Toggle SGML Header (+)


Section 1: 10-K (10-K)

sfr-10k_20151231.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-K

 

 

(Mark One)

þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission file number 001- 36163

 

 

Colony Starwood Homes

(Exact name of registrant as specified in its charter)

 

 

Maryland

 

80-6260391

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

8665 East Hartford Drive

Scottsdale, AZ

 

85255

(Address of principal executive offices)

 

(Zip Code)

 

(480) 362-9760

(Registrant’s telephone number, including area code)

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

 

Title of Each Class

 

Name of Each Exchange on Which Registered

Common Share, $0.01 par value

 

New York Stock Exchange

 

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  þ   No  o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes  o   No  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  þ    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  þ    No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

Large accelerated filer

 

þ

 

Accelerated filer

 

o

 

 

 

 

 

 

 

Non-accelerated filer

 

o  (Do not check if a smaller reporting company)

 

Smaller reporting company

 

o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  o   No  þ

As of June 30, 2015, the aggregate market value of the voting shares held by non-affiliates was $882.3 million based on the last reported sales price of our common shares on the New York Stock Exchange on June 30, 2015.

As of February 25, 2016, there were 101,517,567 of the registrant’s common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Documents Incorporated By Reference: The information required by Part III of this Annual Report on Form 10-K, to the extent not set forth herein or by amendment, is incorporated by reference from the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A on or prior to April 30, 2016.

 

 

 

 


TABLE OF CONTENTS

 

 

 

Page

Part I

 

 

Item 1. Business

 

1

Item 1A. Risk Factors

 

13

Item 1B. Unresolved Staff Comments

 

43

Item 2. Properties

 

43

Item 3. Legal Proceedings

 

44

Item 4. Mine Safety Disclosures

 

44

Part II

 

 

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

 

45

Item 6. Selected Financial Data

 

47

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

49

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

74

Item 8. Financial Statements and Supplementary Data

 

76

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

115

Item 9A. Controls and Procedures

 

115

Item 9B. Other Information

 

115

Part III

 

 

Item 10. Directors, Executive Officers and Corporate Governance

 

116

Item 11. Executive Compensation

 

116

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

 

116

Item 13. Certain Relationships and Related Transactions, and Trustee Independence

 

116

Item 14. Principal Accountant Fees and Services

 

116

Part IV

 

 

Item 15. Exhibits, Financial Statement Schedules

 

117

Signatures

 

120

 

i


CAUTIONARY STATEMENTS

Except where the context suggests otherwise, the terms “company,” “we,” “us,” and “our” refer to Colony Starwood Homes (formerly Starwood Waypoint Residential Trust (“SWAY”)), a Maryland real estate investment trust, together with its consolidated subsidiaries, including Colony Starwood Partnership, L.P. (formerly Starwood Waypoint Residential Partnership, L.P.), a Delaware limited partnership through which we conduct substantially all of our business, which we refer to as “our operating partnership”; the term “CAH” refers to Colony American Homes, Inc.; the term “the Manager” refers to SWAY Management LLC, a Delaware limited liability company, our former external manager; the term “SPT” refers to Starwood Property Trust, Inc., our parent company prior to the Separation (as defined below); the term “Starwood Capital Group” refers to Starwood Capital Group Global, L.P. (and its predecessors), together with all of its affiliates and subsidiaries, including the Manager, other than us; the term “Colony Capital” refers to Colony Capital, Inc. (and its predecessors), together with all of its affiliates and subsidiaries; the term “Waypoint Manager” refers to Waypoint Real Estate Group HoldCo, LLC (and its predecessors), together with all affiliates and subsidiaries; and the term “Waypoint Legacy Funds” refers to DC Real Estate Fund II, LP, Wiel Brien Fund III, LP, Wiel Brien Fund IV, LP, Wiel Brien Fund IV-A, LP, Wiel Brien SCFF Fund I, LP, Waypoint Fund I, LP, Waypoint Fund I-A, LP, Waypoint Fund II-A, LP, Waypoint/GI Venture, LLC and DC Real Estate Group, LLC.

