Colony Starwood Homes Announces First Quarter 2016 Financial and Operating Results

SCOTTSDALE, Ariz.--(BUSINESS WIRE)-- Colony Starwood Homes (NYSE: SFR) (the “Company”), a leading single-family rental real estate investment trust (“REIT”), today announced operating and financial results for the three months ended March 31, 2016.

First Quarter 2016 Highlights

• Same Store portfolio of 22,806 homes produced revenue growth of 6.1%, expense reduction of (0.6%) and Core NOI growth of 10.5%
• Same Store portfolio achieved a Core NOI margin of 65.5%
• Total Homes Occupancy reached 95.0% as of March 31, 2016
• Completed Merger integration and achieved approximately 85% of the estimated $50 million in annualized run-rate synergies as of March 31, 2016, and approximately 95% as of today
• Core FFO of $0.40 per common share produced by the single-family rental home portfolio
• Company estimates Net Asset Value of $32.63 per share as of March 31, 2016
• Company accelerates timeline of non-performing loan (“NPL”) portfolio sale and anticipates exit from the NPL business in 2016
• Company re-affirms full year 2016 guidance

“We are pleased with our first quarter 2016 operating results, our first as the newly combined Colony Starwood Homes,” said Fred Tuomi, Chief Executive Officer. “Our people and platform performed extremely well throughout the integration process, which is now complete and delivering on the strategic and financial advantages we anticipated with the merger. Total portfolio occupancy reached 95%, an important milestone as our business matures and a reflection of continued strong demand for high quality rental homes in high growth markets. Our sizable same store portfolio of over 22,000 homes produced robust revenue growth, which combined with expense decreases led to NOI growth of 10.5% and a core operating margin of 65.5%. This strong performance positions us well to achieve our stated Core FFO guidance for the year. In addition, the intrinsic value of our homes is further validated by our internal NAV estimate of $32.63 per share.”

The first quarter 2016 financial results of the Company (other than Same Store results) include the historical financial results of Starwood Waypoint Residential Trust (“SWAY”) beginning on January 5, 2016, which was the date of the merger between Colony American Homes (“CAH”) and SWAY (the “Merger”). Historical financial results (other than Same Store results) as of dates or for periods prior to January 5, 2016 represent only the pre-Merger financial results of CAH and do not reflect what the financial results would have been had the Merger been complete during such periods.

First Quarter 2016 Operating Results

Core FFO was $43.7 million for the three months ended March 31, 2016, or $0.40 per share. The Company’s Core FFO measure excludes any gains or losses from its non-performing loan business, which the Company intends to exit.

Total revenues were $139.4 million for the three months ended March 31, 2016, and net loss attributable to common shareholders was approximately $44.2 million, or $0.43 per share, driven by depreciation and amortization and transaction costs associated with the Merger.

Same Store Results

For the Company’s Same Store portfolio of 22,806 homes, revenues for the three months ended March 31, 2016 were $100.0 million, a 6.1% increase as compared to the three months ended March 31, 2015. Same Store rental revenue for the three months ended March 31, 2016 was $95.5 million, a 5.9% increase from $90.2 million for the three months ended March 31, 2015. Same Store property operating expenses decreased by 0.6% over the same comparative period, producing a 10.5% increase in Same Store Core NOI for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015. Same Store Core NOI margin for the three months ended March 31, 2016 was 65.5%. The Same Store portfolio is defined as homes stabilized longer than 90 days prior to the beginning of the earliest period presented under the comparison, excluding homes subsequently sold.

Same Store Property Results
Homes as of March 31, 2016					22,806
Occupancy as of March 31, 2016					95.8	%
Quarter-over-Quarter Revenue Growth (three months  ended March 31, 2016 as compared to three months  ended March 31, 2015)					6.1	%
Quarter-over-Quarter Operating Expense Growth (three  months ended March 31, 2016 as compared to three  months ended March 31, 2015)					-0.6	%
Quarter-over-Quarter NOI Growth (three months ended  March 31, 2016 as compared to three months ended  March 31, 2015)					10.5	%
Core NOI Margin for the three months ended March 31,  2016					65.5	%

Investment Activity

The Company sold 351 homes during the first quarter, including 124 single-family rental homes and 227 real estate owned (“REO”) homes. The single-family rental homes were sold for gross sales proceeds of $24.0 million, and the Company recorded a gain of approximately $1.4 million on these sales. The REO homes were sold for gross sales proceeds of $29.9 million, and the Company recorded no gain, as the gain associated with these sales was muted due to the Merger related purchase accounting. During the three months ended March 31, 2016, the Company acquired 12 homes for an aggregate estimated total investment of $1.8 million, or approximately $151,000 per home, including estimated investment costs for renovation.

NPL Business

On May 4th, 2016, the Company’s Board of Trustees (the “Board”) authorized the sale of the NPL portfolio. The Company intends to commence marketing activities and assess disposition options immediately, and anticipates the business will be treated as a discontinued operation in subsequent periods.

As of March 31, 2016, the Company owned 2,308 first lien NPLs compared to 2,539 first lien NPLs owned as of December 31, 2015, and held 738 REO homes as of first quarter end. The aggregate purchase price of $344.6 million for these 2,308 NPLs represents 61.6% of their collateral property broker price opinion (“BPO”) value. The reduction in first lien NPLs is primarily due to resolution activity during the three months ended March 31, 2016. From inception to date, the Company has resolved 71% of all NPLs acquired.

As a result of Merger related purchase accounting, all of the Company’s NPL and REO assets were recorded at fair value as of the Merger transaction date based upon the Company’s decision to exit that business, which muted GAAP accounting gains from resolution and sale of these assets during the quarter. NPL resolutions and REO sales produced $36.3 million of gross cash proceeds during the quarter producing net proceeds of $29.4 million after associated debt pay down of $6.9 million. As of March 31, 2016 there was $267.5 million of outstanding debt associated with the NPL business, which the Company intends to pay down in connection with the wind down of the NPL business.

Balance Sheet and Capital Markets Activities

As of March 31, 2016, the Company had $4.1 billion of debt outstanding. As of March 31, 2016, the Company had a total of approximately $541.2 million of unrestricted cash and undrawn balance on its credit facilities.

In February 2016, the Company entered into interest rate swap contracts effectively fixing the interest rate on approximately $1.6 billion of its variable-rate debt for three years. These swap contracts are structured as step-up swaps, which lock in the forward LIBOR curve with fixed rates of 2.52%, 2.74%, and 2.99%, in years one, two and three, respectively, averaging 2.75% over the three year term.

The Board previously approved and subsequently revised a share repurchase program, under which the Company is authorized to repurchase up to $250 million of its outstanding common shares through May 6, 2017. Under this revised program, the Company purchased approximately 2.0 million common shares during the three months ended March 31, 2016 for an aggregate purchase price of $44.6 million at an average of $21.74 per share, and has purchased a total of 2.4 million shares under the program to date for an aggregate purchase price of $52.8 million at an average of $22.19 per share.

On May 4, 2016, the Board declared a dividend of $0.22 per common share for the second quarter of 2016, which will be paid on July 15, 2016 to shareholders of record on June 30, 2016.

