Exhibit 99.1

 

 

 

 

 

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Table of Contents

 

 

 

 

 

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      I. Earnings Release

 

 

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Earnings Release

 

 

COLONY STARWOOD HOMES ANNOUNCES

FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL AND OPERATING RESULTS

 

Scottsdale, Arizona (February 28, 2017) – Colony Starwood Homes (NYSE: SFR) (the “Company”), a leading single-family rental real estate investment trust (“REIT”), today announced operating and financial results for the three and twelve months ended December 31, 2016. Capitalized terms used herein have the meanings set forth in the Appendix.

Fourth Quarter 2016 Highlights

Full Year 2016 Highlights

“Fourth quarter Core FFO of $0.47 per share, supported by our Same Store Core NOI margin of 66.2%, caps a year of tremendous accomplishments for Colony Starwood Homes,” stated Fred Tuomi, the Company’s CEO. “Demand for our high-quality, well-located single-family rental homes and operational efficiencies from market density produced Full Year Same Store NOI growth of 11.0%. Since completing our merger in early 2016, we have strengthened our balance sheet by reducing outstanding debt, extending maturities and increasing fixed rate debt from 10% to over 80% today. Having met or exceeded our stated goals for our first full year as Colony Starwood Homes, we are highly confident in our ability to continue delivering superior results. Our 2017 full-year growth expectations reflect strong fundamentals in our high growth markets, the underlying strength of our existing portfolio, and the additional growth opportunities we are pursuing.”

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

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Earnings Release (Continued)

 

 

The 2016 financial results of the Company (other than Quarterly Same Store or Full Year Same Store results) include the historical financial results of Starwood Waypoint Residential Trust (“SWAY”) beginning on January 5, 2016, which was the date of the merger between Colony American Homes (“CAH”) and SWAY (the “Merger”). Historical financial results (other than Same Store results) as of dates or for periods prior to January 5, 2016 represent only the pre-Merger financial results of CAH and do not reflect what the financial results would have been had the Merger been complete during such periods.

Fourth Quarter 2016 Operating Results

Total revenues were $146.4 million for the three months ended December 31, 2016, and net loss attributable to common shareholders was approximately $10.5 million, or ($0.10) per share, driven by depreciation and amortization expense.

NAREIT FFO was $40.0 million for the three months ended December 31, 2016, or $0.37 per share, and Core FFO was $51.0 million, or $0.47 per share. NAREIT FFO and Core FFO are common supplemental measures of operating performance for a REIT, and the Company believes both are useful to investors as a complement to GAAP measures because they facilitate an understanding of the operating performance of the Company’s properties.

Same Store Results

For the Company’s Quarterly Same Store portfolio of 28,146 homes, revenue for the three months ended December 31, 2016 was $131.4 million, a 5.4% increase in those homes’ revenues as compared to the three months ended December 31, 2015.  For the Company’s Full Year Same Store portfolio of 22,363 homes, revenue for the twelve months ended December 31, 2016 was $402.7 million, a 6.2% increase in those homes’ revenues as compared to the twelve months ended December 31, 2015. For the Quarterly Same Store portfolio, property operating expenses were down by 8.8% from the three months ended December 31, 2015, resulting in an 15.5% growth of Quarterly Same Store NOI for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015. For the Full Year Same Store portfolio, property operating expenses were down 0.7% from the twelve months ended December 31, 2015, resulting in an 11.0% increase of Full Year Same Store NOI for the twelve months ended December 31, 2016 as compared to the twelve months ended December 31, 2015. Quarterly and Full Year Same Store Core NOI margins were 66.2% and 63.8%, respectively. The table below summarizes Quarterly and Full Year Same Store operating results.

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

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Earnings Release (Continued)

 

 

Investments

During the three months ended December 31, 2016, the Company acquired 549 homes for an aggregate estimated total investment of approximately $132.0 million, or approximately $240,000 per home, including estimated investment costs for renovation.  The Company sold 228 single-family rental homes for gross sales proceeds of $38.2 million, resulting in a gain of approximately $1.3 million.