Forward-Looking Statements

This Annual Report on Form 10-K contains, in addition to historical information, certain forward-looking statements that involve significant risks and uncertainties, which are difficult to predict, and are not guarantees of future performance. Such statements can generally be identified by words such as “anticipates,” “expects,” “intends,” “will,” “could,” “believes,” “estimates,” “continue,” and similar expressions. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on certain assumptions and discuss future expectations, describe future plans and strategies, and contain financial and operating projections or state other forward-looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in, or implied by, the forward-looking statements. Factors that could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects, as well as our ability to make distributions to our shareholders, include, but are not limited to:

 

·

the factors referenced in this Annual Report on Form 10-K, including those set forth in Item 1A. Risk Factors;

 

·

failure to plan and manage the internalization (the “Internalization”) of the Manager or the merger (the “Merger”) with CAH effectively and efficiently under the Contribution Agreement dated as of September 21, 2015 as amended, among us, our operating partnership, the Manager and Starwood Capital Group (the “Contribution Agreement”), or the Agreement and Plan of Merger dated as of September 21, 2015, among us, and certain of our subsidiaries and CAH and certain of its subsidiaries and certain investors in CAH (the “Merger Agreement”);

 

·

the possibility that the anticipated benefits from the Internalization or the Merger may not be realized or may take longer to realize than expected;

 

·

unexpected costs or unexpected liabilities that may arise from the transactions contemplated by the Contribution Agreement or the Merger Agreement;

 

·

the outcome of any legal proceedings that have been or may be instituted against us, CAH or others following the announcement or the completion of the Internalization or the Merger;

 

·

expectations regarding the timing of generating additional revenues;

 

·

changes in our business and growth strategies;

 

·

volatility in the real estate industry, interest rates and spreads, the debt or equity markets, the economy generally or the rental home market specifically, whether the result of market events or otherwise;

 

·

events or circumstances that undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large financial institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts;

 

·

declines in the value of homes, and macroeconomic shifts in demand for, and competition in the supply of, rental homes;

ii


 

·

the availability of attractive investment opportunities in homes that satisfy our investment objective and business and growth strategies;

 

·

the impact of changes to the supply of, value of and the returns on distressed and non-performing residential mortgage loans (“NPLs”);

 

·

our ability to convert the homes and NPLs we acquire into rental homes generating attractive returns;

 

·

our ability to successfully modify or otherwise resolve NPLs;

 

·

our ability to lease or re-lease our rental homes to qualified residents on attractive terms or at all;

 

·

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

 

·

our ability to effectively manage our portfolio of rental homes;

 

·

the concentration of credit risks to which we are exposed;

 

·

the rates of default or decreased recovery rates on our target assets;

 

·

the availability, terms and deployment of short-term and long-term capital;

 

·

the adequacy of our cash reserves and working capital;

 

·

potential conflicts of interest with Starwood Capital Group, Colony Capital, Inc. (“Colony Capital”) and their affiliates;

 

·

the timing of cash flows, if any, from our investments;

 

·

unanticipated increases in financing and other costs, including a rise in interest rates;

 

·

our expected leverage;

 

·

effects of derivative and hedging transactions;

 

·

our ability to maintain our exemption from registration as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”);

 

·

actions and initiatives of the U.S. government and changes to U.S. government policies that impact the economy generally and, more specifically, the housing and rental markets;

 

·

changes in governmental regulations, tax laws (including changes to laws governing the taxation of real estate investment trusts (“REITs”)) and rates, and similar matters;

 

·

limitations imposed on our business and our ability to satisfy complex rules in order for us and, if applicable, certain of our subsidiaries to qualify as a REIT for U.S. federal income tax purposes and the ability of certain of our subsidiaries to qualify as taxable REIT subsidiaries (“TRSs”) for U.S. federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules; and

 

·

estimates relating to our ability to make distributions to our shareholders in the future.

When considering forward-looking statements, keep in mind the risk factors and other cautionary statements in this Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Annual Report on Form 10-K. Our actual results and performance may differ materially from those set forth in, or implied by, our forward-looking statements. Accordingly, we cannot guarantee future results or performance. Furthermore, except as required by law, we are under no duty to, and we do not intend to, update any of our forward-looking statements after the date of this Annual Report on Form 10-K, whether as a result of new information, future events or otherwise.

Merger and Internalization

On September 21, 2015, we and CAH announced the signing of the Merger Agreement to combine the two companies in a stock-for-stock transaction.  In connection with the transaction, we internalized the Manager. The Merger and the Internalization were completed on January 5, 2016. We now own and manage over 30,000 homes and have an aggregate asset value of over $7.0 billion at the closing of the transaction.

Under the Merger Agreement, CAH shareholders received an aggregate of 64,869,526 of our common shares in exchange for all shares of CAH. Upon completion of the transaction, our existing shareholders and the former owner of the Manager owned approximately 41% of our common shares, while former CAH shareholders owned approximately 59% of our common shares. The

iii


share allocation was determined based on each company’s net asset value. The terms of the Internalization were negotiated and approved by a special committee of our board of trustees. Upon the closing of the Internalization and the Merger, we changed our name to Colony Starwood Homes and our common shares are listed and traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “SFR.”  