Full Year 2016 Financial Guidance

Earlier this year the Company provided Core FFO per share guidance related to the single-family rental business only, as the Company is winding down the NPL business. The Company re-affirms that it expects single-family rental Core FFO per share for the full year ending December 31, 2016 for the combined Company to be in the range of $1.55 to $1.65, and re-affirms the occupancy, rent growth and NOI margin assumptions previously provided.

The following presents a summary of the combined Company’s expected financial outlook for the year ending December 31, 2016:

Full Year 2016 Guidance
				Range
Core FFO per share				$1.55 - $1.65
Stabilized Occupancy				94% - 95%
Blended Rent Growth				4% - 5%
Core NOI margin (Stabilized)				62% - 64%

This outlook is based on a number of assumptions, many of which are outside the Company’s control and all of which are subject to change. This outlook reflects the Company’s expectations on (1) existing investments and (2) yield on incremental investments inclusive of the Company’s existing pipeline. All guidance is based on current expectations of future economic conditions and the judgment of the Company’s management team.

First Quarter 2016 Conference Call

A conference call is scheduled on Monday, May 9, 2016, at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the three months and year ended March 31, 2016. The domestic dial-in number is 1-877-407-4018 (for U.S. and Canada) and the international dial-in number is 1-201-689-8471 (passcode not required). An audio webcast may be accessed at www.colonystarwood.com, in the investor relations section. A replay of the call will be available through June 9, 2016, and can be accessed by calling 1-877-870-5176 (U.S. and Canada) or 1-858-384-5517 (international), replay pin number 13634768, or by using the link at www.colonystarwood.com, in the investor relations section.

About Colony Starwood Homes

Colony Starwood Homes (NYSE: SFR) is one of the largest publicly traded owners and operators of single-family rental homes in the United States. Colony Starwood Homes acquires, renovates, leases, maintains and manages single- family homes in markets that exhibit favorable demographics and long-term economic trends, as well as strengthening demand for rental properties. Colony Starwood Homes is building its business upon a foundation of respect for its residents and the communities in which it operates. Additional information can be found at www.colonystarwood.com.

Additional information

A copy of the First Quarter 2016 Supplemental Information Package (“Q1 2016 Supplement”) and this press release are available on the Company’s website at www.colonystarwood.com.

Notice Regarding Non-GAAP Financial Measures

This press release and the Q1 2016 Supplement contain and may refer to certain Non-GAAP financial measures and terms that management believes are helpful in understanding our business, as further set forth in the definitions, explanations and reconciliations of the non-GAAP financial measure to their most comparable GAAP financial measures included in Appendix. These measures and terms are in addition to, not a substitute for or superior to measures of financial performance prepared in accordance with GAAP, and should be read together with the most comparable GAAP measures.

Forward-Looking Statements

The statements herein that are not historical facts, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve significant risks and uncertainties, which are difficult to predict, and are not guarantees of future performance. Such statements can generally be identified by words such as “guidance,” “outlook,” “projects,” “forecast,” “anticipates,” “expects,” “intends,” “will,” “could,” “believes,” “estimates,” “continue,” and similar expressions. Forward-looking statements are based on certain assumptions and discuss future expectations, describe future plans and strategies, and contain financial and operating projections or state other forward-looking information. The Company’s ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company’s actual results and performance could differ materially from those set forth in, or implied by, the forward-looking statements. Factors that could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations and prospects, as well as the Company’s ability to make distributions to its shareholders, include, but are not limited to: failure to plan and manage the Internalization or the Merger effectively and efficiently; the possibility that the anticipated benefits from the Internalization or the Merger may not be realized or may take longer to realize than expected; unexpected costs or unexpected liabilities that may arise from the Internalization or the Merger; the outcome of any legal proceedings that have been or may be instituted against the Company, CAH or others following the announcement or the completion of the Internalization or the Merger; expectations regarding the timing of generating additional revenues; changes in the Company’s business and growth strategies; volatility in the real estate industry, interest rates and spreads, the debt or equity markets, the economy generally or the rental home market specifically, whether the result of market events or otherwise; events or circumstances that undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large financial institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts; declines in the value of homes, and macroeconomic shifts in demand for, and competition in the supply of, rental homes; the availability of attractive investment opportunities in homes that satisfy the Company’s investment objective and business and growth strategies; the impact of changes to the supply of, value of and the returns on NPLs; the Company’s ability to convert the homes and NPLs it acquires into rental homes generating attractive returns; the Company’s ability to successfully modify or otherwise resolve NPLs; the Company’s ability to wind-down its NPL business in the anticipated time period and to re-deploy net cash proceeds therefrom; the Company’s ability to lease or re-lease its rental homes to qualified residents on attractive terms or at all; the failure of residents to pay rent when due or otherwise perform their lease obligations; the Company’s ability to effectively manage its portfolio of rental homes; the concentration of credit risks to which the Company is exposed; the rates of default or decreased recovery rates on the Company’s target assets; the availability, terms and deployment of short-term and long-term capital; the adequacy of the Company’s cash reserves and working capital; potential conflicts of interest with Starwood Capital Group Global, L.P., Colony Capital, Inc. and their affiliates; the timing of cash flows, if any, from the Company’s investments; unanticipated increases in financing and other costs, including a rise in interest rates; the Company’s expected leverage; effects of derivative and hedging transactions; the Company’s ability to maintain its exemption from registration as an investment company under the Investment Company Act of 1940, as amended; actions and initiatives of the U.S. government and changes to U.S. government policies that impact the economy generally and, more specifically, the housing and rental markets; changes in governmental regulations, tax laws and rates, and similar matters; limitations imposed on the Company’s business and its ability to satisfy complex rules in order for the Company and, if applicable, certain of the Company’s subsidiaries to qualify as a REIT for U.S. federal income tax purposes and the ability of certain of the Company’s subsidiaries to qualify as taxable REIT subsidiaries for U.S. federal income tax purposes, and the Company’s ability and the ability of its subsidiaries to operate effectively within the limitations imposed by these rules; and estimates relating to the Company’s ability to make distributions to its shareholders in the future. You should not place undue reliance on any forward-looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. Furthermore, except as required by law, the Company is under no duty to, and the Company does not intend to, update any of its forward-looking statements appearing herein, whether as a result of new information, future events or otherwise.