For the twelve months ended December 31, 2016, the company acquired 1,079 homes for an aggregate estimated total investment of approximately $262.8 million, or $244,000 per home, including estimated investment costs for renovation.  The Company sold 976 single-family rental homes for gross sales proceeds of $167.4 million, resulting in a gain of approximately $4.7 million.

NPL/REO Discontinued Operations

On May 4, 2016, the Company’s board of trustees (the “Board”) authorized the exit of the non-performing loan (“NPL”) business. The remaining operations of the NPL business segment are recorded as discontinued operations, net for the three and twelve months ended December 31, 2016 and all comparable periods.

In Q4 the Company sold 220 real estate owned (“REO”) homes in the NPL business segment for $31.4 million of total cash proceeds, of which $14.4 million was used to pay down associated debt. As of December 31, 2016 there was $19.3 million of outstanding associated debt; subsequent to December 31, 2016 this debt was paid in full and the warehouse line was extinguished.

Balance Sheet and Capital Markets Activities 

As of December 31, 2016, the Company had $3.8 billion of debt outstanding and approximately $492.0 million of undrawn commitments on its credit facilities. Since the Merger closed on January 5, 2016 through December 31, 2016, the Company reduced its outstanding debt by approximately $354.0 million.

Subsequent to December 31, 2016, the Company sold $345.0 million of 3.50% convertible senior notes due 2022.  The Company used the net proceeds from the new convertible offering to repurchase, in privately negotiated transactions, substantially all of its 4.50% convertible senior notes due in 2017.  Remaining proceeds from the note issuance were used to repay amounts drawn on the Company’s credit facilities, to fund ongoing asset acquisitions and for general corporate purposes.

The Company did not repurchase any shares in the fourth quarter of 2016 under its $250.0 million repurchase program, which is authorized through May 6, 2017.  To date, the Company has purchased 2.4 million shares for an aggregate purchase price of $52.8 million at an average of $22.19 per share under the program.

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

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Earnings Release (Continued)

 

 

On February 22, 2017, the Board declared a dividend of $0.22 per common share for the first quarter of 2017, which will be paid on April 14, 2017 to shareholders of record on March 31, 2017.

Full Year 2017 Financial Guidance

The Company does not provide forward-looking guidance for certain financial measures on a GAAP basis because it is unable to reasonably predict certain items contained in the GAAP measures, including one-time and infrequent items that are not indicative of the Company’s ongoing operations. Such items include, but are not limited to, discontinued operations, share-based compensation and other items not reflective of the Company's ongoing operations.

This outlook is based on a number of assumptions, many of which are outside the Company’s control and all of which are subject to change. This outlook reflects the Company’s expectations on (1) existing investments and (2) yield on incremental investments inclusive of the Company’s existing pipeline. All guidance is based on current expectations of future economic conditions and the judgment of the Company’s management team. Please refer to the Forward Looking Statement disclosure on page 8.

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

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Earnings Release (Continued)

 

 

Fourth Quarter 2016 Conference Call

A conference call is scheduled on Tuesday, February 28, 2017, at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the three and twelve months ended December 31, 2016. The domestic dial-in number is 1-877-407-9039 (for U.S. and Canada) and the international dial-in number is 1-201-689-8470 (passcode not required). An audio webcast may be accessed at www.colonystarwood.com in the investor relations section. A replay of the call will be available through March 31, 2017 and can be accessed by calling 1-844-512-2921 (U.S. and Canada) or 1-412-317-6671 (international), replay pin number 13653043, or by using the link at www.colonystarwood.com, in the investor relations section. 

About Colony Starwood Homes

Colony Starwood Homes (NYSE: SFR) is one of the largest publicly traded owners and operators of single-family rental homes in the United States. Colony Starwood Homes acquires, renovates, leases, maintains and manages single-family homes in markets that exhibit favorable demographics and long-term economic trends, as well as strengthening demand for rental properties. Colony Starwood Homes is building its business upon a foundation of respect for its residents and the communities in which it operates. Additional information can be found at www.colonystarwood.com.