Since both SWAY and CAH have significant pre-combination activities, the Merger will be accounted for as a business combination by the combined company in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805. Based upon consideration of a number of factors (see Item 8. Financial Statements and Supplementary Data, Note 14 – Subsequent Events included in this Annual Report on From 10-K for discussion of these factors and the accounting treatment of the Merger), although SWAY is the legal acquirer in the Merger, CAH has been designated as the accounting acquirer, resulting in a reverse acquisition of SWAY for accounting purposes.

Subsequent to the Internalization and the Merger, we own all material assets and intellectual property rights of the Manager and are managed by certain of the officers and employees who formerly managed our business through the Manager and certain of the officers and employees of CAH. The net effect is that, following the Internalization and the Merger, we have the benefit of being internally managed by both (1) officers and employees who formerly managed our business and who have industry expertise, management capabilities and a unique knowledge of our assets and business strategies and (2) officers and employees who managed CAH’s business and who have industry expertise, management capabilities and a unique knowledge of CAH’s assets and business strategies. In addition, we believe that we will combine the best aspects of our and CAH’s sophisticated proprietary technology platforms and retain the best employees from each company.

The historical consolidated financial statements included herein represent only our pre-Internalization and pre-Merger consolidated financial position, results of operations, other comprehensive income and cash flows. As such, the financial statements included herein do not reflect our results of operations, other comprehensive income and cash flows in the future or what our results of operations, other comprehensive income and cash flows would have been had our management been internalized or had we been merged with CAH during the historical periods presented. In addition to the financial statements included herein, you should read and consider the CAH financial statements, pro forma financial statements and notes thereto that we file with the Securities and Exchange Commission (“SEC”).

 

 

 

iv


PART I

 

 

Item 1.  Business.

Our Company

We are an internally managed Maryland real estate investment trust formed in May 2012 primarily to acquire, renovate, lease and manage residential assets in select markets throughout the United States. Our objective is to generate attractive risk-adjusted returns for our shareholders over the long-term through dividends and capital appreciation. Our primary strategy is to acquire single-family rental (“SFR”) homes through a variety of channels, renovate these homes to the extent necessary and lease them to qualified residents. We seek to take advantage of the macroeconomic trends in favor of leasing homes by acquiring, owning, renovating and managing homes that we believe will (1) generate substantial current rental revenue, which we expect to grow over time, and (2) appreciate in value over the next several years. In addition, we have a portfolio of NPLs which we may seek to (1) modify and hold or resell at higher prices if circumstances warrant, thus providing additional liquidity or (2) convert into homes through the foreclosure or other resolution process that can then either be contributed to our rental portfolio or sold.

When pursuing home acquisitions, we focus on markets that we believe present the greatest opportunities for home price appreciation, that have strong rental demand and where we can attain property operating efficiencies as a result of geographic concentration of assets in our portfolio. We identify and pursue individual home acquisition opportunities through a number of sources, including multiple listing services (“MLS”) listings, foreclosure auctions and short sales. In addition, we may opportunistically identify and pursue bulk portfolios of homes from banks, mortgage servicers, other SFR companies, government sponsored enterprises, private investors and other financial institutions. We believe favorable prevailing home prices provide us with a substantial market opportunity to acquire residential assets that may generate attractive risk-adjusted returns.

We were organized as a Maryland corporation in May 2012 as a wholly-owned subsidiary of SPT. Subsequently, we changed our corporate form from a Maryland corporation to a Maryland real estate investment trust and our name from Starwood Residential Properties, Inc. to Starwood Waypoint Residential Trust. We were formed by SPT to own homes and NPLs. On January 31, 2014, SPT completed the spin-off of us to its stockholders (the “Separation”). On January 5, 2016, we completed the Internalization of the Manager and the Merger and changed our name to Colony Starwood Homes.

Our operating partnership was formed as a Delaware limited partnership in May 2012. Our wholly-owned subsidiary is the sole general partner of our operating partnership, and we conduct substantially all of our business through our operating partnership. We own 94.2% of the operating partnership units in our operating partnership (“OP units”).

We intend to operate and to be taxed as a REIT for U.S. federal income tax purposes. We generally will not be subject to U.S. federal income taxes on our REIT taxable income to the extent that we annually distribute all of our REIT taxable income to shareholders and qualify and maintain our qualification as a REIT.

Prior to the Separation, the historical consolidated financial statements were derived from the consolidated financial statements and accounting records of SPT principally representing the single-family segment, using the historical results of operations and historical basis of assets and liabilities of our businesses. The historical consolidated financial statements also include allocations of certain of SPT’s general corporate expenses. Management believes the assumptions and methodologies underlying the allocation of general corporate expenses to the historical results of operations were reasonable. However, such expenses may not be indicative of the actual level of expenses that would have been incurred by us if we had operated as an independent, publicly traded company or of the costs expected to be incurred in the future. As such, the results of operations prior to the Separation, included herein, may not necessarily reflect our results of operations, financial position or cash flows in the future or what our results of operations, financial position or cash flows would have been had we been an independent, publicly traded company during the historical periods presented. Transactions between the single-family business segment and other business segments of SPT’s businesses have been identified in the historical consolidated financial statements as transactions between related parties for periods prior to the Separation.