Condensed Balance Sheet
As of March 31, 2016
Dollars in thousands
Assets											Liabilities
Investments in real estate properties:											Secured credit facilities				$		1,258,920
Land and land improvements				$		1,522,564					Mortgage loans, net						2,218,953
Buildings and building improvements						4,322,350					Non-performing loans warehouse facility						267,547
Furniture, fixtures and equipment						109,424					Convertible senior notes, net						341,712
Total investments in properties						5,954,338					Accounts payable and accrued expenses						96,963
(Less) accumulated depreciation						(248,823	)				Resident prepaid rent and security deposits						55,332
Investments in real estate  properties, net						5,705,515					Other liabilities						1,987
Real estate held for sale, net						114,399					Total liabilities						4,241,414
Total investments in real estate, net						5,819,914					Equity
											Common shares, at par						1,015
											Additional paid-in capital						2,730,163
Cash and cash equivalents						199,099					Accumulated deficit						(211,227	)
Restricted cash						158,519					Accumulated other comprehensive loss						(4,068	)
Asset-backed securitization certificates						60,242					Total shareholders' equity						2,515,883
Non-performing loans						364,930					Non-controlling interests						211,048
Goodwill						264,037					Total equity						2,726,931
Other assets, net						101,604
Total assets				$		6,968,345					Total liabilities and equity				$		6,968,345

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

Statements of Operations
Dollars in thousands
					Three Months Ended March 31,
					2016				2015
Revenues
Rental income					$	130,452			$	64,218
Fee, chargeback and asset management income						8,934				9,605
Total revenues						139,386				73,823
Expenses
Property and maintenance						18,518				13,494
Real estate taxes, insurance, HOA costs						27,282				14,040
Property management						8,751				4,790
Depreciation and amortization						43,630				26,012
General and administrative						17,725				11,741
Merger and transaction related expenses						23,482				—
Interest expense						39,360				17,876
Interest (income) and other (income)/expense						425				3,768
Total expenses						179,173				91,721
Income before income and other taxes, income (loss) from investments  in unconsolidated entities, net gain (loss) on sales of real estate and  discontinued operations						(39,787	)			(17,898	)
Income tax (expense) benefit						(245	)			11
Income (loss) from investments in unconsolidated entities (1)						(8,401	)			93
Net gain on sale of real estate owned						1,384				401
Net loss						(47,049	)			(17,393	)
Net loss attributable to noncontrolling interests						2,850				6,472
Net loss attributable to Colony Starwood Homes						(44,199	)			(10,921	)
Net income attributable to preferred shareholders						—				(4	)
Net loss available to common shareholders					$	(44,199	)		$	(10,925	)

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1) Includes results from NPL business and Fannie Mae Joint Venture.

Reconciliation to FFO and Core FFO
Dollars in thousands, except share and per share data
					Three Months EndedMarch 31, 2016
Reconciliation of net loss to NAREIT FFO
Net loss attributable to common shareholders					$	(44,199	)
Adjustments:
Depreciation and amortization on real estate assets						43,384
Impairment of real estate assets						30
Net gain on sale of depreciable property						(1,384	)
Non-controlling interests						(2,850	)
NAREIT FFO					$	(5,019	)
NAREIT FFO per share (1)					$	(0.05	)
Adjustments for Core FFO
NAREIT FFO					$	(5,019	)
Amortization of deferred financing costs and debt  premium discounts						8,430
Merger and transaction related expenses						23,482
Integration costs						5,630
Share-based compensation						387
Adjustments for derivative instruments						300
Loss on NPLs, net						10,502
Core FFO					$	43,712
Core FFO per share (1)					$	0.40

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Common shares total 108,466,754 comprised of 102,066,754 weighted average shares and outstanding OP units exchangeable for 6,400,000 common shares.

Income Statement Bridge
Normalizations for transaction, merger, integration and NPL costs
Dollars in thousands
		Three Months Ended March 31, 2016
			(+)				(-)				(-)				(-)				(=)			Single Family Rental
		Consolidated Results				Merger and Transaction Related Expenses				Integration Costs				NPL				Total Single Family Rental				Same Store Homes				Stabilized Homes				Development Homes				Other Homes
Revenues
Rents from single-family properties		$	130,452															$	130,452			$	95,532			$	34,458			$	2			$	460
Fees from single-family properties			2,756																2,756				1,991				748				—				17
Tenant chargebacks			3,288																3,288				2,452				778				—				58
Asset Management Fees			2,890																2,890				—				—				—				2,890
Total revenues			139,386				—				—				—				139,386				99,975				35,984				2				3,425
Operating Expenses
Property and maintenance costs			18,518																18,518				12,903				4,847				172				596
Real estate taxes, insurance, HOA costs			27,282																27,282				19,564				6,972				45				701
Property management			8,751								1,259								7,492				4,748				1,350				45				1,349
Total Operating Expenses			54,551				—				1,259				—				53,292			$	37,215			$	13,169			$	262			$	2,646
Net Operating Income			84,835				—				(1,259)				—				86,094				62,760				22,815				(260)				779
Non-Operating Expenses
General and administrative			17,725								4,371								13,354
Merger and transaction related expenses			23,482				23,482												—
Depreciation and amortization			43,630																43,630
Interest Expense			39,360												1,903				37,457
Other Expense / (Income)			7,687												8,599				(912)
Total Non-Operating Expenses			131,884				23,482				4,371				10,502				93,529
Net (Loss)			(47,049)				(23,482)				(5,630)				(10,502)				(7,435)
Net loss attributable to non- controlling interests			2,850																2,850
Net (loss) available to common shareholders		$	(44,199)			$	(23,482)			$	(5,630)			$	(10,502)			$	(4,585)

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

NOI by Segment
Quarter-over-quarter change
Dollars in thousands
					Q1 16							Q1 15						Change %
Rental and other property revenues:
Same-Store Homes					$	99,975						$	94,246						6.1	%
Stabilized Homes						35,984							13,817						160.4	%
Development Homes						2							—					N/A
Other Homes						3,425							3,672						-6.7	%
Total rental and other property revenues					$	139,386						$	111,735						24.7	%
Property operating expenses:
Same-Store Homes					$	37,215						$	37,454						-0.6	%
Stabilized Homes						13,169							8,349						57.7	%
Development Homes						262							112						134.8	%
Other Homes						2,647							3,148						-15.9	%
Total property operating expenses					$	53,292						$	49,062						8.6	%
Net Operating Income:
Same-Store Homes					$	62,760						$	56,792						10.5	%
Stabilized Homes						22,815							5,468						317.3	%
Development Homes						(260	)						(112	)					133.0	%
Other Homes						779							524						48.5	%
Total property NOI					$	86,094						$	62,673						37.4	%

Same Store operating metrics:					Q1 16						Q1 15
NOI margin						62.8	%					60.3	%
Core NOI margin						65.5	%					62.5	%
Occupancy %						95.8	%					94.8	%
Annualized turnover rate						27.2	%				N/A
Blended rent growth						3.9	%				N/A

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

Home Count by Portfolio
Owned and Non-Owned, Managed Homes as of March 31, 2016
Market:		Same StoreHomes				StabilizedHomes				DevelopmentHomes						OtherHomes						OwnedHomes (1)				Owned HomesOccupied % (2)					Non-Owned,Managed Homes				Total Homes
Atlanta			4,987				658				14						141						5,800				96.1%					314				6,114
Miami			2,139				1,548				59						116						3,862				93.6%					146				4,008
Tampa			2,308				942				9						27						3,286				93.6%					199				3,485
Houston			2,283				483				8						115						2,889				94.6%					—				2,889
Southern California			2,611				193				5						30						2,839				96.9%					1,504				4,343
Orlando			1,765				635				16						21						2,437				94.5%					15				2,452
Dallas			1,178				901				32						114						2,225				94.4%					—				2,225
Denver			1,088				832				33						4						1,957				94.1%					—				1,957
Las Vegas			1,629				94				—						2						1,725				95.4%					190				1,915
Phoenix			1,320				26				—						1						1,347				96.9%					454				1,801
Top 10 Markets			21,308				6,312				176						571						28,367				95.0%					2,822				31,189
Northern California			734				47				-						6						787				97.8%					1,164				1,951
Charlotte - Raleigh			161				593				-						-						754				98.1%					-				754
Nashville			-				191				2						-						193				94.8%					-				193
Other Markets			603				369				11						32						1,015				91.6%					402				1,417
Total			22,806				7,512				189						609						31,116				95.0%					4,388				35,504

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Excludes REO properties.
(2)		Calculation excludes "Other Homes" in the denominator of the calculation.