Additional information 

A copy of the Fourth Quarter 2016 Supplemental Information Package (“Q4 2016 Supplement”) and this press release are available on the Company’s website at www.colonystarwood.com.  

Notice Regarding Non-GAAP Financial Measures

This press release and the Q4 2016 Supplement contain and may refer to certain non-GAAP financial measures and terms that management believes are helpful in understanding our business, as further set forth in the definitions, explanations and reconciliations of each non-GAAP financial measure to its most comparable GAAP financial measures included in the Appendix. These measures and terms are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should be read together with the most comparable GAAP measures.

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

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Earnings Release (Continued)

 

 

Forward-Looking Statements

Certain statements in this press release and the quarterly supplement/presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws and are based on certain assumptions and discuss future expectations, describe future plans and strategies and contain financial and operating projections or state other forward-looking information. The Company’s ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company’s actual results and performance could differ materially from those set forth in, or implied by, the forward-looking statements. Factors that could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations and prospects, as well as the Company’s ability to make distributions to its shareholders, include, but are not limited to: the factors referenced in the Company’s Annual Report on Form 10-K; unanticipated increases in financing and other costs, including a rise in interest rates; the availability, terms and the Company’s ability to effectively deploy short-term and long-term capital; the possibility that unexpected liabilities may arise from the Company’s merger (the “Merger”) with Colony American Homes (“CAH”), including the outcome of any legal proceedings that have been or may be instituted against the Company, CAH or others in connection with the Merger and the associated transactions; changes in the Company’s business and growth strategies; the Company’s ability to hire and retain highly skilled managerial, investment, financial and operational personnel; volatility in the real estate industry, interest rates and spreads, the debt or equity markets, the economy generally or the rental home market specifically, whether the result of market events or otherwise; events or circumstances that undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large financial institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts; declines in the value of single-family residential homes, and macroeconomic shifts in demand for, and competition in the supply of, rental homes; the availability of attractive investment opportunities in homes that satisfy the Company’s investment objective and business and growth strategies; the Company’s ability to convert the properties it acquires into rental homes generating attractive returns and to effectively control the timing and costs relating to the renovation and operation of the properties; the Company’s ability to complete its exit from the non-performing loan (“NPL”) (and related real estate owned) business in the anticipated time period on acceptable terms and to re-deploy net cash proceeds therefrom; the Company’s ability to lease or re-lease its rental homes to qualified residents on attractive terms or at all; the failure of residents to pay rent when due or otherwise perform their lease obligations; the Company’s ability to effectively manage its portfolio of rental homes; the concentration of credit risks to which the Company is exposed; the rates of default or decreased recovery rates on the Company’s target assets; the adequacy of the Company’s cash reserves and working capital; potential conflicts of interest with Starwood Capital Group, Colony Capital, LLC (“Colony Capital”), Colony NorthStar, Inc. (“Colony NorthStar”) and their affiliates and managed investment activities; the timing of cash flows, if any, from the Company’s investments; the Company’s expected leverage; financial and operating covenants contained in the Company’s credit facilities and securitizations that could restrict its business and investment activities; effects of derivative and hedging transactions; the Company’s ability to maintain effective internal controls as required by the Sarbanes-Oxley Act of 2002 and to comply with other public company regulatory requirements; the Company’s ability to maintain its exemption from registration as an investment company under the Investment Company Act of 1940, as amended; actions and initiatives of the U.S., state and municipal governments and changes to governments’ policies that impact the economy generally and, more specifically, the housing and rental markets; changes in governmental regulations, tax laws (including changes to laws governing the taxation of real estate investment trusts (“REITs”)) and rates, and similar matters; limitations imposed on the Company’s business and its ability to satisfy complex rules in order for the Company and, if applicable, certain of its subsidiaries to qualify as a REIT for U.S. federal income tax purposes and the ability of certain of the Company’s subsidiaries to qualify as taxable REIT subsidiaries for U.S. federal income tax purposes, and the Company’s ability and the ability of its subsidiaries to operate effectively within the limitations imposed by these rules; and estimates relating to the Company’s ability to make distributions to its shareholders in the future.

