Single-Family Rental Primer, 5th Edition

Industry Update Mortgage Finance
September 28, 2016 Single-Family Rental Primer, 5th Edition

The single-family rental (SFR) market has historically been fragmented,
Jade J. Rahmani funded with capital from small investors. However, institutional participation
212 887 3882 has increased meaningfully as the large foreclosure inventory following the
jrahmani@kbw.com financial crisis combined with a secular shift toward renting and technological
advancements created the possibility for large-scale investment. We estimate
major institutional players have invested $36 billion to acquire 208,000
Ryan Tomasello properties. Although significant, this amounts to 3% of distressed sales since
This report is intended for rtomasello@kbw.com. Unauthorized redistribution of this report is prohibited.
212 887 7740 2010 and 1.3% of the existing single-family rental housing stock.
rtomasello@kbw.com
What’s New? In the 5th Edition of Our Industry Primer, We Provide Several
Brian Jones Updates: 1) summary of major institutional participants; 2) analysis of implied
212 887 7716 cap rates for the public sector including comparisons to other equity REITs; 3)
jonesbr@kbw.com overview of M&A activity to date including analysis of individual deal
economics; 4) KBW’s updated single-family rental model, including a review of
same-home portfolios and comparisons to multifamily; and 5) updated analysis
of underwritten securitization cash flows, including multi-borrower deals and
recent collateral performance.
Single-Family Rentals Are an Emerging Institutional Asset Class. Assuming

net operating income (NOI) margins of 55-65% and cash flow margins after
recurring capital expenditures of 50-60%, the economics of institutionally
managed single-family rentals should prove attractive, including positive cash
flows and potential home price appreciation (HPA). We estimate unlevered cash
returns in the 4-7% range, while levered internal rates of return (IRRs) could
reach the low- to mid-teens including leverage and HPA. Additionally, rent
increases, operational improvements, and improving access to financing should
bolster returns over time.
As the Acquisition Pace Has Moderated, Major SFR Operators Have Focused
on Portfolio Stabilization. Incremental capital deployment and recent merger
activity have targeted increased scale in existing markets and at the enterprise
level. Rent growth has ranged from 4.5-5.5% on a blended basis for
securitization collateral and 4-5.5% on new leases for the public companies as
demand has been robust with occupancy levels averaging 95%. Portfolio
stabilization and operational improvements have driven improved margins and
asset yields based on same-home portfolios. Additionally, while there is concern
about rent deceleration and increased supply in certain property sectors including
multifamily, the single-family rental market appears on a positive trajectory. As a
result, public sector stock prices have appreciated meaningfully and the gap
between market value and net asset value (NAV) has narrowed.
Keefe, Bruyette & Woods, Inc. does and seeks to do business with companies covered in its research reports. As a
result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision.
Please refer to important disclosures and analyst certification information on pages 94–98 of this report.
Table of Contents
Executive Summary ........................................................................................................................................... 3

Part I: Institutional Players in the Single-Family Rental Sector ......................................................................... 8
Public Participants ...................................................................................................................................... 9
Summary of Institutional Players ............................................................................................................. 11
Portfolio Summaries for Major Institutional Operators ............................................................................ 20
Key Industry Themes ............................................................................................................................... 24
Part II: Economics of the Single-Family Rental Model.................................................................................... 30
KBW’s Single-Family Rental REIT Model.............................................................................................. 30
Unlevered versus Levered Returns ........................................................................................................... 34
Public SFR REIT Same-Home Analysis and Expense Disclosures .......................................................... 35
Part III: An Alternative Look at Valuation – Implied Capitalization Rates for Single-Family Rental REITs .. 39
Introduction .............................................................................................................................................. 39
Analysis .................................................................................................................................................... 39
Comparisons to Other Equity REIT Sectors ............................................................................................. 41
Conclusion................................................................................................................................................ 44
Part IV: Mergers & Acquisitions (M&A) in the Single-Family Rental Sector ................................................. 45
Benefits .................................................................................................................................................... 45
Structure ................................................................................................................................................... 45
Summary of Notable M&A Transactions To-Date ................................................................................... 46
Part V: Analysis of Single-Family Rental Securitizations ................................................................................ 56
Single Family Rental Securitization – Part CMBS, Part RMBS............................................................... 56
SFR Securitization Issuance to Date......................................................................................................... 56
Exploring the Economics of Single-Family Rental Securitization ........................................................... 60
Collateral Performance for Single-Borrower SFR Securitizations ........................................................... 71
Specialty SFR Lenders ............................................................................................................................. 73
Appendix .......................................................................................................................................................... 79
Please refer to important disclosures and analyst

2 certification information on pages 94–98 of this report.
Executive Summary
What’s New in the 5th Edition of KBW’s Single-Family Rental Primer?
In this report, we review the single-family rental market (SFR) with a focus on
institutional participation. Updated information includes the following:
 Summary of major institutional participants.
 Implied capitalization (“cap”) rates for public SFR REITs with comparisons to other
equity REIT sectors.
 Notable M&A activity including deal-level economics.
 KBW’s revised single-family rental model, including a summary of public company

same-home property-level expenses and comparisons to multifamily.
 Analysis of underwritten SFR securitization cash flows, as well as a summary of

recent collateral performance.
 Updated housing market data.
Single-Family Rentals: An Emerging Institutional Asset Class

The single-family rental market has historically been fragmented, funded with capital
from individual investors. Institutional interest has increased meaningfully as the large
foreclosure and nonperforming loan (NPL) inventory resulting from the 2008-2009
financial crisis created the possibility for large-scale investments at attractive economics.
Combined with a secular shift toward renting and technological advancements—
including mobile and cloud-based computing that enable key aspects of the acquisition,
renovation, lease-up, and maintenance processes—the resources have become available
to manage sizeable portfolios of single-family homes as rentals with institutional-quality
property management.
By our account, major institutional players have invested nearly $36 billion of capital to
acquire approximately 208,000 properties since 2010. While this is meaningful, it
amounts to approximately 0.1% of the housing stock, 1% of vacant properties, 6% of
mid-2012’s seriously delinquent loans, and 3% of estimated distressed home sales since
2010. Additionally, this amounts to approximately 1.3% of the estimated 15.8 million
attached and detached single-family rental homes. At the same time, we estimate
investors in aggregate (both small and large) have purchased 5.3 million homes since
2010 (roughly 17% of home sales).

Exhibit 1: Institutional Ownership of U.S. Single-Family Rental Housing Stock
Top 17 Insitutional
Players, 1%
Others, 99%
Note: Based on the top 17 institutional portfolios in KBW’s SFR database and an estimated single-family
rental housing stock of 15.8 million units (RentRange). As of September 2016.
Source: Company reports and KBW Research.
Despite increased institutional investment following the 2008-2009 financial crisis and the
subsequent increase in foreclosures, the single-family rental market in the U.S. remains
fragmented, dominated by smaller investors and so-called “mom and pop” owners.
According to data from RentRange, nearly 45% of the estimated single-family rental
housing stock of 15.8 million units is owned by individuals with just one single-family rental
property. Further, more than 85% of the SFR stock is owned by investors with 10 or fewer
properties. RentRange estimates 5% of the SFR stock is owned by investors with more than
50 properties, while just 1% is owned by investors with more than 1,000 properties.
Exhibit 2: Investor Distribution of U.S. Single-Family Rental Housing Stock
101 - 250 251 - 500

51 - 100 >500
26 - 50
11 to 25
6 to 10
1 unit
2 to 5
Note: Based on estimated attached and detached single-family rental housing stock of 15.8 million units. As of
September 2016.
Source: RentRange.

Potential Yields and Long-Term Returns
We estimate unlevered cash returns in the 4-7% range, while levered IRRs could reach
the low- to mid-teens depending on HPA and financial leverage. According to data from
REIS, U.S. apartment rental rates have risen 25% since the end of 2009, including a 4.1%
year-over-year increase in 2Q16 as demand for rentals increased. While multifamily
industry participants expect rent growth to decelerate, Census data shows long-term
compound annual growth rates (CAGRs) of 4.1% back to 1980 and 5% back to 1940.
Additionally, recent data from the public SFR players as well as single-borrower SFR
securitization collateral show strong rent increases. For single-borrower SFR
securitizations, blended rent growth has ranged from approximately 4.5-5.5% over the
last 12 months. Further, we estimate the major public SFR players achieved blended
average rent growth of 4.5% over the last 12 months including 5% on new leases and 4%
on renewals.
At the same time, CoreLogic data shows U.S. single-family home prices up 30% since
2010. As of July 2016, prices were up 6.0% year over year, 36% above the trough and
9.4% from the prior peak, and CoreLogic projects 5.4% growth over the next 12 months.
Additionally, median existing home prices are at a 25% discount to new home prices,
while real estate-owned (REO) properties historically have been at significant discounts
to non-distressed homes, suggesting a continued discount to replacement cost.
Assuming an average investment per home of $170,000 including upfront renovations—a

25% discount to the median single-family home price—and average rents of $1,100-
$1,600, we estimate gross rental yields of 8-11%. Assuming net operating income (NOI)
margins in the 55-65% range and cash flow (NCF) margins after recurring capital
expenditures of 50-60%, the economics of single-family rentals should prove attractive,
including positive cash flows and potential asset price appreciation. Additionally, rent
increases, operational improvements through greater scale, and improving access to
financing should bolster investment returns over time.
Recent same-home data from the portfolios of the public SFR REITs validate these
economics with an estimated average last twelve months (LTM)/annualized core NOI
margin of 60.3% and NCF margin of 53.3%. We estimate this equates to average asset
yields of 5.9% before recurring capital expenditures (“capex”) (NOI yield) and 5.1% after
capex (NCF yield). Assuming 30-50% leverage would equate to a return on equity of 5-
8% before home price appreciation.
Industry Consolidation a Continuing Theme: Summary of M&A to Date

Merger and acquisition (M&A) activity in the institutional SFR sector has increased in
both the public and private markets. As the pace of one-off acquisitions has moderated,
institutional players have used M&A to build scale and complement existing footprints.
We believe the scale benefits of consolidation make well-underwritten transactions
accretive to operating margins largely due to property management efficiencies and the
elimination of corporate overhead. Transactions to date have ranged in size from bulk
acquisitions at the market-level consisting of a few dozen to a few hundred homes to
enterprise level mergers.

Notable Transactions:
 Colony American Homes’ (CAH) merger with Starwood Waypoint (SWAY) in
January 2016.
 American Homes 4 Rent’s (AMH) acquisition of American Residential Properties in

February 2016.
 Silver Bay’s (SBY) acquisition of The American Home in February 2015.
 Tricon American Homes’ acquisition of a portfolio from BLT Homes in April 2015.
 Cerberus’s acquisition of the remaining BLT Homes portfolio in June 2015 and Five
Ten Capital in February 2015.
 AMH’s acquisition of Beazer Pre-Owned Rental Homes in July 2014.
 AMH’s acquisition of the Ellington Housing portfolio in December 2014.
 Altisource Residential’s (RESI) acquisition of two portfolios from Invitation Homes

in July 2015 and March 2016.
 SBY’s recently announced acquisition of a portfolio of 320 properties in Orlando,

Tampa, and Atlanta in September 2016.
In the public markets, share prices of the SFR REITs, particularly those of the larger
players (SFR, AMH), have exhibited positive momentum, outperforming the broader
market in 2016, including other property REIT sectors. Recent mergers highlight the
scale benefits of combinations given anticipated expense synergies. As the gap between
share prices and net asset value (NAV) has narrowed, we believe shares of the public
entities have become an attractive form of currency for additional M&A.
In Exhibit 23 of this report, we provide a database of M&A to date across 18

completed/pending transactions encompassing more than 50,000 properties, including
estimated valuation based on gross and net yields where available. Additionally, we
discuss the economics of individual, large-scale public M&A deals in more detail,
including estimated acquisition cap rates ranging from 5-7%.
An Alternate Approach to Valuation: Implied Cap Rates for Public SFR REITs
As the major public players have largely stabilized their portfolios, we believe implied
cap rates are becoming an important valuation tool for public single-family rental REITs.
For the broader equity REIT universe, cap rates are most commonly used in determining
portfolio NAV.
Given the size and liquidity of the U.S. single-family residential market, market values
based on broker price opinions (BPO) of value are readily available. As a result, many
institutional SFR players have used a BPO approach in determining NAV to date.

However, as the long-term cash economics of the institutional single-family rental sector
become more certain and institutional acceptance of the asset class increases, we believe
cap rates may become a more meaningful determinant of net asset values.
Based on our analysis, we estimate the public SFR REITs (including AMH, SFR, and
SBY) are trading at average implied nominal cap rates of 5.2-5.7% and economic cap
rates (after recurring capex) of 4.7-5.1% based on our 2016-2018 projections. This
compares to major multifamily REITs at an estimated average implied nominal cap rate
of 5.2% and economic cap rate of 4.8% (based on annualized 2Q16 results). Additionally,
we estimate other equity REIT sectors, including office, industrial, and retail, trade at
average implied nominal cap rates of 4.9-5.0% and economic cap rates of 4.7-4.9%.
Update on Underwritten SFR Securitization Cash Flows and Analysis of Actual

Collateral Performance
Securitization has been a meaningful source of financing for SFR REITs. Since late 2013,
27 single-borrower SFR securitizations have been announced or completed totaling $20.9
billion in collateral value and $15.4 billion in debt issuance on 104,000 properties.
Additionally, since April 2015 six multi-borrower transactions have been completed by
three individual specialty SFR lenders totaling $2.4 billion in collateral value and $1.5
billion in debt issuance on more than 20,000 properties. We provide an updated dataset
of underwritten SFR securitization cash flows (including property operating expenses,
capex, margins, and asset yields) for both single- and multi-borrower deals.
As single-borrower deals have tenured, a time series of actual performance data from
underlying collateral is available, including occupancy, turnover, retention, and
delinquency. Importantly the data shows strong average LTM occupancy of 95%+ with
tenant retention above 75%. At the same time, delinquencies remain low (under 1%).
We believe the underwritten cash flows of SFR securitizations and growing amount of
actual performance trends provide the foundation of a historical dataset on the economics
of institutionally managed SFRs.

Part I: Institutional Players in the Single-Family Rental Sector
Exhibits 3 and 4 summarize major institutional players and other participants.
Exhibit 3: Major Players in the Single-Family Rental Sector
Type of # of Homes Investment

Participant Company (units) ($ in millions)
1 American Homes 4 Rent (AMH) Public 48,038 $8,057
2 Invitation Homes (Blackstone) Private 48,000 9,600
3 Colony Starwood Homes (SFR) Public 30,844 5,943
4 Progress Residential (Pretium Partners) Private 17,333 3,049
5 Main Street Renewal (Amherst) Private 10,000 1,250
6 Silver Bay Realty Trust (SBY) Public 9,231 1,258
7 Tricon Capital (TCN-TSX) Public 8,018 1,027

8 Cerberus Private 5,700 615
9 Altisource Residential (RESI) Public 5,414 739
10 Home Partners of America Private 4,844 1,500
11 HavenBrook Homes (PIMCO) Private 4,000 600
12 Connorex-Lucinda (CONREX) Private 3,500 525
13 Waypoint Homes Private 3,400 510
14 GTIS Partners/643 Capital Management Private 3,400 425
15 VineBrook Homes Private 3,113 139
16 Lafayette RE LLC Private 1,500 138
17 Apollo Global Management Private 1,400 210
Total 207,735 $35,586
Note: Data is based on most recent disclosures, media reports, or KBW estimates. Investment value
estimated where not available based on assumed total investment per home.
Source: Company reports, media reports, and KBW Research.
Exhibit 4: Other Players in the Single-Family Rental Market

Other Participants Commentary
Bridge Tower Owns 425 homes in Dallas-Fortworth
Broadtree Homes 506 SFRs in GA, FL, Rochester, and MN; $53 million total investment
Publicly traded Canadian firm; 565 single-family units in FL, GA, NJ for $35 mil.; FKA
Firm Capital American Realty Partners
Delavaco Residenital Properties
Jacksonville Wealth Builders Has purchased 2,000 SFR properties in northeast FL
Landsmith Manages over 1,000 homes through its Landsmith Residential Impact Fund
MACK Companies Chicago-based company; owns/manages 1,200 homes

Has acquired over 7,700 homes since 2010 in NC, GA, TN, FL, and NJ (1,200 on
Residential Capital Management
own behalf and 6,500 for investors)
Note: Data is based on most recent disclosures or media reports.

Source: Company reports, media reports, and KBW Research.

Public Participants
To date there have been six major entities to go public with a focus on the SFR strategy
(including three IPOs, two spin-offs, and one private-to-public merger), while three other
existing public entities have made significant investments:
 Silver Bay Realty Trust (SBY) via its December 2012 IPO raising gross proceeds
of $282 million.
 Altisource Residential (RESI) via the December 2012 spin-out from Altisource
Portfolio Solutions (ASPS) with an initial equity base of approximately $100
million.
 American Residential Properties (ARPI) via its May 2013 IPO raising gross
proceeds of $288 million. ARPI was subsequently acquired by AMH in a February

2016 deal valued at $1.5 billion.
 American Homes 4 Rent (AMH) via its July 2013 IPO raising gross proceeds of
$812 million.
 Starwood Waypoint Residential Trust (SWAY) via its January 2014 spin-off
from Starwood Property Trust (STWD) with an initial equity base of approximately
$1 billion. SWAY subsequently merged with Colony American Homes in January
2016 to form Colony Starwood Homes (SFR).
 Colony Starwood Homes via the merger between Colony American Homes with
Starwood Waypoint in January 2016.
 Colony Capital (CLNY), a diversified REIT and investment manager, has a 14%
stake in Colony Starwood Homes (SFR) with a carrying value of $326 million
(10% of CLNY’s equity) and a market value of approximately $455 million based
on SFR’s recent stock price. CLNY previously had an approximate 23% stake in
CAH, and was issued 15.1 million shares of SFR stock as a result of the merger.
 The Blackstone Group (BX) via its fund investments in Invitation Homes,
which was founded in 2012 and has invested approximately $9.6 billion into the
single-family rental strategy.
 Tricon Capital (TCN-TSX), a Toronto-based investment manager, via its $1.0

billion investment in its single-family rental platform, Tricon American Homes,
since mid-2012.
Exhibit 5 shows KBW’s single-family rental REIT comp sheet.

Exhibit 5: Single-Family Rental REIT Comp Sheet
Book Value Per Share P/BV

Price Div. Debt/
Company Ticker Price Rating Target Mkt. Cap. GAAP Adjusted Tangible GAAP Adjusted Tangible Yield Cap.
Pure-Play
American Homes 4 Rent AMH $21.62 MP $22.00 $6,355 $11.84 $13.04 $12.63 1.83x 1.66x 1.71x 0.9% 0.36x
Colony Starwood Homes SFR $30.15 MP $35.00 $3,253 $24.91 $27.61 $25.23 1.21x 1.09x 1.20x 2.9% 0.58x
Silver Bay Realty Trust SBY $18.03 MP $18.00 $678 $14.28 $15.92 $15.92 1.26x 1.13x 1.13x 2.9% 0.50x
10
NPL/SFR
Altisource Residential RESI $10.75 MP $11.00 $586 $18.47 $15.05 $15.05 0.58x 0.71x 0.71x 5.6% 0.48x
Other
Tricon Capital Group TCN-TSE $7.00 NC NC $786 $6.24 $6.24 $5.99 1.12x 1.12x 1.17x 3.7% 0.19x
Pure-Play: Total/Avg. $10,286 1.43x 1.29x 1.35x 2.2% 0.48x
Pure-Play: Median 1.26x 1.13x 1.20x 2.9% 0.50x
Total/Avg. $11,657 1.20x 1.14x 1.18x 3.2% 0.42x
Median 1.21x 1.12x 1.17x 2.9% 0.48x
FFO/EPS AFFO P/FFO P/AFFO Implied
certification information on pages 94–98 of this report.
Company 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E Cap Rate
Pure-Play
American Homes 4 Rent $0.95 $1.07 $1.16 $0.80 $0.86 $0.95 22.8x 20.2x 18.6x 27.0x 25.1x 22.7x 5.2%
Colony Starwood Homes $1.64 $1.90 $2.01 $1.30 $1.55 $1.64 18.4x 15.9x 15.0x 23.2x 19.5x 18.4x 5.4%
Silver Bay Realty Trust $0.83 $0.93 $1.03 $0.58 $0.67 $0.76 21.7x 19.4x 17.5x 30.9x 26.8x 23.8x 5.7%
NPL/SFR
Altisource Residential ($0.79) $0.60 $0.85 NA NA NA NM 17.9x 12.6x NA NA NA NA
Other
Tricon Capital Group $0.62 $0.69 $0.81 NA NA NA 11.3x 10.1x 8.7x NA NA NA NA
Pure-Play: Total/Avg. 21.0x 18.5x 17.0x 27.0x 23.8x 21.6x 5.5%
Pure-Play: Median 21.7x 19.4x 17.5x 27.0x 25.1x 22.7x 5.5%
Total/Avg. 18.5x 16.7x 14.5x 27.0x 23.8x 21.6x 5.5%
Median 20.1x 17.9x 15.0x 27.0x 25.1x 22.7x 5.5%
Priced as of September 27, 2016.

Note: $ in millions, except per share data. RESI EPS estimates represent GAAP EPS. TCN estimates based on consensus EPS.
Summary of Institutional Players
Below we summarize the major institutional players based on available company
disclosures and media reports.
Invitation Homes (The Blackstone Group): $9.6 Billion Investment

Invitation Homes was formed in 2012 via fund investments by The Blackstone Group
(BX), a global asset management and financial services company with $356 billion in
assets under management (AUM), including $103 billion of real estate. Invitation Homes
began acquiring properties in April 2012 and has rapidly grown to be the largest owner of
single-family rental homes in the U.S. with a total investment of $9.6 billion. The
company’s portfolio of approximately 48,000 homes is concentrated approximately 70%
on the west coast and in Florida, with the remaining located in the Southeast and
Midwest. We estimate an average total investment per home of approximately $200,000.
Notably, Invitation Homes became the first company to complete a single-family rental
securitization in November 2013.
American Homes 4 Rent (AMH): $8.1 Billion Investment

American Homes 4 Rent (AMH) is currently the largest publicly traded single-family
REIT. The company is internally managed and exclusively focused on single-family
rental investments. The company commenced operations in 2012 and went public in July
2013. The company was externally managed until June 2013 when it internalized.
Notably, AMH was founded by B. Wayne Hughes, who is the founder and chairman of
Public Storage (PSA), the largest public storage REIT in the U.S.
As of June 30, 2016, AMH’s portfolio totaled approximately 48,000 homes with a cost
basis of $8.1 billion, including homes held for sale, across 42 markets in 22 states.
Primary markets include Texas (18%), Florida (10%), Atlanta (8%), Indianapolis (6%),
Phoenix (6%), and Charlotte (6%). The average cost basis per home including renovation
costs is $171,000 and the average age is 13.3 years. Overall occupancy at 2Q16 totaled
94.8% excluding homes held for sale.
 American Residential Properties (ARPI). In February 2016, AMH completed the

acquisition of ARPI in the first public-to-public M&A transaction in the sector.
ARPI was founded in 2008 through the formation of American Residential
Properties, LLC, a private investment firm focused on investing in REO-to-rental
properties in the Phoenix area. After several rounds of private funding, the company
went public in May 2013. Prior to its IPO, ARPI internalized its former manager in
2012. At the time it was acquired, ARPI’s portfolio totaled approximately 8,900
homes with a cost basis of $1.3 billion. Primary market concentrations included
Phoenix, Dallas, Houston, and Atlanta. The average cost basis per home including
renovation costs was $150,000 and the average age was 18 years. We discuss
AMH’s acquisition of ARPI in more detail in the M&A section of this report.
In addition to its purchase of ARPI, AMH has grown through other large acquisitions,
including the purchase of Beazer Pre-Owned Rental Homes in August 2014
(approximately 1,300 homes) and the Ellington Housing Single-Family Portfolio in
December 2014 (approximately 900 homes).