The Manager

Prior to the Internalization, we were externally managed and advised by the Manager pursuant to the terms of a management agreement (the “Management Agreement”). The Manager was an affiliate of Starwood Capital Group, a privately-held private equity firm founded and controlled by Barry Sternlicht, our Co-Chairman. Starwood Capital Group has invested in most major classes of real estate, directly and indirectly, through operating companies, portfolios of properties and single assets, including multi-family, office, retail, hotel, residential entitled land and communities, senior housing, mixed use and golf courses. Starwood Capital Group invests at different levels of the capital structure, including equity, preferred equity, mezzanine debt and senior debt, depending on the asset risk profile and return expectation.

1


The Manager drew upon the experience and expertise of Starwood Capital Group’s team of professionals and support personnel. The Manager also benefited from Starwood Capital Group’s asset management, portfolio management and finance functions, which address legal, compliance, investor relations and operational matters, asset valuation, risk management and information technologies, in connection with the performance of the Manager’s duties.

Starwood Capital Group has agreed that, through the first anniversary of the Internalization, it will not compete with us or solicit our employees, subject to certain exceptions as set forth in the Contribution Agreement.

On January 31, 2014, the Manager acquired the Waypoint platform, which is an advanced, technology driven operating platform that provided the backbone for deal sourcing, property underwriting, acquisitions, asset protection, renovations, marketing and leasing, repairs and maintenance, portfolio reporting and property management of homes. In connection with such acquisition, the Waypoint Manager agreed that the Waypoint Legacy Funds will not acquire additional homes and will not acquire single-family NPLs, subject to certain limited exceptions.

As of December 31, 2015, the Manager maintained 21 regional offices and resident service centers. The regional offices house the Manager’s regional officers, local acquisitions and construction teams, and, if applicable, the Manager’s local marketing and leasing, property management and repairs and maintenance teams. The resident service centers serve as localized customer-facing offices aimed at ensuring resident satisfaction and retention, as well as to integrate all local operations. Upon the completion of the Merger and the Internalization, we maintained 41 regional offices and resident service centers.

Proprietary Technology

We believe that achieving consistent operational excellence is crucial to the success of acquiring, renovating, leasing and managing a geographically dispersed portfolio of homes. The backbone of our operations is formed by a proprietary property management platform that has been continually refined and enhanced, including combining the advanced technologies of both ours and CAH’s advanced technology platforms. Our proprietary property management platform is built on a cloud-based operating platform powered by leading technology companies, which provides us with the ability to achieve scalability, security and redundancy in a cost-effective manner.

Our platform enables us to have real-time oversight of all aspects of our business, while maintaining the flexibility to evolve quickly as our business grows and additional functionality is needed. Managers, field personnel and technologists work together to continually define and automate business processes based on the latest data-driven analyses as well as to upgrade existing features and generate new applications.

Our Portfolio

As of December 31, 2015, our portfolio consisted of 16,772 owned homes and homes underlying NPLs, including (1) 14,099 homes and (2) 2,673 homes underlying 2,736 NPLs, of which 2,539 represent first liens and 197 NPLs represent second, third, and unsecured liens. As of December 31, 2015, the 2,539 of first lien NPLs had an unpaid principal balance (“UPB”) of $568.8 million, a total purchase price of $372.1 million and were secured by liens on 2,481 homes and 58 parcels of land with a total broker price opinion (“BPO”) value of $581.2 million. As of December 31, 2015, our homes that were owned by us for 180 days or longer were approximately 94.1% leased.

After giving effect to the Merger, as of December 31, 2015, our combined portfolio consisted of 34,674 owned homes and homes underlying NPLs.

Segment Reporting

We currently operate in two reportable segments. Our primary strategy is to acquire SFR homes through a variety of channels, renovate these homes to the extent necessary and lease them to qualified residents. In addition, we have a portfolio of NPLs which we may seek to (1) modify and hold or resell at higher prices if circumstances warrant, thus providing additional liquidity or (2) convert into homes through the foreclosure or other resolution process that can then either be contributed to our rental  portfolio or sold.  Prior to the Separation, we reported in only one segment. After the Separation, the chief decision maker changed from SPT’s chief executive officer to our Chief Executive Officer who views our NPL activities as a separate segment of our business. In connection with our change in reportable segments, we created revenue line items in our consolidated statements of operations associated with our NPL segment. See Item 8. Financial Statements and Supplementary Data, Note 11 – Segment Reporting included in this Annual Report on Form 10-K for financial information concerning our segments.