Asset Rollforward
First quarter 2016 acquisition and disposition activity summary
Market:				Properties asof 12/31/15 (1)					Acquisitions					Dispositions					Properties asof 3/31/16
Atlanta					5,822					—					(22	)				5,800
Miami					3,880					—					(18	)				3,862
Tampa					3,292					8					(14	)				3,286
Houston					2,899					—					(10	)				2,889
Southern California					2,857					—					(18	)				2,839
Orlando					2,440					—					(3	)				2,437
Dallas					2,249					4					(28	)				2,225
Denver					1,958					—					(1	)				1,957
Las Vegas					1,728					—					(3	)				1,725
Phoenix					1,348					—					(1	)				1,347
Top 10 Markets					28,473					12					(118	)				28,367
Northern California					788					-					(1	)				787
Charlotte - Raleigh					755					-					(1	)				754
Nashville					193					-					-					193
Other Markets					1,019					—					(4	)				1,015
Total Owned Homes					31,228					12					(124	)				31,116
Non-owned, Managed Homes					4,449					7					(68	)				4,388
Total Homes					35,677					19					(192	)				35,504

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Total owned homes as of December 31, 2015 are pro forma for the merger.

Debt Structure

$4.1Bn of outstanding debt with 48% fixed rate inclusive of interest rate swap

Dollars in millions

Amountoutstanding

Interest rate

Initial maturity

Extensions

Full maturity

Securitizations: (1)

CAH 2014-1 Securitization

$

502

L+178bps

Apr-17

Two, one-year

May-19

CAH 2014-2 Securitization

$

554

L+173bps

Jun-16

Three, one-year

Jul-19

CAH 2015-1 Securitization, net (2)

$

639

L+197bps

Jun-17

Three, one-year

Jul-20

SWAY 2014-1 Securitization, net (2)

$

500

L+236bps

Jan-17

Three, one-year

Jan-20

Total Securitizations

$

2,195

Secured Credit Facilities:

CAH Credit Facility

$

508

L+300bps

Jul-17

None

Jul-17

SWAY Credit Facility

$

751

L+295bps

Feb-17

One-year

Feb-18

Total Secured Credit Facilities

$

1,259

Convertible Debt:

Convertible Notes (due 2017)

$

173

450bps

Oct-17

None

Oct-17

Convertible Notes (due 2019)

$

230

300bps

Jul-19

None

Jul-19

Total Convertible Debt

$

403

Total Single-Family REIT Debt (2)

$

3,857

Non-performing loans warehouse facility

$

268

L+238bps

Mar-17

6-months

Sep-17

Total Debt Outstanding (2)

$

4,125

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Colony Starwood Homes entered into an interest rate swap structure in February 2016 with a notional amount of $1.6B at 2.75%.
(2)		Securitization net of Class G certificate, CAH 2015-1 in the amount of $33.6M and SWAY 2014-1 in the amount of $26.6.

Estimated NAV
As of March 31, 2016
Dollars in thousands, except per share data
Fair value of real estate
Total investment in real estate properties, net (1)					$		5,819,914
Real estate fair value adjustment							1,165,119
Total fair value of real estate properties							6,985,033
Other assets
Cash, cash equivalents, and restricted cash							357,618
Asset-back securitization certificates							60,242
Non-performing loans fair value							364,930
Other assets (2)							92,008
Total Tangible Assets at FMV					$		7,859,831
Secured credit facilities					$		1,258,920
Mortgage loans, net (3)							2,255,947
Non-performing loan warehouse facility							267,547
Convertible senior notes (4)							402,500
Other liabilities							154,282
Total liabilities as adjusted					$		4,339,196
NAV					$		3,520,635
Shares (5)							107,887
NAV/Share					$		32.63

• Net asset value build up based on asset-by-asset valuation of single family home portfolio primarily using third-party prepared AVMs and BPOs.
• NPL assets’ fair value based on estimated portfolio sale value; the Company intends to treat the NPL business as a discontinued operation in future financial statements.
• See Appendix for additional details on valuation methodology and process.

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Includes $114.4 million of Real Estate Assets Held for Sale and $112.1 million of REO assets at Book Value.
(2)		Other assets is adjusted to remove deferred financing costs, net of $6,083 and deferred leasing costs, net of $3,513 in arriving at Estimated NAV.
(3)		In our GAAP basis financial statements, Mortgage loans, net include $36,994 of unamortized deferred financing costs as a reduction to the net liability balance. In arriving at Estimated NAV, these deferred financing costs are added back to the liability balance.
(4)		Convertible senior notes are adjusted to reflect the face value of this debt in arriving at Estimated NAV.
(5)		Represents total common shares of 101,486,814 as of April 29th, 2016 plus 6.4 million OP units. Excludes unvested Restricted Share Units.

Same Store Portfolio Overview
As of March 31, 2016
Market:		Same Store Homes			Occupancy %			Average Acquisition Cost per Home				Average Investment				Average Home Size (sq. ft.)			Weighted Average Home Age (years)			Average Monthly Rent per Occupied Home
Atlanta		4,987			96.5%			$	123,125			$	140,660			1,974			23			$	1,242
Southern California		2,611			97.2%				267,142				299,204			1,713			40				1,951
Tampa		2,308			93.4%				158,351				180,300			1,712			29				1,452
Houston		2,283			95.1%				147,335				149,765			1,919			18				1,449
Miami		2,139			95.2%				198,293				208,762			1,673			41				1,700
Orlando		1,765			95.1%				128,914				155,777			1,714			27				1,292
Las Vegas		1,629			95.6%				186,217				201,973			2,029			17				1,372
Phoenix		1,320			96.8%				136,440				151,017			1,696			26				1,120
Dallas		1,178			96.9%				157,810				161,595			1,948			24				1,470
Denver		1,088			96.4%				178,521				198,398			1,658			37				1,606
Top 10 Markets		21,308			95.8%				165,480				182,880			1,825			28				1,458
Northern California		734			97.7%				226,619				249,991			1,428			47				1,692
Charlotte - Raleigh		161			99.4%				151,884				170,810			2,074			14				1,442
Other Markets		603			90.9%				149,690				155,840			1,596			39				1,526
Total		22,806			95.8%			$	166,934			$	184,239			1,808			29			$	1,467

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

Same Store Quarter-Over-Quarter Results
Dollars in thousands
					Q1 16 (1)						Q1 15						% Change
Revenues:
Rental income					$		95,532				$		90,204					6.0	%
Fee income							1,991						1,689					17.8	%
Resident chargebacks							2,452						2,353					4.2	%
Total rental and other property revenue					$		99,975				$		94,246					6.1	%
Expenses:
Repairs, maintenance and turn costs					$		8,309				$		9,863					-15.8	%
Real estate taxes, insurance and HOA costs							19,564						18,295					6.9	%
Property management costs							4,748						5,075					-6.4	%
Bad debt expense (2)							1,650						1,045					57.8	%
Other operating expenses							2,944						3,175					-7.3	%
Total property operating expenses					$		37,215				$		37,453					-0.6	%
Net Operating Income					$		62,760				$		56,793					10.5	%
Net Operating Income margin							62.8	%					60.3	%

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Q1 16 is adjusted for transitions costs, please see Income Statement Bridge slide.
(2)		In Q4 14 CAH recorded a large, non-recurring, bad debt allowance during their transition away from third-party property managers. This event reduced the allowance necessary in Q1 15.