You should not place undue reliance on any forward-looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in the reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. Except as required by law, the Company is under no duty to, and the Company does not intend to, update any of the forward-looking statements appearing herein, whether as a result of new information, future events or otherwise.

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

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      II. Consolidated Financials

 

 

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Balance Sheet (Condensed)

 

As of December 31, 2016

(Unaudited)

Dollars in thousands

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Statements of Operations

 

(Unaudited)

Dollars in thousands

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Reconciliation to FFO and Core FFO

 

Dollars in thousands, except share and per share data

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated

 

 

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Income Statement Bridge

 

Quarter-to-date normalizations for Merger and Transaction, Integration and NPL business

Dollars in thousands

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Income Statement Bridge

 

Year-to-date normalizations for Merger and Transaction, Integration and NPL business

Dollars in thousands

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise.

 

 

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NOI by Segment

 

 Year-over-year comparison

 

Dollars in thousands

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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      III. Selected Additional Information

 

 

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Home Count by Portfolio

 

As of December 31, 2016

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Asset Rollforward

 

Three months ended December 31, 2016

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Debt Summary

 

 

As of December 31, 2016

Dollars in millions

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Capitalization Update

 

Inclusive of events subsequent to December 31, 2016

Capitalization Update Inclusive of events subsequent to December 31, 2016 Capitalization Debt Terms Summary Dollars in millions $7,368 $3,845 $3,523 Debt: 52% Equity market capitalization: (3) 48% Blended Int. Rate Initial Maturity Fully-Extended Maturity Convertible notes due ’17 $5 4.50% Oct '17 Oct '17 Convertible notes due ’19 $230 3.00% Jul '19 Jul '19 Convertible notes due ’22 $345  3.50% Jan ‘22 Jan ‘22 Fixed rate securitization debt(1)(4) $2,600 3.03% Aug'17 Jun ’20 Secured credit facilities $24 L + 3.00% Jun ’17 Feb ’18 Floating rate securitization debt(2)(4) $641 L + 1.99% Nov '17 Jul '20 Subsequent Events Summary In January the Company sold $345 million of 3.50% convertible senior notes due 2022 A portion of the sale proceeds were used to repurchase outstanding 4.50% convertible senior notes, reducing the 2017 notes outstanding from $173 to $5 million due 2022 Additional proceeds were used to pay down secured credit facilities by approximately $84 million and pay off $19 million of debt related to discontinued operations Remaining proceeds will fund ongoing asset acquisitions or be utilized for general corporate purposes

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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      IV. Same Store Information

 

 

 

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Portfolio Overview – Quarterly Same Store

 

As of December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Portfolio Overview – Full Year Same Store

 

As of December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Same Store Year-Over-Year Results

 

 

Dollars in thousands

 

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Same Store Core Year-Over-Year Results

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Results by Market – Quarterly Same Store

 

Three months ended December 31, 2016

Dollars in thousands

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Results by Market – Full Year Same Store

 

 

Twelve months ended December 31, 2016

Dollars in thousands

 

 

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Lease Outcomes – Quarterly Same Store

 

As of December 31, 2016

Based on Quarterly Same Store property count of 28,146 homes

 

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

 

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Lease Outcomes – Full Year Same Store

 

 

As of December 31, 2016

Based on Full Year Same Store property count of 22,363 homes

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

 

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Rent Growth – Quarterly Same Store

 

Quarter-to-Date as of December 31, 2016

Based on Quarterly Same Store property count of 28,146 homes

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Rent Growth – Full Year Same Store

 

Quarter-to-Date as of December 31, 2016

Based on Full Year Same Store property count of 22,363 homes

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Rent Growth – Full Year Same Store

 

Year-to-Date as of December 31, 2016

Based on Full Year Same Store property count of 22,363 homes

 

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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Cost to Maintain a Home

 

Dollars in thousands, except per home amounts

 

 

 

 

 

 

 

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of non-GAAP financial measures. All information is as of December 31, 2016 unless otherwise indicated.