2


Homes

The following table provides a summary of our portfolio of homes as of December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

Average

 

 

Weighted

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Non-

 

 

Number

 

 

 

 

Acquisition

 

 

Average

 

 

Aggregate

 

 

Home Size

 

 

Average

 

 

Average

 

 

Monthly Rent

 

 

 

Stabilized

 

 

Stabilized

 

 

of

 

 

Percent

 

 

Cost

 

 

Investment

 

 

Investment

 

 

(square

 

 

Age

 

 

Year

 

 

Per Leased

 

Markets

 

Homes(1)

 

 

Homes

 

 

Homes(2)(3)

 

 

Leased

 

 

Per Home

 

 

Per Home(4)

 

 

(in millions)

 

 

feet)

 

 

(years)

 

 

Purchased

 

 

Home(5)

 

South Florida

 

 

2,478

 

 

 

122

 

 

 

2,600

 

 

 

93.0

%

 

$

141,094

 

 

$

177,164

 

 

$

460.3

 

 

 

1,587

 

 

 

46

 

 

 

2014

 

 

$

1,660

 

Atlanta

 

 

2,431

 

 

 

44

 

 

 

2,475

 

 

 

93.5

%

 

$

102,648

 

 

$

133,576

 

 

 

330.6

 

 

 

1,938

 

 

 

23

 

 

 

2014

 

 

$

1,228

 

Houston

 

 

1,566

 

 

 

41

 

 

 

1,607

 

 

 

91.8

%

 

$

132,095

 

 

$

151,657

 

 

 

243.7

 

 

 

2,032

 

 

 

28

 

 

 

2014

 

 

$

1,552

 

Tampa

 

 

1,433

 

 

 

49

 

 

 

1,482

 

 

 

93.3

%

 

$

106,001

 

 

$

128,029

 

 

 

189.7

 

 

 

1,465

 

 

 

41

 

 

 

2014

 

 

$

1,294

 

Dallas

 

 

1,355

 

 

 

76

 

 

 

1,431

 

 

 

92.4

%

 

$

144,597

 

 

$

166,214

 

 

 

237.9

 

 

 

2,168

 

 

 

20

 

 

 

2014

 

 

$

1,618

 

Denver

 

 

713

 

 

 

101

 

 

 

814

 

 

 

84.3

%

 

$

206,340

 

 

$

233,271

 

 

 

189.9

 

 

 

1,628

 

 

 

33

 

 

 

2014

 

 

$

1,804

 

Chicago

 

 

730

 

 

 

55

 

 

 

785

 

 

 

84.5

%

 

$

122,123

 

 

$

152,069

 

 

 

119.4

 

 

 

1,593

 

 

 

37

 

 

 

2014

 

 

$

1,688

 

Orlando

 

 

630

 

 

 

55

 

 

 

685

 

 

 

87.0

%

 

$

116,461

 

 

$

143,855

 

 

 

98.4

 

 

 

1,588

 

 

 

38

 

 

 

2014

 

 

$

1,335

 

Southern California

 

 

440

 

 

 

9

 

 

 

449

 

 

 

88.6

%

 

$

243,735

 

 

$

257,310

 

 

 

115.5

 

 

 

1,651

 

 

 

39

 

 

 

2014

 

 

$

1,875

 

Northern California

 

 

269

 

 

 

1

 

 

 

270

 

 

 

96.3

%

 

$

214,603

 

 

$

228,225

 

 

 

61.6

 

 

 

1,505

 

 

 

47

 

 

 

2013

 

 

$

1,757

 

Phoenix

 

 

244

 

 

 

2

 

 

 

246

 

 

 

97.6

%

 

$

139,661

 

 

$

158,732

 

 

 

38.7

 

 

 

1,536

 

 

 

41

 

 

 

2014

 

 

$

1,209

 

Las Vegas

 

 

37

 

 

 

-

 

 

 

37

 

 

 

81.1

%

 

$

152,650

 

 

$

164,678

 

 

 

6.1

 

 

 

1,908

 

 

 

30

 

 

 

2013

 

 

$

1,269

 

Total / Average

 

 

12,326

 

 

 

555

 

 

 

12,881

 

 

 

91.5

%

 

$

135,717

 

 

$

162,458

 

 

$

2,091.8

 

 

 

1,764

 

 

 

34

 

 

 

2014

 

 

$

1,510

 

 

(1)

We define stabilized homes as homes from the first day of initial occupancy or subsequent occupancy after a renovation. Homes are considered stabilized even after subsequent resident turnover. However, homes may be removed from the stabilized home portfolio and placed in the non-stabilized home portfolio due to renovation during the home lifecycle.