Same Store Core Quarter-Over-Quarter Results
Dollars in thousands
					Q1 16						Q1 15						% Change
Revenues:
Rental income					$		95,532				$		90,204					5.9	%
Fee income							1,991						1,689					17.8	%
Bad debt expense (1)							(1,650	)					(1,045	)				57.8	%
Core rental revenue					$		95,873				$		90,848					5.5	%
Expenses:
Total property operating expenses					$		37,215				$		37,453					-0.6	%
Resident chargebacks							(2,452	)					(2,353	)				4.2	%
Bad debt expense (1)							(1,650	)					(1,045	)				57.8	%
Core property operating expenses					$		33,113				$		34,055					-2.8	%
Core Net Operating Income					$		62,760				$		56,793					10.5	%
Core Net Operating Income margin							65.5	%					62.5	%

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		In Q4 14 CAH recorded a large, non-recurring, bad debt allowance during their transition away from third-party property managers. This event reduced the allowance necessary in Q1 15.

Same Store Market Results
Three months ended March 31, 2016
Dollars in thousands
Market:			Same StoreHomes					Revenues					Expenses					Net Operating Income						Core OperatingMargin
Atlanta				4,987				$	18,809				$	6,641				$	12,168						68.2	%
Southern California				2,611					15,331					4,886					10,445						70.6	%
Tampa				2,308					9,823					4,184					5,639						59.5	%
Houston				2,283					9,664					4,678					4,986						53.2	%
Miami				2,139					10,528					4,889					5,639						55.6	%
Orlando				1,765					6,808					2,769					4,039						62.2	%
Las Vegas				1,629					6,824					1,871					4,953						75.3	%
Phoenix				1,320					4,555					1,309					3,246						75.0	%
Dallas				1,178					5,177					1,920					3,257						65.0	%
Denver				1,088					5,256					1,420					3,835						76.4	%
Top 10 Markets				21,308					92,775					34,567					58,208						65.4	%
Northern California				734					3,841					1,188					2,653						73.1	%
Charlotte - Raleigh				161					727					226					500						71.6	%
Other Markets				603					2,632					1,233					1,399						56.1	%
Total				22,806				$	99,975				$	37,215				$	62,760						65.5	%

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

Same Store Lease Outcomes
Three months ended March 31, 2016
				Expiration Outcome (1)																									Turnover (4)
Market:				ExpirationCount					Renewed (2)					Retained (3)					RenewalRate					RetentionRate					Q1TurnoverRate (5)					YTDAnnualizedTurnoverRate (6)
Atlanta					756					501					609					66.3	%				80.6	%				6.5	%				25.9	%
Tampa					430					273					305					63.5	%				70.9	%				8.8	%				35.1	%
Southern California					420					309					346					73.6	%				82.4	%				5.8	%				23.3	%
Orlando					362					243					262					67.1	%				72.4	%				7.7	%				30.7	%
Miami					337					217					264					64.4	%				78.3	%				6.7	%				26.9	%
Las Vegas					240					143					165					59.6	%				68.8	%				6.9	%				27.7	%
Phoenix					218					140					162					64.2	%				74.3	%				7.4	%				29.7	%
Houston					195					103					131					52.8	%				67.2	%				6.3	%				25.2	%
Dallas					129					83					98					64.3	%				76.0	%				6.0	%				24.2	%
Denver					115					65					81					56.5	%				70.4	%				5.5	%				22.1	%
Top 10 Markets					3,202					2,077					2,423					64.9	%				75.7	%				6.8	%				27.1	%
Northern California					123					83					102					67.5	%				82.9	%				6.9	%				27.8	%
Charlotte - Raleigh					12					7					8					58.3	%				66.7	%				8.1	%				32.3	%
Other markets					103					68					87					66.0	%				84.5	%				7.0	%				27.9	%
Total					3,440					2,235					2,620					65.0	%				76.2	%				6.8	%				27.2	%

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Represents the number of leases that expired within the quarter, less early terminations.
(2)		Lease expirations where the lease was renewed (excludes month-to-month leases).
(3)		Lease expirations where the resident did not "move out". Retention results are final as of April 30th, 2016.
(4)		Population limited to assets that realized resident turnover within the subject period, including out of period lease expirations where the lease was terminated early and month-to-month leases.
(5)		The number of assets that become unoccupied during the subject period as a percentage of homes with an initial move-in ready status.
(6)		The number of assets that become unoccupied during the subject period as an annualized percentage of homes with an initial move-in ready status.

Same Store Rent Growth
Three months ended March 31, 2016
				Renewals										Replacement Rent															Escalations on Multi-Year Leases									Total Rent Growth
Market:				TotalLeases					RenewalRentGrowth					TotalLeases					ReplacementRentGrowth					Blended Rent Growth					TotalLeases				AverageRentChange (1)					TotalLeases					AverageRentChange (2)
Atlanta					503					5.2	%				363					3.4	%				4.4	%				128				3.0	%				994					4.2	%
Southern California					370					5.1	%				173					3.0	%				4.4	%				26				3.0	%				569					4.3	%
Tampa					301					3.7	%				157					2.0	%				3.1	%				51				3.0	%				509					3.1	%
Orlando					269					5.1	%				165					2.6	%				4.1	%				16				3.0	%				450					4.1	%
Miami					227					4.1	%				145					2.5	%				3.4	%				116				3.0	%				488					3.3	%
Houston					183					4.3	%				192					-1.5	%				1.2	%				43				3.0	%				418					1.4	%
Phoenix					170					5.7	%				102					8.8	%				6.9	%				3				3.0	%				275					6.9	%
Las Vegas					162					4.5	%				126					0.6	%				2.8	%				3				3.0	%				291					2.8	%
Dallas					95					4.2	%				81					2.8	%				3.6	%				26				3.0	%				202					3.5	%
Denver					72					8.3	%				71					5.0	%				6.6	%				10				3.0	%				153					6.3	%
Top 10 Markets					2,352					4.8	%				1,575					2.5	%				3.9	%				422				3.0	%				4,349					3.8	%
Northern California					93					5.1	%				47					8.5	%				6.3	%				16				3.0	%				156					5.9	%
Charlotte - Raleigh					6					2.3	%				13					3.4	%				3.0	%				-				0.0	%				19					3.0	%
Other Markets					56					3.6	%				52					-1.2	%				1.2	%				14				3.0	%				122					1.4	%
Total					2,507					4.8	%				1,687					2.6	%				3.9	%				452				3.0	%				4,646					3.8	%

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Represents average rent growth on the population of escalating multi-year leases taking effect for the three months ended March, 31, 2016, defined as average of the percentage change in rental rate for all multi-year leases in the period.
(2)		Represents weighted average rent growth on all replacement, renewals and escalating multi-year leases for the three months ended March, 31, 2016.