Colony Starwood Homes (SFR): $5.9 Billion Investment
Colony Starwood Homes was formed via the January 2016 merger between Colony
American Homes (CAH) and Starwood Waypoint Residential Trust (formerly SWAY).
The transaction marked the largest M&A deal in the SFR sector to date. Notably, SFR is
led by CEO Fred Tuomi, who previously served as EVP and president of property
management for Equity Residential (EQR), which he joined in 1994. Mr. Tuomi led the
development of EQR’s property management group as the company expanded to become
the largest U.S. multifamily REIT.
As of June 30, 2016, SFR’s portfolio totaled 31,000 properties with a cost basis of
approximately $5.9 billion across 10 states. Primary market concentrations include
Florida (31%), Atlanta (19%), Texas (16%), and California (12%). The company has an
average of 2,800 homes per market in each of its top ten markets. The average investment
per property is $193,100, which includes the write-up of legacy SWAY homes to market
value, and the average age is 29 years. Overall occupancy at 2Q16 totaled 95.4%.
We discuss the merger of Colony American Homes and Starwood Waypoint in more
detail in the M&A section of this report.
Colony American Homes

Colony American Homes was founded in March 2012 by Colony Capital (CLNY), a
global real estate and investment management firm with more than $18 billion of assets
under management. Prior to its merger with SWAY as of September 30, 2015, CAH’s
portfolio totaled 17,800 properties with a cost basis of $3.5 billion. Primary market
concentrations included Florida (24%), Atlanta (18%), California (14%), and Texas
(11%). The average investment per home was $195,000, and the portfolio had an average
age of approximately 25 years.
Additionally, prior to the merger with SWAY, CAH operated a lending subsidiary,
Colony American Finance (CAF), which originates loans to small to midsize owners of
single-family rental portfolios. CAF was not included in the merger consideration and
now operates as a separate entity. We discuss CAF along with other SFR lenders in more
detail in the securitization section of this report.
Notably, Colony American Homes filed for an IPO in May 2013, which would have raised
as much as $260 million. However, the planned June 2013 offering was cancelled as the
company cited difficult market conditions.
Starwood Waypoint Residential Trust

Starwood Waypoint Residential Trust (SWAY) was formed through the February 2014
spin-off from Starwood Property Trust (STWD), the largest commercial mortgage REIT.
In conjunction with the spin-off of SWAY from STWD, the company’s external
manager, a subsidiary of Starwood Capital, purchased the management platform of
Waypoint Real Estate Group (Waypoint) that merged with SWAY. Waypoint began

investing in the single-family rental market in 2009. The acquisition did not include the
homes already managed by Waypoint.
Immediately prior to the merger, as of December 31, 2015, SWAY’s portfolio totaled
12,881 properties with a cost basis of $2.1 billion. Primary market concentrations
included Florida (37%), Texas (24%), and Atlanta (20%). The average investment per
home was $162,000, and the portfolio had an average age of approximately 34 years.
Additionally, SWAY’s legacy assets included a portfolio of NPLs. This was a strategy
initiated originally by STWD and carried on following the spin-off of SWAY with the
intent of 1) modifying and disposing of the loans, or 2) converting to REO for the rental
portfolio or for property sale. The company largely ceased purchasing NPLs in 2014,
citing unattractive pricing and essentially exited the NPL business following several bulk
sales in 2016. The remaining NPL/REO assets include $120 million of primarily REO
assets, which the company expects to dispose of by the end of the first half of 2017.
Colony Capital (CLNY): 14% Stake in Colony Starwood Homes (SFR)

Colony Capital is a global diversified REIT and investment management firm focused on
both debt and equity. The company has $18.2 billion of assets under management.
In 2012, Colony Capital formed a joint venture (JV), CSFR Operating Partnership (CSFR),
to acquire single-family homes for rent. The initial JV was managed by Colony American
Homes, an affiliate of Colony Capital. Prior to Colony American Homes’ merger with
Starwood Waypoint, Colony Capital owned a 23.3% stake in Colony American Homes
with a carrying value of $326 million (excluding its interest in Colony American Finance,
the company’s lending unit, which was not contributed as part of the merger).
As part of the merger consideration, Colony Capital was issued 15.1 million shares of
SFR in January 2016, representing an initial stake of 13.8% in the combined entity.
Today the company’s ownership represents a 14% stake following share buybacks by
SFR. As of SFR’s most recent stock price, Colony Capital’s investment is valued at
approximately $455 million (40% above carrying value). Colony Capital’s shares have an
approximate nine-month lock-up period from the closing of the merger (ending in
October 2016).
Progress Residential (Pretium Partners): $3.0 Billion Investment

Progress Residential is a subsidiary of Pretium Partners, which was founded by Donald
R. Mullen, Jr. in 2012. Pretium Partners has approximately $5.4 billion of AUM. Mr.
Mullen previously was head of Goldman Sachs’ global credit and mortgage business. As
of June 30, 2016, the company’s portfolio totaled 17,300 properties with a total
investment of $3.0 billion. Including homes held for sale, the company estimates a fair
value of its portfolio of $3.7 billion. Progress Residential’s portfolio encompasses 26
markets across nine states. Major markets include Atlanta (15%), Tampa (11%), Phoenix
(9%), and Houston (8%). We estimate an average total investment per home of
approximately $176,000 and an average age of 14 years. Overall occupancy at 2Q16
totaled 91.9%.

Pretium Partners also manages two other investment vehicles, which invest in
nonperforming and reperforming residential mortgage loans ($2.9 billion in AUM).
Home Partners of America: $1.5 Billion Investment

Home Partners of America (HPA) was founded in 2012 (as Hyperion Homes) and
originally focused on acquiring, renovating, and leasing single-family properties in
Illinois, Colorado, and Texas. As of June 30, 2016, the company owned 4,844 homes in
approximately 50 metropolitan statistical areas (MSAs) across 18 states with a total
investment of more than $1.5 billion. We estimate this equates to an average total
investment per home of more than $300,000. The portfolio is 98.8% leased. Lead
investors in HPA include BlackRock and KKR. HPA has a total of $1.8 billion in
committed capital including $750 million of equity capital.
Unlike strategies employed by other SFR operators, HPA makes investments in

properties via its Right to Purchase Program. Under this process, prospective tenants
apply to HPA’s Right to Purchase Program, which they are typically informed of via a
mortgage broker or real estate agent. Such tenants typically are unable to presently
purchase a home due to liquidity, inability to obtain a mortgage, or uncertainty
surrounding future location preferences/needs. HPA underwrites the tenant based on his
or her credit and income profile along with a determination if the prospective property
meets HPA’s investment criteria. HPA will then purchase the home if the tenant is
approved, and provide the tenant with a right to purchase the home in a 3-5 year period.
The purchase price is determined based on cost increases from HPA’s original purchase
price ranging from 3.5% to 5.0% annually.
Notably, HPA has completed two securitizations to date encompassing 3,600 properties,
or approximately 75% of its total portfolio by unit count.
Silver Bay Realty Trust Corp. (SBY): $1.3 Billion Investment

Silver Bay Realty Trust (SBY) was the first of the participants in the single-family rental
space to go public with its December 2012 IPO. The company was previously externally
managed by PRCM Real Estate Advisers, a joint venture of Pine River Domestic
Management and Provident Real Estate Advisors, two private capital management firms.
SBY completed the internalization of its manager in September 2014.
As of June 30, 2016, and pro forma for a recently announced portfolio acquisition of 320
homes, SBY’s portfolio totals 9,200 homes with a cost basis of $1.3 billion across 13
markets. Primary market concentrations include Atlanta (30%), Florida (27%), Phoenix
(16%), and Charlotte (8%). The average investment per home is $135,000 and the
portfolio has an average age of 27 years. Overall occupancy at 2Q16 totaled 97.6%.
Notably, in April 2015 SBY completed the acquisition of The American Home, whose
portfolio totaled approximately 2,500 homes.

Tricon American Homes (Tricon Capital Group): $1.0 Billion Investment
Tricon American Homes (TAH) was formed in 2012 by Tricon Capital Group (TSN-
TSE). Tricon Capital Group is a diversified principal investor and asset manager focused
on North American real estate with $3.1 billion of assets under management. TAH
operates as a separate division of Tricon Capital Group, which serves as the company’s
manager. The company targets higher yielding investments with net yields of 6.5-6.75%.
TAH plans to take the platform public or sell to another institutional player within a 5-7
year period.
As of June 30, 2016, TAH’s portfolio consisted of 8,018 homes with a total investment of
$1.0 billion across 14 markets. Primary markets include Texas (18%), Charlotte (18%),
and Atlanta (15%). The average total investment per home is $126,000. Overall
occupancy at 2Q16 totaled 88.9% (excluding homes held for sale).
Altisource Residential Corp. (RESI): $739 Million Investment (including REOs under
evaluation)
Altisource Residential was spun out as a REIT from Altisource Portfolio Solutions
(ASPS) in December 2012. The company is externally managed by Altisource Asset
Management Corporation (AAMC). RESI was initially created to pursue a strategy of
acquiring nonperforming loans with the intent of modifying and disposing for a gain or
for the conversion to REO and to rental. In this manner, RESI believed it could source
rental properties at a significant discount while also generating strong gains from NPL
and REO modifications and dispositions. We estimate RESI has acquired nearly 17,000
NPLs since inception at an average cost of 65% of BPO value.
Beginning in 2Q15, management noted a strategic shift away from NPL purchases noting
that given aggressive pricing in the NPL market, it believed direct SFR purchases were
more attractive than NPLs. As a result, RESI plans to acquire single-family rental assets
on a one-by-one and portfolio basis. The company is also accelerating the monetization
of its NPL portfolio via bulk portfolio sales. Through its partnership with ASPS, RESI is
pursuing an acquisition strategy focused on high-yielding properties. Management is
targeting gross asset yields of 11-13% and net asset yields of 6-7%. RESI believes that its
long-term service agreement with Altisource Portfolio Solutions provides RESI’s rental
portfolio with operational scale.
As of June 30, 2016, RESI’s rental portfolio totaled approximately 4,000 homes. Primary
markets include Georgia (49%), Florida (15%), and North Carolina (8%). The estimated
average investment per stabilized home is $111,000 and the average age is 35 years.
Overall occupancy at 2Q16 totaled 75.7% as the company continues to grow its portfolio.
The company has an additional 1,400 REO properties under evaluation for potential
rental. Including these assets, the company’s SFR investment totals $739 million. RESI
has completed two bulk purchases to date from Invitation Homes totaling 1,300
properties (July 2015) and 590 properties (March 2016).

Additionally, in July 2016 RESI entered into a non-binding letter of intent to acquire
4,000-4,500 rental homes from an unrelated third party. The transaction is subject to
continuing due diligence and financing arrangements and if consummated could close in
2H16. Management is also considering other large portfolio purchases available in the
market. RESI expects the rental portfolio to total 10,000 properties by year-end 2016.
The company’s remaining NPL portfolio totaled 4,072 loans with a carrying value of
$707 million and unpaid principal balance (UPB) of $963 million as of June 30, 2016. Of
this amount, 806 are current (RPLs) and the rest delinquent or going through foreclosure.
Additionally, RESI has 1,174 REOs with a carrying value of $226 million, which it plans
to sell.
Main Street Renewal (Amherst): Investment in 10,000 Properties

Main Street Renewal was founded in 2012 by Amherst Holdings to acquire single-family
properties and convert them to rentals. Amherst Holdings is a private financial services
holding company based in Austin, TX that specializes in real estate and related structured
finance markets. According to the company, Main Street Renewal’s portfolio totals
approximately 10,000 homes. Assuming an average investment per home of $125,000
would equate to a total investment of $1.3 billion. Per the company’s website, Main
Street Renewal’s portfolio is located across 13 states (AL, FL, GA, IN, KS, KY, MN,
MS, MO, NC, OK, TN, and TX) in 22 markets.
Cerberus Capital Management: $615 Million Investment

Cerberus Capital Management is a private investment firm with more than $30 billion of
assets under management. Based on media reports (including Bloomberg), Cerberus first
entered the single-family rental sector via its acquisition of Five Ten Capital’s portfolio
of approximately 1,500 homes in February 2015. The Five Ten portfolio was primarily
concentrated in Florida, Illinois, and Texas. Subsequently, in June 2015, Cerberus
acquired BLT Homes’ remaining portfolio of approximately 4,200 properties (per
Bloomberg) in a $402 million deal (per GTIS Partners). The BLT portfolio was primarily
concentrated in Midwest cities such as Indianapolis and Chicago, as well as in Florida.
Cerberus’s aggregate portfolio totals approximately 5,700 homes. Total cost basis is $615
million, implying an average investment per home of approximately $108,000. The
portfolio is located approximately 76% in the Midwest (including Indianapolis, Memphis,
Chicago, St. Louis, and Kansas City), 18% in Florida, and 6% in other markets.
HavenBrook Homes (PIMCO): Estimated Investment in 4,000 Properties (as of last

media report dated March 2015)
HavenBrook Homes was initially founded by Sylvan Road Capital, an asset management
firm launched in August 2012. Sylvan Road Capital was founded by Oliver Chang,
former Head of U.S. Housing Strategy at Morgan Stanley, to invest in distressed single
family homes as rentals. Sylvan Road was partially funded through initial capital
commitments from the Carlyle Group and Seer Capital Management. According to
Bloomberg, in March 2015, Sylvan Road sold its stake in HavenBrook Homes to its

partner in the joint venture at the time, Pacific Investment Management Co. (PIMCO),
which now owns a controlling stake in HavenBrook.
At the time of PIMCO’s acquisition of Sylvan Road’s stake in the JV in March 2015, the
portfolio totaled approximately 4,000 homes, according to Bloomberg. Assuming an
average investment per home of $150,000 would equate to a total investment of $600
million. According to the company’s website, primary markets include Birmingham,
Alabama; Atlanta, Georgia; Southeast and Southwest Florida; and Minneapolis,
Minnesota.
Connorex-Lucinda: More Than 3,500 Homes

Connorex-Lucinda (CONREX) was founded in 2011 and based in Charleston, SC. The
company focuses on acquiring homes and converting them to rentals in under-served
Southeast and Midwest markets where it believes it can achieve higher yields. CONREX
currently manages more than 3,500 properties and continues to actively buy. Markets
include Georgia, Alabama, South Carolina, North Carolina, Ohio Kentucky, Indiana,
Missouri, and Tennessee. Assuming an average investment per home of $150,000 would
equate to a total investment of $525 million.
Waypoint Legacy Funds: Investment in 3,400 Properties

The Waypoint Real Estate Group (WREG) was formed in January 2009, making it one
of the first large institutional investors in the SFR sector. Notably, an affiliate of
WREG filed for the IPO of a single-family rental REIT in May 2013, but subsequently
cancelled the offering. Through a series of transactions, including STWD’s acquisition
of WREG in 2014 and subsequent spin-off of SWAY, and SWAY’s combination with
Colony American Homes in January 2016, WREG’s legacy funds are now managed by
Colony Starwood Homes under the Waypoint brand.
The funds aggregate approximately 3,400 homes with an estimated total investment of
$510 million (assuming an average investment of $150,000 per home). Major markets
include California, Florida, Phoenix, Atlanta, and Chicago.
GTIS Partners/643 Capital Management: Estimated Investment in More Than 3,400

Properties (as of latest available disclosure in 3Q15)
GTIS Partners has partnered with 643 Capital Management to invest in more than 3,400
single-family rental properties (as of 3Q15, the latest available disclosure). As of 3Q15,
the portfolio was located in seven markets (Atlanta, Chicago, Dallas, Houston, Las
Vegas, Nashville, and South Florida) and was 92% leased. GTIS and 643 have noted
their intention to expand into Tampa, Indianapolis, and Charlotte. As of 3Q15, the
portfolio’s gross yield totaled 12.3%, while its net yield was 6.7%.
GTIS Partners is a global real estate investment firm based in New York with $3.3 billion
in AUM. 643 Capital Management is a San Francisco-based private equity firm focused
on debt and equity real estate investments. The partnership considers itself one of the
earliest institutional participants in the single-family rental sector.

Including its partnership with GTIS Partners, 643 Capital Management manages more
than 4,500 units, including other institutional SFR portfolios, which total more than $500
million. In addition to GTIS Partners, the firm has cited partnerships with Och-Ziff
Capital Management, Starwood Capital Group, and Colony Capital Group.
VineBrook Homes: $139 Million Investment

VineBrook Homes was founded in 2007 to invest in single-family rental properties and is
managed by VineBrook Partners. VineBrook focuses its investments in the Midwest on
high yield assets (8%+ net yields), with target home prices of $50,000-$60,000. The
company operates with a fully integrated platform across the full life-cycle of a property.
As of July 2016, VineBrook’s portfolio totaled approximately 3,100 homes with a total
investment of $139 million, implying an average total investment per home of $45,000.
Primary markets include Dayton (53%), Cincinnati (29%), and Columbus (14%). Overall
occupancy as of July 2016 totaled approximately 95%.
Apollo Global Management (APO): Investment in 1,400 Properties

Apollo Global Management (APO) is an alternative asset manager with $186 billion of
assets under management across private equity, credit, and real estate. Through the
company’s real estate private equity fund, Apollo owns (or has ownership interest in)
approximately 1,400 single-family rental properties in Northern and Southern California,
Nevada, Illinois and Georgia. Assuming an average investment per home of $150,000
would equate to a total investment of $210 million.
Lafayette Real Estate LLC: $138 Million Investment

Founded in 2011, Lafayette Real Estate is a private equity firm based in New York that
focuses on distressed real estate, primarily through the acquisition, renovation, and leasing
of single-family homes sold via short sale, foreclosure sale, or REO sale. As of August 31,
2016, the company owned 1,500 single-family rental properties in nine markets across five
states (AZ, IN, FL, GA, and NC). Top markets include Atlanta (34%), Tampa (29%),
Jacksonville (15%), and Orlando (12%). The total cost basis of the portfolio is
approximately $138 million, representing an average investment per home of $92,000.
The firm launched its first fund (Fund 1) in December 2011, which acquired
approximately 600 single-family homes for $42 million across 8 markets. The fund
reached stabilized occupancy of 95% within 18 months and is financed through debt
provided by FirstKey, a subsidiary of Cerberus Capital Management. Fund II was
launched in 2014 and deployed over $80 million of capital across 750 single-family
homes. The company provides internal property management through its Brandywine
Homes USA brand.
Residential Capital Management: Has Acquired More Than 7,700 Homes

Residential Capital Management (RCM) is a private firm that offers vertically integrated,
single-family residential real estate services. These include advisory, asset sourcing,
construction management, leasing, property management, renovation services,
disposition services, title services, and capital raising. The firm is headquartered in

Atlanta, GA with additional offices in GA, FL, and TN. Since 2010, RCM has acquired,
renovated, and managed more than 7,700 homes. This includes more than 1,200
properties on the company’s behalf, subsequently sold to third parties, and more than
6,500 homes acquired on behalf of investors.
MACK Companies: 1,200 Homes

MACK Companies is a diversified, Chicago-based real estate company that offers
investment, construction, residential, commercial, landscape, and brokerage services.
According to the company’s website, MACK Companies’ property management division,
rentMACK, currently owns and manages more than 1,200 homes. Residents are also
granted ownership options for their rentals via a rent-to-own strategy. In late 2012, the
company sold 196 properties for $28 million to American Residential Properties. The
company believes this was the largest bulk sale of performing single-family rentals in the
U.S. at the time.
Landsmith: Investment in 1,000 Homes

Landsmith acquires, renovates and manages single-family homes through its Landsmith
Residential Impact Fund. The fund is a partnership between Landsmith and not-for-profit
companies for the acquisition, renovation, and renting of homes to low and moderate
income families utilizing a rent-to-own strategy. According to its website, the company
currently manages more than 1,000 homes. Landsmith cites a nationwide geographic
focus and acquisition criteria of 12%+ net capitalization (cap) rates and 50% of
replacement cost. The fund covers 25 different markets from seven regional offices.
Broadtree Homes: $53 Million Investment

As of June 30, 2016, Broadtree Homes owned a portfolio of 506 single-family rental
units with a total investment of $53 million, or an average investment per home of
approximately $104,000. Markets include Atlanta, Georgia (52%), Palm Beach County,
Florida (37%), Rochester, New York (9%), and Minneapolis, Minnesota (2%). The
portfolio is 94.3% occupied. The company anticipates near-term growth in its portfolio
and has additional portfolios under contract, including 150 homes in Atlanta expected to
close by the end of 3Q16.
Broadtree Homes is managed by Broadstone Real Estate, a Rochester-based real estate

company founded in 2006. Broadstone Real Estate additionally invests in net lease
properties and provides property management services.
Firm Capital American Realty Partners: $35 Million Investment

Firm Capital American Realty Partners (formerly Delavaco Residential Properties)
invests in income producing real estate in the U.S., as well as real estate bridge loans and
joint venture capital. The company is publicly traded on the TSX Venture Exchange
(Ticker: FCA) and externally managed by Firm Capital Realty Partners Advisors.
According to company filings, as of June 30, 2016, FCA owned a portfolio of 565 single-
family properties with a cost basis of $35.4 million and fair value of $33.7 million

(equivalent to approximately $62,600 and $59,800 per unit, respectively). The portfolio is
located primarily in Georgia (53% of portfolio; 43% occupied), Florida (25% of portfolio;
24% occupied), and New Jersey (22% of portfolio; 81% occupied). The company is
currently marketing its single-family properties for sale. Additionally, the company owns
377 multifamily and condominium units in Florida and Texas (97% occupied).
JWB Real Estate Capital

JWB Real Estate Capital (formerly Jacksonville Wealth Builders) has been investing in
distressed single-family properties since 2006. The firm acquires, renovates, leases and
manages properties in Northeast Florida (primarily Jacksonville). In addition to its own
principal investments, the company provides property management for passive investors.
According to the company, it has purchased approximately 2,000 SFR properties and
currently has 1,200 properties under management.
Other Companies
Roofstock
Roofstock (roofstock.com) is an online, single-family rental marketplace that launched in
March 2016 and caters to institutional and individual investors. The company works with
buyers and sellers from large institutions, as well as high net worth individuals.
Roofstock certifies each rental home on the marketplace and each of the vendors it
recommends. Roofstock currently operates in 10 markets. Investors are able to either buy
homes outright or invest in diversified SFR funds. The funds are managed by SFR
operators with properties selected from the marketplace with Roofstock providing fund
administration and local property management oversight. In its first year of operations,
Roofstock expects to have sold more than $70 million of leased SFR homes with average
days on market trending to under 35 days. Longer-term, the company plans to build out
asset management capabilities, which would provide additional transparency into asset
performance.
HomeUnion
HomeUnion, based in Irvine, CA, has developed an online platform to provide an end-to-
end suite of services to efficiently and remotely invest in single-family rental homes in
more than 20 markets across the U.S. The company offers property selection, acquisition,
renovation, management, and disposition services, as well as financing. In this way,
individuals can build a custom portfolio of investment properties and benefit from a
passive investment in cash flow generating real estate.
Portfolio Summaries for Major Institutional Operators

Exhibit 6 summarizes portfolio metrics for the major SFR operators as of 2Q16.
Together, these portfolios encompass 115,000 properties.
As of 2Q16, we estimate a weighted average occupancy rate of 93.7%, ranging from a

high of 97.6% for Silver Bay Realty Trust to a low of 75.7% for Altisource Residential

(given rapid portfolio growth). We estimate a weighted average total investment per
home of approximately $169,000 and a gross rental yield of 10.1%.
It is important to note the effects of recent mergers, including AMH/ARPI and

CAH/SWAY. Due to merger accounting, acquired assets are written up to market value.
As a result, yields and cost basis may understate the initial economics of homes at the
time of original acquisition.
Exhibit 6: Major SFR Operators Portfolio Summary
2Q16 SFR Portfolio Summary

Avg. Avg. Gross
Total Occupied Occupancy Investment Avg. Avg. Monthly Rental
Company Portfolio Homes Rate Per Home Size (sqft) Age (yrs) Rent Yield
American Homes 4 Rent (AMH) 46,456 44,021 94.8% $170,603 1,958 13.3 $1,461 10.3%
Colony Starwood Homes (SFR) 30,410 29,011 95.4% $193,081 1,850 29.0 $1,519 9.4%
Silver Bay Realty Trust (SBY) 8,911 8,700 97.6% $134,840 1,644 26.8 $1,190 10.6%
Altisource Residential (RESI) 3,977 3,010 75.7% $110,981 1,496 35.0 $1,085 11.7%
Tricon American Homes 7,904 7,025 88.9% $126,000 1,513 NA $1,191 11.3%
Progress Residential 17,333 15,929 91.9% $175,924 1,947 14.5 $1,447 9.9%
Total / Weighted Avg. 114,991 107,696 93.7% $169,450 1,857 19.9 $1,425 10.1%
AMH, SFR, and Tricon American Homes portfolio metrics exclude properties held for sale. RESI portfolio excludes REOs under evaluation
for potential rental strategy. RESI average investment per home and gross yield based on stabilized portfolio.
Geographic Concentration
We compiled data on geographic concentrations from the major SFR operators where
disclosure was available (including from securitization data). Our analysis encompasses
approximately 150,000 properties across eight major operators. The data shows the
majority of large institutional SFR portfolios concentrated in the “sun belt” of the U.S. in
states with favorable population and growth trends.
We estimate that approximately 22% of homes are located in Florida (including Tampa,
Orlando, and Miami), 15% in Georgia (primarily Atlanta), 12% in Texas (including
Houston, Dallas, Austin, and San Antonio), 8% in Arizona (primarily Phoenix), and 8%
in California.