(2)

Excludes 1,218 homes that we do not intend to hold for the long-term.

(3)

Effective January 1, 2015, we measure homes by the number of rental units as compared to our previous measure by number of properties.  Although historically we have primarily invested in SFRs, and expect to continue to do so in the foreseeable future, this change takes into account our investments in multi-family properties and, we believe, provides a meaningful measure to investors. As of December 31, 2015, we owned 125 multi-family homes with 250 rental units.

(4)

Includes acquisition costs and actual and estimated upfront renovation costs. Actual renovation costs may exceed estimated renovation costs, and we may acquire homes in the future with different characteristics that result in higher renovation costs. As of December 31, 2015, the average estimated renovation costs per renovated home were approximately $26,700.

(5)

Represents average monthly contractual cash rent. Average monthly cash rent is presented before rent concessions and incentives (e.g., free rent and other concessions). To date, rent concessions and incentives have been utilized on a limited basis and have not had a significant impact on our average monthly rent. If the use of rent concessions or other leasing incentives increases in the future, they may have a greater impact by reducing the average monthly rent we receive from leased homes.

3


The following table provides a summary of our leasing as of December 31, 2015:

 

 

 

 

 

 

 

Homes Owned 180 Days or Longer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

Average

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

Monthly

 

 

Lease

 

 

Remaining

 

 

 

Number

 

 

Number of

 

 

Percent

 

 

Rent per

 

 

Term

 

 

Lease Term

 

Markets

 

of Homes(1)(2)

 

 

Homes

 

 

Leased

 

 

Leased Home(3)

 

 

(Months)

 

 

(Months)

 

South Florida

 

 

2,600

 

 

 

2,440

 

 

 

96.1

%

 

$

1,652

 

 

 

21

 

 

 

11

 

Atlanta

 

 

2,475

 

 

 

2,445

 

 

 

93.9

%

 

$

1,224

 

 

 

18

 

 

 

9

 

Houston

 

 

1,607

 

 

 

1,560

 

 

 

93.1

%

 

$

1,547

 

 

 

20

 

 

 

12

 

Tampa

 

 

1,482

 

 

 

1,377

 

 

 

96.2

%

 

$

1,286

 

 

 

20

 

 

 

11

 

Dallas

 

 

1,431

 

 

 

1,342

 

 

 

94.4

%

 

$

1,602

 

 

 

19

 

 

 

10

 

Denver

 

 

814

 

 

 

714

 

 

 

92.4

%

 

$

1,788

 

 

 

19

 

 

 

11

 

Chicago

 

 

785

 

 

 

707

 

 

 

89.4

%

 

$

1,682

 

 

 

21

 

 

 

11

 

Orlando

 

 

685

 

 

 

605

 

 

 

93.2

%

 

$

1,322

 

 

 

20

 

 

 

10

 

Southern California

 

 

449

 

 

 

442

 

 

 

88.9

%

 

$

1,866

 

 

 

21

 

 

 

12

 

Northern California

 

 

270

 

 

 

270

 

 

 

96.3

%

 

$

1,757

 

 

 

22

 

 

 

11

 

Phoenix

 

 

246

 

 

 

244

 

 

 

98.4

%

 

$

1,209

 

 

 

19

 

 

 

8

 

Las Vegas

 

 

37

 

 

 

37

 

 

 

81.1

%

 

$

1,269

 

 

 

15

 

 

 

5

 

Total / Average

 

 

12,881

 

 

 

12,183

 

 

 

94.1

%

 

$

1,499

 

 

 

20

 

 

 

10

 

 

(1)

Excludes 1,218 homes that we do not intend to hold for the long-term.

(2)

Effective January 1, 2015, we measure homes by the number of rental units as compared to our previous measure by number of properties.  Although historically we have primarily invested in SFRs, and expect to continue to do so in the foreseeable future, this change takes into account our investments in multi-family properties and, we believe, provides a meaningful measure to investors. As of December 31, 2015, we owned 125 multi-family homes with 250 rental units.

(3)

Represents average monthly contractual cash rent. Average monthly cash rent is presented before rent concessions and incentives (e.g., free rent and other concessions). To date, rent concessions and incentives have been utilized on a limited basis and have not had a significant impact on our average monthly rent. If the use of rent concessions or other leasing incentives increases in the future, they may have a greater impact by reducing the average monthly rent we receive from leased homes.

