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Debt | 9 Months Ended
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Sep. 30, 2015
Debt Disclosure [Abstract] |
Debt | Debt The following table presents the Company’s debt as of September 30, 2015, and December 31, 2014 (in thousands):
|  |  |  |  | Outstanding Principal Balance
| Interest Rate (1) |  | Maturity Date |  | September 30, 2015 |  | December 31, 2014
2014-SFR1 securitization (2) | 1.79 | % |  | June 9, 2019 |  | $ | 474,958 |  |  | $ | 478,565 |
2014-SFR2 securitization | 4.42 | % |  | October 9, 2024 |  | 508,587 |  |  | 512,435 |
2014-SFR3 securitization | 4.40 | % |  | December 9, 2024 |  | 524,429 |  |  | 528,390 |
2015-SFR1 securitization (3) | 4.14 | % |  | April 9, 2045 |  | 550,502 |  |  | — |
2015-SFR2 securitization (4) | 4.36 | % |  | October 9, 2045 |  | 477,716 |  |  | — |
Total asset-backed securitizations |  |  |  |  |  | 2,536,192 |  |  | 1,519,390 |
Secured note payable | 4.06 | % |  | July 1, 2019 |  | 50,980 |  |  | 51,644 |
Credit facility (5) | 2.96 | % |  | September 30, 2018 |  | — |  |  | 207,000 |
Total debt (6) |  |  |  |  |  | $ | 2,587,172 |  |  | $ | 1,778,034 |
(1) | Interest rates are as of September 30, 2015. Unless otherwise stated, interest rates are fixed percentages.
(2) | The 2014-SFR1 securitization bears interest at a duration-weighted blended interest rate of LIBOR plus 1.54%, subject to a LIBOR floor of 0.25%. The maturity date of June 9, 2019, reflects the fully extended maturity date based on an initial two-year loan term and three, 12-month extension options, at the Company’s election, provided there is no event of default and compliance with certain other terms.
(3) | The 2015-SFR1 securitization has a maturity date of April 9, 2045, with an anticipated repayment date of April 9, 2025.
(4) | The 2015-SFR2 securitization has a maturity date of October 9, 2045, with an anticipated repayment date of October 9, 2025.
(5) | The credit facility provides for a borrowing capacity of up to $800.0 million through March 2016 and bears interest at LIBOR plus 2.75% (3.125% beginning in March 2017). Any outstanding borrowings upon expiration of the credit facility period in March 2016 will become due in September 2018.
(6) | The Company was in compliance with all debt covenants associated with its asset-backed securitizations and credit facility as of September 30, 2015.
Asset-Backed Securitizations March 2015 Securitization In March 2015, we completed a private securitization transaction (the “2015-SFR1 securitization”), in which a newly-formed special purpose entity (the “Borrower”) entered into a loan with a third-party lender for $552.8 million represented by a promissory note. The Borrower under the loan is wholly owned by another special purpose entity (the “Equity Owner”) and the Equity Owner is wholly owned by the Operating Partnership. The loan is a fixed-rate loan with a 30 year term, maturity date of April 9, 2045, and a duration-adjusted weighted-average interest rate of 4.14%. The loan requires monthly payments of interest together with principal payments representing one-twelfth of one percent of the original principal amount. The loan has an anticipated repayment date of April 9, 2025. In the event the loan is not repaid on April 9, 2025, the interest rate on each component is increased to a rate per annum equal to the sum of 3% plus the greater of: (a) the initial interest rate and (b) a rate equal to the sum of (i) the bid side yield to maturity for the “on the run” United States Treasury note with a 10 year maturity plus the mid-market 10 year swap spread, plus (ii) the component rate spread for each component. The note was immediately transferred by the third-party lender to a subsidiary of the Company and then to a REMIC trust in exchange for eight classes of single-family rental pass-through certificates representing all the beneficial ownership interests in the loan and the trust. Upon receipt of the certificates, a subsidiary of the Company sold the certificates to investors for gross proceeds of $552.8 million, before issuance costs of $13.3 million. Proceeds from this transaction were used to pay down the outstanding balance on the credit facility and for general corporate purposes. The principal amount of each class of certificates corresponds to the corresponding principal amount of the loan components with an additional class to hold the residual REMIC interest. The loan is secured by first priority mortgages on a pool of 4,661 single-family residential properties transferred to the Borrower from the Company’s portfolio of properties. The Borrower’s homes were substantially similar to the other properties owned by the Company and were leased to tenants underwritten on substantially the same basis as the tenants in the Company’s other properties. During the duration of the loan, the Borrower’s properties may not generally be transferred, sold or otherwise securitized, the Company can substitute properties only if a property owned by the Borrower becomes a disqualified property under the terms of the loan, and the Borrower is limited in its ability to incur any additional indebtedness. The loan is also secured by a security interest in all of the Borrower’s personal property and a pledge of all of the assets of the Equity Owner, including a security interest in its membership interest in the Borrower. The Company provides a limited guaranty (i) for certain losses arising out of designated acts of intentional misconduct and (ii) for the principal amount of the loan and all other obligations under