Exhibit 7: Major SFR Operators Portfolio Geographic Summary
Other/NA
IN 12%
FL
2% 22%
TN
3%
IL
3%
NV
4%
OH
4%
GA
NC 15%
7%
CA
8% TX
AZ 12%
8%
Note: Encompasses 150,000 properties from Invitation Homes, American Homes 4 Rent, Colony Starwood
Homes, Progress Residential, Silver Bay, Tricon American Homes, Altisource Residential, VineBrook Homes,
and Lafayette RE. Invitation Homes data based on securitization collateral across approximately 31,000
properties (approximately 65% of the company’s total portfolio).
Source: Company and ratings agency reports and KBW Research.
Gross Yields
Gross yields vary by market and home price. According to data from RentRange, the
average gross rental yield on estimated market values in 18 top SFR MSAs totals 9.5%.
At the higher end of the range, markets with yields above 10% include Chicago, Houston,
Indianapolis, Dallas-Fort Worth, and Atlanta. Depending on the time of acquisition, gross
yields for major players’ portfolios in these markets may be higher due to cumulative
price appreciation.
We believe lower price point homes are generally associated with higher gross yields
partly due to higher long-term operating costs relative to property price and potentially
lower residual value. For example, Tricon American Homes, with an average investment
per property of $126,000 (versus a sector average of $169,000) has achieved an average
gross yield of 11.3% (versus a 10.2% peer average). Data from RentRange supports this,
showing a clear correlation between home values and gross yields.

Exhibits 8 and 9 summarize this data.
Exhibit 8: Gross Rental Yields for Top MSAs
14
12
Percent 10
8
6
4
2
0 Indianapolis
Dallas-Fort Worth
Phoenix
Orlando
Austin
Houston
Salt Lake City UT

Las Vegas
Atlanta
Charlotte
Nashville
Inland Empire
Jacksonville FL
Tampa
Seattle
Miami
Sacramento
Chicago
Note: Based on RentRange data from nearly 2 million, 3-bedroom SFR properties. Rents and home prices
based estimated current market levels as determined by RentRange’s automated valuation model (AVM).
Source: RentRange.
Exhibit 9: Gross Rental Yields versus Average Home Values
35
30
Average gross yield %
25
20
15
10
0
0 200,000 400,000 600,000 800,000 1,000,000
Average AVM $
Note: Based on RentRange data from nearly 2 million, 3-bedroom SFR properties. Rents and home prices
based estimated current market levels as determined by RentRange’s automated valuation model (AVM).
Based on same MSAs as data in Exhibit 8.
Source: RentRange.

Key Industry Themes
Moderating Acquisition Pace; Increased Focus on Operations
As the pace of acquisitions has moderated, we believe larger SFR operators have focused
on portfolio stabilization and operational improvement. Incremental capital deployment
has been selective, aimed at increasing scale in existing markets that still offer attractive
yields. Additionally, operators have increasingly looked to prune their portfolios in order
to optimize footprint and harvest gains.
Exhibit 10 shows the portfolio growth of the major institutional players where company
disclosure is available. As the graph shows, acquisitions accelerated meaningfully
through 2014. Beginning in 2015, the pace of growth tapered as companies shifted focus
to stabilization and operational improvements.
Exhibit 10: Institutional SFR Portfolio Evolution – Home Count
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2012 2013 2014 2015 2016
AMH Invitation Homes SFR
Progress Residential SBY Tricon American Homes
RESI VineBrook Homes Colony American Homes
ARPI
Note: SFR represents Starwood Waypoint homes prior to 2016 and includes STWD legacy portfolio prior to
2014. Intra-period data estimated where not available.
Source: Company and media reports and KBW Research.
As a result of operational improvement, the public SFR players (including AMH, SFR,
and SBY) have reported improved results based on same-home portfolios. We estimate
an average LTM/annualized core NOI margin of 60.3% and NCF margin of 53.3%,
which equate to average assets yields of 5.9% before capex (NOI yield) and 5.1% after
capex (NCF yield). Further, we estimate average same-home NOI growth of 9.7% in
2Q16 driven by a 5.8% increase in revenues and 1.1% increase in expenses.

Increasing Stabilized Occupancy
As the acquisition pace has slowed, institutional portfolios have largely reached stabilized
occupancy levels of approximately 95%, up from approximately 92% at year-end 2015,
83% at year-end 2014 and 68% at year-end 2013.
Exhibit 11 shows historical average occupancy for the major players (as available).
Exhibit 11: Institutional SFR Portfolio Evolution – Occupancy
100%
90%
80%
70%
60%
50%
40%
30%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
2013 2014 2015 2016
AMH SBY SFR CAH ARPI TAH Progress Average
Note: Represents leased rate where occupancy unavailable. Legacy ARPI data excludes preferred operator
properties with 100% contractual occupancy. SFR includes legacy SWAY data.
Source: Company reports.
Strong Rent Growth

As portfolios have stabilized, the major public SFR REITs have been able to push rent
growth on renewals and re-leases. We compiled data from the public SFR REITs on
recent rent growth for same-home and overall portfolios for re-leases and renewals. We
estimate rent growth on a blended basis has averaged 4.5% over the last 12 months
through 2Q16 (including year-to-date [YTD] data from SFR and LTM data from AMH
and SBY). This includes 4% for renewals and 5% for re-leases. In this year’s 2Q spring-
leasing season, we estimate blended rent growth reached 5.7% on average, including
4.3% for renewals and 7.2% for re-leases. We believe this is indicative of continued
strong demand, limited supply, and favorable demographic trends.

Exhibit 12 summarizes these trends over the LTM period.
Exhibit 12: Rent Increases
Blended Rent Growth

6.0%
5.0%
4.0%
3.0%
2.0%
3Q15 4Q15 1Q16 2Q16
AMH SFR SBY Average

Re-lease Rent Growth Renewal Rent Growth
10.0% 6.0%
8.0% 5.0%
6.0% 4.0%
4.0% 3.0%
2.0% 2.0%
3Q15 4Q15 1Q16 2Q16 3Q15 4Q15 1Q16 2Q16
AMH SFR SBY Average AMH SFR SBY Average
Summary Rent Growth (AMH, SFR, SBY)

8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
3Q15 4Q15 1Q16 2Q16
Renewals Releases Blended
Note: SFR re-lease rent growth not available for 3Q15 and 4Q15 periods. Blended rent growth as disclosed by SFR and calculated for AMH
and SBY based on the simple average of reported renewal and re-lease rent growth. SFR data based on same-home portfolio; AMH and
SBY data based on aggregate portfolio. Averages represent simple averages.
Recent data from SFR securitizations show similar rent increases across 23 single-
borrower securitizations encompassing approximately 90,000 properties. According to
servicer reports compiled by Morningstar Credit Ratings (Morningstar), rent increases on
SFR securitization collateral peaked at 5.7% in May 2016 on a blended basis at the height
of the spring leasing season in April 2016.
Additionally, Morningstar stratifies securitization rent increases by re-leases (vacant-to-
occupied) and renewals. The data shows average renewal rent increases ranging from
3.5% to 4.5% and re-lease rent increases ranging from 2.5% to 7.0% over the 18-month

period ended June 2016. At the height of the spring leasing season in April 2016, rent
increases on re-leases approached 7.0%
Industry Consolidation a Continued Theme

Several large institutional players, such as Invitation Homes and Progress Residential,
remain private. As valuations in the public sector improve, we expect more public
companies to enter the space over time. Additionally, existing public companies may
increasingly look to raise equity capital or use their shares as a currency for M&A as the
gap between NAV and share prices has narrowed. Given industry fragmentation, benefits
of scale, and improved valuations, we expect consolidation to be a major theme going
forward as larger REITs continue to acquire smaller portfolios.
Later in this report, we discuss recent M&A in more detail and provide a deal database
summarizing 18 completed/pending institutional transactions encompassing more than
50,000 properties since 2012.
Improving Access to Financing

We see improving access to capital as a long-term catalyst for the industry, which should
allow participants to boost returns. While most large institutional players have access to
lines of credit to finance acquisitions, other financing sources have expanded to include
convertible debt, preferred equity, and securitization. Notably, in May and June 2016,
American Homes 4 Rent issued $499 million of perpetual preferred stock at a yield of
6.5% and 6.35%.
Long term, we expect SFR REITs to eventually become rated issuers of unsecured debt.
This will require business model validation, including by ratings agencies, and a lower
unencumbered asset base. Other equity REIT sectors tend to be rated and issuers of
unsecured debt. According to the National Association of Real Estate Investment Trusts
(NAREIT), 46 equity REITs are rated investment grade, representing 68% of the sector
by market capitalization and an estimated 25% by number of REITs.
We estimate the public SFR REITs currently operate with average leverage ratios (debt-to-
capital) of 48%, ranging from 36% to 58%. This compares with a median leverage ratio for
equity REITs of 45%, including 40% for multifamily. We estimate unsecured debt
comprises a median 65% of total debt for equity REITs, including 63% for multifamily.
Exhibit 13 summarizes current financing sources for the SFR sector.
Exhibit 13: SFR REIT Financing Sources

Financing Sources
Credit Preferred
Company Facility Equity Converts Securitization
Invitation Homes X X
American Homes 4 Rent (AMH) X X X X
Colony Starwood Homes (SFR) X X X
Silver Bay Realty Trust (SBY) X X
Altisource Residential X
Tricon American Homes X X
Progress Residential X X

Exhibit 14 summarizes leverage for the public SFR REITs and comparisons with major
property REIT sectors.
Exhibit 14: Leverage Summary
Leverage %
Debt/ Debt/ Unsecured
Company/Sector Capital Equity Debt
SFR REITs:
American Homes 4 Rent (AMH) 36.4% 0.57x 3.6%
Colony Starwood Homes (SFR) 57.6% 1.36x 18.5%
Silver Bay Realty Trust (SBY) 49.8% 0.99x 0.0%
SFR REIT average 47.9% 0.97x 7.4%
Equity REITs:
Multifamily 40.4% 0.68x 63.2%

Student Housing 40.4% 0.68x 62.2%
Manufactured Housing 52.4% 1.10x 11.0%
Office 45.5% 0.84x 82.2%
Industrial 38.8% 0.63x 75.8%
Retail 46.5% 0.87x 56.2%
Self-Storage 38.5% 0.84x 86.9%
Lodging 34.9% 0.53x 46.1%
Healthcare 44.5% 0.80x 87.7%
Equity REIT median 44.7% 0.80x 64.9%
Debt/Capital
70%
SFR Other Equity REITs
58%
60% 52%
50% 48%
50% 47% 46% 45% 45%
40% 40% 39% 38%
40% 36% 35%
30%
20%
10%
0%
Note: As of 2Q16. Excludes accumulated depreciation where applicable and available. AMH and SFR
unsecured debt represents convertible debt. Leverage calculated on book equity.
Source: Company reports, FactSet, SNL, and KBW Research.

A Shift Toward Internalized Management
While most of the public players in the SFR sector were initially formed as externally
managed vehicles, all but one have since internalized their management over the past
several years. We believe this shift is commensurate with the history of other equity
REIT sectors, as internally managed structures provide operating leverage and better align
the interests of management with shareholders.
 American Residential Properties (ARPI) internalized its former manager in 2012

prior to its IPO in May 2013.
 American Homes 4 Rent (AMH) internalized its former manager in June 2013 prior
to the company’s IPO in July 2013. We estimate total consideration of $130 million
equated to approximately 7.3x revenues and 12.6x EBITDA.
 In September 2014, Silver Bay Realty Trust (SBY) completed the internalization of
its prior manager. As consideration, SBY issued 2.2 million shares (5.8% of shares
outstanding) for approximately $36 million, or approximately 4.1x revenues and
6.8x estimated EBITDA.
 In November 2014, Colony American Homes internalized its manager. The terms of
the deal were not disclosed.
 In connection with its merger with Colony American Homes, Starwood Waypoint
Residential Trust (SWAY, since renamed Colony Starwood Homes [SFR])
internalized its prior manager. The company issued 6.4 million shares (equivalent to
17% of total share count at the time) for approximately $166 million (based on the
share price at the time of the announcement). We estimate this equated to 8.5x
revenues and 9.6x EBITDA.
 Altisource Residential Corp. (RESI), whose strategy has focused on both NPLs and
SFRs, is externally advised by a separate public company, Altisource Asset
Management Corp. (AAMC). AAMC receives a graduated base fee based on rental
portfolio size in addition to certain incentive fees based on return hurdles and
leasing activity. RESI’s management agreement was amended in March 2015 from a
prior agreement, which included more onerous incentive fees paid to the manager
based on low return hurdles. Investors who dislike externally managed structures
may choose to own shares of both the REIT as well as its manager.

Part II: Economics of the Single-Family Rental Model
KBW’s Single-Family Rental REIT Model
We estimate unlevered returns of 4-7% while total returns could reach the low to mid-
teens depending on HPA and leverage. In Exhibit 15, we summarize KBW’s operating
assumptions for single-family rental REITs in an illustrative example.
Exhibit 15: KBW’s Single-Family Rental REIT Model
$ per $ per % of gross % of effect. %

Company XYZ month year revenue revenue Yield Commentary
Gross rent $1,376 $16,512 100.0% 104.2% 9.8% 9.5% gross rental yield and 3% year 1 inflation
Other income (primarily tenant fees) 34 413 2.5% 2.6% 0.2% 2.5% of revenue for ancillary fees
Vacancy (69) (826) (5.0% ) (5.2% ) (0.5% ) 95% occupancy
Credit loss (21) (248) (1.5% ) (1.6% ) (0.1% ) 1.5% bad debt expense, in-line with public co's
Effective gross rent $1,321 $15,852 96.0% 100.0% 9.4%
Implied occupancy rate 95.0%
Implied occupancy rate after credit loss 93.5%
Expenses
Property management fee ($99) ($1,189) (7.2% ) (7.5% ) (0.7% ) 7.5% of revenue, could improve long term
Property taxes (246) (2,953) (17.9% ) (18.6% ) (1.8% ) 1.75% of cost basis
HOA fees (20) (238) (1.4% ) (1.5% ) (0.1% ) 1.5% of revenue
Insurance expense (25) (300) (1.8% ) (1.9% ) (0.2% ) Blanket policy of $200-$400 per home
Repairs and maintenance (83) (1,000) (6.1% ) (6.3% ) (0.6% ) Approx. $80 per month
Turnover costs (50) (594) (3.6% ) (3.7% ) (0.4% ) $1/sqft or $1,800/turn (assumes 33% turnover)
Total expenses ($523) ($6,274) (38.0%) (39.6%) (3.7%)
Net operating income (NOI) $798 $9,578 58.0% 60.4% 5.7%
Recurring capital expenditures (capex) (83) (1,000) (6.1% ) (6.3% ) (0.6% ) $1,000 per year
Net cash flow (NCF) $715 $8,578 51.9% 54.1% 5.1%
Note: Total R&M, turnover, and capex ($216) ($2,594) (15.7%) (16.4%) (1.5%) In-line with public same-home results
Purchase price per property $150,000
Upfront renovation cost 18,750 12.5% of purchase price
Total investment per property $168,750 In-line with major players
Source: KBW Research.
 Based on a total investment per home of approximately $170,000, we assume a

9.8% gross rental yield, including a 9.5% initial yield and 3% of year one rental
inflation. Additionally, we assume 2.5% of rental revenue from ancillary tenant fees.
 After accounting for a stabilized 95% occupancy and 1.5% in bad debt expense, we
project an effective rental yield of 9.4%.

Property Operating Expenses
Below we discuss our expense assumptions for the single-family rental model.
Additionally, we provide comparisons to the multifamily sector where relevant based on

data from the National Apartment Association’s (NAA) 2016 expense survey (based on
fiscal year 2015 data), which encompasses 2,970 multifamily properties containing
819,100 units.
 NAA also stratifies the data between garden properties (2,575 properties with
699,488 units) and mid- and high-rise (395 properties with 119,612 units).
 Importantly, we note the difference in average square footage between single-family

rentals and multifamily units. Average unit size for NAA’s multifamily universe is
934 square feet, including 938 square feet for garden and 910 square feet for mid-
and high-rise. For the major SFR players, we estimate an average home size of
approximately 1,900 square feet.
Repairs and Maintenance (R&M)

 We believe repairs and maintenance can vary widely from operator to operator
depending on scale, portfolio vintage, and initial upfront capex. We assume $1,000
per property, or $80 per month and 6% of revenue (excluding turnover cost).
 This compares to $840 per unit, or $40 per month and 3.7% of revenue for
multifamily, which likely includes some turnover costs (per NAA, including
contract services such as landscaping). This is inclusive of garden properties at
$800 per unit and mid- and high-rise properties at $1,100 per unit.
 For major public multifamily REITs (including EQR, AVB, and ESS), we
estimate average R&M per unit (including turnover costs) of $1,300 based on
YTD/LTM same-property results.
Turnover Costs
 We assume approximately $1,800 per turn ($1 per square foot), or $600 per
property assuming 33% turnover.
 This compares to 52% annualized turnover for multifamily per NAA (including
53% for garden and 52% for mid- and high-rise).
 NAA and major public multifamily REITs do not explicitly break out turnover
costs, which we assume are mostly included within R&M.
Property Management
 We assume 7.5% of revenue, which could improve over the long term with a scaled
portfolio.

 This compares to an estimated 4.7% for multifamily per NAA including
management and administrative fees. This is inclusive of garden at 4.8% and
mid- and high-rise at 4.5%. We exclude personnel costs, which we assume are
included in G&A.
 Additionally, we estimate an average of 3.1% for the five largest public multifamily
REITs (EQR, AVB, ESS, UDR, and MAA) based on YTD 2Q16 results.
Property Taxes
 We assume 1.75% of cost basis, or approximately 18.5% of revenue. Property taxes
can vary depending on property age and location.
 This compares with 11.8% of revenue for multifamily (per NAA) including
11.4% for garden and 13.5% for mid- and high-rise.
HOA Fees
 We assume 1.5% of revenue, equivalent to $240 per year. We note that some
properties may not require HOA fees depending on the neighborhood.
Insurance Expense
 We believe that scaled operators can secure cheaper, blanket insurance policies for
their portfolios for around $200 to $400 per property. Our model assumes
approximately $300 per home or 2% of revenue.
 This compares with $260 per unit or 1.9% revenue for multifamily (per NAA). This
is inclusive of $250 per unit for garden and $300 per unit for mid- and high-rise.
Net Operating Income (NOI)

 The above assumptions equate to an NOI margin of 60% (after vacancy and bad
debt) and an NOI yield of 5.7% on cost basis.
 This compares with 61% for multifamily based on NAA data including garden at
61% and mid- and high-rise at 62%.
 For the public sector, we estimate an average NOI margin of 65%.
Recurring Capital Expenditures

 We assume recurring capital expenditures (capex) of approximately $1,000 per year,
or 6% of revenue.
 This compares with $1,180 per unit or 8.8% of revenue for multifamily (per
NAA), inclusive of $1,130 per unit for garden and $1,500 for mid- and high-rise.
 For major public multifamily REITs (including EQR, AVB, and ESS), we
estimate average recurring capex per unit of $1,440 based on YTD/LTM same-
property results.

Net Cash Flow (NCF)
 After incorporating recurring capex, we calculate a NCF margin of 54% and an NCF
yield of 5.1% on cost basis.
Notably, we assume total annual property-level expenses (repairs & maintenance,

turnover costs, and recurring capex) of $2,600 per property or 16.4% of revenue.
 This compares with $2,020 per unit for multifamily (per NAA), including $1,930 for
garden and $2,580 for mid- and high-rise.
 For major public multifamily REITs (including EQR, AVB, and ESS), we estimate
average R&M, turnover, and recurring capex of $2,740 per unit based on YTD/LTM
same-property results (although this could include some expenses the SFR REITs
allocate elsewhere as an apples-to-apples comparison is not available).
Equity REIT NOI Margin Comparison

Exhibit 16 summarizes our estimate of NOI margins across the various equity REIT
sectors. We estimate an average and median NOI margin for equity REITs of 67% and
65%. This compares to our baseline estimate of 60.4% for the SFR sector and an
estimated 60.3% on an LTM/annualized basis for the same-home portfolio of the major
public SFR players (AMH, SFR, and SBY).
At the higher end, the triple net lease sector has an average NOI margin of 93%. In a net
lease, the tenant is typically responsible for a majority of the property operating expenses,
which results in the above-average margin. For multifamily, the most comparable equity
REIT sector to SFR REITs, we estimate an average NOI margin of 65%. We note that the
two largest public SFR REITs, AMH and SFR, have guided to core NOI margins
following recent merger integrations of 62-64%.
Exhibit 16: Equity REIT NOI Margins
100% 93%
80% 75% 71%

70% 66% 67% 65%
65% 62%
60% 60% 58%
60% 55%
40%
20%
0%
Note: Equity REIT NOI margins based on most recent fiscal year data per SNL Financial.
Source: FactSet, SNL, and KBW Research.

Unlevered versus Levered Returns
In Exhibit 17, we summarize illustrative levered and unlevered returns using our baseline
assumptions.
Exhibit 17: KBW’s Single-Family Rental REIT Model – Hypothetical Returns
Company XYZ Unlevered Levered

Rental revenue (incl. vacancy/credit loss) $309 $309
Other income 8 8
Total revenue $317 $317
Property operating expenses (125) (125)
Net operating income (NOI) $192 $192
% margin 60.4% 60.4%
Corporate G&A ($27) ($27)

% of assets 0.75% 0.75%
Interest expense $0 ($53)
Cost of debt NA 3.0%
Funds from operations (FFO) $165 $112
Recurring capital expenditures (capex) (20) (20)
Adjusted funds from operations (AFFO) $145 $92
ROE (FFO) before HPA 4.7% 6.3%
ROE (AFFO) before HPA 4.1% 5.2%
Annual home price appreciation (HPA) 3.5% 3.5%
ROE (FFO) incl. HPA 8.0% 13.0%
ROE (AFFO) incl. HPA 7.4% 11.8%
Illustrative balance sheet:
Total investment per property $168,750 $168,750
Total properties 20,000 20,000
Total investment $3,375 $3,375
Working capital $169 $169
Total assets $3,544 $3,544
Debt $0 $1,772
Equity $3,544 $1,772
Leverage (debt/capital) 0% 50%
Note: $ in millions except per-property investment.

 Assuming a total investment per home as in the previous example of $170,000 and a
total portfolio size of 20,000 properties, we use an asset base of $3.5 billion
including a 5% assumption for working capital requirements.
 We assume our same gross rental yield and property operating expense assumptions,
equating to a 60% NOI margin.
 We assume corporate general and administrative expenses (G&A) of 0.75% of

assets. We believe with scale, this level of G&A and possibly lower should be
achievable given management commentary and comparisons to other equity REITs.
 The largest public SFR REIT, American Homes 4 Rent (AMH), currently
operates with corporate G&A of 0.37% of assets (for 1H16).
 In the equity REIT universe, we estimate median G&A of 0.8% of assets. We

estimate G&A runs approximately 0.3-0.6% for multifamily, 0.4-0.8% for office,
0.6-1.0% for industrial, 0.9-1.1% for retail, 1.0% for diversified, and 0.8% for
lodging and resorts.
 In our unlevered example, our analysis equates to a return on equity (ROE) of 4.7%
on funds from operations (FFO) and 4.1% on adjusted FFO (AFFO) after recurring
capex. Including an assumption for annual HPA of 3.5%, we calculate an ROE of
8.0% on FFO and 7.4% on AFFO.
 In our levered example, we assume 50% debt to capital (1.0x debt to equity, in line
with the average for the public players) and a 3.0% cost of funds. Our analysis
equates to an ROE of 6.3% on FFO and 5.2% on AFFO after ongoing capex.
Including an assumption for annual HPA of 3.5%, we calculate an ROE of 13.0% on
FFO and 11.8% on AFFO.
 Our analysis assumes an internal management structure with no management fee

(typically 1.5% of equity).
Public SFR REIT Same-Home Analysis and Expense Disclosures

Over the past few quarters, the public SFR REITs have begun to provide more granular
property level disclosure and operating performance as a result of increased same-home
portfolios.
Exhibit 18 summarizes this disclosure including occupancy, turnover, rent increases, NOI
increases, per property expenses for repairs and maintenance (R&M), turnover, stabilized
capex, and asset yields. Our analysis is based on LTM data where available, or otherwise
annualizes year-to-date 2Q16 results.

