What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-22 compared with 2021-02-19 · 340 added, 531 removed, 401 unchanged (68% of the section changed)

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Invitation Homes is a leading owner and operator of single-family homes for lease, offering residents high-quality homes in sought-after neighborhoods across America.

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

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

With over 80,000 homes for lease in 16 markets across the country as of December 31, 2021, we are meeting the needs of a growing share of Americans who prefer the ease of leasing over the burden of owning a home.

We provide our residents access to updated homes with features they value, as well as close proximity to jobs and access to good schools.

The continued demand for our product proves that the choice and flexibility we offer is attractive to many prospective residents.

We operate in markets with strong demand drivers, high barriers to entry, and high rent growth potential, primarily in the Western United States, Florida, and the Southeast United States.

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Since our founding in 2012, we have built a proven, vertically integrated operating platform that enables us to effectively and efficiently acquire, renovate, lease, maintain, and manage our homes.

We invest in markets that we expect will exhibit lower new supply, stronger job and household formation growth, and superior NOI growth relative to the broader United States housing and rental markets.

Within our 16 markets, we target attractive neighborhoods in in-fill locations with multiple demand drivers, such as proximity to major employment centers, desirable schools, and transportation corridors.

Our homes average approximately 1,870 square feet with three bedrooms and two bathrooms, appealing to a resident base that we believe is less transitory than the typical multifamily resident.

Our homes average approximately 1,870 square feet with three bedrooms and two bathrooms, appealing to a resident base that we believe is less transitory than a typical multifamily resident.

We invest in the upfront renovation of homes in our portfolio in order to address capital needs, reduce ongoing maintenance costs, and drive resident demand.

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

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

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

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

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

The safety and service measures currently in place include:

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

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

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

At Invitation Homes, we are committed to creating a better way to live and to being a force for positive change, while at the same time advancing efforts that make our company more innovative and our processes more sustainable.

ESG initiatives are an important part of our strategic business objectives and are critical to our long-term success.

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

Each aspect of our operations — whether in our corporate headquarters or field offices located in our 16 markets — is driven by a resident-centric model.

Our associates take our values seriously and work hard every day to honor the trust our residents have placed in us to provide safe and secure homes for them and their loved ones.

In turn, we focus on ensuring our associates are fairly compensated and that we provide a diverse, equitable, and inclusive culture where they are appreciated for who they are and what they bring to the business.

We also place a strong emphasis on the impact we have in our communities and to the environment in general, and we continue to develop programs that will demonstrate that commitment.

In addition, we ensure that we operate under strong, well-defined governance practices and adhere to the highest ethical standards at all times.

The COVID-19 pandemic has spread rapidly, adversely affecting public health, economic activity, financial markets and employment.

The continued development and fast-changing nature of the COVID-19 pandemic creates many unknowns that impact our residents, associates, and suppliers.

The ultimate impacts remain unknown, but have included and could range from macroeconomic effects (such as continued strain on global and United States economic conditions and disruptions to, and volatility in, the credit and financial markets, consumer spending, supply chains, and the market for acquisition and disposition of single-family homes) to more industry-specific effects (such as depressed collection rates, higher or lower occupancy levels, and restrictions on evictions, collections, rent increases, and late fees), and other unanticipated consequences.

Throughout the COVID-19 pandemic, we have maintained continuity in business operations and have supported our residents and associates by implementing a host of measures and protocols that enable our teams to safely provide outstanding service to residents.

These protocols include:

(1) implementing a safety training program and providing personal protective equipment for all associates;

(2) creating flexible work schedules for our associates in terms of both location and hours of work;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Controls and Procedures” for additional information).

Investment Management

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

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

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

(“Rockpoint”).

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

Joint Venture with Rockpoint

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

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

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

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

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

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

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

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

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

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

Capital Markets and Financing

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

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

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

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

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

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

Ongoing Considerations

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

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

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

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

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

“Risk Factors.”

(4) leveraging self-show and virtual-tour technology;

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

We also believe that we are in material compliance with federal, state, and local restrictions on items such as evictions, collections, rent increases, and late fees as appropriate.

Additionally, to act on our core values of "Genuine Care" and "Standout Citizenship," we offer flexible solutions for residents experiencing financial hardship when requested, including payment plans and late fee abatements.

We continue to work with residents experiencing financial hardship to find solutions that keep them in their homes.

This includes continuing to provide residents with information about rental assistance programs for which they may be eligible, application instructions, necessary documentation, and owner requirements.

We have helped thousands of residents apply for rental assistance programs and, as a result, they have received $48.0 million in rental assistance payments during the year ended December 31, 2021, and $50.5 million cumulatively since such programs were put in place.

Neither the aforementioned procedural adjustments nor the overall impact of the COVID-19 pandemic created significant disruptions to our business model during the years ended December 31, 2021 and 2020.

The situation surrounding the ongoing COVID-19 pandemic and its variants remains fluid, and we continue to actively monitor the effects of the pandemic and manage our response in collaboration with our residents and business partners and to assess potential impacts to our financial position and operating results, as well as potential adverse developments in our business.

For further discussion of risks related to the pandemic, see Part I.

“Risk Factors — Risks Related to Our Business and Industry — Our business, results of operations, financial condition, and cash flows may be adversely affected by pandemics and outbreaks of infectious disease, particularly the ongoing COVID-19 pandemic ” in our Annual Report on Form 10-K.

Other Matters

In July 2021, we received congressional inquiries requesting information and documentation about our eviction practices during the COVID-19 pandemic, including information relating to compliance with federal eviction moratorium requirements and cooperation with impacted residents to use federal assistance funds as an alternative to eviction.

In October 2021 and January 2022, we received additional congressional inquiries requesting information about our activities in the housing market.

We are in the process of responding to and cooperating with these inquiries and information requests.

In August 2021, we received a letter from the staff of the Federal Trade Commission requesting information as to how we conduct our business generally and during the COVID-19 pandemic specifically.

We are in the process of responding to and cooperating with this request.

As these inquiries are ongoing, we cannot currently predict their timing, outcome, or scope.

Climate Change

Climate change continues to attract considerable public, political, and scientific attention.

Experiencing or addressing the various physical, regulatory, and adaptation/transition risks of climate change may affect our profitability.

Government authorities and various interest groups are promoting laws and regulations relating to climate change, including regulations aimed at limiting greenhouse gas emissions and the implementation of “green” building codes.

These laws and regulations may require us to make costly improvements to our existing properties beyond our current plans to decrease the impact of our homes on the environment, resulting in increased operating costs.

Implementation of any voluntary improvements requires consideration of multiple factors, including whether such elections would raise our costs to maintain our homes.

Alternatively, choosing not to enhance our homes’ resource efficiency could make our portfolio less attractive to residents and investors and/or increase the vulnerability of our residents to rising energy and water expenses and use restrictions.

As the climate continues to change, and with a portfolio located in a variety of United States markets that include coastal areas, we recognize the increased potential for acute weather events and other climate-related impacts to our business, operations, and homes.

We take a proactive approach to protect our properties against potential risks related to climate change and business interruptions, and we recognize that we must continue to adapt our policies, objectives, and processes to improve the resiliency of our physical properties and our business.

Our management and the Board of Directors are focused on managing our business risks, including climate change-related risks.

The process to identify, manage, and integrate climate-change risk is part of our enterprise risk management program.

For more information on risks related to climate change, see Part I.

“Risk Factors — Risks Related to Environmental, Social, and Governance Issues — Climate change, related legislative and regulatory responses to climate change, and the transition to a lower-carbon economy may adversely affect our business , and — We are subject to risks from natural disasters such as earthquakes and severe weather .”

Our Portfolio

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Nashville (5)

16 67.4% 2,135 0.81 0.1 %

3 N/A N/A N/A — %

Total / Average

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

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

As of December 31, 2021, we have three remaining homes in the market.