the loan agreement in the event of insolvency or bankruptcy proceedings. The loan agreement provides that the Borrower maintain covenants typical for securitization transactions including maintaining certain reserve accounts and a debt service coverage ratio of at least 1.20 to 1.00. The loan agreement defines the debt service coverage ratio as of any determination date as a ratio in which the numerator is the net cash flow divided by the aggregate debt service for the 12 month period following the date of determination. As of September 30, 2015, the Company was in compliance with all covenants under the loan agreement. The Company has accounted for the transfer of the note from its subsidiary to the trust as a sale under ASC 860, Transfers and Servicing, with no resulting gain or loss as the note was both originated by the third party lender and immediately transferred at the same fair market value. The Company has also evaluated and not identified any variable interests in the trust. Accordingly, the Company continues to consolidate, at historical cost basis, the 4,661 homes placed as collateral for the note. The principal balance outstanding on the note was $550.5 million as of September 30, 2015, and was included in asset-backed securitizations within the condensed consolidated balance sheets. The 4,661 collateral homes had a net book value of $741.5 million as of September 30, 2015. September 2015 Securitization In September 2015, we completed a private securitization transaction (the “2015-SFR2 securitization”), which was structured substantially similar to the 2015-SFR1 securitization. The principal differences from the 2015-SFR1 securitization are: (1) the loan is a fixed-rate loan for $477.7 million with a 30 year term, maturity date of October 9, 2045, and a duration-adjusted weighted-average interest rate of 4.36%, (2) the loan is secured by first priority mortgages on a portfolio of 4,125 single-family residential properties owned by the borrower, a subsidiary of the Company, and (3) the loan has an anticipated repayment date of October 9, 2025. In the event the loan is not repaid on October 9, 2025, the interest rate on each component is increased to a rate per annum equal to the sum of 3% plus the greater of: (a) the initial interest rate and (b) a rate equal to the sum of (i) the bid side yield to maturity for the “on the run” United States Treasury note with a 10 year maturity plus the mid-market 10 year swap spread, plus (ii) the component rate spread for each component. Gross proceeds to the Company from the 2015-SFR2 securitization were $477.7 million, before issuance costs of $11.3 million. Proceeds from this transaction were used to pay down the outstanding balance on the credit facility and for general corporate purposes. The loan agreement provides that the Borrower maintain covenants typical for securitization transactions including maintaining certain reserve accounts and a debt service coverage ratio of at least 1.20 to 1.00. The loan agreement defines the debt service coverage ratio as of any determination date as a ratio in which the numerator is the net cash flow divided by the aggregate debt service for the 12 month period following the date of determination. As of September 30, 2015, the Company was in compliance with all covenants under the loan agreement. The Company consolidates, at historical cost basis, the 4,125 homes placed as collateral for the note. The principal balance outstanding on the note was $477.7 million as of September 30, 2015, and was included in asset-backed securitizations within the condensed consolidated balance sheets. The 4,125 collateral homes had a net book value of $686.8 million as of September 30, 2015. Credit Facility In March 2013, the Company entered into a $500.0 million senior secured revolving credit facility with a financial institution, which was subsequently amended in September 2013 to, among other things, expand our borrowing capacity to $800.0 million and extend the repayment period to September 30, 2018. Borrowings under the credit facility are available through March 7, 2016, at which point, any outstanding borrowings will convert to a term loan through September 30, 2018. All borrowings under the credit facility bear interest at 30 day LIBOR plus 2.75% until March 2017, and thereafter at 30 day LIBOR plus 3.125%. The credit facility is secured by our Operating Partnership’s membership interests in entities that own certain of our single-family properties and requires that we maintain certain financial covenants. As of September 30, 2015, the Company was in compliance with all loan covenants. The Company did not have any borrowings outstanding under the credit facility as of September 30, 2015, compared to $207.0 million in total outstanding borrowings under the credit facility at December 31, 2014. Interest Expense The following table outlines our total gross interest, including unused commitment and other fees and amortization of deferred financing costs, and capitalized interest for the three and nine months ended September 30, 2015 and 2014 (in thousands):
| Three Months Ended |  | Nine Months Ended
| September 30, 2015 |  | September 30, 2014 |  | September 30, 2015 |  | September 30, 2014
Gross interest | $ | 25,029 |  |  | $ | 8,500 |  |  | $ | 69,181 |  |  | $ | 19,228 |
Capitalized interest | (1,163 | ) |  | (3,388 | ) |  | (7,642 | ) |  | (8,726 | )
Interest expense | $ | 23,866 |  |  | $ | 5,112 |  |  | $ | 61,539 |  |  | $ | 10,502 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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