Exhibit 18: Public SFR REIT Same-Home Analysis
As of June 30, 2016

Same-Home summary AMH SFR SBY Avg./Total
# of Homes 25,288 24,657 5,942 55,887
% of total portfolio 54.4% 79.9% 66.7% 67.0%
Occupancy 95.5% 95.8% 97.7% 96.3%
Y/Y ∆ 1.2% 0.2% 1.4% 0.9%
Turnover-rate (LTM/annualized) 40.4% 32.8% 29.8% 34.3%

NOI - 2Q16 Y/Y change:
Revenues 5.4% 6.3% 5.8% 5.8%
Expenses (0.4% ) 5.2% (1.4% ) 1.1%
NOI 9.2% 7.8% 12.0% 9.7%
Core NOI margin - 2Q16 62.2% 62.8% 57.2% 60.7%

Y/Y ∆ 2.2% 0.6% 2.8% 1.9%
LTM/Annualized Core NOI margin 61.0% 64.1% 55.9% 60.3%

LTM/Annualized Core NOI margin after capex 56.7% 55.1% 48.2% 53.3%
Estimated LTM/Annualized NOI Yield 5.8% 5.9% 5.9% 5.9%
Estimated LTM/Annualized NCF Yield 5.4% 5.1% 5.1% 5.2%
Per property costs (LTM/annualized):
R&M & turnover $1,440 $1,428 $2,573 $1,814
R&M NA $934 NA NA
Turnov er NA $494 NA NA
Cost per turn (based on disclosed turnover) NA $1,506 NA NA
Recurring capex $717 $1,540 $1,098 $1,118
Total R&M, turnover, & capex $2,157 $2,968 $3,671 $2,932
LTM/annualized prop. mgmt. % of rental revenue 8.7% 5.3% 9.2% 7.8%
Note: SFR data for turnover-rate, LTM/Annualized Core NOI margins, per property costs, and property
management % of rental revenue based on YTD 2Q16 annualized data. AMH R&M and turnover includes in-
house maintenance expenses. SFR R&M includes landscaping and pool services expenses. SFR recurring
capex includes recurring capex and turnover-related capex. Core NOI margins based on individual company
definitions. SFR NOI margin includes asset management fee income. SBY R&M and turnover based on
property operating and maintenance expense, which removes an estimated $350 per home per year for
insurance costs. Asset yields based on disclosed same-home portfolio average investment per home for AMH
and SFR, and total portfolio average investment per home for SBY.
 We estimate average LTM/YTD annualized turnover of 34.3%, which compares to

our baseline assumption of 33% for the sector. The average appears skewed by
AMH’s high 40.4% LTM turnover, which may be driven by the company’s lease
expiration schedule.
 Core NOI in 2Q16 increased by an average of 9.7% year over year driven by 5.8%
revenue growth and 1.1% expense growth. At the same time, we estimate an average
core NOI margin in 2Q16 of 60.7%, up 1.9% year over year.

 We estimate an average LTM/YTD core NOI margin of 60.3% and NCF
margin 53.3% after recurring capex. This compares to our baseline assumption
for the sector of 60% and 54%, respectively.
 We estimate an average LTM/YTD NOI yield of 5.9% and NCF yield of 5.1%
after recurring capex. This compares to our baseline assumption for the sector of
5.7% and 5.1%, respectively.
 We estimate average LTM/YTD annualized R&M, turnover, and recurring capex

of $2,900 per property per year. This includes an estimated $1,800 for R&M and
turnover and $1,118 for capex.
 SFR is the only company to break out R&M and turnover separately ($934 for
R&M and $494 for turnover [$1,503 per turn] on a 2Q YTD annualized basis).
 Our baseline assumption for R&M, turnover, and recurring capex is

approximately $2,600 per property, including $1,000 for R&M, $600 for
turnover ($1,800 per turn), and $1,000 for recurring capex.
 We estimate average LTM annualized property management expense as a % of rental
revenue of 7.8%. This compares to our baseline assumption for the sector of 7.5%.
Below we summarize individual management targets for property-level cash costs
including R&M, turnover, and recurring capex.
 American Homes 4 Rent (AMH). Management has noted that it is targeting a

reduction in total property-level cash costs of at least 10% in 2016 to approximately
$2,150 per home. This compares to $2,160 per home on an LTM basis as of 2Q16
for AMH’s same-home portfolio. Importantly, AMH’s same-home portfolio
excludes the acquired ARPI portfolio.
 Colony Starwood Homes (SFR). Management is targeting property-level cash costs

per year of approximately $2,600-$2,800. This is composed of approximately
$1,000-$1,100 of R&M, $500-$600 of turnover costs (or $1,500-$1,800 per turn
assuming 33% turnover), and $1,100-$1,200 of recurring capex. On a YTD
annualized basis as of 2Q16, we estimate total same-home R&M, turnover, and
recurring capex per home of approximately $2,970, including $930 of R&M, $490
of turnover ($1,500 per turn based on YTD annualized turnover of 32.8%), and
recurring capex of $1,540 (which includes $1,030 of capital replacements and $510
of turnover-related capital costs).
 Silver Bay Realty Trust (SBY). Management is targeting property-level cash costs
per year of approximately $2,500-$3,000, which includes R&M, turnover, and
recurring capex. We estimate total R&M and turnover per home on an LTM basis
on SBY’s same-home portfolio of $3,670, which includes $2,570 for R&M and
turnover and $1,110 for recurring capex. We estimate SBY’s R&M and turnover
based on property operating and maintenance expense from which we remove an
estimated $350 per home per year for insurance costs.

SFR Securitization Capex Data
Kroll Bond Ratings Agency (KBRA) compiled actual 2015 incurred capex data from
servicer reports across 17 various SFR securitizations transactions encompassing several
issuers, including American Homes for Rent, Colony Starwood Homes, Silver Bay
Realty Trust, Invitation Homes, Progress, Residential, and Tricon American Homes.
The data shows simple average recurring capex per property of $1,100 per year (annualized
in certain cases). For the public SFR REITs, incurred capex on securitization assets appears
overall similar to reported same-home data. However, actual incurred capex is above issuer
underwritten capex for each transaction. We estimate a weighted average issuer
underwritten capex per home of $575 across the deals included in Kroll’s analysis. As a
result, capex appears to have underperformed original management expectations.
Exhibit 19 summarizes this data and includes comparisons to issuer underwritten capex
as well as same-home portfolio data for the public participants.
Exhibit 19: SFR Securitizations Actual Incurred Capex
# of Avg. Home Rehab % Property Capex Per Home Per Year Report
Deal Homes Age (yrs.) of Purchase Size (sq.ft.) Underwritten Actual Type
American Homes 4 Rent
AH4R 2014-SFR1 3,852 12 12.1% 2,028 $450 $1,012 9M Annualized (2015)
AH4R 2014-SFR2 4,487 12 10.0% 1,912 $450 $854 Full Year 2015
AH4R 2014-SFR3 4,503 12 10.9% 2,028 $450 $767 Full Year 2015
AH4R 2015-SFR1 4,661 13 12.3% 1,933 $450 $669 9M Annualized (2015)
Total/average 17,503 12 11.3% 1,973 $450 $817
Same-home portfolio 25,288 $2,157 LTM 2Q16
Colony Starwood Homes
SWAY 2014-1 4,081 33 14.7% 1,752 $1,003 $1,374 Full Year 2015
Same-home portfolio 24,657 $2,968 YTD 2Q16 Annualized
Silver Bay
SBY 2014-1 3,011 24 15.8% 1,703 $750 $1,015 Full Year 2015
Same-home portfolio 5,942 $3,671 LTM 2Q16
Invitation Homes
IH 2013-SFR1 3,191 30 13.1% 1,698 $450 $1,201 TTM June 2015
IH 2014-SFR3 4,011 28 14.1% 1,908 $450 $1,212 Full Year 2015
IH 2015-SFR1 3,026 27 12.5% 1,849 $750 $1,091 Full Year 2015
IH 2015-SFR2 3,521 28 13.3% 1,920 $750 $1,113 Full Year 2015
IH 2015-SFR3 7,192 29 14.4% 1,795 $750 $1,105 Full Year 2015
Total/average 20,941 29 13.7% 1,831 $647 $1,139
Progress Residential
Progress 2014-SFR1 3,138 14 7.6% 2,045 $450 $1,603 Full Year 2015
Progress 2015-SFR1 3,995 13 8.5% 1,978 $450 $1,259 11M Annualized (2015)
Progress 2015-SFR2 3,311 13 8.6% 1,917 $450 $1,071 6M Annualized (2015)
Total/average 10,444 13 8.3% 1,979 $450 $1,303
Tricon American Homes
TAH 2015-SFR1 3,505 35 23.0% 1,534 $489 $1,544 8M Annualized (2015)
Securitization weighted average 59,485 22 12.8% 1,869 $575 $1,107
Source: Kroll Bond Ratings Agency, servicer reports, company reports, and KBW Research.

Part III: An Alternative Look at Valuation – Implied Capitalization Rates
for Single-Family Rental REITs
Introduction
A capitalization rate (cap rate) is defined as the initial unlevered return on a property
based on property-level cash flows before interest expense and corporate overhead.
Nominal cap rates are based on cash flows before recurring capex, while economic cap
rates include recurring capex. For publicly traded REITs, a cap rate analysis is used to
determine the implied net yield of a REIT’s underlying real estate assets based on today’s
share price and can be useful for determining estimates of NAV.
As the portfolios of major single-family rental players have begun to stabilize, we believe
implied cap rates are becoming an increasingly relevant valuation tool for the public
sector. While we believe other valuation metrics should also be considered (such as
earnings multiples, dividend yields, BPO-based NAV), implied cap rates provide another
baseline for comparing the SFR sector to other public equity REITs, including
multifamily. Given similarities between multifamily and SFR, including their history of
institutionalization, we believe multifamily REITs will become an increasingly relevant
comparable for SFR REITs over time.
Our analysis suggests the public SFR sector trades at an average implied nominal cap
rate of 5.2%, 5.5%, and 5.7% and economic cap rate of 4.7%, 4.9%, and 5.1% based on
our 2016, 2017, and 2018 forecasts.
Analysis
We performed a cap rate analysis for the three pure-play public SFR REITs, including
American Homes 4 Rent (AMH), Colony Starwood Homes (SFR), and Silver Bay Realty
Trust (SBY). We used our 2016-2018 forecasts for NOI to look at cap rates on a forward
basis. Utilizing a full year estimated NOI figure captures seasonality throughout the year,
as well as our expectations of long-term earnings power following recent merger
integrations. Our forecasts include an assumption of modest portfolio growth ranging
from 1-3% annually for each company.
American Homes 4 Rent (AMH)

 We calculate implied nominal cap rates utilizing our 2016, 2017, and 2018 estimates
of 4.8%, 5.2%, and 5.6%, respectively.
 Our 2016 forecast includes a 10-month contribution from ARPI, which was acquired
on February 29, 2016. As a result, we adjust our 2016 NOI figure for the purposes
of this analysis to assume the ARPI portfolio was acquired on January 1, 2016.
 Management has guided to moderate headwinds on margins in 2016 due to ARPI’s
subscale operations. We currently forecast a 2016 NOI margin of 61.9%. However,
following stabilization of the ARPI portfolio, management has guided to run-rate
2017 NOI margins of 62-64%. We currently forecast a core NOI margin of 62.7% in
2017 and 62.7% in 2018.
 We forecast net portfolio growth of 0.9% in 2017 and 1.5% in 2018.

Colony Starwood Homes (SFR)
 We value the remaining NPL and REO assets at carrying value, which our model
assumes are fully divested by year-end 2017. Management completed several bulk
NPL sales in 2016 and has noted its expectation to sell remaining assets (primarily
REOs) by the end of 1H17. Ascribing any incremental value to these assets would
result in a higher implied cap rate on SFR’s single-family rental portfolio.
 Our forecast assumes a core NOI margin of 63.2% in 2016, 63.5% in 2017, and
63.7% in 2018 (based on the company’s definition). We note that unlike AMH and
SBY, SFR’s calculation of core NOI includes asset management fees (primarily
from the company’s management of legacy Waypoint funds, as well as a Fannie
Mae portfolio joint venture). Excluding this income, we calculate a comparable core
NOI margin of 60.7% in 2016, 61.4% in 2017, and 61.7% in 2018.
 Our implied cap rate estimates for SFR exclude asset management income from
NOI. Ascribing a value to this fee stream would increase the implied cap rate on
SFR’s single-family rental assets. For example, capitalizing this fee stream at a 6-8x
multiple would increase the implied cap rate by 6-8 basis points.
 We forecast net portfolio growth of 0.9% in 2017 and 0.8% in 2018.
Silver Bay Realty Trust

 Our forecast assumes a core NOI margin of 56.6% in 2016, 57.7% in 2017, and
58.8% in 2018.
 We forecast net portfolio growth of 0.8% in 2017and 2.8% in 2018.
Economic Cap Rate

Another measure of return for real estate assets is an economic cap rate, which, unlike an
implied cap rate, incorporates recurring capital expenditures. Given the capital intensity of
real estate, economic cap rates are viewed as a superior measure of cash flow and returns.
 We calculate the economic cap rate for each of the prior scenarios by incorporating
our individual company assumptions for recurring capex.
 Our 2016-2018 forecasts for AMH, SFR, and SBY assume recurring capex of
approximately $750-$1,000, $1,200-$1,300, and $1,000-$1,100 per property per
year, respectively.
 We note that AMH and SBY reported same-home recurring capex of $717 and
$1,098 per home over the LTM period ended 2Q16, while SFR reported 1H16
annualized capex per home of $1,540.

We estimate an average economic cap rate for the group of 4.7%, 4.9%, and 5.1%
based on our 2016, 2017, and 2018 forecasts, or 0.5% to 0.6% lower than pre-capex
(nominal) cap rates.
Exhibit 20 summarizes our analysis of implied cap rates utilizing our 2016-2018
forecasts, including cap rates before recurring capex (nominal cap rates) and cap rates
including recurring capex (economic cap rates).
Exhibit 20: SFR Implied Cap Rates – 2016 - 2018 Forecast
Nominal Cap Rate

6.5% 6.0%
6.0% 5.6% 5.7%
5.5% 5.6% 5.6% 5.7%
5.3% 5.4%
5.5% 5.2% 5.2%
5.0% 4.8%
4.5%
4.0%
3.5%
3.0%
SBY SFR AMH Avg. SBY SFR AMH Avg. SBY SFR AMH Avg.
2016 2017 2018
Economic Cap Rate

5.5% 5.3%
5.0% 5.1% 5.0% 5.1%
4.9% 4.9% 4.7% 4.9%
5.0% 4.7% 4.7%
4.4%
4.5%
4.0%
3.5%
3.0%
SBY SFR AMH Avg. SBY SFR AMH Avg. SBY AMH SFR Avg.
2016 2017 2018
Comparisons to Other Equity REIT Sectors

Multifamily
We compiled data from a subset of the largest multifamily equity REITs, including
Apartment Investment and Management Company (AIV), AvalonBay Communities
(AVB), Camden Property Trust (CPT), Equity Residential (EQR), Essex Property Trust
(ESS), Mid-America Apartment Communities (MAA), and UDR (UDR).
 We calculate an average implied cap rate based on annualized in-place 2Q16 NOI of
5.2%. Assuming 5% annual forward NOI growth would translate to an average

implied cap rate for the sector of 5.5%. This compares to the SFR REITs at an
average of 5.2%, 5.5%, and 5.7%, based on our 2016-2018 forecast.
 We also compiled disclosure on recurring capex in order to calculate implied

economic cap rates for the aforementioned multifamily REITs. We calculate an
average economic cap rate for the sector of 4.8% based on annualized 2Q16 NOI.
Assuming 5% NOI growth would translate to an average implied economic cap rate
of 5.1%. This compares to the SFR REITs at an average of 4.7%, 4.9%, and 5.1%,
based on our 2016-2018 estimates.
 Additionally, according to data from Real Capital Analytics (RCA), on an LTM

basis as of 2Q16, the average U.S. multifamily acquisition cap rate totals 5.8%,
inclusive of garden properties at 6.0% and mid-/high-rise properties at 5.0%.
Exhibit 21 summarizes implied nominal and economic cap rates for the multifamily
REITs versus SFR REITs.
Exhibit 21: SFR REITs versus Multifamily REITs - Implied Cap Rates
Nominal Cap Rate
SFR 2016E SFR 2017E SFR 2018E Multifamily REITs - 2Q Annualized

6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
SFR
SFR
SFR
UDR
EQR
SBY
Avg.
SBY
Avg.
SBY
Avg.
ESS
AVB
AIV
Avg.
AMH
AMH
AMH
MAA
CPT
Economic Cap Rate
SFR 2016E SFR 2017E SFR 2018E Multifamily REITs - 2Q Annualized

5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
SFR
SFR
SFR
UDR
EQR
SBY
Avg.
SBY
Avg.
SBY
Avg.
AVB
ESS
AIV
Avg.
AMH
AMH
AMH
MAA
CPT
Note: Multifamily REIT cap rates based on annualized 2Q reported NOI. Economic cap rates include company-disclosed recurring
capex/non-revenue enhancing capex. Calculations include non-consolidated JV NOI where material and disclosure available. No incremental
value applied to other assets or fee streams.

Other Equity REITs
We also calculated implied nominal and economic cap rates for office, industrial, and
retail REITs.
 For a subset of major office and industrial REITs, including BXP, DCT, FR, PLD,
SLG, and VNO, we calculate an average implied nominal cap rate of 4.9% based on
annualized 2Q16 NOI. Assuming 5% forward NOI growth would result in a cap rate
of 5.2%.
 We calculate an implied economic cap rate for office and industrial REITs of 4.7%
based on annualized 2Q16 NOI. Assuming 5% forward NOI growth would result in
a cap rate of 4.9%.
 According to RCA, the average LTM acquisition cap rate (as of 2Q16) for U.S.
office properties totals 6.7%. This includes 5.7% for central business district
(CBD) office and 7.0% for suburban office. Certain markets are well below these
levels, including Manhattan office at 4.4%.
 For U.S. industrial properties, the average LTM acquisition cap rate (as of 2Q16)
totals 6.8%.
 For a subset of major retail REITs, including BRX, FRT, GGP, KIM, MAC, and
SPG, we calculate an average implied nominal cap rate of 5.0% based on annualized
2Q16 NOI. Assuming 5% forward NOI growth would result in a cap rate of 5.3%.
 We calculate an implied economic cap rate for retail REITs of 4.9% based on
annualized 2Q16 NOI. Assuming 5% forward NOI growth would result in a cap rate
of 5.1%.
 According to RCA, the average LTM acquisition cap rate (as of 2Q16) for U.S.
retail properties totals 6.5%. This includes 7.0% for “strip” retail and 5.9% for
malls.

Exhibit 22 shows SFR REIT implied cap rates versus multifamily, office/industrial, and
retail REITs.
Exhibit 22: SFR REITs versus Other Equity REIT Sectors – Implied Cap Rates
Implied Nominal Cap Rate

6.0% 5.7%
5.5%
5.5% 5.2% 5.2%
5.0% 4.9%
5.0%
4.5%
4.0%
3.5%
3.0%
SFR REITS - SFR REITs - SFR REITs - Multifamily Retail Office/Industrial
2018E 2017E 2016E
Implied Economic Cap Rate

5.5% 5.1%
4.9% 4.8% 4.9%
5.0% 4.7% 4.7%
4.5%
4.0%
3.5%
3.0%
SFR REITS - Retail Multifamily SFR REITs - Office/Industrial SFR REITs -
2018E 2017E 2016E
Note: Multifamily, office/industrial, and retail cap rates based on annualized 2Q16 NOI. Certain adjustments
made where materially applicable in order to calculate run-rate cash NOI. Calculations include non-
consolidated JV NOI where material and disclosure available. Economic cap rates include company-disclosed
recurring capex/non-revenue enhancing capex. No incremental value applied to other assets or fee streams.
Conclusion
For the broader equity REIT universe, cap rates are most commonly used in determining
portfolio NAV. Given the size and liquidity of the U.S. single-family residential market,
market values based on BPO value are readily available. As a result, many institutional
SFR players have used a BPO approach in determining NAV.
However, as the long-term cash economics of the institutional single-family rental sector
become more certain and institutional acceptance grows, we believe cap rates will
become a more meaningful source for determining net asset values for the public sector.

Part IV: Mergers & Acquisitions (M&A) in the Single-Family Rental Sector
M&A activity in the institutional SFR sector has begun to increase in both the public and
private markets. As the pace of one-off acquisitions has slowed, institutional players have
looked to M&A to build scale and complement their existing portfolios. Transactions to
date have ranged in size from bulk acquisitions at the market-level consisting of a few
dozen to a few hundred homes, as well as enterprise level mergers.
Benefits
We believe the primary benefits of M&A in the institutional SFR sector are scale and
operating leverage. At the enterprise level, scale benefits can come in the form of general
and administrative (G&A) reductions and overhead consolidation. Within individual
geographic markets, increases in property density can lead to property-level efficiencies
such as repairs and maintenance (R&M) and turnover costs.
Market density efficiencies can also drive more operating leverage in property
management such as through the elimination of excess field personnel, leasing offices,
and call centers. However, it is important to note that the benefits of scale have
diminishing returns—for example increasing a portfolio from 5,000 properties to 10,000
properties versus from 30,000 properties to 35,000 properties.
As a result of these operational efficiencies, we believe M&A both on a large and small
scale should be accretive at the margin for acquirers depending on price and structure.
However, color from the public participants has been vague regarding which specific
qualifiers management observes in order to determine the economic viability of a
transaction. Accretion considerations can be made both with regards to net asset value
and earnings. Depending on the structure, certain transactions may be accretive to
earnings and not necessarily NAV, or vice versa.
To date, we believe M&A both at the large and small scale has focused on building out
existing markets rather than expanding footprint. We believe this strategy echoes the
benefits of market density and the resulting scale efficiencies at the property level.
Structure
We believe mergers structured on an NAV-for-NAV basis similar to the SWAY-CAH
deal are possible and that existing shareholders may need to accept shares in other SFR
REITs for companies to achieve the scale benefits that may eventually allow the names to
trade closer to NAV. Additionally, we believe the contribution of portfolios into umbrella
partnership REITs (UPREITs) in exchange for operating (OP) units of a public REIT
may represent an attractive exit strategy for smaller property owners as such transactions
would create liquidity, preserve upside from dividends and price appreciation, and take
place on a tax-deferred basis.
Consideration for smaller acquisitions has primarily been in the form of cash on hand and
through the use of existing credit facilities. For larger transactions, public companies
have used their shares as currency. Depending on acquirer valuation levels, it is possible
share issuance below certain benchmarks can be dilutive to NAV and book value.

M&A Transactions to Date
Exhibit 23 summarizes publicly available M&A activity in the institutional SFR sector
since 2013, including estimated transaction values, gross yields, cost per home, and cost
per square foot where available. Additionally, we calculate estimated acquisition cap
rates ranging from 5-7%, which are based on our assumption of run-rate NOI margins of
55-62%. Our dataset includes 18 completed/pending transactions encompassing more
than 50,000 properties.

Exhibit 23: Institutional SFR M&A Activity
Transaction # of Est. Price Est. Price Monthly Est. Gross Est. Primary
Buyer Seller Date Value ($mm) Homes per Home per Sq. Ft. Rent Yield Cap rate Locations Notes
1 American Residential Properties MACK Companies Dec-12 $28 196 $142,857 NA NA NA NA Chicago
2 American Residential Properties MACK Companies Mar-13 $12 93 $129,032 NA NA NA NA Chicago

3 Invitation Homes BLT Homes Apr-13 $100 1,400 $71,429 NA NA NA NA Atlanta 16% Section 8
4 Broadtree Homes The Dominion Group Jul-14 $10 127 $78,740 NA NA NA NA Atlanta Cash
5 American Homes 4 Rent Beazer Pre-Owned Rental Homes Jul-14 $263 1,372 $191,691 $99 $1,349 8.4% 4.8% AZ, CA, FL, NV Cash and stock
6 Broadtree Homes The Dominion Group Dec-14 $2 24 $83,333 NA NA NA NA Atlanta Cash
7 American Homes 4 Rent Ellington Housing Dec-14 $126 914 $137,856 NA NA NA NA AZ, CO, GA, NC, TN, TX Cash
Atlanta, Tampa, Charlotte,
47
8 Silver Bay Realty Trust The American Home Feb-15 $263 2,460 $106,911 $66 $960 10.8% 5.6% Cash
Orlando
9 Cerberus Five Ten Capital Feb-15 NA 1,500 NA NA NA NA NA FL, IL, TX
10 PIMCO Sylvan Road/HavenBrook Homes Mar-15 NA 4,000 NA NA NA NA NA GA, FL, MN, AL Sylvan Road's JV stake
11 Tricon American Homes BLT Homes Apr-15 $150 1,385 $108,303 $74 $1,070 11.9% 6.8% NC, SC, TX Cash
12 Cerberus BLT Homes Jun-15 $402 4,200 $95,714 NA NA NA NA IL, FL, MO, IL, TN
13 Altisource Residential Invitation Homes Jul-15 $111 1,314 $84,779 $54 $848 12.0% 6.8% Atlanta Cash
Atlanta, FL, TX, CA, CO,
14 Starwood Waypoint Colony American Homes Jan-16 $3,710 17,763 $184,029 $97 $1,486 9.7% 5.7% Stock (NAV-to-NAV)
Las Vegas, Phoenix
Phoenix, Dallas, Houston,
15 American Homes 4 Rent American Residential Properties Feb-16 $1,495 8,924 $146,649 $80 $1,272 10.4% 5.7% Stock
Atlanta, Nashville, FL
16 Altisource Residential Invitation Homes Mar-16 $65 590 $109,785 $76 $1,010 11.0% 6.3% IL, NC, SC, GA, FL Cash
17 Silver Bay Realty Trust NA Oct-16 $42 320 $129,688 $72 $1,215 11.2% 6.0% Atlanta, Tampa, Orlando Cash
18 Altisource Residential NA Pending NA 4,000-4,500 NA NA NA NA NA NA Under LOI
Total/Average $6,778 50,832 $120,053 $77 $1,151 10.7% 6.0%
Note: Estimated acquisition capitalization rates calculated based on assumed NOI margins ranging from 55-62% and stabilized occupancy of 95%.
Source: Company and media reports and KBW Research.