Same Store Repairs and Maintenance and Capital Expenditures
Three months ended March 31, 2016
Dollars in thousands
Category					Total Cost					Q1 Costper Home
Repairs, maintenance and turnover expenses (1)
Repairs and maintenance					$	4,085				$	179
Turnover related costs						2,681					118
Landscaping and pool services						749					33
Total repairs, maintenance and turnover expenses					$	7,515				$	330
Recurring capital expenditures (2) (3)
Repairs and maintenance					$	4,962				$	218
Turnover related costs						2,620					115
Total recurring capital expenditures						7,582					333
Total repairs and maintenance and recurring capital expenditures					$	15,097				$	663
Revenue enhancing capital expenditures (4)
Total revenue enhancing capital expenditures					$	841

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Net of resident chargebacks.
(2)		Excludes Initial Renovation and Re-Development expenditures.
(3)		General replacements and expenditures necessary to preserve and maintain the value and functionality of the home and its systems.
(4)		Capital improvements and additions intended to increase the revenue potential for a given property.

NPL Portfolio Overview
As of March 31, 2016
Dollars in millions
State					LoanCount (1)(2)					TotalPurchasePrice					Total UPB						TotalBPO						PurchasePrice as% ofUPB					PurchasePrice as% ofBPO					WeightedAverage LTV (3)
Florida					415					$	55.1				$		100.9				$		98.4					54.6	%				55.9	%				102.5	%
Illinois					196						27.9						44.1						43.6					63.3	%				64.1	%				101.1	%
California					176						56.7						76.4						94.5					74.2	%				60.0	%				80.9	%
New York					176						36.5						58.1						68.9					62.9	%				53.0	%				84.3	%
Indiana					120						8.6						11.6						12.2					73.9	%				70.2	%				95.0	%
New Jersey					118						18.8						31.2						29.4					60.2	%				63.8	%				106.1	%
Maryland					106						21.0						30.6						27.3					68.9	%				76.9	%				111.7	%
Wisconsin					104						9.8						12.9						16.1					75.4	%				60.5	%				80.3	%
Pennsylvania					71						6.7						9.6						9.9					69.6	%				67.6	%				97.1	%
Georgia					53						5.3						8.4						8.4					62.8	%				62.3	%				99.3	%
Arizona					51						6.7						9.8						9.4					68.7	%				71.3	%				103.9	%
Other						722					91.7						130.7						141.0					70.1	%				65.0	%				92.7	%
Total						2,308				$	344.6				$		524.2				$		559.1					65.7	%				61.6	%				93.7	%

Status					Loan Count (1)					Total Purchase Price					Total UPB						Total BPO						Purchase Price as % of UPB (3)						Purchase Price as % of BPO						Weighted Average LTV (3)
Foreclosure					1617					$	250.7				$		390.8				$		402.6					64.1	%					62.3	%					97.1	%
Performing					619						85.0						120.5						143.0					70.6	%					59.5	%					84.2	%
Delinquent						72					8.9						12.9						13.5					69.1	%					65.8	%					95.2	%
Total/Average						2,308				$	344.6				$		524.2				$		559.1					65.7	%					61.6	%					93.7	%

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		Represents first liens on 2,252 homes and 56 parcels of land.
(2)		Excludes 189 unsecured, second, and third liens with an aggregate purchase price of $1.4 million.
(3)		LTV is based on the ratio of UPB to BPO.

2016 Guidance

Management re-affirms full-year 2016 guidance

2016 Guidance (1)
					Range
Core FFO/Share					$1.55 - $1.65
Stabilized Occupancy					94% - 95%
Blended Rent Growth					4% - 5%
Core NOI Margin (Stabilized)					62% - 64%

• Core FFO guidance excludes NPL results as Colony Starwood Homes winds-down the business
• Management expects to generate $150 - $250MM of net proceeds from NPL loan pool sales and REO sales throughout 2016/2017(2)

Please see the Appendix at the back of this presentation for certain definitions, explanations and reconciliations of Non-GAAP financial measures. All information is as of March 31, 2016 unless otherwise indicated.

(1)		This outlook is based on a number of assumptions, many of which are outside of the Colony Starwood Homes’ control, and all of which are subject to change. This outlook reflects Colony Starwood Homes’ expectations on (a) existing investments and (b) yield on incremental investments inclusive of Colony Starwood Homes’ existing pipeline. All guidance is based on current expectations of future economic conditions and the judgment of the Colony Starwood Homes’ management team.
(2)		Net Proceeds after associated debt pay down and carrying costs.

Appendix

Annualized Turnover Rate. Is calculated by dividing a) the number of homes that become unoccupied during a period of time by b) the number of homes that had completed initial renovation/rehabilitation and were leasable during the specified period, expressed as an annualized percentage by multiplying the period of measurement to reach a 12 month period (e.g., multiplying a three month turnover measurement by four). Management believes this operational measure is useful in understanding tenant satisfaction, pricing effectiveness and assessing associated property repairs and maintenance expenses.

Average Acquisition Cost per Home. Is calculated by dividing a) the total acquisition cost for each home in an identified population (such acquisition costs including purchase price and closing costs, but excluding renovation/rehabilitation costs incurred prior to leasing) by b) the number of homes in the respective population. Total acquisition cost for assets owned by SWAY prior to the Merger includes the purchase accounting fair market value step-up applied to those assets as of the close of Merger on January 5, 2016.

Average Investment. Is calculated by dividing the sum of a) the total acquisition cost for each home in an identified population b) all property related capitalized expenditures incurred in the renovation/rehabilitation of a property prior to leasing by c) the number of homes in the respective population. Total acquisition cost for assets owned by SWAY prior to the Merger includes the purchase accounting fair market value step-up applied to those assets as of the close of Merger on January 5, 2016.

Average Monthly Rent per Occupied Home. Is calculated by dividing a) the aggregate monthly contractual cash rent (excluding rent concessions and incentives) for an identified population of occupied rental units by b) the number of rental units in the identified population. To date, rent concessions and incentives have been utilized on a limited basis and have not had a significant impact on the Colony Starwood Homes portfolio’s average monthly rent.

Blended Rent Growth. Represents the weighted average rent growth on all new leases (replacement leases) and renewals during a measured period, and is calculated by dividing a) the aggregate contractual first month rent on all new leases and lease renewals executed during the three months ended March 31, 2016 for an identified population of occupied rental units by b) the aggregate contractual last month rent for such identified population of rental units before renewal or new lease. This calculation does not include lease escalations / step-ups for multi-year leases.

Core FFO. Core FFO is a non-GAAP financial measure of operating performance that we believe assists investors in assessing the results of the Company’s single family rental business, which is our core operating business. Core FFO adjusts FFO to eliminate the impact of certain items that we believe are not indicative of our core operating performance, including the results of the NPL business, which we intend to exit, as well as certain non-cash items so that period-over-period measurements are more consistent. Our Core FFO begins with NAREIT FFO and is adjusted for revenues and expenses directly related to our NPL business, for amortization of deferred financing costs and debt premium discounts, share-based compensation, loss on derivative financial instruments, amortization of derivative financial instruments, non-cash interest expense, merger and transaction-related expenses. Please see the reconciliation to Net Income/Loss and NAREIT FFO on page 14. Core FFO does not represent cash generated from operating activities determined in accordance with GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to net income (determined in accordance with GAAP) as a performance measure.

