Note 15. Fair Value

The carrying amount of rents and other receivables, restricted cash for resident security deposits, escrow deposits, prepaid expenses and other assets, accounts payable and accrued expenses and amounts payable to affiliates approximate fair value because of the short maturity of these amounts. As the Company's credit facility bears variable interest at 30 day LIBOR plus 2.75% and was recently amended on September 30, 2013, management believes the carrying value of the credit facility as of March 31, 2014 reasonably approximates fair value, which has been estimated by discounting future cash flows at market rates (Level 2).

The Company's contingently convertible Series E units liability and preferred shares derivative liability are the only financial instruments recorded at fair value on a recurring basis in the accompanying condensed consolidated financial statements and are both valued using a Monte Carlo simulation model.

Inputs to the model used to value the contingently convertible Series E units liability include a risk-free rate corresponding to the assumed timing of the conversion date and a volatility input based on the historical volatilities of selected peer group companies. The starting point for the simulation is the most recent trading price in the Company's Class A common shares, into which the Series E units are ultimately convertible. The timing of such conversion is based on the provisions of the contribution agreement and the Company's best estimate of the events that trigger such conversions.

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 service areas as outlined in the agreement.

The following table sets forth the fair value of the contingently convertible Series E units liability and preferred shares derivative liability as of March 31, 2014 (in thousands):

			March 31, 2014

Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingently convertible Series E units liability	$	69,694	$	—	$	—	$	69,694
Preferred shares derivative liability	$	29,849	$	—	$	—	$	29,849

The following table presents changes in the fair value of the 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 accompanying condensed consolidated statements of operations, for the three months ended March 31, 2014 (in thousands):

Description	January 1, 2014		Issuances		Remeasurement included in earnings		March 31, 2014

Contingently convertible Series E units liability	$	66,938	$	—	$	2,756	$	69,694
Preferred shares derivative liability	$	28,150	$	1,242	$	457	$	29,849

Changes in inputs or assumptions used to value the contingently convertible Series E units liability and preferred shares derivative liability may have a material impact on the resulting valuation.

The following table sets forth the fair value of the contingently convertible series E units liability and preferred shares derivative liability as of December 31, 2013 (in thousands):

			December 31, 2013

Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingently convertible Series E units liability	$	66,938	$	—	$	—	$	66,938
Preferred shares derivative liability	$	28,150	$	—	$	—	$	28,150