INVH

Invitation Homes Inc. Form 8-K Summary

Business Context and Reporting Period

Invitation Homes Inc. (the "Company") filed this Current Report on Form 8-K on May 9, 2018, regarding events occurring on May 8, 2018. The Company, an emerging growth company incorporated in Maryland, operates as a single-family rental housing provider. This filing details the completion of a significant securitization transaction and the entry into a material definitive loan agreement.

Key Financial Metrics and Transaction Details

The Company completed a securitization transaction involving a total principal balance of $1,057,225,000. The transaction structure includes the following key metrics:

• Total Loan Principal: $1,057,225,000
• Loan Term: 7-year floating rate loan with an initial term of 25 months and five 12-month extension options.
• Collateral: First priority mortgages on a portfolio of 5,614 single-family rental homes.
• Risk Retention: The Company purchased and retained 5% of each class of pass-through certificates, totaling $52,865,000.
• Interest Rate Structure: Floating rates based on One-Month LIBOR plus spreads ranging from 0.90% to 2.25%, plus a fixed servicing and licensing fee of 0.0505%.
• Interest Rate Cap: An agreement was entered into for the initial 25-month term to ensure a debt service coverage ratio of no less than 1.20x.

The loan is divided into six components (A through F) with the following initial principal balances:

Material Changes and Use of Proceeds

The net proceeds from the Loan were utilized to:

• Repay outstanding balances under mortgage loans related to the Company's IH 2015-1 and IH 2015-2 securitizations.
• Fund certain reserves.
• Any remaining net proceeds may be used for general corporate purposes.

This transaction represents a refinancing of prior debt obligations and the establishment of a new capital structure secured by a specific portfolio of 5,614 properties.

Outlook, Risks, and Contingencies

Covenants and Restrictions: The Loan Agreement imposes customary affirmative and negative covenants, including limitations on additional indebtedness, restrictions on the sale or disposition of the collateral properties, and requirements to maintain specified cash reserves.

Guaranty: Invitation Homes Operating Partnership LP ("IHOP") provided a limited recourse guaranty. In the event of specified "bad-boy" acts, bankruptcy, or insolvency proceedings, IHOP may be liable for the greater of (i) the lesser of $30,000,000 or the outstanding principal balance, or (ii) 20% of the outstanding principal balance.

Extension Conditions: The Borrower has the option to extend the loan for five successive 12-month terms, contingent upon no event of default, obtaining an acceptable replacement interest rate cap, and compliance with other agreement terms.

Risks: The filing notes customary events of default which could allow the Lender to accelerate payment of all amounts outstanding. The floating rate nature of the debt exposes the Company to interest rate volatility, partially mitigated by the interest rate cap for the initial term.

Key Facts for Investor Verification

• Verify the specific terms of the interest rate cap agreement and its impact on future debt service costs beyond the initial 25-month term.
• Confirm the exact amount of proceeds used to repay the IH 2015-1 and IH 2015-2 securitizations versus the amount allocated to reserves or general corporate purposes.
• Review the full text of the Loan Agreement (Exhibit 10.1) for detailed covenants regarding property dispositions and additional indebtedness.
• Assess the financial impact of the 5% risk retention requirement ($52,865,000) on the Company's liquidity and balance sheet.
• Monitor the Company's ability to meet the 1.20x debt service coverage ratio requirement to maintain the interest rate cap and extension options.