18,801,750 $ ( 2,513,057 ) (1) Number of properties represents 80,177 total properties owned less 179 properties classified as held for sale and recorded in other assets, net on the consolidated balance sheet as of December 31, 2020. (2) Number of encumbered properties and encumbrances include the number of properties secured by first priority mortgages under the mortgage loans and the Secured Term Loan, as well as the aggregate value of outstanding debt attributable to such properties. Excluded from this is original issue discount, deferred financing costs, and 49 held for sale properties with an encumbered balance of $ 9,376 . (3) The gross aggregate cost of total real estate in the table above for federal income tax purposes was approximately $ 17,003,597 (unaudited) as of December 31, 2020. F-44 INVITATION HOMES INC. Schedule III Real Estate and Accumulated Depreciation (dollar amounts in thousands) For the Years Ended December 31, 2020 2019 2018 Residential Real Estate Balance at beginning of period $ 18,247,164 $ 18,229,974 $ 18,387,898 Additions during the period Acquisitions 621,697 586,075 252,391 Initial renovations 93,096 63,630 44,207 Other capital expenditures 167,549 168,575 141,595 Deductions during the period Dispositions and other ( 407,762 ) ( 839,873 ) ( 472,168 ) Reclassifications Properties held for sale, net of dispositions 80,006 38,783 ( 123,949 ) Balance at close of period $ 18,801,750 $ 18,247,164 $ 18,229,974 Accumulated Depreciation Balance at beginning of period $ ( 2,003,972 ) $ ( 1,543,914 ) $ ( 1,075,634 ) Depreciation expense ( 546,419 ) ( 529,205 ) ( 511,988 ) Dispositions and other 44,974 70,382 32,429 Reclassifications Properties held for sale, net of dispositions ( 7,640 ) ( 1,235 ) 11,279 Balance at close of period $ ( 2,513,057 ) $ ( 2,003,972 ) $ ( 1,543,914 ) F-45