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 participating preferred shares derivative liability is the only financial instrument recorded at fair value on a recurring basis in the consolidated financial statements as of March 31, 2018.

Our revolving credit facility, term loan facility, asset-backed securitizations 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. Our unsecured senior notes and exchangeable senior notes are also financial instruments, which are classified as Level 2 in the fair value hierarchy as their fair values are estimated using observable inputs, based on the market value of the last trade at the end of the period.

The following table displays the carrying values and fair values of our debt instruments as of March 31, 2018, and December 31, 2017 (in thousands):



	March 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
AH4R 2014-SFR2 securitization	$	495,043	$	500,863	$	496,326	$	504,730
AH4R 2014-SFR3 securitization	510,721		518,292		512,041		521,252
AH4R 2015-SFR1 securitization	536,341		541,689		537,723		544,592
AH4R 2015-SFR2 securitization	465,940		472,594		467,267		475,832
Total asset-backed securitizations (1)	2,008,045		2,033,438		2,013,357		2,046,406
Unsecured senior notes, net (1) (2)	497,245		491,395		—		—
Exchangeable senior notes, net (2)	112,597		131,968		111,697		147,462
Secured note payable	48,604		48,652		48,859		49,027
Revolving credit facility (1) (3)	—		—		140,000		140,000
Term loan facility (1) (4)	200,000		200,000		200,000		200,000
Total debt	$	2,866,491	$	2,905,453	$	2,513,913	$	2,582,895

(1)

The carrying values of the asset-backed securitizations, unsecured senior notes, revolving credit facility and term loan facility exclude $34.8 million, $5.0 million, $8.3 million and $1.9 million, respectively, of unamortized deferred financing costs as of March 31, 2018, and exclude $36.0 million, zero, $8.8 million and $2.0 million, respectively, of unamortized deferred financing costs as of December 31, 2017.


(2)	The carrying values of the unsecured senior notes, net and exchangeable senior notes, net are presented net of unamortized discounts.

(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 0.825% to 1.55% or a base rate (generally determined according to a prime rate or federal funds rate) plus a margin ranging from 0.00% to 0.55%, management believes that the carrying value of the revolving credit facility reasonably approximates fair value.


(4)	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 0.90% to 1.75% or a base rate (generally determined according to a prime rate or federal funds rate) plus a margin ranging from 0.00% to 0.75%, management believes that the carrying value of the term loan facility reasonably approximates fair value.

Valuation of the participating preferred shares derivative liability considers scenarios in which the participating 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 Series C participating preferred shares were redeemed through a conversion into Class A common shares on April 5, 2018, and the related participating preferred shares derivative liability was therefore remeasured based on the actual liquidation value at March 31, 2018 (see Note 10).

In October 2017, in anticipation of the issuance of the 2028 Notes and in order to hedge interest rate risk, the Operating Partnership entered into a treasury lock agreement on a notional amount of $350.0 million, based on the 10-year treasury note rate at the time. The treasury lock was designated as a cash flow hedging instrument and had a fair value of $0.1 million as of December 31, 2017, which was included in escrow deposits, prepaid expenses and other assets within the consolidated balance sheets, with a corresponding unrealized gain reflected in other comprehensive income. The treasury lock was settled upon the issuance of the 2028 Notes in February 2018 and resulted in a $9.6 million gain that was recorded in other comprehensive income and will be reclassified into earnings as a reduction of interest expense over the term of the 2028 Notes. The treasury lock is classified as Level 2 within the fair value hierarchy as its fair value was estimated using observable inputs, based on the 10-year treasury note rate.

The following tables set forth the fair values of the participating preferred shares derivative liability and treasury lock as of March 31, 2018, and December 31, 2017 (in thousands):



	March 31, 2018
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Liabilities:
Participating preferred shares derivative liability	$	—	$	—	$	28,258	$	28,258



	December 31, 2017
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Treasury lock	$	—	$	75	$	—	$	75

Liabilities:
Participating preferred shares derivative liability	$	—	$	—	$	29,470	$	29,470

The following tables present changes in the fair values of our Level 3 financial instruments that are measured on a recurring basis with changes in fair value recognized in remeasurement of participating preferred shares within the condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017 (in thousands):



Description	January 1, 2018		Remeasurement included in earnings			March 31, 2018
Liabilities:
Participating preferred shares derivative liability	$	29,470	$	(1,212	)	$	28,258



Description	January 1, 2017		Remeasurement included in earnings		March 31, 2017
Liabilities:
Participating preferred shares derivative liability	$	69,810	$	5,410	$	75,220