NPL Portfolio

The following table summarizes our first lien NPL portfolio as of December 31, 2015:

 

 

 

Total Loans

 

 

Rental Pool Assets(4)

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Loan

 

 

Purchase Price

 

 

Total UPB

 

 

Total BPO

 

 

Average

 

 

Purchase Price as a

 

 

Purchase Price as a

 

 

Loan

 

 

Total Loans

 

State

 

Count(1)(2)

 

 

(in millions)

 

 

(in millions)

 

 

(in millions)

 

 

LTV(3)

 

 

Percentage of UPB

 

 

Percentage of BPO

 

 

Count

 

 

Per State

 

Florida

 

 

469

 

 

$

61.9

 

 

$

112.9

 

 

$

104.7

 

 

 

125.9

%

 

 

54.8

%

 

 

59.1

%

 

 

85

 

 

 

48.6

%

Illinois

 

 

219

 

 

 

30.5

 

 

 

48.5

 

 

 

46.7

 

 

 

127.7

%

 

 

62.9

%

 

 

65.3

%

 

 

24

 

 

 

13.7

%

California

 

 

197

 

 

 

62.1

 

 

 

84.2

 

 

 

97.2

 

 

 

99.3

%

 

 

73.8

%

 

 

63.9

%

 

 

39

 

 

 

22.3

%

New York

 

 

179

 

 

 

37.1

 

 

 

59.0

 

 

 

69.3

 

 

 

104.8

%

 

 

62.9

%

 

 

53.6

%

 

 

 

 

 

0.0

%

Indiana

 

 

128

 

 

 

8.9

 

 

 

12.2

 

 

 

12.3

 

 

 

119.7

%

 

 

73.1

%

 

 

72.5

%

 

 

 

 

 

0.0

%

New Jersey

 

 

121

 

 

 

19.2

 

 

 

32.0

 

 

 

30.1

 

 

 

125.5

%

 

 

59.9

%

 

 

63.6

%

 

 

 

 

 

0.0

%

Wisconsin

 

 

116

 

 

 

10.2

 

 

 

14.0

 

 

 

16.3

 

 

 

112.7

%

 

 

72.9

%

 

 

62.6

%

 

 

 

 

 

0.0

%

Maryland

 

 

113

 

 

 

22.5

 

 

 

32.5

 

 

 

27.5

 

 

 

138.4

%

 

 

69.2

%

 

 

81.7

%

 

 

 

 

 

0.0

%

Pennsylvania

 

 

81

 

 

 

7.9

 

 

 

11.4

 

 

 

11.6

 

 

 

117.7

%

 

 

69.2

%

 

 

67.9

%

 

 

 

 

 

0.0

%

Georgia

 

 

59

 

 

 

5.8

 

 

 

9.4

 

 

 

9.2

 

 

 

117.3

%

 

 

62.3

%

 

 

63.7

%

 

 

9

 

 

 

5.1

%

Arizona

 

 

55

 

 

 

6.9

 

 

 

10.4

 

 

 

9.3

 

 

 

249.3

%

 

 

66.1

%

 

 

73.9

%

 

 

 

 

 

0.0

%

Other

 

 

802

 

 

 

99.1

 

 

 

142.3

 

 

 

147.0

 

 

 

114.8

%

 

 

69.6

%

 

 

67.4

%

 

 

18

 

 

 

10.3

%

Total/Average

 

 

2,539

 

 

$

372.1

 

 

$

568.8

 

 

$

581.2

 

 

 

119.3

%

 

 

65.4

%

 

 

64.0

%

 

 

175

 

 

 

100.0

%

 

(1)

Represents first liens on 2,481 homes and 58 parcels of land.

(2)

Excludes 197 unsecured, second, and third lien NPLs with an aggregate purchase price of $1.5 million.

(3)

Weighted average loan-to-value (“LTV”) is based on the ratio of UPB to BPO weighted by UPB for each state.

(4)

See Item 1. Business - Prime Joint Venture included in this Annual Report on Form 10-K for the definition of Rental Pool Assets.

4


Our Business Strategy

Home Acquisition

We acquire homes in our target markets through all customary home acquisition channels. We use a multi-market and multi-channel investment strategy to provide flexibility in deploying capital and to diversify our portfolio, mitigate risk and avoid overexposure to any single market. We continue to seek expansion of our investment channels to acquire and sell homes both from a single and bulk asset perspective. Acquisitions may be financed from various sources, including proceeds from the sale of equity and debt securities, retained cash flow, our existing credit facilities or the issuance of OP units.

When pursuing home acquisitions, we focus on markets that we believe present the greatest opportunities for significant home price appreciation, have expected population and household growth and other positive economic fundamental that we believe will lead to sustained periods of rental demand and rent growth and where we can attain property operating efficiencies as a result of geographic concentration of assets in our portfolio. We believe that we can achieve improved operating efficiencies by pursuing a market density strategy within target markets. These markets are also characterized by proximity to quality school districts, work centers, retail services and transportation infrastructure, low crime rates and other factors which we utilize in determining our proprietary neighborhood score. Our target markets currently include: Miami, Orlando and Tampa, Florida; Atlanta, Georgia; Chicago Illinois; Dallas and Houston, Texas; Denver, Colorado; Southern California; Las Vegas, Nevada, North Carolina; Tennessee and Phoenix, Arizona. We identify and pursue home acquisition opportunities through a number of sources, including MLS listings, our strategic relationships in our target markets, foreclosure auctions and short sales. In addition, we may opportunistically identify and pursue bulk portfolios of homes from banks, mortgage servicers, direct relationships with SFR companies, government sponsored enterprises, private investors and other financial institutions.