Factors That Affect Our Results of Operations and Financial Condition

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“Risk Factors” for more information regarding factors that could materially adversely affect our results of operations and financial condition.

Key factors that impact our results of operations and financial condition include market fundamentals, rental rates and occupancy levels, turnover rates and days to re-resident homes, property improvements and maintenance, property acquisitions and renovations, and financing arrangements.

Key factors that impact our results of operations and financial condition include market fundamentals, rental rates and occupancy levels, collection rates, turnover rates and days to re-resident homes, property improvements and maintenance, property acquisitions and renovations, and financing arrangements.

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

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Our results are impacted by housing market fundamentals and supply and demand conditions in our markets, particularly in the Western United States and Florida, which represented 71.1% of our rental revenues and other property income during the year ended December 31, 2021.

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

We actively monitor the impact of the COVID-19 outbreak and its resulting macroeconomic impacts on market fundamentals and quickly implement changes in pricing as market fundamentals shift.

Rental Rates and Occupancy Levels:

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

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

The ongoing COVID-19 pandemic has negatively impacted our ability to increase rents in certain markets.

Collection Rates:

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

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

Additionally, we work with residents to identify and pursue rental assistance payments from various federal, state, and local government and other entities providing such assistance.

Despite these efforts, a portion of amounts receivable may not ultimately be collected.

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

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

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

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

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

The period of time to market and lease a property can vary greatly and is impacted by local demand, our marketing techniques, the size of our available inventory, the ability of our suppliers and other business partners to carry out their assigned tasks and/or source labor or supply materials at ordinary levels of performance relative to the conduct of our business, and both current economic conditions and future economic outlook.

Many of these factors have been and continue to be impacted by the ongoing COVID-19 pandemic.

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

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

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

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

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

While the COVID-19 outbreak has required us to modify our property improvement and maintenance procedures to accommodate resident preferences, we complete all maintenance work orders in a timely manner unless a resident reports symptoms of or exposure to COVID-19.

Property Acquisitions and Renovations:

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

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

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

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

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The time to renovate a newly acquired property can vary significantly among homes for several reasons, including the property’s acquisition channel, the condition of the property, whether the property was vacant when acquired, and whether there are any state or local restrictions on our ability to complete renovations as an essential business function.

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

Additionally, the ability of our suppliers and other business partners to carry out their assigned tasks and/or source labor or supply materials at ordinary levels of performance relative to the conduct of our business have increased the time required to renovate our homes.

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

Financing Arrangements:

Financing arrangements directly impact our interest expense, mortgage loans, secured term loan, term loan facility, revolving facility, and convertible debt, as well as our ability to acquire and renovate homes.

Financing arrangements directly impact our interest expense, our various debt instruments, and our ability to acquire and renovate homes.

We have historically utilized indebtedness to fund the acquisition and renovation of new homes.

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

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

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

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

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

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

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

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

Joint Venture Management Fees

Joint venture management fees consist of asset and property management fees from our unconsolidated joint ventures.

Property Operating and Maintenance

Once a property is available for its initial lease, which we refer to as “rent-ready,” we incur ongoing property-related expenses, which consist primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel

expenses, utility expenses, repairs and maintenance, leasing costs, marketing expenses, and property administration.

expenses, utility expenses, repairs and maintenance, and property administration.

Prior to a property being “rent-ready,” certain of these expenses are capitalized as building and improvements.

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General and administrative expense represents personnel costs, professional fees, and other costs associated with our day-to-day activities.

General and administrative expense also includes merger and transaction-related expenses, among other things, that are of a non-recurring nature.

General and administrative expense may also include expenses that are of a non-recurring nature, such as severance.

Share-Based Compensation Expense

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Depreciation and Amortization

We recognize depreciation and amortization expense associated with our homes and other capital expenditures over their expected useful lives.

We recognize depreciation and amortization expense associated with our homes and other capital expenditures over the expected useful lives of the assets.

Impairment and Other

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

Unrealized Gains on Investments in Equity Securities

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

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

Gains (Losses) on Investments in Equity Securities, net

Gains (losses) on investments in equity securities, net includes unrealized gains and losses resulting from mark to market adjustments and realized gains and losses resulting from the sale of such securities.

Other, net includes interest income and other miscellaneous income and expenses.

Gain on Sale of Property, net of tax

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

Income (Loss) from Investments in Unconsolidated Joint Ventures

Income (loss) from investments in unconsolidated joint ventures consists of our share of net earnings and losses from investments in unconsolidated joint ventures accounted for using the equity method.

Results of Operations

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Rental revenues and other property income $ 1,991,722 $ 1,822,828 $ 168,894 9.3 %

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

Joint venture management fees 4,893 — 4,893 N/M

Total revenues 1,996,615 1,822,828 173,787 9.5 %

Property operating and maintenance 706,162 680,543 25,619 3.8 %

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Depreciation and amortization 592,135 552,530 39,605 7.2 %

Impairment and other 696 18,743 (18,047) (96.3) %

Impairment and other 8,676 696 7,980 N/M

Total expenses 1,777,046 1,709,610 67,436 3.9 %

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

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

Gains (losses) on investments in equity securities, net (9,420) 29,723 (39,143) N/M

Other, net (5,835) (86) (5,749) N/M

Gain on sale of property, net of tax 60,008 54,594 5,414 9.9 %

Income (loss) from investments in unconsolidated joint ventures (1,546) — (1,546) N/M

Net income $ 262,776 $ 197,449 $ 65,327 33.1 %

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During the years ended December 31, 2021 and 2020, we acquired 2,938 and 2,252 homes, respectively, and sold 734 and 1,580 homes, respectively.

During the years ended December 31, 2020, and 2019, we owned an average of 79,530 and 80,372 single-family rental homes, respectively.

During the years ended December 31, 2021 and 2020, we owned an average of 80,901 and 79,530 single-family rental homes, respectively, in our total portfolio.

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

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As of December 31, 2021, our Same Store portfolio consisted of 72,245 single-family rental homes.

Rental Revenues and Other Property Income

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

For the years ended December 31, 2021 and 2020, total revenues were $1,996.6 million and $1,822.8 million, respectively.

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

For the years ended December 31, 2021 and 2020, total portfolio rental revenues and other property income totaled $1,991.7 million and $1,822.8 million, respectively, an increase of 9.3%, driven by an increase in average occupancy, an increase in average monthly rent per occupied home, and an 1,371 home increase between periods in the average number of homes owned.

Average occupancy for the years ended December 31, 2021 and 2020 for the total portfolio was 97.0% and 96.1%, respectively.

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For the Same Store portfolio, an average home remained unoccupied for 28 and 36 days between residents for the years ended December 31, 2021 and 2020, respectively.

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

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

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

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

Our turnover rate may have been, and may continue to be, impacted by the effects of the COVID-19 pandemic (e.g., eviction moratoriums and residents who are not inclined to relocate during this period).

We cannot predict how long existing eviction moratoriums will remain in place, if new eviction moratoriums will be issued and/or reinstated, or when the general effects of the pandemic will subside and how those items may affect our turnover and occupancy rates.

To monitor prospective changes in average monthly rent per occupied home, we compare the monthly rent from an expiring lease to the monthly rent from the next lease for the same home, in each case, net of any amortized non-service concessions, to calculate net effective rental rate growth.

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For our Same Store portfolio, renewal lease net effective rental rate growth averaged 6.7% and 3.7% for the years ended December 31, 2021 and 2020, respectively, and new lease net effective rental rate growth averaged 14.4% and 4.2% for the years ended December 31, 2021 and 2020, respectively.

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

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

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

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

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

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

The COVID-19 pandemic has negatively impacted rental revenues and other property income since the onset of the pandemic in mid-March 2020 in two notable ways:

(1) collection rates have decreased from pre-pandemic levels which negatively impacts bad debt as a percentage of gross rental income;

and (2) a significant portion of all late fees typically enforced in accordance with our lease agreements were not enforced or collected for a significant period of time.

