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 facilities, term loan 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 September 30, 2016, and December 31, 2015 (in thousands):



	September 30, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
AH4R 2014-SFR1 securitization	$	457,979	$	460,767	$	473,755	$	472,258
AH4R 2014-SFR2 securitization	503,093		513,484		507,305		476,952
AH4R 2014-SFR3 securitization	519,148		532,755		523,109		489,448
AH4R 2015-SFR1 securitization	544,861		555,558		549,121		496,673
AH4R 2015-SFR2 securitization	473,237		484,615		476,920		433,633
Total asset-backed securitizations (1)	2,498,318		2,547,179		2,530,210		2,368,964
Exchangeable senior notes, net (2)	107,283		107,283		—		—
Secured note payable	50,065		50,377		50,752		48,631
Revolving credit facilities (3)	75,000		75,000		—		—
Term loan facility (4)	250,000		250,000		—		—
Total debt	$	2,980,666	$	3,029,839	$	2,580,962	$	2,417,595


(1)	The carrying values of the asset-backed securitizations exclude $50.4 million and $56.6 million of deferred financing costs as of September 30, 2016, and December 31, 2015, respectively.


(2)	The 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 the fair value approximates the carrying value.

(3)

As our revolving credit facility bears interest at a floating rate based on an index plus a spread, which is a LIBOR rate plus a margin ranging from 1.75% to 2.30% or a base rate (generally determined according to a prime rate or federal funds rate) plus a margin ranging from 0.75% to 1.30%, and since this facility was recently entered into in August 2016, management believes that the carrying value of the revolving credit facility as of September 30, 2016, reasonably approximates fair value.

(4)

The carrying value of the term loan facility excludes $3.4 million of deferred financing costs as of September 30, 2016. As our term loan facility bears interest at a floating rate based on an index plus a spread, which is a LIBOR rate plus a margin ranging from 1.70% to 2.30% or a base rate (generally determined according to a prime rate or federal funds rate) plus a margin ranging from 0.70% to 1.30%, and since this facility was recently entered into in August 2016, management believes that the carrying value of the term loan facility as of September 30, 2016, reasonably approximates fair value.

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



	September 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
Liabilities:
Preferred shares derivative liability	$	—	$	—	$	65,730	$	65,730



	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
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 nine months ended September 30, 2016 and 2015 (in thousands):



Description	January 1, 2016		Issuances		Conversions			Remeasurement included in earnings		September 30, 2016
Liabilities:
Contingently convertible Series E units liability	$	69,957	$	—	$	(69,957	)	$	—	$	—
Preferred shares derivative liability	$	62,790	$	—	$	—		$	2,940	$	65,730



Description	January 1, 2015		Issuances		Conversions		Remeasurement included in earnings			September 30, 2015
Liabilities:
Contingently convertible Series E units liability	$	72,057	$	—	$	—	$	(3,456	)	$	68,601
Preferred shares derivative liability	$	57,960	$	—	$	—	$	2,300		$	60,260

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