 

 

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      V. Earnings Guidance

 

 

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2017 Guidance

 

Colony Starwood Homes 2017 full-year guidance

 

 

 

 

 

 

 

 

The Company does not provide forward-looking guidance for certain financial measures on a GAAP basis because it is unable to reasonably predict certain items contained in the GAAP measures, including one-time and infrequent items that are not indicative of the Company’s ongoing operations. Such items include, but are not limited to, discontinued operations, share-based compensation and other items not reflective of the Company's ongoing operations.

 

 

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      Appendix

 

 

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Appendix A: Definitions

 

Annualized Turnover Rate. Is calculated by dividing a) the number of homes that become unoccupied during a period of time by b) the number of homes that had completed initial renovation/rehabilitation and were leasable during the specified period, expressed as an annualized percentage by multiplying the period of measurement to reach a 12 month period (e.g., multiplying a three month turnover measurement by four). Management believes this operational measure is useful in understanding resident satisfaction, pricing effectiveness and assessing associated property repairs and maintenance expenses.

Average Acquisition Cost per Home. Is calculated by dividing a) the total acquisition cost for each home in an identified population (such acquisition costs including purchase price and closing costs, but excluding renovation/rehabilitation costs incurred prior to leasing) by b) the number of homes in the respective population. Total acquisition cost for assets owned by SWAY prior to the Merger includes the purchase accounting fair market value step-up applied to those assets as of the close of Merger on January 5, 2016.

Average Investment. Is calculated by dividing the sum of a) the total acquisition cost for each home in an identified population b) all property related capitalized expenditures incurred in the renovation/rehabilitation of a property prior to leasing by c) the number of homes in the respective population. Total acquisition cost for assets owned by SWAY prior to the Merger includes the purchase accounting fair market value step-up applied to those assets as of the close of Merger on January 5, 2016.

Average Monthly Rent per Occupied Home. Is calculated by dividing a) the aggregate monthly contractual cash rent (excluding rent concessions and incentives) for an identified population of occupied rental units by b) the number of rental units in the identified population. To date, rent concessions and incentives have been utilized on a limited basis and have not had a significant impact on the CSH portfolio’s average monthly rent.

Blended Rent Growth. Represents the weighted average rent growth on all new leases (replacement leases) and renewals during a measured period, and is calculated by dividing a) the aggregate contractual first month rent on all new leases and lease renewals executed during the applicable period for an identified population of occupied rental units by b) the aggregate contractual last month rent for such identified population of rental units before renewal or new lease. This calculation does not include lease escalations / step-ups for multi-year leases.

Core FFO. Core FFO is a non-GAAP financial measure of operating performance that we believe assists investors in assessing the results of CSH’s single-family rental business, which is our core operating business. Core FFO adjusts NAREIT FFO (defined below) to eliminate the impact of certain items that CSH believes are not indicative of our core operating performance, including the results of the NPL business, which we intend to exit, as well as certain non-cash items. Our Core FFO begins with NAREIT FFO and is adjusted for revenues and expenses directly related to our NPL business, for amortization of deferred financing costs and debt premium discounts, share-based compensation, loss on derivative financial instruments, amortization of derivative financial instruments, non-cash interest expense, merger and transaction-related expenses. Core FFO does not represent cash generated from operating activities determined in accordance with GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to net income (determined in accordance with GAAP) as a performance measure.

Core Net Operating Income or Core NOI. CSH calculates Core NOI by subtracting Core Property Operating Expenses from Core Rental Revenue, as defined, which eliminates (a) revenues and expenses that CSH believes are not directly related to the operating performance of the homes themselves and (b) GAAP presentations of resident chargeback fees and bad debt expense to provide a clearer presentation of rental and fee income streams as well as associated expenses. Please refer to the definition of NOI below for an explanation of how that measure is calculated separate from Core NOI. Core NOI is a non-GAAP measure of operating performance that CSH believes assists investors in assessing the performance of our portfolio of single-family homes, which is our core operating business. Please see Appendix B for a reconciliation of net income (loss) to Core NOI.