As of the third quarter of 2021, bad debt began to moderate compared to the year ended December 31, 2020.

Enforcement and collections of late fees generally re-commenced in all markets where permissible beginning in the second quarter of 2021.

While the effects of the COVID-19 pandemic and the ensuing jurisdictional restrictions on rental rates, late fees, collections, and evictions have decreased over time, they may continue to affect our future collection rates, ability to increase rental revenues in certain markets, and fees and other ancillary income charged to residents.

For the year ended December 31, 2021, joint venture management fees totaled $4.9 million.

For the years ended December 31, 2021 and 2020, total expenses were $1,777.0 million and $1,709.6 million, respectively.

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For the year ended December 31, 2021, property operating and maintenance expense increased to $706.2 million from $680.5 million for the year ended December 31, 2020.

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

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

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

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

In addition to an 1,371 home increase between periods in the average number of homes owned, increases in property taxes, utilities, personnel and other services costs, and HOA expenses, partially offset by decreases in repairs and maintenance and turnover costs, resulted in the overall 3.8% net increase in property operating and maintenance expense.

Property management expense and general and administrative expense increased to $147.4 million from $121.9 million for the years ended December 31, 2021 and 2020, respectively.

The increase is comprised primarily of a $10.1 million increase in share-based compensation expense due to changes in expected results for performance-based awards and a $9.7 million increase in short term incentive plan compensation based on estimated annual performance.

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

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

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

December 31, 2019.

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

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

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

Interest expense decreased from $353.9 million for the year ended December 31, 2020 to $322.7 million for the year ended December 31, 2021.

The decrease in interest expense was primarily due to refinancing activities since December 31, 2020 and the impact of the December 2020 amended and restated credit facility.

During the year ended December 31, 2021, we issued $1,950.0 million of newly issued unsecured notes, repaid $1,766.9 million of mortgage loan indebtedness, and converted $203.5 million of convertible debt into shares of our common stock.

These financing activities resulted in a 25 bps decrease in the weighted average interest rate on our outstanding debt between the respective period ends, inclusive of a 55 bps reduction in the spread on our term loan facility as a result of achieving an investment grade rating.

Depreciation and amortization expense increased to $592.1 million for the year ended December 31, 2021 from $552.5 million for the year ended December 31, 2020 due to an increase in cumulative capital expenditures and an increase in the average number of homes owned during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Impairment and other expenses were $8.7 million and $0.7 million for the years ended December 31, 2021 and 2020, respectively.

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

During the year ended December 31, 2019, impairment and other expenses was comprised of impairment losses of $14.2 million on our single-family residential properties and casualty losses of $4.5 million.

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

Unrealized Gains on Investments in Equity Securities

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

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

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

During the year ended December 31, 2021, impairment and other expenses were comprised of impairment losses of $0.7 million on our single-family residential properties and net casualty losses of $8.0 million.

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

The impairment costs recognized during the years ended December 31, 2021 and 2020 were not a direct result of the COVID-19 pandemic.

Gains (Losses) on Investments in Equity Securities, net

For the year ended December 31, 2021, $9.4 million of losses on investments in equity securities, net was comprised of $5.5 million of net losses recognized on investments sold during the year, including the reversal of unrealized gains recognized during the year ended December 31, 2020, and $3.9 million net unrealized losses recognized on investments held as of December 31, 2021.

For the year ended December 31, 2020, $29.7 million of unrealized gains were recognized on investments held as of year end.

Other, net was $5.8 million for the year ended December 31, 2021, compared to $0.1 million for the year ended December 31, 2020, primarily due to lower interest income from our investments in debt securities and increases in transaction and administrative costs between those periods, partially offset by the non-recurrence of a $1.8 million ROU lease impairment during the year ended December 31, 2020.

Additionally, joint venture management fees and income (loss) from investments in unconsolidated joint ventures presented separately on our consolidated statement of operations for the year ended December 31, 2021 were included in other, net during the year ended December 31, 2020.

Gain on Sale of Property, net of tax

Gain on sale of property, net of tax was $60.0 million and $54.6 million for the years ended December 31, 2021 and 2020, respectively.

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

The primary driver of the increase was an increase in disposition proceeds received per home between periods, offset by a decrease in the number of homes sold from 1,580 for the year ended December 31, 2020 to 734 for the year ended December 31, 2021.

Income (Loss) from Investments in Unconsolidated Joint Ventures

Income (loss) from investments in unconsolidated joint ventures was comprised of our equity in earnings and/or (losses) therefrom on a net basis.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

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Liquidity and Capital Resources

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

Our liquidity and capital resources as of December 31, 2021 and 2020 include unrestricted cash and cash equivalents of $610.2 million and $213.4 million, respectively, a 185.9% increase primarily due to the capital markets activity described below, net of cash used to fund acquisitions of single-family residential properties.

The following significant activity occurred during the year ended December 31, 2021:

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

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

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

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

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

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

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

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

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

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

The remaining proceeds were used primarily for acquisitions.

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

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

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

• In May 2021, we issued and sold $300.0 million of unsecured notes in a private placement transaction.

We used the proceeds to repay $300.0 million of the highest-cost classes of various securitizations due to reach final maturity between December 2024 and January 2026.

• In August 2021, we issued and sold $650.0 million of unsecured notes in an underwritten public offering.

We used the proceeds to repay $635.3 million of the highest-cost classes of various securitizations due to reach final maturity between December 2024 and January 2026.

• In November 2021, we issued and sold $1,000.0 million of unsecured notes in an underwritten public offering.

We used the proceeds to repay $798.2 million of various securitizations, including full repayment of IH 2017-2 and partial repayment of IH 2018-3, and for general corporate purposes, including acquisitions.

• We completed an underwritten public offering to sell 14,375,000 shares of our common stock, including 1,875,000 shares sold pursuant to the underwriters’ full exercise of the option to purchase additional shares, and generated net proceeds of $571.2 million (the “2021 Public Offering”).

Proceeds were and will be used primarily for general corporate purposes, including acquisitions.

• We sold 9,008,528 shares of our common stock under our at the market equity program (“2019 ATM Equity Program”), generating net proceeds of $362.6 million after giving effect to agent commissions and other costs totaling $6.2 million.

We terminated the 2019 ATM Equity Program immediately after entering into the 2021 ATM Equity Program (defined below).

• In November 2021, we agreed to invest $250.0 million with Pathway Homes, a new real estate company that provides customers multiple options to purchase a home whereby they are able to first lease and then purchase the home in the future.

In addition to investing in the homes and technology platform for the startup and its real estate fund, we will provide maintenance and other services to all Pathway Homes properties, enabling us to broaden our third party property management services.

As of December 31, 2021, we have invested $25.0 million in the joint venture.

• In December 2021, we entered into a new at the market equity program (the "2021 ATM Equity Program") to sell, from time to time, shares of our common stock, with an aggregate sales price of up to $1,250.0 million through at the market and forward offerings.

No shares had been issued under the 2021 ATM Equity Program as of December 31, 2021.

• We settled $203.5 million of the 2022 Convertible Notes through the issuance of 8,943,374 shares of our common stock.

As of December 31, 2021, our $1,000.0 million revolving facility (the “Revolving Facility”) remains undrawn, and there are no restrictions on our ability to draw additional funds thereunder provided we remain in compliance with all covenants.

We have no debt reaching final maturity until March 2025, provided all extensions are exercised, with the exception of $141.5 million of 2022 Convertible Notes which matured on January 15, 2022.

On January 18, 2022, we settled the outstanding principal balance of the 2022 Convertible Notes with the issuance of 6,216,261 shares of our common stock and a cash payment of $0.3 million.

“Risk Factors.”