We believe a number of other privately negotiated transactions have taken place
consisting of small portfolios of a few dozen to a few hundred homes in distinct markets
with deal sizes in the range of $10-25 million. As an example, American Homes 4 Rent
recently noted it has focused its acquisition strategy on small bulk portfolios. The
company will not typically disclose these individual transactions due to their small size.
Despite the pick-up in activity, we believe potential transactions both large and small
have failed to come to fruition given still wide bid-ask spreads. Over time, we expect deal
activity to accelerate as bid-ask spreads narrow and as more public companies are able to
use their shares as currency.
Starwood Waypoint Residential Trust/Colony American Homes

Overview
In September 2015, former Starwood Waypoint Residential Trust (SWAY) announced

that it signed a definitive agreement to merge with Colony American Homes (CAH) in a
stock-for-stock transaction. In connection with the merger, SWAY would internalize its
manager, an affiliate of Starwood Capital Group. The transaction was approved by
SWAY shareholders in January 2016, and the transaction closed shortly thereafter. The
combined company was renamed Colony Starwood Homes (ticker SFR).
Following the close of the deal, SFR owned approximately 30,500 homes (including 12,700
from SWAY and 17,800 from CAH) with a total asset value of $7.7 billion ($5.4 billion in
cost basis). Management highlighted the significant overlap in each company’s primary
markets, which included Atlanta, Florida, California, Texas, Denver, Las Vegas, and
Phoenix. Post-merger, the combined companies’ top ten markets made up approximately
90% of the total portfolio with an average of 2,700 homes in each top ten market.
Structure
To finance the merger, SWAY issued 64.9 million shares in exchange for all shares of
CAH equivalent to $1.46 billion or 171% of market capitalization at the time of the
closing. The merger’s ownership allocation was determined based on each company's
NAV, including an estimated $1.3 billion for SWAY and $2.1 billion for CAH, which
was not subject to adjustment following the agreement. Assuming a normalized NOI
margin of 62-64%, we calculate an acquisition cap rate of 5.7-5.9%.
As consideration for the internalization, SWAY issued 6.4 million OP units, equivalent to
16.9% of shares outstanding and a market value of $144 million at the close of the
transaction. We estimate that the cost of the internalization equated to 7.4x revenue and
8.3x EBITDA of the manager.
As a result, immediately following the merger, prior SWAY shareholders owned 35.2%
of the combined entity, Starwood Capital owned 5.8% (as a result of the internalization),
and prior CAH shareholders owned 59.0%. Colony Capital (CLNY, which had a prior
23% stake in Colony American Homes, or 13.2% CLNY’s book value) owned a pro
forma 13.7% of the entity.

Colony American Homes’ subsidiary, Colony American Finance, which provides lending
services for single-family rental operators, was not contributed as a part of the merger.
Financial Impact
Since SWAY’s stock issuance exceeded 50% of its outstanding shares, SWAY was
considered the acquirer for legal purposes and the target for accounting purposes. As a
result, SWAY’s assets were written up to fair value upon the closing of the transaction,
leading to an increase in pro forma GAAP book value to approximately $29 per share, or
7% increase from prior GAAP book value of approximately $27 per share. However,
based on a constant accounting basis, we estimate pro forma book value declined to
approximately $24 per share, or a 12% decline. Management cited a pro forma NAV of
$3.5 billion, equivalent to an approximate $32 per share based on the pro forma share
count. This compared to prior NAV of approximately $35 per share. The dilution is the
result of share issuance below book value and NAV.
Per the merger proxy, the transaction is expected to be 17.6-50.2% accretive to

management’s 2016-2018 core FFO projections for stand-alone SWAY. Management
guided to approximately $50 million of expense synergies, or approximately 9% of pro
forma revenues, on a normalized annual basis. We outline the components of these
synergies below.
 Property-level synergies: Approximately $10-15 million (20-30% of total synergies)

or 2-3% of pro forma revenue. Headcount efficiencies are expected to drive 85% of
$500 per property of annual property level savings. This is expected to translate to
200-250+ basis points (bps) of operating margin expansion.
 G&A: Approximately $13-18 million of corporate-level synergies (26-36% of total

synergies) or 2.5-3.5% of pro forma revenue. Corporate-level headcount efficiencies
are expected to drive 60% of the G&A cost savings and the remaining 40% is
expected to come from occupancy costs, ongoing professional services, and other
corporate operations.
 Internalization: Approximately $17 million in annual management fee savings

(34% of total synergies) or 3% of pro forma revenue.
Management believes the merger’s strong property-level synergies were driven by the
concentrated overlap of each company’s top markets. Exhibit 24 provides a graphic of the
overlap of SWAY and CAH’s portfolio in Atlanta, Miami, and Tampa.

Exhibit 24: SWAY/CAH Market Overlap
Source: Colony Starwood Homes.
One month following the close of the merger, the company had realized 70% of expected
synergies, which was ahead of management’s initial expectations. By May 2016 (five
months post-close), the company had realized 95% of synergies, and 100% of synergies
were reported realized by the end of 2Q16. As evidence of these synergies, post-close of
the merger in February 2016, the board of directors raised the quarterly dividend by 22%
to $0.22 per share from $0.19 per share.
Concluding Thoughts
We believe the merger resolved several strategic issues, helping position Colony
Starwood Homes as a best-in-class SFR operator. Additionally, we view the transaction
as a significant milestone for the industry. Given the successful execution of synergy
realization, we believe the transaction highlights the scale benefits of the business model
and accretion potential from M&A in the sector.

American Homes 4 Rent
American Residential Properties
Overview
In December 2015, American Homes 4 Rent (AMH) announced an agreement to merge
with American Residential Properties (ARPI) in a deal valued at $1.5 billion. The
transaction was approved by ARPI shareholders in February 2016 and closed February
29. Assuming a normalized NOI margin of 55-60%, we calculate an acquisition cap rate
of 5.4-5.9%.
The merger increased AMH’s portfolio by approximately 23% to more than 47,000 homes
with a cost basis of more than $8 billion. Immediately following the merger, approximately
85% of the combined portfolio was located in AMH’s top 20 markets versus 83%
previously, and 60% located in the company’s top 10 markets versus 56% previously.
Structure
As consideration for the merger, ARPI shareholders received 1.135 AMH shares for each
ARPI share, representing a value of $19.01 per share based on AMH’s closing price on
the day prior to announcement. This represented a 19.8% premium over the volume
weighted average price of ARPI’s stock over the preceding 20 days and an 8.7%
premium over ARPI’s closing price on the day prior to the announcement. As a result,
AMH issued approximately 38 million shares, or approximately 14.5% of its stand-alone
market capitalization before the merger. At the close of the merger, ARPI shareholders
owned approximately 12.6% of the combined company.
Financial Impact
ARPI’s weak legacy operations (with NOI margins of 48-57%) are expected to
negatively impact financial results in the first year following the merger (2016).
Specifically, AMH highlighted approximately 15% of ARPI’s portfolio (1,300 homes),
which was managed under the company’s legacy preferred operator program or originally
sourced though local operators under this program. Including these homes, AMH
identified approximately 1,400-1,500 homes for strategic sales.
Additionally, management noted ARPI’s average property level cost per home (including
R&M, turnover, and capex) of approximately $3,800 versus AMH’s $2,500 at the time.
As a result, the company initially guided to $8-10 million of deferred maintenance costs
($0.03/share) it expected to incur and expense or capitalize primarily during turns.
However, management has recently noted that the cost to complete this deferred
maintenance may be less than originally projected.
Following stabilization and integration of the ARPI portfolio, management expects:
 2017 NOI margins of 62-64%, or approximately 100 bps higher than stand-alone
AMH margin expectations in 2016.

 G&A savings of approximately 80% of ARPI’s corporate G&A, or an estimated
$0.05/share.
 Strong property management-level synergies, with an incremental cost of 4.5% of

revenues for the ARPI portfolio versus AMH’s legacy 8.8%.
Following G&A synergy realization and property operating expense stabilization,

management expects the merger to be $0.04-$0.05 accretive to 2017 Core FFO. This
would imply approximately 4% to 5% accretion based on our 2017 Core FFO estimate.
Concluding Thoughts
While ARPI’s weaker legacy operations are expected to be a near-term drag on margins,
we believe the longer-term expected accretion from G&A and property management
synergies demonstrate the scale benefits of M&A.
Beazer Pre-Owned Rental Homes

In July 2014, American Homes 4 Rent announced it completed the acquisition of Beazer
Pre-Owned Rental Homes, a portfolio that was previously backed by an investment from
private equity firm KKR. The portfolio consisted of 1,372 homes located in Arizona,
California, Florida, and Nevada. Of these states, AMH did not have a presence in
California as it had previously exited that market. The acquisition equated to 5% of
AMH’s total portfolio prior to the acquisition (approximately 28,000 homes).
Total consideration was $263.4 million, consisting of the issuance of 8.2 million Class A
shares of common stock (valued at $145 million at the time of the closing), $5 million in
cash held in an indemnification escrow, and the repayment of $112.8 million of outstanding
debt. Management noted that it was not the highest bidder for the portfolio, but was able to
prevail in negotiations due to the attractiveness of AMH’s stock as a currency.
The purchase price equated to an estimated $192,000 per home (versus AMH’s average
$170,000 at the time). Management cited an average cost per foot of $99 and we
estimated an initial gross rental yield of 8.4% based on the purchase price (versus AMH’s
9.9% at the time). Assuming a normalized NOI margin of 60-64%, we calculate an
acquisition cap rate of 4.8-5.1%.
Given the small size of the portfolio relative to AMH’s size and pace of acquisitions at
the time, the acquisition had an immaterial impact on our earnings estimates. However,
we believe it bolstered scale and could have been moderately accretive at the margin due
to the elimination of overhead in the prior Beazer portfolio.
Ellington Housing Single-Family Portfolio

In December 2014, American Homes 4 Rent announced that it completed the acquisition
of the Ellington Housing Single-Family Portfolio (Ellington), which was previously
managed by Ellington Management Group. The portfolio consisted of 914 homes located
in Arizona, Colorado, North Carolina, Tennessee, and Texas.

Total consideration for the transaction was $126 million including $74.4 million in cash
and the assumption of $51.6 million of debt. The purchase price equated to an estimated
$138,000 per home (versus AMH’s $171,000 at the time). The portfolio was 96.3%
leased at the time of the acquisition.
Given the small size of the portfolio relative to AMH’s size and pace of acquisitions at
the time, the acquisition had an immaterial impact on our earnings estimates.
Altisource Residential/Invitation Homes Portfolios

In July 2015, Altisource Residential (RESI) agreed to acquire a portfolio of single-family
rental properties from Invitation Homes located in Atlanta, Georgia. The acquisition
closed in August 2015. The portfolio consisted of 1,314 homes, which were 94% leased.
At the time of the acquisition, RESI had a minimal single-family rental portfolio of
approximately 900 homes as the company historically had focused on nonperforming

loan (NPL) acquisitions. RESI paid $112.6 million in total consideration for the portfolio
funded through cash on hand and drawings on its existing credit facility. The
consideration equated to an average purchase price per home of $85,000, or $54 per
square foot, with an average gross rental yield of 12.0%. Assuming a normalized NOI
margin of 60%, we calculate an acquisition cap rate of 6.8%.
In March 2016, RESI acquired a second portfolio of approximately 590 homes from
Invitation Homes at a purchase price of $65 million paid in cash. The portfolio consisted
of properties located in Illinois, North Carolina, South Carolina, Georgia, and Florida.
The purchase price equated to $110,000 per home, or $76 per square foot, with an
average gross rental yield of 11.0%. Assuming a normalized NOI margin of 60%, we
calculate an acquisition cap rate of 6.3%.
Additionally, in July 2016, RESI entered into a non-binding letter of intent to acquire
4,000-4,500 rental homes from an unrelated third party. The transaction is subject to
continuing due diligence and financing arrangements and is expected to close in 2H16.
Management noted it is also considering other large SFR portfolio purchases available in
the market. RESI expects the rental portfolio to total 10,000 properties by year-end 2016.
Silver Bay Realty Trust

The American Home
Overview
In February 2015, Silver Bay Realty Trust (SBY) announced the acquisition of The
American Home (TAH), a REIT with a portfolio of 2,462 properties. The acquisition
closed in April 2015. The acquisition increased SBY’s portfolio by 36% to approximately
9,300 properties following the closing from a prior 6,900 properties. The portfolio was
located primarily in Atlanta (66%), Charlotte (18%), Tampa (8%), and Orlando (8%).
SBY’s geographic concentration in these markets was approximately 17%, 4%, 14%, and
5%, respectively, at the time of the acquisition.

Consideration
As consideration for the transaction, SBY paid $263 million in cash funded through
SBY’s credit facility, which was upsized from $200 million to $400 million in
conjunction with the transaction. The purchase price equated to an average cost per home
of approximately $107,000 and management cited a cost per foot of approximately $66,
which compared to SBY’s $88 at the time. Assuming a normalized NOI margin of 55-
60%, we calculate an acquisition cap rate of 5.6-6.1%.
Financial Impact
The purchase price equated to a gross rental yield of 10.8% (versus SBY’s 10.3% at the
time), and management cited expected net yields on the acquisition of 5.5-6.0%. The
portfolio was 90% leased at the time of acquisition. Management noted that the
transaction would be immediately accretive to core FFO and NAV. Additionally,
management guided to minimal incremental G&A. Following the announcement, we

raised our estimates by approximately $0.02-$0.04 per quarter, or 13-19% annually.
Orlando, Tampa, and Atlanta Portfolio

In September 2016, SBY announced that it entered an agreement to acquire a portfolio of
320 leased homes (95% occupancy) in Atlanta, Tampa, and Orlando for $41.5 million in
cash. The acquisition will be funded through SBY’s credit facility. The deal is expected
to close mid- to late-October 2016. The seller was not disclosed.
The acquisition increases SBY’s portfolio by 3.6%. Approximately 48% of SBY’s

portfolio was located in Atlanta, Tampa, and Orlando as of 2Q16 (by home count).
Following the close of the transaction, we estimate this will increase to 52%.
The $41.5 million purchase price equates to approximately $130,000 per home (versus
SBY’s $135,000 as of 2Q16) and $72 per square foot. Average monthly rents are $1,215
per month, which equates to a gross yield of 11.2% versus SBY’s 10.6% as of 2Q16.
Assuming a core NOI margin of 55-60% (versus our 56.5% forecast for SBY in 2016),
we estimate the acquisition equates to a net yield of 5.9-6.4% (before recurring capex).
We raised our estimates by approximately 3% after incorporating the acquisition into our
financial model. We believe the portfolio will require immaterial incremental G&A given
management’s previous discussion of minimal incremental G&A for The American
Home portfolio.
Tricon American Homes/BLT Homes Portfolio

In March 2015, Tricon American Homes (TAH), an affiliate of Tricon Capital Group
(TSE: TCN), announced an agreement to purchase a portfolio of properties from BLT
Homes, a private SFR player based in Stamford, Connecticut. The acquisition closed in
April 2015. The portfolio consisted of 1,385 properties located in Texas, North Carolina,
and South Carolina. The acquisition increased TAH’s portfolio by 27% to approximately
6,600 homes from 5,200 homes.

The total purchase price was $149.8 million in cash funded through the company’s
existing credit facility, which was upsized to $450 million from $400 million in
conjunction with the transaction. The purchase price equated to $108,000 per property
(versus TAH’s $114,000 average at the time) or $74 per square foot. The portfolio was
93% occupied at the time of the acquisition and the purchase price equated to a gross
rental yield of 11.9% (versus TAH’s 12.0% at the time). Assuming a normalized NOI
margin of 60%, we calculate an acquisition cap rate of 6.8%.
Cerberus Capital Management

Five Ten Capital
In February 2015, according to Bloomberg, private equity firm Cerberus Capital
Management acquired Five Ten Capital’s portfolio of approximately 1,500 homes. The
portfolio was primarily concentrated in Florida, Illinois, and Texas. The terms of the deal
were not disclosed. Five Ten Capital was previously a Piedmont, California-based asset
manager focused on single-family rentals. We believe the transaction marked Cerberus’s
initial entry into the institutional single-family rental sector.
BLT Homes
Following BLT Homes’ 1,400 home portfolio sale to Tricon in March 2015, the company
sold its remaining portfolio, approximately 4,200 homes, to Cerberus Capital
Management in June 2015 (according to Bloomberg). As a result, the sale completed
BLT Homes’ exit from the market. The portfolio was primarily concentrated in the
Midwest, such as Indianapolis and Chicago, as well as in Florida. The terms of the deal
were not disclosed. According to private equity firm GTIS Partners, the total deal value
was $402 million, or approximately $96,000 per home.
PIMCO/Sylvan Road Capital (HavenBrook Homes)

In March 2015, Sylvan Road Capital sold its stake in HavenBrook Homes to its partners in
the joint venture, Pacific Investment Management Co. (PIMCO), according to Bloomberg.
At the time, HavenBrook Homes managed about 4,000 single-family rental properties
located primarily in Georgia, Florida, Minnesota and Alabama. The terms of the deal were
not disclosed. HavenBrook Homes, as previously discussed, was founded in 2013. Sylvan
Road Capital launched in August 2012, which included an initial investment of
approximately $20 million from The Carlyle Group, a large private equity firm.
Invitation Homes/BLT Homes Atlanta Portfolio

According to Bloomberg, in April 2013, Blackstone’s Invitation Homes acquired a portfolio
of 1,400 properties in Atlanta from BLT Homes. At the time, the transaction marked the
largest purchase in the institutional single-family rental market to date. The total price for the
portfolio was approximately $100 million, equating to a price per home of approximately
$71,000. Approximately 16% of the portfolio was designated Section 8 housing.

Part V: Analysis of Single-Family Rental Securitizations
Securitization has emerged as an available financing source for major SFR operators.
Given the attributes of both residential and commercial real estate, the SFR sector is
unique. On the one hand, the underlying real estate is residential-use only with an end-
status as either owner occupied or rented. On the other hand, the entity owning the rental
property may be a commercial enterprise in the form of a corporation, limited liability
company (LLC), partnership, or REIT. We view the emergence of SFR securitization
over the past three years as a meaningful development for the sector that demonstrates the
financeability of the SFR asset class and investor demand for the underlying securities,
while establishing that high ROEs on the assets are achievable.
Single Family Rental Securitization – Part CMBS, Part RMBS

In our view, securitization of single-family rentals is about creating for institutional fixed
income investors a stable, long-duration, diversified, and well-collateralized cash flow

stream supported by portfolios of properties with downside protection in a stressed
scenario. Given strong yields on rental conversions coupled with a dual end-use suited to
either owner occupants or renters, single-family rentals should be conducive to
securitization. In exchange for this financing, SFR investors would receive a low cost of
capital on a refinanceable asset.
This low cost of capital should increase the investable opportunity set for investors and
provide a mechanism to monetize HPA since the financing advance rate would be based
on market value estimates rather than initial cost basis. Over the long run, we believe this
should lead to higher home prices and improved neighborhood quality, particularly at the
low end of the market, as well as higher eventual NAVs for SFR portfolios. On the other
hand, it is worth noting that declining affordability is a risk as investor demand for rental
properties could further raise both home prices and rents.
SFR Securitization Issuance to Date

Twenty-seven single-borrower securitizations have been completed to date totaling $20.9
billion in collateral value, $19.0 billion in cost basis, and $15.4 billion in debt issuance on
104,000 properties. Advance rates have ranged from 65% to 75% on BPO value and 67%
to 88% on cost basis. Deal structures have included five and 10-year fixed rate deals, as
well as two and three-year floating rate deals with two to three one-year extension
options. Funding costs have ranged from 3.5% to 4.4% on fixed rate issuance and
LIBOR+1.6% to LIBOR+2.7% on floating rate issuance.
Single-borrower issuers have included Invitation Homes (seven deals), American Homes
4 Rent (six deals, including one from American Residential Properties), Progress
Residential (five deals), Colony Starwood Homes (five deals, including three from
Colony American Homes, one from Starwood Waypoint, and one from the combined
entity), Silver Bay Realty Trust (one deal), Tricon American Homes (one deal), and
Home Partners of America (two deals).

We view the deals and associated terms as positives for the SFR sector. Importantly, we
believe the ongoing participation of three ratings agencies adds institutional credibility to
the sector. Additionally, the size of the deals (ranging from approximately $300 million
to $1.2 billion) demonstrates investor acceptance, in our view. Lastly, we believe the
pricing terms, both the advance rates and cost of funds, highlight strong execution.
Exhibit 25 summarizes single-borrower SFR securitizations completed to date.


Exhibit 25: SFR Single-Borrower Securitization Transaction Summary
American American Colony Colony Home Tricon
Homes Residential American Starwood Partners of Invitation Progress Silver Starwood American Total/
Metric 4 Rent Properties Homes Homes America Homes Residential Bay Waypoint Homes Wtd. Avg.
Number of deals 5 1 3 1 2 7 5 1 1 1 27
Amount (mil.) $2,553 $342 $1,746 $536 $851 $5,344 $2,796 $313 $531 $381 $15,393
Cost of Funds (floating) L+1.54% L+2.11% L+1.76% L+2.22% L+2.51% L+2.14% L+2.27% L+1.92% L+2.37% L+1.96% L+2.13%
Cost of Funds (fixed) 4.327% NA NA NA NA NA 3.770% NA NA NA 4.158%
Cost basis (mil.) $3,547 $450 $2,144 $686 $1,079 $6,271 $3,347 $410 $647 $448 $19,028
BPO value (mil.) $3,760 $489 $2,400 $783 $1,092 $6,867 $3,758 $481 $721 $517 $20,868
58
Leverage (LTV) on BPO 67.6% 70.0% 71.2% 62.0% 74.1% 75.0% 71.3% 65.0% 70.0% 70.0% 73.8%
Leverage (D/E) on BPO 2.10x 2.33x 2.49x 1.63x 2.86x 3.00x 2.49x 1.86x 2.33x 2.33x 2.81x
Leverage (LTV) on cost 72.1% 76.1% 79.9% 70.8% 74.8% 82.7% 79.6% 76.3% 77.9% 80.8% 80.9%
Leverage (D/E) on cost 2.81x 3.18x 4.04x 2.42x 2.98x 5.06x 3.98x 3.22x 3.53x 4.21x 4.23x
UW NCF Yield (on cost) 6.3% 5.1% 4.5% 4.8% 4.5% 4.8% 5.2% 4.7% 5.8% 6.5% 5.2%
Est. all-in cost of funds 4.3% 3.3% 2.9% 3.7% 3.8% 3.3% 3.9% 3.1% 3.5% 3.1% 3.6%
Est. ROE 12.8% 10.8% 10.7% 7.4% 6.5% 13.3% 10.4% 10.0% 13.8% 20.6% 11.7%
% AAA-rated 55.5% 54.0% 51.9% 49.7% 50.8% 46.5% 47.4% 47.3% 44.1% 44.8% 48.9%
Per unit metrics

Property count 21,628 2,876 11,005 3,566 3,642 31,331 19,192 3,089 4,095 3,509 103,933
Avg. purch. price per prop. $137,603 $145,940 $162,856 $167,623 $293,513 $163,527 $159,523 $106,448 $133,847 $99,594 $137,323
Avg. initial capex per prop. $15,518 $8,771 $21,742 $24,749 $5,729 $22,974 $13,051 $21,603 $19,640 $22,957 $18,309
% of purchase price 11.3% 6.0% 13.3% 14.8% 2.0% 14.6% 8.2% 20.3% 14.7% 23.1% 13.3%
Avg. total inv. per prop. $163,671 $156,450 $194,489 $192,372 $299,241 $201,264 $174,113 $132,642 $158,104 $127,558 $183,084
Avg. BPO per prop. $173,999 $170,063 $217,941 $219,656 $301,913 $221,417 $194,506 $155,722 $175,997 $147,278 $200,786
Implied HPA 6.6% 8.7% 12.1% 14.2% 1.0% 10.3% 11.7% 17.4% 11.3% 15.5% 9.7%
Avg. square footage 1,976 1,908 1,888 1,963 2,347 1,837 1,979 1,703 1,752 1,535 1,903
Avg. property age (yrs) 12 12 24 23 23 28 13 24 33 35 21
Median acquisition date Aug-13 Jun-13 Jun-13 Nov-13 NA Feb-13 Mar-14 Dec-12 Aug-13 Aug-13 Jul-13
Avg. lease term (months) 12.4 14.3 12.5 12.4 12.9 15.8 13.9 20.6 16.9 12.6 14.2
Avg. monthly rent $1,405 $1,280 $1,432 $1,549 $2,210 $1,480 $1,396 $1,139 $1,424 $1,168 $1,443
Gross rental yield 10.3% 9.8% 8.8% 9.7% 8.9% 8.9% 9.6% 10.3% 10.8% 11.0% 9.5%
NOI margin 66.1% 58.5% 59.0% 60.1% 57.0% 61.3% 59.6% 55.7% 63.0% 65.1% 61.1%
NOI margin (incl. capex) 63.3% 55.0% 55.0% 54.4% 52.9% 57.8% 56.4% 49.8% 56.8% 61.5% 57.5%
Note: ROEs based on LIBOR at the time of issuance. Averages represent weighted averages.
Source: Kroll, Moody’s, Morningstar, Bloomberg, company reports, and KBW Research.
Deal Size
The 27 single-borrower SFR securitizations completed to date have had an average deal
size of approximately $570 million, ranging from $300 million to $1.2 billion. We
believe the minimum size for efficient execution to be approximately $300 million given
the fixed overhead costs associated with a transaction. Assuming a 70% loan to value
(LTV) and average BPO value per home of $200,000 (in line with securitizations to
date), this would equate to 1,400-2,150 properties.
Funding Cost
We believe funding costs on floating-rate securitizations have ranged from L+1.54% to
L+2.70%, with an average of approximately L+2.10%. Including the amortization of
fees and hedging costs over the expected life of the loan amounting to an estimated 100
bps, we estimate an average all-in funding cost of L+3.1%. Additionally, of the six
fixed-rate deals completed to date, average costs have ranged from 3.5-4.4% with five-
to 10-year terms. Assuming 3.0% of issuance costs amortized over 10 years would
equate to all-in costs of 3.8-4.7%.
Leverage
Leverage (based on BPO value) on SFR securitizations to date has ranged from 62-75%
(LTV), equivalent to debt-to-equity ratios of 1.6-3.0x. On cost basis, leverage has ranged
from 67-88% (LTV), equivalent to debt-to-equity ratios of 2.0-7.5x. This compares to
typical SFR credit facility advance rates of 50-70%.
Monetizing HPA
The BPO premium over cost basis (including capex) on properties securitized has ranged
widely, depending upon acquisition date, geographic concentration, and property age.
Overall, we calculate an average premium over cost basis of 10% with a mean acquisition
date of July 2013. We note that this premium to cost basis does not necessarily
correspond to cumulative HPA over the period as reported by a home price index, but
would also recognize the market discounts at which the properties were acquired as well
as the value added through initial renovation.

Exploring the Economics of Single-Family Rental Securitization
For the 27 securitizations completed or announced to date, we estimate ROEs have
averaged 12%. This analysis is based on underwritten cash flows as opposed to actual
performance and amortizes deal issuance costs over the expected duration.
We estimate advance rates on current credit facilities are typically in the 50-70% range
with a cost of funds of approximately 2.0-4.0% on average. As securitization advance
rates are based on BPO, advance rates on the underlying cost basis can reach or exceed
80% depending on cumulative home price appreciation to date, allowing SFR operators
to monetize home price appreciation and achieve potentially significant ROEs due to
greater leverage.
Including other costs such as amortized issuance fees, servicing fees, miscellaneous
operating expenses, as well as hedging costs, we estimate average total funding costs for
a typical floating rate deal of approximately 3.0%. As a result, assuming asset yields of 4-
7% and all-in funding costs of 3%, we estimate that ROEs on SFR securitizations could
total 10-25% depending on leverage and HPA. Additionally, annual rent increases could
drive upside to unlevered yields and result in stronger incremental returns.
In Exhibit 26 we provide an illustrative example showing ROE potential based on a base

case and upside case for asset yields, leverage, and HPA.
Exhibit 26: Illustrative SFR Securitization ROEs
Low High Average

# Properties 3,500 3,500 3,500
Cost basis per property $150,000 $150,000 $150,000
BPO per property $165,000 $172,500 $168,750
% HPA 10.0% 15.0% 12.5%
Total cost basis (mil.) $525.0 $525.0 $525.0
Total BPO (mil.) $577.5 $603.8 $590.6
LTV (on BPO) 65.0% 70.0% 67.5%
Implied leverage 1.86x 2.33x 2.08x
Securitization size $375.4 $422.6 $398.7
LTV (on cost basis) 71.5% 80.5% 75.9%
Implied leverage 2.51x 4.13x 3.16x
Return on equity (ROE)
Asset yield 4.50% 6.50% 5.50%
Total cost of funds 3.00% 3.00% 3.00%
Spread 1.50% 3.50% 2.50%
Leverage ratio (LTV) on cost basis 2.51x 4.13x 3.16x
Levered portion of ROE 3.76% 14.45% 7.89%
Plus: equity portion of ROE 4.50% 6.50% 5.50%
ROE 8.26% 20.95% 13.39%

Exhibit 27 summarizes estimated initial ROEs on SFR securitizations.
Exhibit 27: Estimated SFR Securitization ROEs
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Note: Based on underwritten cash flows and funding costs (LIBOR) at the time of deal close. Does not include
assumption for future rent growth.
Source: Kroll, Moody’s, Morningstar, company reports, and KBW Research.
Analyzing the Underwritten Cash Flows of SFR Securitization Collateral

In this section we review major cash flow drivers, including property operating expenses,
capex, margins, and asset yields.
Exhibit 28 summarizes underwritten cash flows for single-borrower securitizations to

date and calculates average margins, asset yields, and property-level operating expenses.
In summary, the data shows (based on weighted averages) the following:
 A gross rental yield of 9.5%.

 Total property operating expenses of 39% of revenue, equivalent to $6,300 per
property per year.
 R&M costs per property per year of $930.
 Turnover costs per property per year of $630 ($1,880 per turn assuming 33%
annual turnover).
 Recurring capex of $600 per property per year. Notably, as discussed earlier in
this report, available actual cash flow performance on 15 single-borrower SFR
securitization shows average incurred recurring capex per property of
approximately $1,100.
 Total R&M, turnover, and recurring capex of $2,160 per year.

 An NOI margin of 61.4% and net cash flow (NCF) margin 57.7% (including
recurring capex).
 An NOI yield of 5.5% and NCF yield of 5.2%.
This analysis compares with our baseline margin expectations for the sector of 60.4%
(NOI) and 54.1% after recurring capex, as well as our asset yield assumptions of 5.7%
(NOI yield) and 5.1% (NCF yield).
Exhibit 28: SFR Securitization Underwriting Assumptions Summary
% of Per
Total (all securitizations) $ mil. EGI Property
Rental revenue $1,786.8 106.1% $17,411
Vacancy/collection loss ($109.3) (6.1% ) ($1,065)

Effective gross income (EGI) $1,677.5 100.0% $16,346
Property management fee ($108.3) (6.5% ) ($1,055)

Property taxes ($266.8) (15.9% ) ($2,600)
HOA expense ($32.4) (1.9% ) ($316)
Insurance expense ($36.9) (2.2% ) ($360)
Repairs and maintenance ($95.6) (5.7% ) ($932)
Turnover costs ($64.4) (3.8% ) ($627)
Leasing and marketing ($39.9) (2.4% ) ($389)
Other operating costs ($4.0) (0.2% ) ($39)
Total property operating expenses ($648.3) (38.6%) ($6,318)
Net operating income (NOI) $1,029.2 61.4% $10,029

Recurring capital expenditures ($61.2) (3.6% ) ($596)
Net cash flow (NCF) $968.0 57.7% $9,433
Note: total R&M, turnover, and capex ($221.2) (13.2%) ($2,155)
Asset yields (on cost basis)
NOI yield 5.5%
NCF yield 5.2%
Note: Represents data across 27 securitizations encompassing 103,000 properties. Averages represent
weighted averages.
Property Operating Expenses Comparison

Below we summarize major expense line-items for each of the individual securitizations
based on underwritten cash flows. We provide the data on a per-property per-year basis
and as a percentage of revenue. It is important to note that this analysis is based on the

underwritten cash flows rather than ratings agency “haircut” assumptions or actual
incurred expenses.
Repairs and Maintenance (R&M)

As a percentage of revenue, repairs and maintenance expenses equate to an average of
5.7%. On a per-property per-year basis, this equates to an average of $950 ($80 per
month). Assuming three to four service calls per year per property, this suggests an
average cost per service call of approximately $240-$320 per property. By comparison,
we generally expect annual repairs and maintenance of approximately $1,000 per
property per year.
Repairs and maintenance can vary widely from operator to operator due to property age,
portfolio scale (both nationally and by individual market), technology, degree of vertical
integration, and extent of initial renovation. We believe technology can help promote
efficient property visits via route optimization and mobile computing capabilities.
Additionally, we believe differences in capitalization policies and difficulty in
categorizing certain property-level expense items can drive variances among operators.
Exhibit 29: Repairs and Maintenance
$1,800 12%
$1,600
10%
$1,400
Per Home (annual)
$1,200 8%
% of Rev.
$1,000
6%
$800
$600 4%
$400
2%
$200
$0 0%
Per Home % of Revenue
Note: Average represents simple average.


Turnover Cost
As a percentage of revenue, turnover costs equate to an average of 4.0%. On a per-
property per-turn basis (assuming 33% turnover), this equates to $2,000, or
approximately $670 per property per year. For Home Partners of America (HPA), the
company’s unique rent-to-own business model and higher price-point properties may be
driving the higher expenses. Excluding HPA, we calculate an average of $1,880 per turn,
or $615 per property per year.
By comparison, our baseline model assumes turn costs to total approximately $1,800 per
turn or approximately $600 per property per year. The data shows a wide range, which
we believe is a function of the average property age, degree of internalization, and extent
of initial renovation work.
Like R&M, we believe differences in capitalization policies and difficulty in categorizing

certain property-level expense items can drive variances among operators. As a result,
public players largely refer to property-level expense expectations as one category
including all cash costs of R&M, turnover, and capex.
Exhibit 30: Turnover Cost
$5,000 7%
$4,500
6%
$4,000
$3,500 5%
$3,000
% of Rev.
4%
Per Turn
$2,500
$2,000 3%
$1,500 2%
$1,000
1%
$500
$0 0%
Note: Per turn assumes 33% turnover. Average represents simple average.
Ongoing Capital Expenditures (Recurring Capex)

As a percentage of revenue, ongoing capex equates to an average of 3.7%. On a per-
property per-year basis, the data shows an average of $615. This compares with our long-
term expectation of approximately $1,000 per property per year. Recent same home data
for the public players has shown average recurring capex per property of approximately
$700-$1,500. This is inclusive of capitalized repairs and maintenance and turnover costs.

Additionally, as discussed earlier in this report, available actual cash flow performance
on 15 single-borrower SFR securitization shows average incurred recurring capex per
property of approximately $1,100.
We believe the establishment of a formalized approach to budgeting for future capex is

essential for sustainability of the business model. Given the limited operating history, it is
still early to tell what the long-term capital requirements will be for institutional SFR
operators.
Exhibit 31: Ongoing Capex
$1,200 7%
$1,000 6%
5%
Per Home (annual)
$800
% of Rev.
4%
$600
3%
$400
2%
$200 1%
$0 0%
$ per home % of Revenue

Source: Kroll, Moody’s, Morningstar; company reports, and KBW Research.
Property Management
We calculate the average property management fee equates to 6.5% of revenue. Property
management can be provided in-house for companies with internal property management
or be fully or partially contracted out to a third party.
This compares with our long-term assumption of 7.5% and an estimated 5-9% on a
consolidated basis for the major public SFR REITs. We believe differences in G&A and
property management expense classification may drive variances among operators.

Exhibit 32: Property Management
$2,000 10%
$1,800
$1,600 8%
Per Home (annual) $1,400
$1,200 6%
% of Rev.
$1,000
$800 4%
$600
$400 2%
$200
$0 0%

Property Taxes
As a percentage of revenue, property taxes equate to an average of 15.8%. On a per
property per year basis, this equates to $2,700, or 1.4% of BPO value. Our baseline
model assumes approximately 18.5% of revenue and 1.8% of BPO. Property taxes are
determined based on the appraised value of the home and thus are correlated to average
property age and location.
Exhibit 33: Property Taxes
$6,000 25%
$5,000 20%
Per Home (annual)
$4,000
15%
% of Rev.
$3,000
10%
$2,000
$1,000 5%
$0 0%


Homeowner Association Fees
As a percentage of revenue, homeowner association (HOA) fees equate to an average of
1.9%. On a per-property per-year basis, the data shows an average of $320. This
compares with our baseline assumption of 1.5% of revenue or $240 per property. Certain
homes may not be subject to an HOA fee depending on the neighborhood.
Exhibit 34: HOA Fees
$450 3%
$400
$350
Per Home (annual)
$300 2%
% of Rev.
$250
$200
$150 1%
$100
$50
$0 0%

Insurance Expense
As a percentage of revenue, insurance expenses equate to an average of 2.2%. On a per-
property per-year basis, the data shows an average of $365. We believe the major
operators have access to low-cost blanket insurance policies. For example, we estimate an
average insurance cost per property for AMH of approximately $200. Our baseline model
assumes $300 per home per year.

Exhibit 35: Insurance Expense
$700 5%
$600
4%
$500
Per Home (annual) 3%
% of Rev.
$400
$300 2%
$200
1%
$100
$0 0%

Underwritten Margins and Yields

Below we compare issuer underwritten margins and asset yields for individual
securitizations.
Gross Rental Yield

We calculate an average gross rental yield of 9.5% with a high of 11.0% (TAH 2015-
SFR1) and a low of 8.5% (Invitation Homes 2015-SFR2). In general, we expect higher
gross yields on lower price point properties.
Exhibit 36: Securitization Gross Rental Yields

12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%


NOI Margin
We calculate an average NOI margin of 61.1% By comparison, our baseline estimates
assume a stabilized NOI margin of 60.4%.
Exhibit 37: Securitization NOI Margins

70.0%
65.0%
60.0%
55.0%
50.0%

Net Cash Flow (NCF) Margin

We calculate an average NCF margin (which is after recurring capex) of 57.5%. This
compares with our baseline estimate of 54% for the sector.
Exhibit 38: Securitization NCF Margins

70.0%
65.0%
60.0%
55.0%
50.0%
45.0%


NOI Yield
We calculate an average NOI yield (on cost basis) of 5.5%. This compares with our
baseline estimate for the sector of 5.7%.
Exhibit 39: Securitization NOI Yields

8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

Net Cash Flow Yield

We calculate an average NCF yield after recurring capex (on cost basis) of 5.1%. This
compares with our baseline estimate for the sector of 5.1%.
Exhibit 40: Securitization NCF Yields

7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%


Collateral Performance for Single-Borrower SFR Securitizations
Following the first single-family rental securitization in November 2013, deals have
tenured allowing for a time series of actual performance of underlying collateral.
We compiled collateral performance data from Morningstar on 23 rated, single-borrower

SFR securitizations encompassing 90,000 properties (as of the most recent August 2016
monthly report). Below we summarize monthly performance since March 2015 for
occupancy, retention and turnover rates, and delinquency.
Occupancy
The time-series shows expected seasonality with modestly lower occupancy in the
summer months when turnover is high. Average occupancy as of July 2016 was 95.1%
and over the prior 12-month period averaged 95.3%. We believe the strong occupancy
levels are a testament to the robust tenant demand for single-family rentals.
Exhibit 41: SFR Securitization Performance - Occupancy
96.5%
96.0%
95.5%
95.0%
94.5%
94.0%
93.5%
Feb-16
May-15
May-16
Jun-15
Jan-16
Jun-16
Apr-15
Jul-15
Oct-15
Apr-16
Jul-16
TTM Avg.
Nov-15
Dec-15
Mar-15
Aug-15
Sep-15
Mar-16
Note: Encompasses 89,619 properties across 23 securitizations as of July 2016.

Source: Morningstar and KBW Research.
Retention and Turnover

Retention rates, defined as the number of renewed leases over total lease expirations in a
given period, have averaged 77% over the past 12 months and totaled 75% as of June
2016 (latest available).
Turnover rates, defined as the number of move-outs over total properties in a given
period, have averaged 35.7% over the last 12 months on an annualized basis. Industry
participants have cited expectations of 33% normalized turnover rates in the long term,
implying a three-year average tenancy. While the securitization collateral performance
appears modestly below these expectations, this may relate to maturing lease-expiration
schedules given the recent rapid pace of lease-ups.

Similar to occupancy, turnover follows an expected seasonal pattern with higher turnover
in summer months.
Exhibit 42: SFR Securitization Performance – Retention & Turnover
Retention Rate
80%
79%
78%
77%
76%
75%
74%
73%
72%
71%
Feb-16
May-15
May-16
Jun-15
Jan-16
Jun-16
Apr-15
Jul-15
Oct-15
Apr-16
TTM Avg.
Nov-15
Dec-15
Mar-15
Aug-15
Sep-15
Mar-16
Turnover rate (annualized)
50%
40%
30%
20%
10%
0%
Feb-16
May-15
May-16
Jun-15
Jan-16
Jun-16
Apr-15
Jul-15
Oct-15
Apr-16
TTM Avg.
Nov-15
Dec-15
Mar-15
Aug-15
Sep-15
Mar-16
Note: Encompasses 89,619 properties across 23 securitizations as of July 2016.


Delinquency
Delinquencies have remained low, averaging 0.7% over the last 12 months and 0.6% as
of July 2016.
Exhibit 43: SFR Securitization Performance – Delinquency
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
Feb-16
May-15
May-16
Jun-15
Jan-16
Jun-16
Apr-15
Jul-15
Oct-15
Apr-16
Jul-16
TTM Avg.
Mar-15
Aug-15
Sep-15
Nov-15
Dec-15
Mar-16
Note: Delinquency typically defined as past due by 30 days or more and owing at least $200-$500 or more.
Encompasses 89,619 properties across 23 securitizations as of July 2016.
Specialty SFR Lenders

Since 2013, several new firms have arranged lending units to provide blanket mortgage
financing to small-to-mid-size SFR operators.
 B2R Finance: Formed in July 2013 by funds managed by Blackstone Tactical

Opportunities.
 Colony American Finance (CAF): Formed in November 2013 as a wholly owned

subsidiary of Colony American Homes (CAH). In conjunction with CAH’s merger with
Starwood Waypoint in January 2016, CAF was reorganized as a separate private entity.
 FirstKey: Formed in early 2013 by Cerberus Capital Management. In a May 2016

report, Kroll Bond Ratings Agency confirmed that Cerberus was shutting down its
SFR lending platform for smaller borrowers under its “express” loan program due to
lack of scale. The company will continue to make larger SFR loans under its
“premier” loan program.
Loan terms generally include 5- and 10-year loans with 30-year amortization periods,
interest rates of 5-10%, 60-80% LTVs, and prepayment penalties. Larger loans would
generally be non-recourse, while smaller loans would have borrower recourse. B2R and
Colony American Finance also offer shorter-term, floating-rate loans to fund SFR
acquisitions and stabilization.

Exhibits 44-46 summarize the lending programs of the three SFR lenders.
Exhibit 44: Colony American Finance Lending Program Summary
Bridge Loan Program Term Loan Program

Target investor: Target investor:
Aggregators of homes that are in some state of Owners of at least 5 properties that seek a long-
rehab for either rental aggregation or fix and flip term financing solution for their stabilized rental
looking for short term financing portfolio
Term 12 - 24 months Term 5 or 10 years
Interest rate 8.0% - 10.0% Interest rate S + min. 375 bps
LTV 70% LTV Up to 75%
Loan amount $500K-$50MM Loan amount $500K-$100MM
Property type Non-stabilized Property type Stabilized (leased)
Source: Kroll Bond Rating Agency and KBW Research.
Exhibit 45: FirstKey Lending Program Summary

Premier Loans Express Loans
Fixed Rate Loan Bridge Loan Property Loan Portfolio Loan
Term 5, 7, or 10 year Up to 12 months Term 30 year 5, 10, or 30 year
First mortgage and equity First mortgage and equity First mortgage and equity
Security First mortgage
Security pledge pledge pledge
Rate Fixed Floating Rate Fixed Fixed
Size $5 - $500MM $10 - $500MM Size $75K - $1MM $150K - $5MM
Recourse: Up to 75%
LTV Up to 75% Up to 70% LTC LTV Up to 75%
Non Recourse: Up to 60%
Amortization Up to 30-year Interest only Amortization Fully amortized 30-year
Prepayment Prepayment 30-year: None
Yes Exit fees None
Premium Premium 5 or 10 year: Yes
Note: FirstKey ceased offering its “express” loan product as reported by Kroll Bond Ratings Agency in May
2016.
Source: Kroll Bond Rating Agency and KBW Research.
Exhibit 46: B2R Finance Lending Program Summary
Portfolio Pro Annex Pro Flash Pro

For: borrowers with existing rental portfolio For: acquisition, rehab, & rental stabilization For: fix & flip
Loan size: $1+ Mil.; 10 or more properties Loan size: $1.5 Mil. - $25+ Mil. Loan size: $1.5 Mil. - $25+ Mil.
Terms: 75% LTV; fixed rate; Terms: short term bridge; floating rate Terms: short term; floating rate
IO avail. up to 70% LTV
30-year amortization
Exhibit 47 summarizes Colony American Finance’s portfolio of single-family rental

loans as of September 30, 2015, which was disclosed via the proxy pertaining to Colony
American Homes’ merger with Starwood Waypoint.

Exhibit 47: B2R Finance Lending Program Summary
Colony American Finance Portfolio

As of September 30, 2015
Carrying Avg. Avg. # of
Loan type Principal Amount Coupon Maturity Loans
Bridge loans 131,114 129,766 9.2% 0.8 yrs 275
Term Loans 332,566 330,196 5.6% 6.2 yrs 82
Total 463,680 459,962 357
Source: Company filings and KBW Research.
Multi-Borrower SFR Securitization

As their portfolios have grown, specialty SFR lenders have begun to contribute these
blanket mortgages, which encompass multiple encumbered assets with individual legal
descriptions, to multi-borrower securitizations. To date, six multi-borrower SFR
securitizations have been completed, totaling $1.5 billion in issuance, including two deals
from Colony American Finance, one from FirstKey, and three from B2R Finance.
Exhibit 48 summarizes various metrics of the multi-borrower SFR securitizations

completed to date.
Exhibit 48: Multi-Borrower SFR Securitization Summary

FKL B2R CAF B2R CAF B2R Total/
Metric 2015-SFR1 2015-1 2015-1 2015-2 2016-1 2016-1 Average
Closing date Apr-15 Apr-15 Oct-15 Nov-15 May-16 Aug-16
Loan balance ($ mil.) $241 $230 $252 $301 $255 $199 $1,478
# of Loans 16 144 69 211 85 164 689
Average loan size ($ mil.) $15.1 $1.6 $3.7 $1.4 $3.0 $1.2 $2.1
Average loan coupon 5.10% 5.96% 5.60% 5.74% 5.70% 6.26% 5.71%
Unit count NA NA 4,140 4,674 3,810 3,224 NA
Property count 3,628 3,160 3,488 4,272 3,301 2,528 20,377
% Singe-family 98.1% 99.3% 75.2% 74.0% 79.5% 78.0% 84.0%
Avg. loan term (years) 4.3 7.7 5.8 6.7 5.4 6.6 6.6
# of borrowers 10 NA 53 NA 66 NA 43
% AAA-rated 62.2% 66.2% 66.7% 63.8% 66.0% 67.0% 65.2%
BPO value $384.6 $374.5 $403.5 $537.8 $389.3 $357.4 $2,447.1
Loan to issuer BPO value (LTV) 62.6% 61.3% 62.5% 66.2% 65.5% 63.9% 63.7%
DSCR 1.32x 1.39x 1.36x 1.50x 1.32x 1.39x 1.38x
BPO value/property $106,009 $118,513 $115,682 $125,895 $117,934 $141,382 $120,093
Average square footage 1,559 1,376 1,308 1,472 1,401 1,551 1,443
Average home age (years) 34 41 46 NA 41 NA 40
Average monthly rent $1,151 $1,117 $1,136 $1,294 $1,148 $1,362 $1,199
Gross rental yield (on BPO) 11.8% 12.4% 12.3% 12.3% 12.0% 11.6% 12.1%
Occupancy 93.6% 95.9% 95.0% 96.1% 94.3% 96.8% 95.2%
NOI margin 56.9% 57.4% 54.3% 57.2% 57.6% 57.5% 56.8%
NOI yield on BPO (cap rate) 6.05% 6.84% 5.97% 6.74% 6.32% 6.36% 6.40%
NCF margin 49.9% 55.8% 49.4% 55.6% 52.6% 55.9% 53.4%
NCF yield on BPO (economic cap rate) 5.32% 6.66% 5.43% 6.54% 5.77% 6.18% 6.01%
Source: Ratings agency reports and KBW Research.

Deal Size
On the six deals completed to date, the average deal size is $250 million, ranging from a
high of $301 million to a low of $199 million. In comparison, we estimate an average
deal size for single-borrower transactions of $570 million. On average the six deals to
date are 65% AAA-rated, which compares to 49% for single-borrower deals.
Collateral
The underlying collateral of the deals completed to date has varied. While two deals consist
primarily of single-family properties as collateral (FKL 2015-SFR1 and B2R 2015-1), four
deals (CAF 2015-1, CAF 2016-2, B2R 2015-2, and B2R 2016-1) are also collateralized by
a large amount of 2-4 unit properties, multifamily properties, and condo collateral. Single-
family properties comprised 75-80% of these three deals. The mix of collateral complicates
comparisons and analysis of underwritten cash flows, in our view, given the difference in
business models between single-family rental, condos, and multifamily.
On average, deals are backed by 115 individual loans on 3,400 properties. As a result, the
average loan is backed by 30 individual properties. Average loan sizes have ranged from a
low of $1.2 million for B2R 2016-1 to a high of $15.1 million of FKL 2015-SFR1.
Coupons on these loans range from a high of 6.3% to a low of 5.1% on average. Loan terms
of the underlying collateral range on average from a low of 4.3 years to a high of 7.7 years.
Underwritten Cash Flows

Exhibit 49 summarizes the underwritten cash flows of the multi-borrower SFR securitizations
completed to date with comparisons to single-borrower deals. We discuss these underwriting
metrics below and compare them to single-borrower deals where applicable.
 Margins. We calculate an average NOI margin of 57% and NCF margin of 53%.
This compares to the single-borrower average of 61% and 58%, respectively. This is
not surprising, in our view, given that larger single-borrower operators are able to
achieve greater economies of scale given portfolio sizes and market density.
 Net Yields. We calculate an average NOI yield on BPO of 6.4% and NCF yield of
6.0%. This compares to the single-borrower average of 5.0% and 4.7%,
respectively. Cost basis for the underlying properties in the multi-borrower deals is
not available; however, it is reasonable to assume yields on cost basis would be
higher due to HPA. For single-borrower deals, we calculate an average NOI and
NCF yield of 5.5% and 5.1% on cost basis. We believe yields on cost basis are more
indicative of actual returns for the borrower. We believe a likely driver of the higher
yields for multi-borrower deals is the lower average price points of the underlying
homes ($120,000 for multi-borrower and $201,000 for single-borrower [based on
BPO]).
 Gross yields. On a gross basis, we calculate an average yield of approximately

12.1% for multi-borrower and 8.6% for single-borrower on BPO. As discussed

above, cost basis is not available for multi-borrower deals. For single-borrower, we
calculate an average gross rental yield of 9.5% on cost basis.
 Property level expenses. Comparisons among individual drivers of property-level

expenses (R&M, turnover, capex, leasing and marketing) are difficult due to
differences in classification as well as the partial mix of non-single-family properties.
We calculate aggregate multi-borrower property-level expenses of $2,800 per unit.
This compares to the single-borrower deal average of approximately $2,500 per home.
 Property management. For multi-borrower, property management as a percent of

revenue varies widely from deal to deal. While the average totals 5.7%, this includes
8-9% for FKL 2015-SFR, CAF 2015-1, and CAF 2016-1 and 3-4% for B2R’s three
deals. For single-borrower, we calculate an average of 6.5%. The dispersion may
relate to the mix of collateral in each deal. Simplistically, we would expect multi-
borrower deals to have higher property management expenses due to smaller

portfolios and less scale.

Exhibit 49: Multi-Borrower SFR Securitization Cash Flow Summary
FKL B2R CAF B2R CAF B2R Total/ Single-borrower
Issuer underwritten cash flow analysis 2015-SFR1 2015-1 2015-1 2015-2 2016-1 2016-1 Average Average
NOI margin 56.9% 57.4% 54.3% 57.2% 57.6% 57.5% 56.8% 61.4%
NCF margin 49.9% 55.8% 49.4% 55.6% 52.6% 55.9% 53.4% 57.7%
NOI yield on BPO 6.05% 6.84% 5.97% 6.74% 6.32% 6.36% 6.40% 5.00%
NCF yield on BPO 5.32% 6.66% 5.43% 6.54% 5.77% 6.18% 6.01% 4.70%
Average BPO value per property $106,009 $118,513 $115,682 $125,895 $117,934 $141,382 $120,093 $200,570
Per property/unit metrics per year
Rent (per month) $1,052 $1,227 $970 $1,182 $1,010 $1,068 $1,264 $1,443
Real estate taxes $1,561 $1,870 $1,674 $1,936 $1,723 $1,868 $2,068 $2,602
Property management $880 $399 $848 $536 $974 $491 $812 $1,056
HOA expense $82 $129 $135 $228 $87 $132 $159 $316
Insurance expense $636 $856 $584 $811 $575 $615 $793 $360
Repairs & maintenance $776 $287 $960 $319 $738 $296 $668 $933
Leasing/marketing/turnover $787 $171 $663 $309 $611 $314 $563 $1,017
Per turn, assuming 33% turnover $2,385 $518 $2,010 $938 $1,851 $952 $1,706 $2,291
Other costs $147 $2,311 $29 $1,652 $51 $1,497 $1,066 NA

Capex $784 $192 $531 $226 $562 $201 $493 $596
Total R&M, Turn, Other, Capex $2,494 $2,962 $2,183 $2,507 $1,962 $2,309 $2,790 $2,546
% of revenue
Real estate taxes 13.83% 13.23% 15.62% 14.29% 15.36% 15.22% 14.56% 15.90%
Property management 7.80% 2.83% 7.92% 3.96% 8.68% 4.00% 5.72% 6.46%
HOA expense 0.72% 0.91% 1.26% 1.69% 0.78% 1.07% 1.12% 1.93%
Insurance expense 5.63% 6.06% 5.45% 5.99% 5.13% 5.01% 5.59% 2.20%
Repairs & maintenance 6.88% 2.03% 8.96% 2.36% 6.58% 2.41% 4.70% 5.70%
Leasing/marketing/turnover 6.97% 1.21% 6.19% 2.29% 5.44% 2.56% 3.97% 6.21%
Other 1.30% 16.36% 0.27% 12.20% 0.45% 12.21% 7.51% 0.20%
Capex 6.95% 1.56% 4.95% 1.67% 5.00% 1.64% 3.48% 3.65%
% of BPO value
Rent (per year) 11.91% 12.43% 11.95% 12.33% 11.86% 11.56% 12.03% 8.63%
Real estate taxes 1.47% 1.58% 1.72% 1.68% 1.69% 1.68% 1.64% 1.30%
Property management 0.83% 0.34% 0.87% 0.47% 0.95% 0.44% 0.64% 0.53%
HOA expense 0.08% 0.11% 0.14% 0.20% 0.09% 0.12% 0.13% 0.16%
Insurance expense 0.60% 0.72% 0.60% 0.71% 0.56% 0.55% 0.63% 0.18%
Repairs & maintenance 0.73% 0.24% 0.99% 0.28% 0.72% 0.27% 0.53% 0.47%
Leasing/marketing/turnover 0.74% 0.14% 0.68% 0.27% 0.60% 0.28% 0.45% 0.51%
Other 0.14% 1.95% 0.03% 1.44% 0.05% 1.35% 0.85% NA
Capex 0.74% 0.19% 0.54% 0.20% 0.55% 0.18% 0.39% 0.30%
Source: Ratings agency reports and KBW Research.

Appendix
Housing Snapshot
Exhibit 50 provides an overview of key U.S. residential housing metrics.
Exhibit 50: Housing Snapshot

Units in thousands, unless otherwise indicated
Y/Y Last 6 Months % Change
Jul-15 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 M/M Y/Y
Home Sales
Existing home sales 551 314 421 470 525 582 514 (11.7% ) (6.7% )
New home sales 44 45 49 55 53 53 57 7.5% 29.5%
Total 595 359 470 525 578 635 571 (10.1% ) (4.0% )
Distressed sales % 7.0% 11.0% 10.0% 7.0% 6.0% 6.0% 5.0% (16.7% ) (28.6% )
Home Prices
Case-Shiller M/M 0.7% 0.2% 1.0% 1.1% 0.9% 0.8% 0.6% 0.6% NA
Case-Shiller Y/Y 4.5% 4.6% 4.8% 4.7% 4.4% 4.3% 4.2% NA 4.2%
CoreLogic (ex. distress) M/M 0.3% 0.3% 0.9% 0.9% 0.6% 0.7% 1.0% 0.6% NA
CoreLogic (ex. distress) Y/Y 4.5% 4.7% 4.7% 4.7% 4.5% 4.6% 5.4% NA 0.3%
Housing Inventory & Months Supply
Existing homes 2,260 1,870 1,960 2,120 2,140 2,110 2,130 0.9% (5.8% )
New homes 215 242 243 241 239 240 233 (2.9% ) 8.4%
Total 2,475 2,112 2,203 2,361 2,379 2,350 2,363 0.6% (4.5% )
Non-performing loans
30-60 Days 1,503 1,479 1,330 1,415 1,434 1,485 1,591 7.1% 5.9%
90+ Days 886 772 733 730 719 692 695 0.4% (21.5% )
Foreclosures 711 655 631 595 574 558 550 (1.5% ) (22.7% )
Total Non-Current 3,100 2,907 2,693 2,741 2,727 2,736 2,836 3.7% (8.5% )
Months Supply
Existing and New Homes 5.0 4.5 4.5 4.7 4.7 4.6 4.7 2.3% (5.6% )
Serious Delinquencies 3.2 3.1 2.8 2.7 2.6 2.4 2.5 1.3% (22.9% )
Total 8.2 7.6 7.3 7.4 7.2 7.0 7.2 2.0% (12.4% )
Housing Starts
Total Housing Starts 1,147 1,213 1,113 1,155 1,128 1,186 1,211 2.1% 5.6%
Single-family Housing Starts 760 845 751 764 737 766 770 0.5% 1.3%
Multi-family Housing Starts 376 356 353 378 386 400 433 8.3% 15.2%
Delinquencies (%)
Total noncurrent loans 6.1% 5.7% 5.3% 5.4% 5.4% 5.4% 5.6% 0.2% (0.5% )
Source: CoreLogic, NAR, U.S. Census Bureau, Case-Shiller, RealtyTrac, Black Knight Financial Services, and KBW Research.

U.S. Housing Supply
 The national housing stock totals 135.5 million units. This includes 118.3 million
occupied units (87%) and 17.2 million vacant units (13%). The occupied units
consist of 74.4 million owned (55% of the total housing stock and 63% of occupied
units) and 43.9 million rented (32% of housing stock and 37% of occupied units).
 The vacant housing stock includes 12.9 million year-round vacant (9.5%) and 3.2
million homes listed for rent (2.4%). An additional 7.3 million units are held off
market (5.4%).
Exhibit 51 summarizes the national housing stock based on U.S. Census Bureau data.
Exhibit 51: National Housing Inventory

Units in thousands
2014 2015 2016
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr
All Housing Units 133,087 133,209 133,331 133,453 133,575 134,603 134,797 134,991 135,184 135,474
Vacant 18,326 18,082 18,021 16,806 17,335 17,317 17,443 17,216 17,677 17,195
Year-round vacant 13,791 13,596 13,447 12,683 12,828 12,843 13,141 13,014 13,120 12,904
For-rent 3,712 3,350 3,346 3,214 3,280 3,196 3,391 3,233 3,267 3,213
For-sale-only 1,521 1,425 1,370 1,449 1,410 1,380 1,421 1,446 1,312 1,305
Rented or Sold 1,021 1,121 1,158 958 977 1,130 1,190 1,014 969 1,079
Held off Market 7,535 7,700 7,573 7,062 7,161 7,138 7,139 7,321 7,572 7,307
Occ'l use 2,284 2,426 2,282 1,925 1,888 2,037 2,085 2,026 2,084 2,076
URE 1,364 1,300 1,389 1,363 1,433 1,279 1,266 1,415 1,568 1,423
Other 3,888 3,975 3,902 3,774 3,840 3,822 3,788 3,880 3,920 3,807
Seasonal 4,537 4,486 4,575 4,122 4,507 4,475 4,303 4,202 4,557 4,291
Total Occupied 114,762 115,127 115,310 116,647 116,240 117,286 117,353 117,775 117,508 118,279
Owner 74,404 74,458 74,240 74,606 74,018 74,407 74,745 75,194 74,656 74,417
Renter 40,357 40,669 41,070 42,041 42,222 42,878 42,609 42,581 42,852 43,862
Note: Units in thousands.

Source: U.S. Census Bureau.

For-Sale Properties: Existing and New Home Supply
As of July 2016, the combined inventory of existing and new homes totaled 2.4 million
units, equivalent to 4.7 months of supply based on the current sales pace.
 The inventory of existing homes totaled 2.1 million in July 2016, equivalent to a 4.7
month supply.
 The new home inventory totaled 233,000 units in July 2016, equivalent to a 4.3
month supply.
Exhibit 52: Existing Home Inventory Exhibit 53: New Home Inventory
Inventory units in millions Inventory units in thousands
Inventory (l.axis) (mil.) Mos. Supply (r.axis) Inventory (l.axis) (000s) Mos. Supply (r.axis)
700 14.0
4.50 14.0
4.00 600 12.0
12.0
3.50 500 10.0
10.0
3.00
8.0 400 8.0
2.50
2.00 6.0 300 6.0
1.50 200 4.0
4.0
1.00
0.50 2.0 100 2.0
0.00 0.0 0 0.0

Mar-07
Mar-12
Jan-03
Nov-03
May-06
Jan-08
Nov-08
May-11
Jan-13
Nov-13
May-16
Sep-04
Sep-09
Sep-14
Jul-05
Jul-10
Jul-15
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Source: National Association of Realtors. Source: U.S. Census Bureau.

Supply of Vacant Homes
We believe that the supply of vacant homes is a useful gauge of excess inventory. Over
the past 40 years, this number has averaged 11.5% of the housing stock and stood at 11%
in 1994. It peaked at 14.6% in 1Q09 and stood at 12.7% as of 2Q16. Vacant homes for
sale peaked at 1.7% in 2008 and stood at 1.0% as of 2Q16.
Exhibit 54: Vacant Home Supply

Vacant Homes for sale (l. axis) Vacant Homes for sale as a % of Total Homes (r.axis)
2,500 1.8%
1.6%
2,000 1.4%
1.2%
1,500
1.0%
0.8%
1,000
0.6%
500 0.4%
0.2%
- 0.0%
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Vacant Homes (l.axis) Vacant Homes (%) (r.axis)
20,000 16.0%
18,000 14.0%
16,000
12.0%
14,000
12,000 10.0%
10,000 8.0%
8,000 6.0%
6,000
4.0%
4,000
2,000 2.0%
- 0.0%
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Source: U.S. Census Bureau and KBW Research.

The vacant housing stock totals 17.2 million units (12.7%), including 3.2 million units for
rent (2.4%), 1.3 million for sale (1.0%), and 1.1 million that are rented or sold (0.8%).
The number of vacant homes also includes homes that are categorized as occasional use,
such as second homes or vacation homes. This includes 7.3 million units that are held off
market (5.4%), consisting of 2.1 million occasional use (1.5%), 1.4 million usual
residence elsewhere (URE) (1.1%), and 3.8 million categorized as “other” (2.8%).
Exhibit 55: Vacant Rental Home Supply

Vacant Homes for rent (l. axis) Vacant Homes for rent as a % of Total Homes (r.axis)
5,000 4.0%
4,500 3.5%
4,000
3.0%
3,500
3,000 2.5%
2,500 2.0%
2,000 1.5%
1,500
1.0%
1,000
500 0.5%
- 0.0%
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Vacant Homes for rent or sale (l. axis) Vacant Homes for sale or rent as a % of Total Homes (r.axis)
7,000 6.0%
6,000 5.0%
5,000
4.0%
4,000
3.0%
3,000
2.0%
2,000
1,000 1.0%
- 0.0%
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014

Single-Family Rental Inventory
As of 2013 (the Census’s latest available data), single-family rental inventory totaled 14.3
million units including attached and detached homes, comprising 12.3% of the occupied
housing stock and 35.6% of the occupied rental housing stock. The single-family rental
stock is at its highest point and was lowest in 1977 at 8.2 million units. As a percentage
of the occupied housing stock, single-family rentals have averaged approximately 11%
over the past 40 years versus 12.3% as of 2013.
Exhibit 56 shows the relationship between total single-family rentals and the percentage
of total housing stock and total rental housing stock.
Exhibit 56: Occupied Single-Family Rental Inventory

Total Single Family Rentals Single Family Rentals as % of Total Occupied Housing Stock
16,000 14.0%
14,000 12.0%
12,000
10.0%
10,000
8.0%
8,000
6.0%
6,000
4.0%
4,000
2,000 2.0%
- 0.0%
1973
1974
1975
1976
1977
1978
1979
1980
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Total Single Family Rentals Single Family Rentals as % of Total Occupied Rental Housing Stock
16,000 36.0%
14,000 35.0%
12,000 34.0%
10,000 33.0%
8,000 32.0%
6,000 31.0%
4,000 30.0%
2,000 29.0%
- 28.0%
1973
1974
1975
1976
1977
1978
1979
1980
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013

Excess Supply and Shadow Inventory
Shadow supply totaled 2.8 million of delinquent and foreclosed loans as of July 2016.
Total non-current loans include 0.6 million of foreclosures, 0.7 million of 90-day plus
delinquencies, and 1.6 million of 30-60 day delinquent loans. Including the listed
inventory of 2.4 million homes and seriously delinquent loans/foreclosures of 1.2 million,
this equates to potential additional supply of 3.6 million (7.2 months total). Including all
the non-current loans, this would equate to a total potential additional supply of 5.2
million (10.3 months total).
As a percentage of existing home sales, distressed sales have declined to approximately

5% of sales from a peak of 50% in early 2009. In 2015, we estimate distressed sales
totaled approximately 8.4% of existing home sales, down from 11.2% in 2014, 16.5% in
2013, and 25.8% in 2012.
Exhibit 57: Distressed Transactions as a Percentage of Existing Homes Sales
60%
50%
40%
% of Sales
30%
20%
10%
0%
Feb-09
Feb-14
May-10
May-15
Jan-12
Jun-12
Jul-09
Oct-10
Apr-13
Jul-14
Oct-15
Sep-08
Dec-09
Nov-12
Mar-11
Aug-11
Sep-13
Dec-14
Distressed Mar-16
Source: National Association of Realtors and KBW Research.

Exhibit 58 shows non-performing loan counts from Black Knight Financial Services
database. In July 2016, the total number of non-current loans and foreclosure pre-sale
inventory totaled 2.8 million, a decrease from 3.1 million a year ago and a peak of 8.1
million in January 2010.
Exhibit 58: Residential Non-Performing Loan Counts

In millions, except average day data
Total Avg. Days Avg. Days

Active 90+ Foreclosure Total Non- Delinquent Delinquent
Month Count 30 Days 60 Days Days (FC) Current for 90+ for FC
Dec-08 55.862 2.159 0.999 1.842 1.297 6.297 194 314
Dec-09 54.704 1.947 0.933 3.005 2.077 7.962 249 406
Dec-10 52.930 1.797 0.759 2.118 2.196 6.870 334 507

Dec-11 50.319 n/a n/a 1.792 2.066 6.167 332 528
Dec-12 49.874 n/a n/a 1.545 1.716 5.292 397 668
Dec-13 50.164 1.411 0.551 1.280 1.244 4.488 490 920
Dec-14 50.819 1.252 0.484 1.132 0.820 3.688 515 1010
Jan-15 50.567 1.228 0.474 1.112 0.815 3.628 515 1009
Feb-15 50.628 1.211 0.434 1.067 0.800 3.512 531 1004
Mar-15 50.574 1.019 0.390 0.971 0.782 3.162 542 1003
Apr-15 50.601 1.075 0.388 0.952 0.764 3.179 544 1011
May-15 50.648 1.184 0.407 0.922 0.754 3.268 535 1013
Jun-15 50.715 1.137 0.412 0.895 0.739 3.183 533 1012
Jul-15 50.699 1.091 0.412 0.886 0.711 3.100 537 1011
Aug-15 50.427 1.168 0.420 0.825 0.748 3.161 519 1061
Sep-15 50.478 1.211 0.429 0.817 0.737 3.194 510 1056
Oct-15 50.586 1.173 0.421 0.820 0.721 3.136 514 1057
Nov-15 50.577 1.233 0.430 0.827 0.698 3.189 502 1061
Dec-15 50.406 1.176 0.428 0.808 0.689 3.097 491 1060
Jan-16 50.541 1.299 0.445 0.831 0.659 3.234 495 1047
Feb-16 50.562 1.102 0.377 0.772 0.655 2.907 489 1064
Mar-16 50.534 0.986 0.343 0.733 0.631 2.693 514 1071
Apr-16 50.663 1.063 0.652 0.730 0.595 2.741 520 1088
May-16 50.655 1.072 0.361 0.719 0.574 2.727 519 1092
Jun-16 50.569 1.112 0.373 0.692 0.558 2.736 519 1087
Jul-16 50.670 1.199 0.393 0.695 0.550 2.836 502 1084
Source: Black Knight Financial Services.

Exhibit 59 summarizes historical for-sale inventory and shadow inventory.
Exhibit 59: For-Sale Inventory and Shadow Inventory
12.0
10.0
8.0
6.0
Units in mil.
4.0
2.0
0.0
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Existing+New Homes Sales Inventory 30-60 90+ Foreclosure
Source: National Association of Realtors, U.S. Census Bureau, LPS, and KBW Research.
Foreclosure/Short Sale Discount

According to the National Association of Realtors (NAR), the historical discount for
foreclosures and short sales to the median existing single-family home price totals 17% and
13%, respectively, on average back to May 2012. In July 2016, the discount was 16% for
short sales and 18% for foreclosures. Exhibit 60 summarizes historical discounts for
foreclosures and short sales.
Exhibit 60: Historical Discount for Foreclosures and Short Sales
25%
20%
15%
10%
5%
0%
Feb-13
Feb-14
Feb-15
Feb-16
May-12
May-13
May-14
May-15
May-16
Nov-12
Nov-13
Nov-14
Nov-15
Aug-12
Aug-13
Aug-14
Aug-15
Short Sales Foreclosures

Investor Mix of Home Sales
Since 2011 investors have accounted for an average of approximately 17% of home sales,
according to data from the NAR. Investors totaled 11% in July 2016 (the lowest level
since the beginning of our data set in January 2010). Investor participation reached a high
of 23% in January and March of 2012 and in January 2011.
According to data from the NAR, distressed transactions have totaled an average of 19%
of home sales since 2008. Distress sales totaled 5% of home sales in July 2016, down
from an average of 8% in 2015, 11% in 2014, 16.5% in 2013, and a peak of 50% in
March 2009.
Exhibit 61 summarizes distressed and cash sales, and investor purchases.

Exhibit 61: Distressed and Cash Sales versus Investor Purchases (Existing Home
Sales)
45%
40%
35%
30%
% of Sales
25%
20%
15%
10%
5%
0%
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Distressed Cash Investors
Mix of Existing Home Sales

We track monthly existing single-family and new home sales back to 1989 and aggregate
existing (including multifamily) and new home sales back to 1965. Historically, existing
single-family home sales account for approximately 90% of total home sales and new
home sales, which are based on orders, account for approximately 10% of total home
sales (in line with approximately 8-11% today).
Looking at the mix of existing home sales back to 2008, we estimate first-time
homebuyers have accounted for approximately 32% of home sales. We estimate first-
time homebuyers reached 45-50% as a result of the first-time homebuyer tax credit, but
have since steadily drifted to slightly above 30%. We estimate a normalized historical
participation rate for first-time homebuyers would be in the 35-40% range and that
ultimately this level of participation will be required for the housing market to normalize.

Exhibit 62 summarizes the mix of investors, repeat, and first-time buyers back to 2010.
Exhibit 62: Mix of Investors, Repeat, and First-Time Buyers (Existing Home Sales)
70%
60%
50%
% of Sales
40%
30%
20%
10%
0%
May-10
May-11
May-12
May-13
May-14
May-15
May-16
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
First Time Repeat Investors
Homeownership Rate
The homeownership rate has declined from its peak of 69.2% in 2004 to 62.9% as of
2Q16. Exhibit 63 shows the correlation between single-family housing starts and the
homeownership rate.
Exhibit 63: Historical Homeownership Rate Versus Single-Family Housing Starts
2,000 70.0%
1,800 69.0%
1,600 68.0%
1,400 67.0%
1,200 66.0%
1,000 65.0%
800 64.0%
600 63.0%
400 62.0%
200 61.0%
0 60.0%
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Housing Starts - 000s (r.axis) Homeownership Rate (l.axis)

Foreclosure Activity
Foreclosure filings hit a high of 367,000 in March 2010 before trending down to around
258,000 by year-end. In 2016 YTD, foreclosure filings have averaged approximately
100,000.
Exhibit 64: Properties with Foreclosure Filings
400,000 140%
350,000 120%
300,000 100%
% of Exis. Home Sales

Foreclosure filings
250,000
80%
200,000
60%
150,000
100,000 40%
50,000 20%
0 0%
Mar-10
Feb-06
Feb-13
Nov-07
Jun-08
Jan-09
May-11
Dec-11
Nov-14
Jun-15
Jan-16
Sep-06
Aug-09
Sep-13
Jul-05
Apr-07
Oct-10
Jul-12
Apr-14
Foreclosures % Chg.
Source: RealtyTrac.
REO Market: Real Estate Owned Properties

REO properties refer to real estate owned by a bank or lender. These properties are
typically repossessed by a lender through a foreclosure auction if the lender is the highest
bidder, or if there are no competing bids at auction. Alternatively, lenders can reach an
agreement with the owner during pre-foreclosure. This may result in a short sale in which
the additional costs of foreclosure are avoided (although the owner’s credit is still
impaired) and sale proceeds to the lender are below the unpaid balance on the mortgage.
Bank foreclosures can become government foreclosures if the loan is guaranteed by a
government agency, such as the government sponsored enterprises (GSEs). REO
properties usually sell for higher prices than short sales or foreclosures at auction, as the
lender will clear title on the property and perform necessary maintenance and repair.
Investors can purchase a foreclosure at one of three stages: the initial phase of default
(prior to a foreclosure auction), the foreclosure auction, or from the lender if there are no
accepted bids at the public sale and the property is repossessed by the lender. Once a
property is repossessed by a bank or lender, the property will likely be listed for sale
through a real estate agent.

REO Trends Through the Downturn
According to RealtyTrac, approximately 400,000 U.S. properties became REO in 2007,
followed by 861,000 REOs in 2008, 918,000 in 2009, and peak REO activity of more than 1
million properties in 2010.
Exhibit 65 summarizes historical REO activity.
Exhibit 65: Historical REO Activity
120,000
100,000
80,000
60,000
40,000
20,000
0
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Source: RealtyTrac and KBW Research.
Foreclosure and REO Overview

Foreclosure
Foreclosure is a process in which a lender attempts to recover the balance of a loan from
the borrower who is unable to make principal and interest payments on his/her mortgage.
The process can be explained in four simple steps:
 Notice of Default. The process starts when a borrower can no longer pay the
monthly mortgage payment and subsequently defaults. After 30 to 45 days of
missed payments, the lender files a public default notice called the Notice of Default
(NOD). This provides the borrower with notice that he/she could potentially face
foreclosure, and starts a grace period (pre-foreclosure) of time for the homeowner to
repay the lender the required amount and return the loan to good standing.
 Filing for Foreclosure. If the default is not repaid in three months, the lender will
typically proceed with foreclosure. There are two types of foreclosures: judicial and
non-judicial. In a judicial foreclosure, the lender will file a lawsuit in order to
receive a court order to sell the property. In a non-judicial case, the process typically
goes along with the procedures detailed in the deed of trust that allows a trustee
(bank or mortgage company) to sell the property.

 Notice of Sale. The homeowner will then receive a Notice of Sale, which details the
time and location of the sale, and provides the lender with notice of the date by
which he/she must move out. The notice is published in the local newspapers for
three weeks and posted on the property.
 Trustee Auction. After three weeks, the property is auctioned in public (usually at
the county courthouse) to the highest bidder. The bidder must pay the high bid price
in cash, and usually must have a deposit up front and the remainder of the cost
within 24 hours. Once paid in full, the bidder will receive a trustee’s deed to the
property.
Exhibit 66 is a timeline detailing the foreclosure process.
Exhibit 66: Foreclosure Process

Source: RealtyTrac.
Although the above list is the general process for the majority of foreclosures, it is also
possible for the process to end early if the borrower/owner were to pay off the loan
during the pre-foreclosure period, or if the borrower were to sell the property to a third
party during the same period. The lender could also buy the property, either through a
short sale or buy it back at the auction.
Pre-Foreclosure. Pre-foreclosure is the status of a property in the beginning stages of

being repossessed due to the borrower’s inability to pay his/her mortgage obligation. The
pre-foreclosure period begins when the lender files the NOD on the property.
Real Estate Owned (REO)

REO is a foreclosure property repossessed by banks or lenders. If a lender or bank is the
top bidder in the public auction, or if no third party bids at the auction, the property will
revert to the lender as an REO. Once the lender repossesses the property, it is listed on its
balance sheet as REO (a non-performing asset). REO properties are typically sold at a
discount from their inherent property values. RealtyTrac calculated that the average REO
discount from REO properties to non-foreclosed properties ranged from 33-41% from
2010 to 2012.
In order for an investor to purchase REOs at an auction, he/she must be registered with
the company running the auction. The highest bidder must give the auctioneer a deposit,
payable in cash, or a cashier’s check. Deposits are usually between 5% and 10% of the
outstanding loan amount, and the bidder must close in cash within 30 days. Some states

even require the bidder to pay the full amount at the auction. Also, properties are sold in
their current state, so it is important to inspect the home before buying it.
There are several ways to locate and buy a bank-owned REO. First, investors can contact
lenders and banks directly. Large banks have departments that primarily deal with selling
bank REOs and lenders will often post REO lists on their websites. Investors can also
search for REO properties using web databases. For example, RealtyTrac has extensive
REO listings by state.
For investors and homebuyers, REO properties have significant advantages. First, liens
against the properties are removed and taxes are paid. REOs are also sold at discounts to
the actual property’s value and often come with attractive terms, such as low down
payments and low interest rates. Oftentimes, REOs are restored to a readily salable
condition by the lending bank. Buyers can also negotiate with the bank to have them pay
for all or part of their closing costs since the seller is the lender.

IMPORTANT DISCLOSURES
RESEARCH ANALYST CERTIFICATION
We, Jade J. Rahmani, Ryan Tomasello, and Brian Jones, hereby certify that the views expressed in this research report
accurately reflect our personal views about the subject companies and their securities. We also certify that we have not
been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation in
this report.
Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation
based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall
firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.
COMPANY SPECIFIC DISCLOSURES

For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see the
most recently published company report or visit our global disclosures page on our website at
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on how to obtain these disclosures.
AFFILIATE DISCLOSURES
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KBW Distribution of Ratings / IB Services:

*IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
Outperform [BUY] 200 32.36 77 38.50
Market Perform [HOLD] 345 55.83 90 26.09
Underperform [SELL] 44 7.12 10 22.73
Restricted [RES] 0 0.00 0 0.00
Suspended [SP] 29 4.69 4 13.79
Covered -Not Rated [CNR] 4 0.65 1 25.00
Ratings Distribution as of September 27, 2016.
*KBW maintains separate research departments; however, the above chart, “Distribution of Ratings/IB Services,” reflects
combined information related to the distribution of research ratings and the receipt of investment banking fees globally.
Note: All ratings for Keefe, Bruyette and Woods, Inc. as of January 15, 2015 reflect a relative ratings system.

Explanation of Ratings: KBW Research Department provides three core ratings: Outperform, Market Perform, and
Underperform, and three ancillary ratings: Suspended, Restricted, and Covered-Not Rated. For purposes of New York
Stock Exchange Rule 472 and FINRA Rule 2241, Outperform is classified as a Buy, Market Perform is classified as a
Hold, and Underperform is classified as a Sell. Suspended indicates that KBW’s investment rating and/or target price
have been temporarily suspended due to applicable regulations and/or KBW policies. Restricted indicates that KBW is
precluded from providing an investment rating or price target due to the firm’s role in connection with a merger or other
strategic financial transaction. Covered-Not Rated indicates that KBW is not providing an investment rating and/or price
target due to the lack of publicly available information and/or its inability to adequately quantify the publicly available
information to sufficiently produce such metrics.
North American Stocks and European Stocks are rated based on the share price upside to target price relative to the
relevant sector index performance on a 12-month horizon. Outperform rated stocks have a greater than 10 percentage
point (“pp”) relative performance versus the sector, Market Perform rated stocks between +10pp to -10pp relative
performance versus the sector, and Underperform rated stocks a lower than 10pp relative performance versus the sector.
The 12-month price target may be determined by the stock’s fundamentally driven fair value and/or other factors (e.g.,
takeover premium or illiquidity discount).
KBW Model Portfolio: “Model Portfolio Buy” - Companies placed on this list are expected to generate a total rate of
return (percentage price change plus dividend yield) of 10% or more over the next 3 to 6 months. “Model Portfolio Sell” -
Companies placed on this list are expected to generate a total rate of return (percentage price change plus dividend
yield) at or below -10% over the next 3 to 6 months.
The purpose of the Model Portfolio is to inform institutional investors of KBWI’s short-term (as described above) outlook
for a particular industry sector. The Portfolio is not available for purchase or sale, cannot be duplicated as shown, is
hypothetical and is for illustrative purposes only. For a more detailed description of the selection criteria and other
specifics related to the construction of the Model Portfolio, please refer to the January 5, 2010 Model Portfolio Primer
and/or contact your KBWI representative for more information.
The Model Portfolio should be viewed as a short-term outlook of a particular industry sector, not as individual security
recommendations. The Model Portfolio uses a three-to-six-month time horizon and should not be considered when
making longer term investments. KBWI Research publishes research with a 12-month outlook on each issuer of
securities contained in the Model Portfolio. Investors who are interested in a particular security should request KBWI
Research’s coverage of such securities by contacting your KBWI representative. KBW research contains analyses of
fundamentals underlying each issuer.
KBWI’s long-term recommendations may differ from recommendations made for the Model Portfolio. These differences
are the result of different time horizons—KBWI research has a 12-month outlook and the Model Portfolio has a three-to-
six-month outlook.
Although the model portfolio is based upon actual performance of actual investments, KBWI did not recommend that
investors purchase this combination—or hypothetical portfolio—of investments during the time period depicted here. As
this hypothetical portfolio was designed with the benefit of hindsight, the choice of investments contained in it reflects a
subjective choice by KBWI. Accordingly, this hypothetical portfolio may reflect a choice of investments that performed
better than an actual portfolio, which was recommended during the depicted time frame, would have performed during
the same time period. Moreover, unlike an actual performance record, these results do not represent actual trading
wherein market conditions or other risk factors may have caused the holder of the portfolio to liquidate or retain all or part
of the represented holdings.
Stifel/KBW Income Opportunity List, Stifel/KBW Analyst Select List, and Stifel/KBW Select Income Opportunity—
The Crossovers List: These lists include companies that analysts believe have the most attractive risk-adjusted return
potential over the next 12 months, or, in the case of the Stifel/KBW Income Opportunity Ideas List, have yield in excess of
2%. In some cases, analysts who cover more than one sub-sector may have more than one name on the list.
Other Research Methods: Please be advised that KBW provides to certain customers on request specialized research
products or services that focus on covered stocks from a particular perspective. These products or services include, but
are not limited to, compilations, reviews, and analysis that may use different research methodologies or focus on the
prospects for individual stocks as compared to other covered stocks or over differing time horizons or under assumed
market events or conditions.

OTHER DISCLOSURES
Indexes: The following indexes: U.S.: KBW Nasdaq Bank Index (BKX), KBW Nasdaq Insurance Index (KIX), KBW
Nasdaq Capital Markets Index (KSX), KBW Nasdaq Regional Banking Index (KRX), KBW Nasdaq Mortgage Finance
Index (MFX), KBW Nasdaq Property & Casualty Index (KPX), KBW Nasdaq Financial Technology Index (KFTX), KBW
Nasdaq Premium Yield Equity REIT Index (KYX); KBW Nasdaq Financial Sector Dividend Yield Index (KDX); and Global:
KBW Nasdaq Global Bank Index (GBKX), are the property of KBWI and Nasdaq.
KBWI and Nasdaq do not guarantee the accuracy and/or completeness of the indexes, make no express or implied
warranties with respect to the indexes and shall have no liability for any damages, claims, losses, or expenses caused by
errors in the index calculation. KBWI and Nasdaq make no representation regarding the advisability of investing in
options on the Index. Past performance is not necessarily indicative of future results.
ETFs—Important Disclosures: The shares (“Shares”) of ETFs are not sponsored, endorsed, sold, or promoted by
KBWI. KBWI makes no representation or warranty, express or implied, to the owners of the Shares or any member of the
public regarding the advisability of investing in securities generally or in the Shares particularly or the ability of its Indexes
to track general stock market performance. The only relationship of KBWI to Invesco PowerShares Capital Management
LLC is the licensing of certain trademarks and trade names of KBWI and its Indexes which are determined, composed,
and calculated by KBWI without regard to Invesco PowerShares Capital Management LLC, the fund, or the Shares.
KBWI has no obligation to take the needs of Invesco PowerShares Capital Management LLC or the owners of the shares
into consideration in determining, composing, or calculating the Indexes. KBWI is not responsible for and has not
participated in any determination or calculation made with respect to issuance or redemption of the Shares. KBWI has no
obligation or liability in connection with the administration, marketing, or trading of the Shares.
Compensation. KBWI and Invesco PowerShares Capital Management LLC are parties to an index licensing agreement
wherein KBWI licenses its Indexes to Invesco PowerShares Capital Management LLC and KBWI receives as
compensation payments based on the amount of assets under management in the ETFs (which the licensed Indexes
underlie) and which may be recommended in this report.
ETF and Index Reports. The author of index and related ETF reports is the Director of KBWI’s Research Department,
who is also the head of the KBWI Index Committee. This Index Committee selects index components for the indexes
upon which the recommended ETFs are based.
ETF Risks. There are risks involved with investing in ETFs, including possible loss of money. ETFs may not always trade
or price as expected. Generally, security classifications used in calculating allocation tables are as of the last trading day
of the previous month. ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at
prices above or below the ETFs net asset value. Diversification does not ensure a profit and may not protect against loss
in declining markets. Investors should refer to the individual ETF prospectus for a more detailed discussion of the specific
risks and considerations for an individual ETF.
Investing in a single sector may be subject to more volatility than funds investing in a diverse group of sectors. Brokerage
commissions and ETF expenses will reduce returns. In general, ETFs can be expected to move up or down in value with
the value of the applicable index. Although ETFs may be bought and sold on the exchange through any brokerage
account, ETFs are not individually redeemable from the Fund. Investors may acquire ETFs and tender them for
redemption through the Fund in Creation Unit Aggregations only, please see the prospectus (link below) for more details.
Shares are not actively managed and are subject to risks including those regarding short selling and margin maintenance
requirements. Past performance is not necessarily indicative of future results.
An investor should consider the Funds’ investment objectives, risks, charges, and expenses carefully before investing.
This and other information can be found in their prospectuses. For this and more complete information about the Funds,
call InvescoPowerShares at 1-800-983-0903 or visit https://www.powershares.com for a prospectus. The prospectus
should be read carefully before investing.
Shares of the ETFs funds are not guaranteed or insured by the FDIC or by another governmental agency; they are
not obligations of the FDIC nor are they deposits or obligations of or guaranteed by KBWI or Invesco PowerShares
Capital Management LLC. ETFs are distributed by Invesco Distributors, Inc. the distributor of the PowerShares
Exchange-Traded Fund Trust II. PowerShares® is a registered trademark of Invesco PowerShares Capital
Management LLC.

General Risk Disclosure: Investments in securities or financial instrument involve numerous risks which may include
market risk, counterparty default risk, liquidity risk and exchange rate risk. No security or financial instrument is suitable
for all investors, and some investors may be prohibited in certain states or other jurisdictions from purchasing securities
mentioned in this communication. The securities of some issuers may not be subject to the audit and reporting standards,
practices and requirements comparable to those companies located in the investor’s local jurisdiction. Where net
dividends to ADR investors are discussed, these are estimated, using withholding tax rate conventions, and deemed
accurate, but recipients should always consult their tax advisor for exact dividend computations.
COUNTRY-SPECIFIC AND JURISDICTIONAL DISCLOSURES

United States: This report is being distributed in the U.S. by KBWI. Where the report has been prepared by a non-U.S.
affiliate, KBWI accepts responsibility for its contents.
U.K. and European Economic Area (EEA): This report is issued and approved for distribution in the EEA by Stifel
Nicolaus Europe Limited, also trading as Keefe, Bruyette & Woods Europe, which is regulated in the United Kingdom by
the Financial Conduct Authority (FCA).
To access a table of all rating and price target changes in the preceding 12 months for stocks under KBW coverage,
please click here: https://kbw3.bluematrix.com/sellside/MAR.action
Canadian Distribution: Research produced by KBW is distributed in Canada by KBW in reliance on the international
dealer exemption. This material is intended for use only by professional or institutional investors. None of the investments
or investment services mentioned or described herein is available to other persons or to anyone in Canada who is not a
“permitted client” as defined under applicable Canadian securities law.
In jurisdictions where KBW is not already licensed or registered to trade securities, transactions will only be affected in
accordance with local securities legislation which will vary from jurisdiction to jurisdiction and may require that a
transaction is carried out in accordance with applicable exemptions from registration and licensing requirements. Non-
U.S. customers wishing to effect a transaction should contact a representative of the KBW entity in their regional
jurisdiction except where governing law permits otherwise. U.S. customers wishing to effect a transaction should do so by
contacting a representative of KBWI.
ONLY DISTRIBUTE UNDER REGULATORY LICENSE

This communication is only intended for and will only be distributed to persons residing in any jurisdictions where such
distribution or availability would not be contrary to local law or regulation. This communication must not be acted upon or
relied on by persons in any jurisdiction other than in accordance with local law or regulation and where such person is an
investment professional with the requisite sophistication and resources to understand an investment in such securities of
the type communicated and assume the risks associated therewith.
The securities discussed in this report may not be available for sale in all jurisdictions. Clients considering an investment
in the securities discussed should speak with their sales representative prior to making an investment decision.
CONFIDENTIAL INFO
This communication is confidential and is intended solely for the addressee. It is not to be forwarded to any other person
or copied without the permission of the sender. Please notify the sender in the event you have received this
communication in error.
NO SOLICITATION OR PERSONAL ADVICE

This communication is provided for information purposes only. It is not a personal recommendation or an offer to sell or a
solicitation to buy the securities mentioned. Investors should obtain independent professional advice before making an
investment.
ASSUMPTIONS, EFFECTIVE DATE, AND UPDATES

Certain assumptions may have been made in connection with the analysis presented herein, so changes to assumptions
may have a material impact on the conclusions or statements made in this communication. Facts and views presented in
this communication have not been reviewed by, and may not reflect information known to, professionals in other business
areas of KBW, including investment banking personnel.

The information relating to any company herein is derived from publicly available sources and KBW makes no
representation as to the accuracy or completeness of such information. Neither KBW nor any of its officers or employees
accept any liability whatsoever for any direct, indirect, or consequential damages or losses arising from any use of this
report or its content.
This communication has been prepared as of the date of the report.
KBW does not undertake to advise clients of any changes in information, estimates, price targets, or ratings, all of which
are subject to change without notice. The recipients should assume that KBW will not update any fact, circumstance, or
opinion contained in this report.
COPYRIGHT
This report is produced for the use of KBW customers and may not be reproduced, re-distributed or passed to any other
person or published in whole or in part for any purpose without the prior consent of KBW.

GLOBAL DIRECTOR OF RESEARCH
Frederick Cannon, CFA
1 212 887 3887
Keefe, Bruyette & Woods, Inc. Keefe, Bruyette & Woods Europe
BANKS DIVERSIFIED FINANCIALS CO-DIRECTORS OF EUROPEAN RESEARCH

Jacquelynne Bohlen, CFA 1 503 499 6281 Bose George 1 212 887 3843 William Hawkins George Karamanos
Damon DelMonte 1 860 722 5908 Eric Hagen 1 212 887 3834 +44 20 7663 5294 +44 20 7663 3214
Douglas Doucette 1 212 887 7730 Brian Jones 1 212 887 7716 EUROPEAN BANKS
Brady Gailey, CFA 1 404 231 6546 Steven Kwok, CFA 1 212 887 7713 Hadrien de Belle +44 20 7663 5285
Collyn Bement Gilbert 1 973 549 4092 Ryan Lynch, CPA 1 314 342 2918 Nikolaos Charisis +44 20 7663 5282
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Michael Perito 1 212 887 7733 Frederick Cannon, CFA 1 212 887 3887 Hari Sivakumaran +44 20 7663 5293
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CAPITAL MARKETS OPTIONS STRATEGY
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Robert Lee 1 212 887 7732 Michele Ballatore +44 20 7663 5286
Andrew McLaughlin 1 212 887 3884 QUANTITATIVE ANALYSIS William Hawkins +44 20 7663 5294
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INSURANCE Gary Lee +44 20 7663 3213
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Blake Mock, CFA 1 212 887 2093
Meyer Shields, FCAS 1 443 224 1331 JAPANESE BANKS
Arash Soleimani, CFA, CPA 1 443 224 1377 David Threadgold, CFA +813 5770 2551
JAPANESE INSURANCE
David Threadgold, CFA +813 5770 2551
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Single-Family Rental Primer, 5th Edition

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Single-Family Rental Primer, 5th Edition

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Industry Update Mortgage Finance

September 28, 2016 Single-Family Rental Primer, 5th Edition

Single-Family Rentals Are an Emerging Institutional Asset Class. Assuming

Executive Summary ........................................................................................................................................... 3

Please refer to important disclosures and analyst

 Summary of major institutional participants.

 Notable M&A activity including deal-level economics.

 KBW’s revised single-family rental model, including a summary of public company

same-home property-level expenses and comparisons to multifamily.

 Analysis of underwritten SFR securitization cash flows, as well as a summary of

 Updated housing market data.

Single-Family Rentals: An Emerging Institutional Asset Class

Please refer to important disclosures and analyst

Exhibit 2: Investor Distribution of U.S. Single-Family Rental Housing Stock

101 - 250 251 - 500

Please refer to important disclosures and analyst

Assuming an average investment per home of $170,000 including upfront renovations—a

Industry Consolidation a Continuing Theme: Summary of M&A to Date

Please refer to important disclosures and analyst

 American Homes 4 Rent’s (AMH) acquisition of American Residential Properties in

 Silver Bay’s (SBY) acquisition of The American Home in February 2015.

 AMH’s acquisition of Beazer Pre-Owned Rental Homes in July 2014.

 AMH’s acquisition of the Ellington Housing portfolio in December 2014.

 Altisource Residential’s (RESI) acquisition of two portfolios from Invitation Homes

 SBY’s recently announced acquisition of a portfolio of 320 properties in Orlando,

In Exhibit 23 of this report, we provide a database of M&A to date across 18

Please refer to important disclosures and analyst

Update on Underwritten SFR Securitization Cash Flows and Analysis of Actual

Please refer to important disclosures and analyst

Exhibit 3: Major Players in the Single-Family Rental Sector

Type of # of Homes Investment

7 Tricon Capital (TCN-TSX) Public 8,018 1,027

Exhibit 4: Other Players in the Single-Family Rental Market

MACK Companies Chicago-based company; owns/manages 1,200 homes

Note: Data is based on most recent disclosures or media reports.

Please refer to important disclosures and analyst

proceeds of $288 million. ARPI was subsequently acquired by AMH in a February

 Tricon Capital (TCN-TSX), a Toronto-based investment manager, via its $1.0

Exhibit 5 shows KBW’s single-family rental REIT comp sheet.

Please refer to important disclosures and analyst

Book Value Per Share P/BV

Priced as of September 27, 2016.

Invitation Homes (The Blackstone Group): $9.6 Billion Investment

American Homes 4 Rent (AMH): $8.1 Billion Investment

 American Residential Properties (ARPI). In February 2016, AMH completed the

Please refer to important disclosures and analyst

Colony American Homes

Starwood Waypoint Residential Trust

Please refer to important disclosures and analyst

Colony Capital (CLNY): 14% Stake in Colony Starwood Homes (SFR)

Progress Residential (Pretium Partners): $3.0 Billion Investment

Please refer to important disclosures and analyst

Home Partners of America: $1.5 Billion Investment

Unlike strategies employed by other SFR operators, HPA makes investments in

Silver Bay Realty Trust Corp. (SBY): $1.3 Billion Investment

Please refer to important disclosures and analyst

Please refer to important disclosures and analyst

Main Street Renewal (Amherst): Investment in 10,000 Properties

Cerberus Capital Management: $615 Million Investment

HavenBrook Homes (PIMCO): Estimated Investment in 4,000 Properties (as of last

Please refer to important disclosures and analyst

Connorex-Lucinda: More Than 3,500 Homes

Waypoint Legacy Funds: Investment in 3,400 Properties

GTIS Partners/643 Capital Management: Estimated Investment in More Than 3,400