 

 

 

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Appendix A: Definitions

 

The Core NOI measures included in this presentation should not be considered alternatives to net loss or net cash flows from operating activities, as determined in accordance with GAAP, as indications of CSH’s performance or as measures of liquidity. Although CSH uses these non-GAAP measures for comparability in assessing their performance against other REITs, not all REITs compute the same non-GAAP measures. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures are comparable with that of other REITs.

Core Property Operating Expenses. Is calculated by adjusting operating costs for the properties in the relevant sample by eliminating the impact of resident chargebacks bad debt expense.

Core Rental Revenue. Is calculated by rental and fee income for the properties in the relevant sample adjusted to eliminate the impact of bad debt expense.

Development Homes.  Homes that a) are awaiting initial rehabilitation, b) are currently undergoing initial rehabilitation, or c) have completed initial rehabilitation but have not yet experienced initial occupancy.

Full Year Same Store. Homes that met the definition of Same Store Homes as of January 1, 2016.  As of December 31, 2016 there were 22,363 homes.

Integration Costs.  Costs and charges incurred during the integration of the Starwood Waypoint Residential Trust and Colony American Homes operations in the three and twelve months ended December 31, 2016 that are not reflective of our core operating performance and that we do not expect to incur subsequent to the completion of the Merger integration, but which do not qualify for Merger and transaction-related expenses under GAAP.  The majority of Integration Costs consist of base salaries, benefits, and payroll taxes of employees separated or scheduled for separation as a result of the Merger. See Appendix B for a summary of Integration Costs through the three and twelve months ended December 31, 2016.

Merger and Transaction-Related Expenses.  Direct costs incurred as a result of the Merger closing or costs required to ensure the Merger was completed successfully.  These costs include legal fees, advisory services (accounting, tax, and entity filings), success fees, employee retention plans and severance costs, and property tax / transfer costs.  See Appendix B for a summary of costs for the three and twelve months ended December 31, 2016.

NAREIT FFO. Funds from operations is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income or loss (in accordance with GAAP) excluding gains or losses from sale of previously depreciated real estate assets, plus depreciation and amortization of real estate assets, impairment of real estate assets, discontinued operations and adjustments for unconsolidated partnerships and joint ventures.  Consistent with real estate industry and investment community preferences, we use NAREIT FFO as a supplemental measure of operating performance for a REIT. We consider NAREIT FFO useful to investors as a complement to GAAP measures because it facilitates an understanding of the operating performance of the Company’s properties. NAREIT FFO does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that NAREIT FFO provides investors with a clearer view of the Company’s operating performance.

Net Operating Income or NOI. CSH defines NOI as rental and other property revenues less property operating expenses. CSH has presented NOI for Same Store Homes as CSH believes this NOI measure to be an appropriate supplemental measure of operating performance to net income attributable to common shareholders because it reflects the operating performance of our homes without allocation of corporate level overhead or general and administrative costs and reflects the operations of our business. Refer to the table below for a reconciliation of net loss attributable to common shareholders to NOI. Please refer to the definition of Core NOI above for an explanation of how that measure is calculated separate from NOI, and see Appendix B for a reconciliation of net income (loss) to NOI.

 

 

 

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Appendix A: Definitions

 

These NOI measures included in this presentation should not be considered alternatives to net loss or net cash flows from operating activities, as determined in accordance with GAAP, as indications of CSH’s performance or as measures of liquidity. Although CSH uses these non-GAAP measures for comparability in assessing their performance against other REITs, not all REITs compute the same non-GAAP measures. Accordingly, there can be no assurance that CSH’s basis for computing these non-GAAP measures is comparable with that of other REITs.

