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 and treasury lock are the only financial instruments recorded at fair value on a recurring basis in the consolidated financial statements.

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 December 31, 2018 and 2017 (in thousands):



	December 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
AH4R 2014-SFR2 securitization	491,195		494,820		496,326		504,730
AH4R 2014-SFR3 securitization	506,760		511,450		512,041		521,252
AH4R 2015-SFR1 securitization	532,197		534,666		537,723		544,592
AH4R 2015-SFR2 securitization	462,358		467,303		467,267		475,832
Total asset-backed securitizations (1)	1,992,510		2,008,239		2,013,357		2,046,406
Unsecured senior notes (1) (2)	497,454		479,730		—		—
Exchangeable senior notes (2)	—		—		111,697		147,462
Secured note payable (3)	—		—		48,859		49,027
Revolving credit facility (1) (4)	250,000		250,000		140,000		140,000
Term loan facility (1) (5)	100,000		100,000		200,000		200,000
Total debt	$	2,839,964	$	2,837,969	$	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 $31.0 million, $4.7 million, $6.9 million, and $0.8 million, respectively, of unamortized deferred financing costs as of December 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 and exchangeable senior notes are presented net of unamortized discounts.


(3)	The secured note payable was paid off in full during the second quarter of 2018.


(4)	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 term loan facility reasonably approximates fair value.


(5)	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 considered 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 considered 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 Series A and B participating preferred shares were redeemed through a conversion into Class A common shares on October 3, 2017 (see Note 9).

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 is being reclassified into earnings as a reduction of interest expense over the ten-year 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 December 31, 2018 and 2017 (in thousands):



Description	Fair Value Hierarchy	December 31, 2018		December 31, 2017
Assets:
Treasury lock	Level 2	$	—	$	75
Liabilities:
Participating preferred shares derivative liability	Level 3	$	—	$	29,470

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



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



Description	January 1, 2017		Conversions			Remeasurement included in earnings			December 31, 2017
Liabilities:
Participating preferred shares derivative liability	$	69,810	$	(37,499	)	$	(2,841	)	$	29,470