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

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

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

Long-Term Debt Strategy

The following table summarizes certain information about our debt obligations as of December 31, 2021 ($ in thousands):

Debt Instruments (1)

(Gross of Retained Certificates and Unamortized Discounts) Balance

(Net of Retained Certificates) Weighted Average Interest Rate Weighted Average Years to Maturity (2)

Amount Freely Prepayable (Gross)

IH 2017-1 (3)

$ 995,640 $ 940,140 4.23% 5.4 $ —

IH 2018-1 (4)

568,495 540,064 L + 88 bps 3.2 568,495

IH 2018-2 (4)

629,237 597,769 L + 105 bps 3.4 629,237

IH 2018-3 (4)

204,637 194,405 L + 112 bps 3.5 204,637

IH 2018-4 (4)

669,548 636,069 L + 122 bps 4.0 669,548

Secured Term Loan (5)

403,363 403,363 3.59% 9.4 —

Total secured (6)

3,470,920 $ 3,311,810 3.81% 4.8 2,071,917

2022 Convertible Senior Notes (7)

141,490 3.50% 0.0 —

Term Loan Facility 2,500,000 L + 100 bps 4.1 2,500,000

Revolving Facility — L + 89 bps 4.1 —

Unsecured Notes — May 2028

150,000 2.46% 6.4 —

Unsecured Notes — November 2028

600,000 2.30% 6.9 —

Unsecured Notes — August 2031

650,000 2.00% 9.6 —

Unsecured Notes — January 2034

400,000 2.70% 12.0 —

Unsecured Notes — May 2036

150,000 3.18% 14.4 —

Total unsecured (6)

4,591,490 3.17% 6.2 2,500,000

Total debt (6)

8,062,410 3.45% 5.6 $ 4,571,917

Unamortized discounts and fair value adjustments (13,605)

Deferred financing costs, net (50,146)

Total debt per balance sheet 7,998,659

Retained certificates (159,110)

Cash and restricted cash, excluding security deposits and letters of credit (649,722)

Deferred financing costs, net 50,146

Unamortized discounts and fair value adjustments 13,605

Net debt $ 7,253,578

(1) For detailed information about and definition of each of our financing arrangements see Part IV.

“Exhibits and Financial Statements — Note 7 of Notes to Consolidated Financial Statements.” For information about our derivative instruments that hedge floating rate debt, see “Financial Statements — Note 8 of Notes to Consolidated Financial Statements.”

(2) Weighted average years to maturity assumes all extension options are exercised, which are subject to certain conditions being met.

(3) IH 2017-1 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) 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, 2021, LIBOR was 0.10%.

(5) 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.

(6) For secured debt, unsecured debt, and total debt, the weighted average interest rate is calculated based on LIBOR as of December 31, 2021, 0.10%, and includes the impact of interest rate swap agreements effective as of that date.

(7) Effective July 15, 2021, we notified note holders of our intent to settle conversions of the 2022 Convertible Notes in shares of common stock.

On January 18, 2022, we settled the outstanding principal balance of the 2022 Convertible Notes with the issuance of 6,216,261 shares of our common stock and a cash payment of $0.3 million.

As part of our long-term debt strategy, our goal is to improve our credit ratings, and, over time, we generally intend to target a reduction in our level of net debt to approximately 5.5 to 6.0 times trailing twelve months Adjusted EBITDA re (see “— Non-GAAP Measures — EBITDA, EBITDA re , and Adjusted EBITDAr e ”), a reduction in our level of secured debt to less than 20% of gross assets, and an increase in our level of unencumbered assets to greater than 70% of gross assets.

To facilitate our long-term debt strategy we expect to seek to, among other things, (a) refinance a significant portion of our secured debt maturing in 2025 through 2026 (assuming all extension options are exercised) with unsecured debt, including potential unsecured bond issuances and/or (b) repay a portion of such debt.

There can be no assurance that we will be successful in implementing our long-term debt strategy, improving our credit ratings, or achieving our targets in the short or medium term or at all, or that we will not change our strategy or targets in the future.

Even if we do achieve our targets, we may from time to time fall outside of our target ranges;

and there can be no assurance that we will continue to meet our targets.

In addition, we cannot assure you that we will be able to access the capital and credit markets to obtain additional unsecured debt financing or that we will be able to obtain financing on terms favorable to us.

For further discussion of risks related to our indebtedness, see Part I.

“Risk Factors — Risks Related to Our Indebtedness,” including “Risk Factors — Risks Related to Our Indebtedness — We may be unable to obtain financing through the debt and equity markets, which would have a material adverse effect on our growth strategy and our financial condition and results of operations .”

Short-Term and Long-Term Liquidity Needs

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

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Our near-term liquidity requirements consist primarily of:

(i) renovating newly-acquired homes;

(ii) funding HOA fees (as applicable), property taxes, insurance premiums, and the ongoing maintenance of our homes;

(iii) interest expense;

(iv) payment of dividends to our equity investors;

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

• acquisition of homes currently under contract;

• renovation of newly-acquired homes;

• HOA fees (as applicable), property taxes, insurance premiums, and the ongoing maintenance of our homes;

• property management and general and administrative expenses;

• interest expense;

• dividend payments to our equity investors;

• required contributions to our joint ventures.

We believe our rental income, net of total expenses, will generally provide cash flow sufficient to fund operations and dividend payments on a near-term basis.

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

Additionally, we have guaranteed the funding of certain tax, insurance, and non-conforming property reserves related to the financing of one of our joint ventures.

We do not expect this guarantee to have a material current or future effect on our liquidity.

“Exhibits and Financial Statements — Note 5 of Notes to Consolidated Financial Statements” for additional information about our investments in unconsolidated joint ventures.

agreement such payments were not made.

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

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

fund shortfalls from consolidated cash flow;

If an event of default occurs for a specific mortgage loan or for our secured term loan, our loan agreements provide certain remedies, including our ability to fund shortfalls from consolidated cash flow;

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

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A timely liquidation of assets may not be a viable source of short-term liquidity should a cash flow shortfall arise, and we may need to source liquidity from other financing sources, such as the Revolving Facility, which had an undrawn balance of $1,000.0 million as of December 31, 2021.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the acquisition of, and non-recurring capital expenditures for, our homes and principal payments on our indebtedness.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the acquisition of, and non-recurring capital expenditures for, our homes, and principal and interest payments of our indebtedness.

We intend to satisfy our long-term liquidity needs through cash provided by operations, long-term secured and unsecured borrowings, the issuance of debt and equity securities, and property dispositions.

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Instead, we will need to meet these needs from external sources of capital and amounts, if any, by which our cash flow generated from operations exceeds taxable income.

On August 22, 2019, we entered into distribution agreements with a syndicate of banks (the “Agents”), pursuant to which we may sell, from time to time, up to an aggregate sales price of $800.0 million of our common stock through the Agents (the “ATM Equity Program”).

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

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

Certain Securitizations (defined below), the Secured Term Loan (defined below), the Term Loan Facility, and the Revolving Facility (collectively, the “LIBOR-Based Loans”) use LIBOR as a benchmark for establishing interest rates.

Our derivative instruments are also indexed to LIBOR.

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

Once LIBOR is phased out, the interest rates for our LIBOR-Based Loans will be based on a comparable or successor rate as provided for in our loan agreements.

We will work with the counterparties to our swap and cap agreements to adjust each floating rate to a comparable or successor rate.

While we do not expect that the transition from LIBOR and risks related thereto will have a material adverse effect on our financing costs, the ultimate outcome of this change is uncertain at this time, and significant management time and attention may be required to transition to using the new benchmark rates and to implement necessary changes to our financial models.

The following describes the key terms of our current indebtedness.

Contractual Obligations

Our contractual obligations as of December 31, 2021, consist of the following:

($ in thousands) Total 2022 2023-2024 2025-2026 Thereafter

Mortgage loans (1)(2)(3)

Our securitization transactions (the “Securitizations” or the “mortgage loans”) are collateralized by certain homes owned by wholly owned subsidiaries of INVH LP that were formed to facilitate certain of our financing arrangements (the “Borrower Entities”).