Non-Owned, Managed Homes. Colony Starwood Homes currently provides its property and asset management services to third parties and/or joint venture partners as a fee service.  The non-owned properties are all managed within the same platform from which Colony Starwood Homes services its Owned homes.

Occupancy %. Represents the percentage of an identified rental unit population that is occupied as of the measurement period and is calculated by dividing a) the number of occupied units as of the last day of the measurement period by b) the number of rental units in the identified population of rental units (Same Store, Owned Homes, etc.).

Other Homes. Includes 266 Owned Homes as of December 31, 2016 that were not intended to be held for the long-term and not in service.  The 266 Other Homes excludes the 353 REO homes held as of December 31, 2016.

Owned Homes. Represents wholly-owned single-family rental properties, and is measured by the number of total rental units. This takes into account investments in multi-unit properties which Management believes provides a more meaningful measure to investors.  Owned Homes excludes the 353 REO homes held as of December 31, 2016.

Quarterly Same Store. Homes that met the definition of Same Store Homes as of October 1, 2016.  As of December 31, 2016 there were 28,146 homes.

Recurring Capital Expenditures or Recurring Capex. General replacements and expenditures required to preserve and maintain the value and functionality of a home and its systems as a single-family rental.

Renewal Rate. Is calculated by dividing a) the number of renewed residents with current period lease expirations by b) the total lease expirations during the period.

Renewal Rent Growth. Represents the percentage change in monthly contractual rent resulting from all lease renewals that became effective during a measurement period for an identified population of rental units, and is calculated by dividing a) the aggregate contractual first month rent (excluding rent concessions and incentives) on lease renewals executed during the applicable measurement period for an identified population of rental units by b) the aggregate contractual last month rent for such identified population of rental units before renewal. To date, rent concessions and incentives have been used on a limited basis and have not had a significant impact on contractual rent.

REO. Real estate owned, which is associated with the NPL business.

Replacement Rent Growth. Represents the percentage change in monthly contractual rent resulting from new leases on properties previously leased to different residents during a measurement period for an identified population of rental units and is calculated by dividing a) the aggregate contractual first month rent (excluding rent concessions and incentives) on new leases signed during the applicable measurement period for an identified population of occupied rental units by b) the aggregate contractual last month rent for such identified population of rental units under the prior lease on such properties. To date, rent concessions and incentives have been used on a limited basis and have not had a significant impact on contractual rent.

 

 

 

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Appendix A: Definitions

 

Retention Rate. Is calculated by dividing a) the number of retained residents with current period lease expirations by b) the total lease expirations during the period.

Revenue Enhancing Capital Expenditures. Capital improvements and additions intended to increase the revenue potential for a given property.

Same Store Homes. Homes which have been stabilized for at least fifteen (15) months prior to the start of the current measurement period, excluding any homes that have been disposed of, removed from service or returned to the development period for significant renovation.

Stabilized Homes. Homes that are currently occupied or have been previously leased and occupied that do not meet the criteria to be a Same Store Home. For the three and twelve months ended December 31, 2016 the Stabilized Home count excludes 110 homes not intended to be held for the long term.

Top 10 Markets. Refers to CSH Homes’ ten markets with the greatest number of homes as of December 31, 2016.

Total Homes. Represents all homes Colony Starwood Homes manages.  Includes both Owned Homes and Non-Owned, Managed Homes.  

Total Rent Growth. Represents the weighted average rent growth on replacement rents, renewals, and escalating multi-year leases for the period.

UPB. Unpaid principal balance.

Weighted Average Home Age (years). Rounded number of years between when a home was built and the last day of the current measurement period with each market being weighted by its area asset count.

 

 

 

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Appendix B: Reconciliations

 

Cost to Maintain a Home:

 

 

 

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Appendix B: Reconciliations

 

Integration Costs:

 

 

 

Merger and Transaction-Related Expenses:   

 

 

 

 

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Appendix B: Reconciliations

 

Net Operating Income or NOI:  

 

 

 

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Appendix B: Reconciliations

 

Other Assets:

Other Markets:

Weighted-Average Shares: