Fair Value

The carrying amount of rents and other receivables, restricted cash, escrow deposits, prepaid expenses and other assets, and accounts payable and accrued expenses approximate fair value because of the short maturity of these amounts. The Company’s interest rate cap agreement and preferred shares derivative liability are the only financial instruments recorded at fair value on a recurring basis in the condensed consolidated financial statements.

Our credit facility, asset-backed securitizations, exchangeable senior notes and secured note payable are also financial instruments, which are classified as Level 3 in the fair value hierarchy as they were estimated by using unobservable inputs. We estimated their fair values by modeling the contractual cash flows required under the instruments and discounting them back to their present values using estimates of current market rates. The following table displays the carrying values and fair values of our debt instruments as of June 30, 2016, and December 31, 2015 (in thousands):



	June 30, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
AH4R 2014-SFR1 securitization	$	471,351	$	473,227	$	473,755	$	472,258
ARP 2014-SFR1 securitization (1)	330,822		330,822		—		—
AH4R 2014-SFR2 securitization	504,739		512,232		507,305		476,952
AH4R 2014-SFR3 securitization	520,468		532,360		523,109		489,448
AH4R 2015-SFR1 securitization	546,358		554,836		549,121		496,673
AH4R 2015-SFR2 securitization	474,532		485,061		476,920		433,633
Total asset-backed securitizations, net (2)	2,848,270		2,888,538		2,530,210		2,368,964
Exchangeable senior notes, net (1)	106,434		106,434		—		—
Secured note payable	50,295		50,351		50,752		48,631
Credit facility (3)	142,000		142,000		—		—
Total debt	$	3,146,999	$	3,187,323	$	2,580,962	$	2,417,595


(1)	The ARP 2014-SFR1 securitization and exchangeable senior notes, net are presented net of unamortized discounts. As they were recently acquired in connection with the Merger with ARPI in February 2016, we believe their fair values approximate their carrying values.


(2)	The carrying values of the asset-backed securitizations exclude $52.5 million and $56.6 million of deferred financing costs as of June 30, 2016, and December 31, 2015, respectively.

(3)

As our credit facility bears interest at a floating rate based on an index plus a spread, which is 1-month LIBOR plus 2.75%, and the credit spread is consistent with those demanded in the market for credit facilities with similar risks and maturities, management believes that the carrying value of the credit facility as of June 30, 2016, reasonably approximates fair value, which has been estimated by discounting future cash flows at market rates.

Valuation of the preferred shares derivative liability considers scenarios in which the preferred shares would be redeemed or converted into Class A common shares by the Company and the subsequent payoffs under those scenarios. The valuation also considers certain variables such as the risk-free rate matching the assumed timing of either redemption or conversion, volatility of the underlying home price appreciation index, dividend payments, conversion rates, the assumed timing of either redemption or conversion and an assumed drift factor in home price appreciation across certain metropolitan statistical areas, or MSAs, as outlined in the agreement.

The fair value of our interest rate cap agreement is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate cap. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. To comply with the provisions of ASC 820, Fair Value Measurements and Disclosures, the Company incorporates credit valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements.

The following table sets forth the fair value of our interest rate cap agreement, the contingently convertible Series E units liability and preferred shares derivative liability as of June 30, 2016, and December 31, 2015 (in thousands):



	June 30, 2016
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Interest rate cap agreement	$	—	$	—	$	—	$	—

Liabilities:
Preferred shares derivative liability	$	—	$	—	$	63,240	$	63,240



	December 31, 2015
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Interest rate cap agreement	$	—	$	—	$	—	$	—

Liabilities:
Contingently convertible Series E units liability	$	—	$	—	$	69,957	$	69,957
Preferred shares derivative liability	$	—	$	—	$	62,790	$	62,790

The following table presents changes in the fair values of our Level 3 financial instruments, consisting of our contingently convertible series E units liability and preferred shares derivative liability, which are measured on a recurring basis with changes in fair value recognized in remeasurement of Series E units and remeasurement of preferred shares, respectively, in the condensed consolidated statements of operations for the six months ended June 30, 2016 and 2015 (in thousands):



Description	January 1, 2016		Issuances		Conversions			Remeasurement included in earnings		June 30, 2016
Liabilities:
Contingently convertible Series E units liability	$	69,957	$	—	$	(69,957	)	$	—	$	—
Preferred shares derivative liability	$	62,790	$	—	$	—		$	450	$	63,240



Description	January 1, 2015		Issuances		Conversions		Remeasurement included in earnings			June 30, 2015
Liabilities:
Contingently convertible Series E units liability	$	72,057	$	—	$	—	$	(3,981	)	$	68,076
Preferred shares derivative liability	$	57,960	$	—	$	—	$	(700	)	$	57,260

Changes in inputs or assumptions used to value the preferred shares derivative liability may have a material impact on the resulting valuation.