We utilize the proceeds from our securitizations to fund:

(i) repayments of then-outstanding indebtedness;

(ii) initial deposits into Securitization reserve accounts;

(iii) closing costs in connection with the mortgage loans;

and (iv) general costs associated with our operations.

The following table sets forth a summary of our mortgage loan indebtedness as of December 31, 2020 and 2019:

Outstanding Principal Balance (5)

($ in thousands) Maturity

Maturity Date if

Fully Extended (2)

Range of Spreads (4)

December 31, 2020 December 31, 2019

IH 2017-1 (6)

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

SWH 2017-1 (7)

December 9, 2020 N/A —% N/A — 744,092

IH 2017-2 (7)

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

IH 2018-1 (7)(8)

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

IH 2018-2 (7)

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

IH 2018-3 (7)

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

IH 2018-4 (7)(9)

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

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

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

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

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

For all other mortgage loans, the maturity dates above reflect all 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, 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 $2.3 million and $2.6 million as of December 31, 2020 and 2019, respectively.

(7) The initial maturity term of each of these mortgage loans is two years, individually subject to three to five, one year extension options at the Borrower Entity’s discretion (provided that there is no continuing event of default under the mortgage loan agreement and the Borrower Entity obtains and delivers a replacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender).

Our 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.

Securitization Transactions

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

Except for IH 2017-1, each outstanding mortgage loan originally consisted of six floating rate components.

The two year initial terms are individually subject to three to five, one year extension options at the Borrower Entity’s discretion.

Such extensions are available provided there is no continuing event of default under the respective mortgage loan agreement and the Borrower Entity obtains and delivers a replacement interest rate cap agreement from an approved counterparty within the required timeframe to the lender.

IH 2017-1 is a 10 year, fixed rate mortgage loan comprised of two components.

Certificates issued by the trust in connection with Component A of IH 2017-1 benefit from the Federal National Mortgage Association’s guaranty of timely payment of principal and interest.

Each mortgage loan is secured by a pledge of the equity in the assets of the respective Borrower Entities, as well as first-priority mortgages on the underlying properties and a grant of security interests in all of the related personal property.

As of December 31, 2020 and 2019, a total of 31,316 and 37,040 homes, respectively, with a net book value of $5,761.6 million and $7,137.6 million, respectively, are pledged pursuant to the mortgage loans.

Each Borrower Entity has the right, subject to certain requirements and limitations outlined in the respective loan agreements, to substitute properties.

We are obligated to make monthly payments of interest for each mortgage loan.

Transactions with 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.

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.

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 $245.2 million and $317.0 million 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.

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.

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 $1,434.6 million, $997.4 million, and $4,579.6 million, respectively, under the terms of the mortgage loan agreements.

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

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

During the year ended December 31, 2018, prepayments included full repayment of the CAH 2014-1, CAH 2014-2, CAH 2015-1, CSH 2016-1, IH 2015-1, IH 2015-2, and IH 2015-3 mortgage loans.

Secured Term Loan

On June 7, 2019, 2019-1 IH Borrower LP, a consolidated subsidiary (“2019-1 IH Borrower” and one of our Borrower Entities), entered into a 12 year loan agreement with a life insurance company (the “Secured Term Loan”).

The Secured Term Loan bears interest at a fixed rate of 3.59%, including applicable servicing fees, for the first 11 years and bears interest at a floating rate based on a spread of 147 bps, including applicable servicing fees, over one month LIBOR (subject to certain adjustments as outlined in the loan agreement) for the twelfth year.

The Secured Term Loan is secured by first priority mortgages on a portfolio of single-family rental properties as well as a first priority pledge of the equity interests of 2019-1 IH Borrower.

We utilized the proceeds from the Secured Term Loan to fund:

(i) repayments of then-outstanding indebtedness;

(ii) initial deposits into the Secured Term Loan’s reserve accounts;

(iii) transaction costs related to the closing of the Secured Term Loan;

and (iv) general corporate purposes.

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

($ in thousands) Maturity

December 31, 2020 December 31, 2019

$ 3,384,970 $ 66,627 $ 133,321 $ 2,170,927 $ 1,014,095

Secured Term Loan (1)(2)

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

Deferred financing costs, net

539,953 14,472 28,944 28,944 467,593

Secured Term Loan, net

Unsecured Notes (1)(2)

2,392,331 46,060 92,120 92,120 2,162,031

(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.

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

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

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.

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.

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 $0.1 million.

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 the Credit Facility.

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

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

The Credit Facility provides us with the option to enter into additional incremental credit facilities (including an uncommitted incremental facility that provides us with the option to increase the size of the Revolving Facility and/or the Term Loan Facility such that the aggregate amount does not exceed at any time $4,000.0 million), subject to certain limitations.

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

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

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

Proceeds from the Revolving Facility are used for general corporate purposes.

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

($ in thousands)

Date Interest

December 31, 2020 December 31, 2019

Term Loan Facility (1)(2)(3)

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

Deferred financing costs, net

2,614,102 27,914 55,904 2,530,284 —

Term Loan Facility, net

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

Revolving Facility (1)(2)(3)(4)

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 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.

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 $230.0 million in aggregate principal amount of 3.00% convertible senior notes due 2019 (the “2019 Convertible Notes”).

Interest on the 2019 Convertible Notes was payable semiannually in arrears on January 1st and July 1st of each year.

The notes matured on July 1, 2019, and we settled substantially all of the outstanding balance of the 2019 Convertible Notes through the issuance of 12,553,864 shares of our common stock.

In January 2017, SWH issued $345.0 million in aggregate principal amount of 3.50% convertible senior notes due 2022 (the “2022 Convertible Notes” and together with the 2019 Convertible Notes, the “Convertible Senior Notes”).

Interest on the 2022 Convertible Notes is payable semiannually in arrears on January 15th and July 15th of each year.

The 2022 Convertible Notes will mature on January 15, 2022.

The following table summarizes the terms of the Convertible Senior Notes outstanding as of December 31, 2020 and 2019:

Principal Amount

($ in thousands)

Remaining Amortization

December 31, 2020 December 31, 2019

8,289 2,028 4,061 2,200 —

2022 Convertible Notes (1)(2)(5)

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

Net unamortized fair value adjustment

143,966 143,966 — — —

Derivative instruments (6)

425,556 126,292 254,064 45,200 —

(1) Effective rate includes the effect of the adjustment to the fair value of the debt as of the Merger Date, the value of which reduced the initial liability recorded to $324.3 million for the 2022 Convertible Notes.

(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 $5.6 million and $11.1 million, respectively.

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 $103.5 million as of December 31, 2020 as the closing market price of our common stock of $29.70 per common share (actual $) exceeds the implicit conversion price.

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

General Terms

We may not redeem the 2022 Convertible Notes prior to their maturity date except to the extent necessary to preserve our status as a REIT for United States federal income tax purposes, as further described in the indenture.

If we undergo a fundamental change as defined in the indenture, holders may require us to repurchase for cash all or any portion of their 2022 Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

The indenture contains customary terms and covenants and events of default.

If an event of default occurs and is continuing, the Convertible Notes Trustee, by notice to us, or the holders of at least 25% in aggregate principal amount of the outstanding 2022 Convertible Notes, by notice to us and the Convertible Notes Trustee, may, and the Convertible Notes Trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest on all the 2022 Convertible Notes to be due and payable.

In the case of an event of default arising out of certain events of bankruptcy, insolvency or reorganization in respect to us (as set forth in the indenture), 100% of the principal of and accrued and unpaid interest on the 2022 Convertible Notes will automatically become due and payable.

Certain Hedging Arrangements

From time to time, we enter into derivative instruments to manage the economic risk of changes in interest rates.

We do not enter into derivative transactions for speculative or trading purposes.

Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges.

Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we did not elect to designate as hedges.

Designated Hedges

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 ($ in thousands):

Agreement Date Forward

Effective Date

Rate Index Notional

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

During the years ended December 31, 2020, 2019, and 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate interest payments.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt.

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

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

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

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

Non-Designated Hedges

Concurrent with entering into certain of the mortgage loan agreements and in connection with 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%.

Purchase commitments (7)

138,134 138,134 — — —

Operating leases 14,041 4,579 6,694 2,467 301

Finance leases 6,065 2,776 3,267 22 —

Total $ 9,667,407 $ 572,848 $ 578,375 $ 4,872,164 $ 3,644,020

(1) For detailed information about each of our financing arrangements and derivative instruments see Part IV.

“Exhibits and Financial Statements — Note 7 of Notes to Consolidated Financial Statements.”

(2) Includes estimated interest payments through the extended maturity date based on the principal amount outstanding as of December 31, 2021.

Interest is calculated at rates in effect as of such date;

for LIBOR based loans, the December 31, 2021 LIBOR, or 0.10%, is held constant until the maturity date.

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

“Exhibits and Financial Statements — Note 7 of Notes to Consolidated Financial Statements” for a description of maturity dates without consideration of extension options.

(4) Includes the related unused commitment fee.

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

The 2022 Convertible Notes principal amount of $141.5 million is included in 2022 maturities presented above.

On January 18, 2022, we settled the outstanding principal balance of the 2022 Convertible Notes with the issuance of 6,216,261 shares of our common stock and a cash payment of $0.3 million.

(6) Includes interest rate swap and interest rate cap obligations calculated using LIBOR as of December 31, 2021, or 0.10%.

(7) Represents commitments to acquire 360 single-family rental homes.

The amounts above do not include commitments pursuant to binding purchase agreements with certain homebuilders for the purchase of 1,357 homes over the next six years.

Estimated remaining commitments under these agreements total approximately $420.0 million as of December 31, 2021.

Additionally, we have a commitment, which is not reflected in the table above, to make additional capital contributions to our joint ventures.

As of December 31, 2021, our remaining equity commitments to the joint ventures total $244.4 million.

LIBOR Transition

Certain securitizations, the Secured Term Loan, the Term Loan Facility, and the Revolving Facility (collectively, the “LIBOR-Based Loans”) use the one month LIBOR as a benchmark for establishing interest rates.

Our derivative instruments are also indexed to one month LIBOR.

On March 5, 2021, the Financial Conduct Authority of the United Kingdom, which has statutory powers to require panel banks to contribute to LIBOR, announced that it would cease publication of the one week and two month USD LIBOR immediately after December 31, 2021 and cease publication of the remaining tenors immediately after June 30, 2023.

Once one month LIBOR is phased out after June 30, 2023, the interest rates for our LIBOR-Based Loans will be based on a comparable or successor rate as provided for in our loan agreements.

We will work with the counterparties to our swap and cap agreements to adjust each floating rate to a comparable or successor rate.

Supplemental Guarantor Information

In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities.

The amendments became effective on January 4, 2021.

INVH, INVH LP, the General Partner, and IH Merger Sub, LLC (“IH Merger Sub”) have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of INVH LP, fully and unconditionally guaranteed, on a joint and several basis, by INVH, the General Partner, and/or IH Merger Sub.

As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information.

Accordingly, separate consolidated financial statements of INVH LP, the General Partner, and IH Merger Sub have not been presented.

Furthermore, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial information for the INVH LP, the General Partner, and IH Merger Sub, because the combined assets, liabilities, and results of operations of INVH, INVH LP, the General Partner, and IH Merger Sub are not materially different than the corresponding amounts in our consolidated financial statements, and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

Purchase of Outstanding Debt Securities or Loans

As market conditions warrant, we, our equity investors, our and their respective affiliates, and members of our management, may from time to time seek to purchase our outstanding debt, including borrowings under our credit facility and mortgage loans or debt securities that we may issue in the future, in privately negotiated or open market transactions, by tender offer or otherwise.

Subject to any applicable limitations contained in the agreements governing our indebtedness, any purchases made by us may be funded by the use of cash on our consolidated balance sheet or the incurrence of new secured or unsecured debt, including borrowings under our credit facility and mortgage loans.

As market conditions warrant, we may from time to time seek to purchase our outstanding debt or debt securities that we may issue in the future, in privately negotiated or open market transactions, by tender offer or otherwise.

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

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The following table summarizes our cash flows for the years ended December 31, 2021 and 2020:

For the Years Ended December 31,

For the Years

Ended December 31,

($ in thousands) 2021 2020 $ Change % Change

Net cash provided by operating activities $ 907,660 $ 696,712 $ 210,948 30.3 %

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

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

Net cash used in investing activities (1,159,558) (425,156) (734,402) (172.7) %

Net cash provided by (used in) financing activities 658,988 (146,033) 805,021 551.3 %

Change in cash, cash equivalents, and restricted cash $ 407,090 $ 125,523 $ 281,567 224.3 %

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Net cash provided by operating activities was $907.7 million and $696.7 million for the years ended December 31, 2021 and 2020, respectively, an increase of 30.3%.

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

The increase in cash provided by operating activities was driven by improved operational profitability, including an $148.2 million increase in total revenues net of property operating and maintenance expense from period to period and a net $70.8 million source of cash from an increase in changes in operating assets and liabilities.

Investing Activities

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

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

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

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

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

Net cash used in investing activities consists primarily of the acquisition costs of homes, capital improvements, proceeds from property sales, and investments in our joint ventures.

Net cash used in investing activities was $1,159.6 million and $425.2 million for the years ended December 31, 2021 and 2020, respectively, an increase of $734.4 million.

The increase in net cash used in investing activities resulted primarily from the combined effect of the following significant changes in cash flows during the year ended December 31, 2021 compared to the year ended December 31, 2020:

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

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

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

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

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

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

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

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

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

(3) an increase in amounts deposited and held by others for acquisitions of homes;

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

More specifically, acquisition spend increased $505.1 million due to an increase in the number of homes acquired from 2,252 during the year ended December 31, 2020 to 2,938 homes acquired during the year ended December 31, 2021 and an increase in average cost per home.

Proceeds from sales of homes decreased $183.3 million from the year ended December 31, 2020 to the year ended December 31, 2021 due to a significant decrease in the number of homes sold from 1,580 to 734, respectively, partially offset by an increase in proceeds per home.

Cash deposited and held by others increased $59.2 million due to increased deposits made to homebuilders for the acquisition of new-build single-family residential properties.

Investments in joint ventures increased $48.7 million due to increased contributions to our joint ventures during year ended December 31, 2021 compared to the year ended December 31, 2020.

Financing Activities

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

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

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

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

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

For the year ended December 31, 2019, proceeds from our Secured Term Loan of $403.5 million, proceeds from our ATM Equity Program of $55.3 million, along with proceeds from home sales and operating cash flows, were used (1) to repay $997.4 million of our mortgage loans, including full repayment of CSH 2016-2 and partial repayments of IH 2017-2, IH 2018-1, IH 2018-2, and IH 2018-3;

Net cash provided by (used in) financing activities was $659.0 million and $(146.0) million for the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, we received $1,938.0 million of net proceeds from the issuance and sale of unsecured notes which were used to repay $1,766.9 million of principal on our mortgage loans, including full repayment of IH 2017-2 and partial repayments of IH 2018-1, IH 2018-2, IH 2018-3, and IH 2018-4.

Issuances and sales of stock under our terminated 2019 ATM Equity Program and the 2021 Public Offering generated $933.8 million of net proceeds during the year ended December 31, 2021.

During that period, we also made $395.9 million of dividend and distribution payments.

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

(2) to repay $1,434.6 million of our mortgage loans, including full

repayment of SWH 2017-1 and partial repayments of IH 2018-1, IH 2018-2, IH 2018-3, and IH 2018-4;

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

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 10-K .

Contractual Obligations

Our contractual obligations as of December 31, 2020, consist of the following:

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

Mortgage loans, net (1)(2)

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

Secured Term Loan (1)

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

Term Loan Facility, net (1)

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

Revolving Facility (1)(2)(3)

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

2022 Convertible Notes (4)

363,113 12,075 351,038 — —

Derivative instruments (5)

590,270 134,183 274,838 181,249 —

Purchase commitments (6)

30,894 30,894 — — —

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

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

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

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

as of December 31, 2020, LIBOR was 0.14%.

(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.

“Exhibits and Financial Statement Schedules — Note 7 of Notes to Consolidated Financial Statements” for a description of maturity dates without consideration of extension options.

(3) Includes the related unused commitment fee.

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

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

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

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

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

Critical Accounting Policies and Estimates

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Investments in Single-Family Residential Properties

The following significant accounting policies affect the acquisition, disposition, recognition, classification, and fair value measurements (on a nonrecurring basis) related to our portfolio of over 80,000 single-family residential properties in 16 markets across the United States .

The following significant accounting policies affect the acquisition, disposition, recognition, classification, and fair value measurements (on a nonrecurring basis) related to our portfolio of over 80,000 single-family residentia l properties in 16 markets across the United States.

For a complete discussion of our accounting policy and other factors related to each category below, see Part IV.

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For asset acquisitions, homes are recorded at their purchase price, which is allocated between land, building and improvements, and in-place lease intangibles (when a resident is in place at the acquisition date) based upon their relative fair values at the date of acquisition.

The purchase price for purposes

of this allocation is inclusive of acquisition costs which typically include legal fees, bidding service and title fees, payments made to cure tax, utility, HOA, and other mechanic’s and miscellaneous liens, as well as other closing costs.

The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, bidding service and title fees, payments made to cure tax, utility, HOA, and other mechanic’s and miscellaneous liens, as well as other closing costs.

The attributes and location of each home acquired are considered at the individual home level when determining the percentage of purchase price allocated to building and improvements versus land.

As such, these allocation percentages vary based on the homes acquired during each reporting period.

If the percentage allocated to buildings and improvements versus land for the homes acquired during the year ended December 31, 2021 was increased or decreased by 500 bps, our annualized depreciation expense would have changed by approximately $2.0 million.

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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 and for certain furniture and fixtures additions.

The capitalized costs are depreciated over their estimated useful lives on a straight-line basis.

The capitalized costs are depreciated on a straight-line basis over their estimated useful lives, which are reviewed on an annual basis.

The weighted average useful lives range from 7 years to 28.5 years.

There have not been any significant changes in our estimate of useful lives during the current reporting period.

If the useful lives for costs capitalized during the year ended December 31, 2021 were increased or decreased by 10%, our annualized depreciation expense would have changed by approximately $6.0 million.

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We evaluate multiple information sources and perform a number of internal analyses, each of which are important components of our process with no one information source or analysis being necessarily determinative.

For those homes for which a change in an event or circumstance was identified in the most recent impairment analysis, a 5% change in the estimated fair value of those homes may have resulted in an increase in impairment expense of less than $0.1 million.

There have not been any significant process changes in our review for impairment during the current reporting period.

For those homes for which a change in an event or circumstance was identified in the most recent impairment analysis, a 10% decrease in the estimated fair value of those homes may have resulted in an increase in impairment expense of approximately $0.3 million.

• Single-Family Residential Properties Held for Sale:

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Once we identify a property to be sold pursuant to GAAP requirements, we cease depreciating the property, measure the property at the lower of its carrying amount or its fair value less estimated costs to sell, and present the property separately within other assets, net on our consolidated balance sheets.

As of December 31, 2021, 80 homes, less than 0.1% of our portfolio, were held for sale, compared to 179 homes as of December 31, 2020.

If market values less disposal costs for our properties that were classified as held for sale as of December 31, 2021 were 10% lower, our impairment expense related to those properties would have increased by approximately $0.3 million.

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

If the market values less disposal costs were 10% higher, our impairment expense would not have changed.

Segment Reporting

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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.

Decisions regarding acquisitions and dispositions of homes are made at the individual home level with a focus on accretive growth in high-growth locations where we have greater scale and density.

Non-GAAP Measures

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income tax expense;

and depreciation and amortization.

depreciation and amortization;

and adjustments for unconsolidated joint ventures.

The National Association of Real Estate Investment Trusts (“Nareit”) recommends as a best practice that REITs that report an EBITDA performance measure also report EBITDA re .

We define EBITDA re , consistent with the Nareit definition, as EBITDA, further adjusted for gain on sale of property, net of tax and impairment on depreciated real estate investments.

Consistent with the Nareit definition, we define EBITDA re as EBITDA, further adjusted for the following:

gain on sale of property, net of tax;

impairment on depreciated real estate investments;

and adjustments for unconsolidated joint ventures.

Adjusted EBITDA re is defined as EBITDA re before the following items:

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casualty (gains) losses, net;

unrealized gains on investments in equity securities;

(gains) losses on investments in equity securities, net;

and other income and expenses.

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Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies.

The following table presents a reconciliation of net income (loss) (as determined in accordance with GAAP) to EBITDA, EBITDA re , and Adjusted EBITDA re for each of the periods indicated:

The following table presents a reconciliation of net income (as determined in accordance with GAAP) to EBITDA, EBITDA re , and Adjusted EBITDA re for each of the periods indicated:

For the Years Ended December 31,

($ in thousands) 2021 2020 2019

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

Net income available to common stockholders $ 261,098 $ 195,764 $ 145,068

Net income available to participating securities 327 448 395

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Interest expense 322,661 353,923 367,173

Interest expense in unconsolidated joint ventures 1,209 — —

Depreciation and amortization 592,135 552,530 533,719

Depreciation and amortization of investments in unconsolidated joint ventures

EBITDA 1,180,085 1,103,902 1,048,003

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Impairment on depreciated real estate investments 650 4,578 14,210

Net gain on sale of investments in unconsolidated joint ventures (1,050) — —

1,119,677 1,053,886 965,877

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Merger and transaction-related expenses (2)

— 4,347 16,895

Severance 1,057 601 8,465

Casualty (gains) losses, net 8,026 (3,882) 4,533

(3,882) 4,533 14,110

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

(Gains) losses on investments in equity securities, net 9,420 (29,723) (6,480)

Other, net (3)

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(2) Includes merger and transaction-related expenses included within general and administrative.

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

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

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

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NOI is a non-GAAP measure often used to evaluate the performance of real estate companies.

We define NOI for an identified population of homes as rental revenues and other property income less property operating and maintenance expense (which consists primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel expenses, repairs and maintenance, leasing costs, and marketing expense).

We define NOI for an identified population of homes as rental revenues and other property income less property operating and maintenance expense (which consists primarily of property taxes, insurance, HOA fees (when applicable), market-level personnel expenses, utility expenses, repairs and maintenance, and property administration).

NOI excludes:

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gain on sale of property, net of tax;

unrealized gains on investments in equity securities;

and other income and expenses.

(gains) losses on investments in equity securities, net;

other income and expenses;

joint venture management fees;

and income (loss) from investments in unconsolidated joint ventures.

We consider NOI to be a meaningful supplemental financial measure of our performance when considered with the financial statements determined in accordance with GAAP.

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We believe that Same Store NOI is also a meaningful supplemental measure of our operating performance for the same reasons as NOI and is further helpful to investors as it provides a more consistent measurement of our performance across reporting periods by reflecting NOI for homes in our Same Store portfolio.