Core Net Operating Income (Core NOI). We calculate Core NOI by subtracting Core Property Operating Costs from Core Rental Revenue, as defined, which eliminates (a) revenues and expenses that we believe are not directly related to the operating performance of the homes themselves and (b) GAAP presentations of resident chargeback fees and bad debt expense to provide a clearer presentation of rental and fee income streams as well as associated expenses. Please refer to the definition of NOI below for an explanation of how that measure is calculated separate from Core NOI. Core NOI is a non-GAAP measure of operating performance that we believe assists investors in assessing the performance of our portfolio of single family homes, which is our core operating business.

The Core NOI measures included in this presentation should not be considered alternatives to net loss or net cash flows from operating activities, as determined in accordance with GAAP, as indications of our performance or as measures of liquidity. Although we use these non-GAAP measures for comparability in assessing their performance against other REITs, not all REITs compute the same non-GAAP measures. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures are comparable with that of other REITs.

Core Property Operating Expenses. Is calculated by adjusting operating costs for the properties in the relevant sample by eliminating the impact of resident chargebacks bad debt expense.

Core Rental Revenue. Is calculated by rental and fee income for the properties in the relevant sample adjusted to eliminate the impact of bad debt expense.

Development Homes. Homes that a) are awaiting initial rehabilitation, b) are currently undergoing initial rehabilitation, or c) have completed initial rehabilitation but have not yet been marketed for initial occupancy.

Estimated Net Asset Value (NAV). Estimated NAV is the estimated value of all tangible assets net of liabilities at current fair market values. The Company believes that Estimated NAV provides investors with useful information to facilitate their understanding of the approximate current market value of our real estate assets, and their value in excess of our obligations to third parties, which we do not believe are immediately apparent from our GAAP balance sheet. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions as opposed to depreciating over a useful life presumed by GAAP, the Company believes that Estimated NAV enhances investors’ ability to assess the Company’s approximate franchise value and evaluate our balance sheet risk. Estimated NAV is not meant to represent the liquidation value of our assets, and neither Estimated NAV, nor any of the metrics or methodologies described below in its development and calculation should be viewed as a substitute for book value, net investments in real estate, equity, net income or cash flows from operations prepared in accordance with GAAP, or as measures of profitability or liquidity. Estimated NAV does not consider potential changes in the value of the assets since the last date of valuation, the collectability of rents from our tenants or the value associated with our operating platform. Further, not all real estate investment trusts (“REITs”) compute this same non-GAAP measure or valuation methodologies, therefore, there can be no assurance that our basis for computing this non-GAAP measure is comparable with that of other REITs.

We estimate the fair value of our investments in single-family rentals using a progressive method that incorporates three value sources:

1) automated valuation model values (“AVMs”),

2) broker price opinions (“BPOs”) and

3) internal desktop evaluations

AVM values are value estimates provided by service providers based on their proprietary mathematical modeling platforms utilizing historical sales and public records data of comparable homes with adjustments based on characteristics specific to the relevant home being valued. The AVMs we receive are accompanied with a confidence index which provides a measure of perceived reliability of the AVM value. The AVM confidence index is prepared by a third-party AVM service provider and includes a confidence score, which is a statistically based measurement of how similar or dissimilar the results of the third-party AVM service provider’s multiple proprietary valuation models are to each other. We accept AVMs with confidence scores that equate to a statistical error margin of approximately 5% or less. When a home’s AVM confidence index falls below our acceptable score, we will rely on a current BPO, which is a value estimate provided by a local broker based on comparable sales data and adjusted based on characteristics specific to the relevant home being valued. If a current BPO is not available, an internal evaluation is performed by a licensed appraiser using the market approach as defined by the Appraisal Institute to estimate the fair value.

The fair value of investments in NPLs is estimated using the net present values of the BPOs of the underlying homes discounted at a then current market discount rate. The net present values of the BPOs of the underlying homes are determined using estimates of the length of time service providers as adjusted from time to time based on our experience. The fair value of investments in REO properties is based on current BPO values.

The costs of selling properties in the portfolio, including commissions and other related costs are not deducted for the purpose of calculating the Estimated NAV, with the exception of homes held for sale. Further, future promoted interests on the NPL portfolio are not deducted for the purpose of calculating Estimated NAV. We consider Estimated NAV to be an appropriate supplemental measure as it illustrates the estimated imbedded value in our SFR portfolio and NPL and REO portfolio that is carried on our balance sheet at historical cost. The Estimated SFR Value, Estimated NPL and REO Value and Estimated NAV are non-GAAP financial measures. However, they are provided for informational purposes to be used by investors in assessing the value of our assets. A reconciliation of total shareholders’ equity to Estimated NAV is provided below.

The use of AVMs in preparing the estimated NAV is subject to certain inherent limitations, including potentially imperfect and/or incomplete information regarding the properties being valued and comparable properties used in the AVM model. SFR, NPL and REO values used in the calculation of estimated NAV are not subject to audit procedures by our independent auditors. These metrics should be considered along with other available information in valuing and assessing us, including our GAAP financial measures and other cash flow and yield metrics.

These metrics should not be viewed as a substitute for book value, net investments in real estate, equity, net income or cash flows from operations prepared in accordance with GAAP, or as measures of profitability or liquidity. Further, not all real estate investment trusts (“REITs”) compute this same non-GAAP measure, therefore, there can be no assurance that our basis for computing this non-GAAP measure is comparable with that of other REITs.

Estimated NAV
($ in thousands, except per share data)
Total assets					$	6,968,345
Add: fair value adjustment of SFR assets						1,165,119
Less: deferred financing costs, net						(6,083	)
Less: deferred leasing costs, net						(3,513	)
Less: goodwill						(264,037	)
Total Tangible Assets at FMV					$	7,859,831
Total liabilities					$	4,241,414
Add: adjust convertible debt to face value						60,788
Add: unamortized deferred financing costs						36,994
Total liabilities as adjusted					$	4,339,196
NAV					$	3,520,635
Shares(1)						107,887
NAV/Share					$	32.63

(1) Represents total common shares of 101,486,814 as of April 29th, 2016 plus 6.4 million OP units

Integration Costs. Costs and charges incurred during the integration of the Starwood Waypoint Residential Trust and Colony American Homes operations in the three months ended March 31, 2016 that are not reflective of our core operating performance and that we do not expect to incur subsequent to the completion of the Merger integration, but which do not qualify for Merger and transaction related expenses under GAAP. The majority of Integration Costs consist of base salaries, benefits, and payroll taxes of employees separated or scheduled for separation as a result of the Merger. Below is a summary of Integration Costs through the three months ended March 31, 2016:

Category					Amount (000s)
Employee related costs					$	4,208
Accounting and audit						775
Technology costs						360
Office rents						223
Other						64
Total					$	5,630

Merger and Transaction Related Expenses. Direct costs incurred as a result of the Merger closing or costs required to ensure the Merger was completed successfully. These costs include legal fees, advisory services (accounting, tax, and entity filings), success fees, employee retention plans and severance costs, and property tax / transfer costs. A summary of costs for the three months ended March 31, 2016 is summarized below:

Category					Amount (000s)
Closing and Success Fees					$	13,717
Legal						4,280
Employee Related Costs						4,078
Other						1,407
Total					$	23,482

NAREIT FFO. Funds from operations is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income or loss (in accordance with GAAP) excluding gains or losses from sale of previously depreciated real estate assets, plus depreciation and amortization of real estate assets and adjustments for unconsolidated partnerships and joint ventures. See page 14 for reconciliation to Income Statement Net Loss. Consistent with real estate industry and investment community preferences, we use FFO as a supplemental measure of operating performance for a REIT. We consider FFO useful to investors as a complement to GAAP measures because it facilitates an understanding of the operating performance of the Company’s properties. FFO does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company’s operating performance.

Net Operating Income or NOI. We define NOI as rental and other property revenues less property operating expenses. We have presented NOI for various segments of our portfolio, including Same Store Homes, Stabilized Homes, Development Homes, and Other Homes as we believe these NOI measures to be appropriate supplemental measures of operating performance to net income attributable to common shareholders because they reflect the operating performance of our homes without allocation of corporate level overhead or general and administrative costs and reflect the operations of the segments and sub-segments of our business. Refer to the table below for a reconciliation of net loss attributable to common shareholders to NOI. Please refer to the definition of Core NOI above for an explanation of how that measure is calculated separate from NOI.

These NOI measures included in this presentation should not be considered alternatives to net loss or net cash flows from operating activities, as determined in accordance with GAAP, as indications of our performance or as measures of liquidity. Although we use these non-GAAP measures for comparability in assessing their performance against other REITs, not all REITs compute the same non-GAAP measures. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures are comparable with that of other REITs.

					Three months ended March 31,2016
(Dollars in thousands)					Same StoreHomes			StabilizedHomes (2)
Reconciliation of net loss to NOI
Net loss available to Colony Starwood Homes shareholders					$	(44,199	)	$	(44,199	)
Add (deduct) adjustments to get to total NOI
Expense on non-performing loans, net						8,598			8,598
General and administrative						17,338			17,338
Share-based compensation						387			387
Interest expense						39,360			39,360
Depreciation and amortization						43,630			43,630
Transaction-related expense						23,482			23,482
Impairment of real estate						30			30
Realized (gain) loss on sales of investments in real estate, net						(1,384	)		(1,384	)
Equity in income from unconsolidated joint ventures						(197	)		(197	)
Other (expense) income, net						395			395
Income tax expense						245			245
Net income attributable to non-controlling interests						(2,850	)		(2,850	)
Total NOI						84,835			84,835
Add (deduct) adjustments to get to total same store portfolio NOI
Property management integration costs (1)						1,259			1,259
Non-same store portfolio NOI components:
Property operating revenues on non-same store homes (1)						(39,411	)		(3,428	)
Property operating expenses on non-same store homes (1)						16,077			2,908
Add Total Non-stabilized portfolio NOI						(23,334	)		(520	)
Total same store portfolio NOI					$	62,760		$	85,574
Calculation of same store portfolio NOI margin:
Rental income					$	95,532		$	129,990
Fee income						1,991			2,739
Less bad debt expense						(1,650	)		(2,195	)
Total rental revenues					$	95,873		$	130,534
Same store portfolio NOI margin						65.5	%		65.6	%
(1)  See Income Statement Bridge page
(2)  Stabilized is the summation of Same Store Homes and Stabilized Homes as defined in the Appendix.

Non-Owned, Managed Homes. Colony Starwood Homes currently provides its property and asset management services to third parties and/or joint venture partners as a fee service. The non-owned properties are all managed within the same platform from which Colony Starwood Homes services its Owned homes.

Occupancy %. Is calculated by dividing a) the number of occupied homes as of the last day of the period by b) the comparative home set (Same Store, Stabilized, Owned, etc.).

Other Assets:

Description					Amount (000s)
Fannie Mae joint venture					$	35,380
Accounts receivable, net of allowance						24,201
Prepaids						17,120
Deferred finance costs, net						6,083
Deposits						4,477
Deferred leasing costs and lease intangibles, net						3,513
Related-party receivable						238
Other						9,902
Total					$	100,914

Other Homes. Includes 609 Owned Homes as of March 31, 2016 that were not intended to be held for the long-term and not in service. The 609 Other Homes excludes the 738 REO homes held as of March 31, 2016.

Other Markets.

Market:					Same-StoreHomes					StabilizedHomes					DevelopmentHomes					OtherHomes					OwnedHomes (1)
Chicago						406					362					11					16					795
Other (2)						197					7					—					16					220
Total						603					369					11					32					1,015

(1)		Excludes REO properties.
(2)		Other Market includes Tucson, Delaware, Pennsylvania, New York, Maryland and Central Texas markets.

Owned Homes. Represents wholly-owned single family rental properties, and is measured by the number of total rental units. This takes into account investments in multi-unit properties which Management believes provides a more meaningful measure to investors. Owned Homes excludes the 738 REO homes held as of March 31, 2016.

Recurring Capital Expenditures. General replacements and expenditures required to preserve and maintain the value and functionality of a home and its systems as a single family rental.

Renewal Rate. Is calculated by dividing a) the number of renewed residents with current period lease expirations by b) the total lease expirations during the period.

Renewal Rent Growth. Is calculated as the percentage change in monthly contractual rent for all lease renewals during the period.

Replacement Rent Growth. Is calculated as the percentage of rent growth from the new lease rate (new resident) relative to the prior lease rate (prior resident) on the population of replacement leases occurring during the period.

Retention Rate. Is calculated by dividing a) the number of retained residents with current period lease expirations by b) the total lease expirations during the period.

Revenue Enhancing Capital Expenditures. Capital improvements and additions intended to increase the revenue potential for a given property.

Same Store Homes. Homes which have been stabilized for at least fifteen (15) months prior to the start of the current measurement period, excluding any homes that have been disposed of, removed from service or returned to the development period for significant renovation.

Stabilized Homes. Homes that are currently occupied or have been previously leased and occupied that do not meet the criteria to be a Same Store Home. For the three months ended March 31, 2016 the Stabilized Home count excludes 609 homes not intended to be held for the long term.

Top 10 Markets. Refers to Colony Starwood Homes ten markets with the greatest number of homes as of March 31, 2016.

Total Homes. Includes both Owned Homes and Non-Owned, Managed Homes. Represents all homes Colony Starwood Homes manages.

Total Rent Growth. Represents the weighted average rent growth on replacement rents, renewals, and escalating multi-year leases for the period.

UPB. Unpaid principal balance.

Weighted Average Home Age (years). Rounded number of years between when a home was built and the last day of the current measurement period with each market being weighted by its area asset count.

Weighted Average Shares:

Description					Number of Shares
Weighted-average shares - basic and diluted						102,066,754
OP units						6,400,000
Total						108,466,754

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Source: Colony Starwood Homes