Our current target markets are illustrated below:

 

 

5


Our pre-Merger portfolio has substantial market overlap with CAH’s pre-Merger portfolio, and our post-Merger portfolio is characterized by a significant number of homes in each of its markets. As of December 31, 2015, our post-Merger portfolio had an average of approximately 2,700 homes in each of its 10 largest markets. Management believes this market overlap and density will create operating efficiencies due to economies of scale. Over time, our management expects to further expand our depth in markets currently represented in our post-Merger portfolio and to target select additional high-growth markets, with a focus on markets where we will be able to establish the requisite critical mass of homes management believes is necessary to maximize operational efficiency. The following table illustrates the market density of our post-Merger portfolio as of December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

Average

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

Non-

 

 

Number

 

 

 

 

 

 

Total

 

 

Acquisition

 

 

Average

 

 

Aggregate

 

 

Home Size

 

 

Average

 

 

Monthly Rent

 

 

 

Stabilized

 

 

Stabilized

 

 

of

 

 

Stabilized

 

 

Portfolio

 

 

Cost

 

 

Investment

 

 

Investment

 

 

(square

 

 

Age

 

 

Per Leased

 

Markets

 

Homes(1)

 

 

Homes

 

 

Homes(2)(3)

 

 

Occupancy(4)

 

 

Occupancy

 

 

Per Home

 

 

Per Home(5)

 

 

(in millions)

 

 

feet)

 

 

(years)

 

 

Home(6)

 

Atlanta

 

 

5,633

 

 

 

48

 

 

 

5,681

 

 

 

94.2

%

 

 

93.7

%

 

$

108,456

 

 

$

137,628

 

 

$

782

 

 

 

1,999

 

 

 

23

 

 

$

1,243

 

Miami

 

 

3,359

 

 

 

135

 

 

 

3,494

 

 

 

94.3

%

 

 

90.8

%

 

$

164,011

 

 

$

204,044

 

 

 

713

 

 

 

1,710

 

 

 

41

 

 

$

1,783

 

Tampa

 

 

2,981

 

 

 

40

 

 

 

3,021

 

 

 

94.3

%

 

 

93.0

%

 

$

141,946

 

 

$

173,463

 

 

 

524

 

 

 

1,738

 

 

 

30

 

 

$

1,482

 

Southern California

 

 

2,808

 

 

 

11

 

 

 

2,819

 

 

 

96.1

%

 

 

95.7

%

 

$

263,646

 

 

$

300,232

 

 

 

846

 

 

 

1,712

 

 

 

41

 

 

$

1,941

 

Houston

 

 

2,758

 

 

 

41

 

 

 

2,799

 

 

 

93.1

%

 

 

92.1

%

 

$

127,206

 

 

$

139,791

 

 

 

391

 

 

 

1,934

 

 

 

19

 

 

$

1,474

 

Orlando

 

 

2,197

 

 

 

58

 

 

 

2,255

 

 

 

93.9

%

 

 

91.5

%

 

$

128,639

 

 

$

160,131

 

 

 

361

 

 

 

1,751

 

 

 

27

 

 

$

1,342

 

Dallas

 

 

2,103

 

 

 

77

 

 

 

2,180

 

 

 

95.3

%

 

 

92.0

%

 

$

145,828

 

 

$

164,748

 

 

 

359

 

 

 

2,095

 

 

 

22

 

 

$

1,574

 

Denver

 

 

1,825

 

 

 

129

 

 

 

1,954

 

 

 

94.8

%

 

 

88.7

%

 

$

184,293

 

 

$

212,767

 

 

 

416

 

 

 

1,737

 

 

 

35

 

 

$

1,656

 

Las Vegas

 

 

1,723

 

 

 

1

 

 

 

1,724

 

 

 

94.7

%

 

 

94.6

%

 

$

187,637

 

 

$

203,602

 

 

 

351

 

 

 

2,045

 

 

 

16

 

 

$

1,375

 

Phoenix

 

 

1,369

 

 

 

2

 

 

 

1,371

 

 

 

96.3

%

 

 

96.1

%

 

$

129,583

 

 

$

146,958

 

 

 

201

 

 

 

1,707

 

 

 

26

 

 <