The following table presents a reconciliation of net income (loss) (as determined in accordance with GAAP) to NOI for our total portfolio and NOI for our Same Store portfolio for each of the periods indicated:

The following table presents a reconciliation of net income (as determined in accordance with GAAP) to NOI for our total portfolio and NOI for our Same Store portfolio for each of the periods indicated:

For the Years Ended December 31,

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2021 2020 2019

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

Net income available to common stockholders $ 261,098 $ 195,764 $ 145,068

Net income available to participating securities 327 448 395

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Impairment and other 8,676 696 18,743

696 18,743 20,819

Gain on sale of property, net of tax (60,008) (54,594) (96,336)

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

(Gains) losses on investments in equity securities, net 9,420 (29,723) (6,480)

Other, net (3)

5,835 86 (5,120)

Joint venture management fees (4,893) — —

(Income) loss from investments in unconsolidated joint ventures 1,546 — —

NOI (total portfolio)

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(2) Includes $21,743, $13,579, and $15,083 of share-based compensation expense for the years ended December 31, 2021, 2020, and 2019, respectively.

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

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

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

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Funds From Operations (“FFO”), Core FFO, and Adjusted FFO are supplemental, non-GAAP measures often utilized to evaluate the performance of real estate companies.

FFO is defined by Nareit as net income or loss (computed in accordance with GAAP) excluding gains or losses from sales of previously depreciated real estate assets, plus depreciation, amortization and impairment of real estate assets, and adjustments for unconsolidated partnerships and joint ventures.

We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization.

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share-based compensation expense;

offering related expenses;

merger and transaction-related expenses;

severance expense;

unrealized gains on investments in equity securities;

and casualty (gains) losses, net, as applicable.

We define Adjusted FFO as Core FFO less recurring capital expenditures that are necessary to help preserve the value, and maintain the functionality, of our homes.

merger and transaction-related expense;

casualty (gains) losses, net;

and (gains) losses on investments in equity securities, net, as applicable.

We define Adjusted FFO as Core FFO less recurring capital expenditures, including adjustments for unconsolidated joint ventures, that are necessary to help preserve the value, and maintain the functionality, of our homes.

The GAAP measure most directly comparable to Core FFO and Adjusted FFO is net income or loss.

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Accordingly, there can be no assurance that our basis for computing this non-GAAP measures is comparable with that of other companies.

The following table presents a reconciliation of net income (loss) (as determined in accordance with GAAP) to FFO, Core FFO, and Adjusted FFO for each of the periods indicated:

The following table presents a reconciliation of net income (as determined in accordance with GAAP) to FFO, Core FFO, and Adjusted FFO for each of the periods indicated:

For the Years Ended December 31,

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2021 2020 2019

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

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

Net income available to common stockholders $ 261,098 $ 195,764 $ 145,068

Add (deduct) adjustments from net income to derive FFO:

Net income available to participating securities

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Net gain on sale of previously depreciated investments in real estate (60,008) (54,594) (96,336)

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

Depreciation and net gain on sale of investments in unconsolidated joint ventures 254 — —

788,773 693,852 594,190

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

Non-cash interest expense related to amortization of deferred financing costs, loan discounts, and non-cash interest expense from derivatives, including our share from unconsolidated joint ventures 34,520 40,415 48,515

Share-based compensation expense (1)

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Merger and transaction-related expenses (3)

— 4,347 22,962

Severance expense 1,057 601 8,465

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

Casualty (gains) losses, net 8,026 (3,882) 4,533

(3,882) 4,533 14,110

(Gains) losses on investments in equity securities, net 9,420 (29,723) (6,480)

868,966 718,353 673,995

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

Recurring capital expenditures, including our share from unconsolidated joint ventures (123,405) (115,951) (118,988)

$ 745,561 $ 602,402 $ 555,007

Net income (loss) available to common stockholders

Net income available to common stockholders

Weighted average common shares outstanding — diluted (4)(5)(6)

579,209,523 555,458,607 532,499,787

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

Net income per common share — diluted (4)(5)(6)

$ 0.45 $ 0.35 $ 0.27

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(3) Includes merger and transaction-related expenses included within general and administrative.

Additionally, for the year ended December 31, 2018, includes accelerated depreciation and amortization of certain corporate assets included in depreciation and amortization.

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

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

(4) On July 1, 2019, we settled the full outstanding balance of the 2019 Convertible Notes with the issuance of 12,553,864 shares of common stock, and these shares of common stock are included within all net income (loss), FFO, Core FFO, and AFFO per common share calculations subsequent to that date.

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

For the years ended December 31, 2019 and 2018, the numerator for FFO per common share — diluted is adjusted for $5,586 and $11,057, respectively, of interest expense on the 2019 Convertible Notes, including non-cash amortization of discounts.

For the years ended December 31, 2019 and 2018, the denominator is adjusted for 6,225,341 and 12,420,013, respectively, potential shares of common stock for the 2019 Convertible Notes for the period prior to conversion.

For the year ended December 31, 2019, the numerator for FFO per common share — diluted is adjusted for $5,586 of interest expense on the 2019 Convertible Notes, including non-cash amortization of discounts.

For the year ended December 31, 2019, the denominator is adjusted for 6,225,341 potential shares of common stock for the 2019 Convertible Notes for the period prior to conversion.

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

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

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

For the years ended December 31, 2019 and 2018, 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes are excluded from the computation of net income or loss and FFO per common share — diluted as they are anti-dilutive, and are excluded from Core FFO and AFFO per common share — diluted.

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

For the year ended December 31, 2018, we had a net loss, and inclusion of incremental shares attributed to non-vested share-based awards would be anti-dilutive to net loss per common share — diluted.

With respect to the 2022 Convertible Notes, during the year ended December 31, 2021, at the election of the note holders, we settled $203,510 of principal outstanding for the 2022 Convertible Notes with the issuance of 8,943,374 shares of common stock.

These issued shares of common stock are included within all net income, FFO, Core FFO, and AFFO per common share calculations subsequent to the conversion date.

For the years ended December 31, 2021 and 2020, the numerator for FFO per common share — diluted is adjusted for interest expense on the 2022 Convertible Notes, including non-cash amortization of discounts, totaling $14,364 and $17,181, respectively, and the denominator is adjusted for 11,293,203 and 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes, respectively.

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

For the year ended December 31, 2019, 15,100,443 potential shares of common stock issuable upon the conversion of the 2022 Convertible Notes are excluded from the computation of net income or loss and FFO per common share — diluted as they are anti-dilutive, and are excluded from Core FFO and AFFO per common share — diluted.

(5) Incremental shares attributed to non-vested share-based awards totaling 1,528,453, 1,465,286, and 1,263,825 for the years ended December 31, 2021, 2020, and 2019, respectively, are included in weighted average common shares outstanding in the calculation of net income per common share — diluted.

For the computations of FFO, Core FFO, and AFFO per common share — diluted, common share equivalents of 1,822,015, 1,851,297, and 1,748,787 for the years ended December 31, 2021, 2020, and 2019, respectively, related to incremental shares attributed to non-vested share-based awards are included in the denominator.

(7) Vested units of partnership interests in INVH LP (“OP Units”) have been excluded from the computation of net income (loss) per common share — diluted for the periods above because all net income (loss) attributable to the vested OP Units has been recorded as non-controlling interest and thus excluded from net income (loss) available to common stockholders.

(6) Vested units of partnership interests in INVH LP (“OP Units”) have been excluded from the computation of net income per common share — diluted for the periods above because all net income attributable to the vested OP Units has been recorded as non-controlling interest and thus excluded from net income available to common stockholders.

Weighted average vested OP Units of 2,939,381, 3,463,285, and 5,940,757 for the years ended December 31, 2021, 2020, and 2019, respectively, are included in the denominator for the computations of FFO, Core FFO, and AFFO per common share — diluted.

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What changed 10-K

Item 7. Management’s Discussion and Analysis