Colony Starwood Homes Announces Second 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 and six months

ended June 30, 2016. Capitalized terms used herein have the meanings

ascribed thereto in the Appendix.

Second Quarter 2016 Highlights

• 
  
• 
  Total revenues increased to $143.8 million in Q2 2016, supported by an
  acceleration of Quarterly Same Store Blended Rent Growth of 5.5%
  compared to 3.9% in Q1 2016; Quarterly Same Store revenue growth was
  6.3%
  
• 
  
• 
  Total Homes Occupancy exceeds 95% for second straight quarter,
  measuring 95.4% as of June 30, 2016; Quarterly Same Store Occupancy
  for Q2 was 95.8%
  
• 
  
• 
  Net loss of $15.7 million or ($0.15) per share, with Core FFO of $0.39
  per share for the three months ended June 30, 2016
  
• 
  
• 
  Quarterly Same Store NOI increased 7.8% compared to Q2 2015; Quarterly
  Same Store Core NOI margin was 62.8%
  
• 
  
• 
  Completed $485.6 million securitization and subsequently entered into
  a $450 million interest rate swap contract, effectively locking in an
  average interest rate of 3.3% over the five-year term and increasing
  the percentage of fixed rate debt to total debt to over 60%
  
• 
  
• 
  Company tightened full year 2016 Core FFO guidance to $1.60 - $1.65
  per share
  
• 
  

“Continued strong demand and virtually no new supply of single-family

rental homes led to accelerating rent growth and stable occupancy

through the second quarter,” stated Fred Tuomi, the Company’s CEO.

“Quarterly Same Store Blended Rent growth was 5.5% compared to 3.9% in

the first quarter. Through the first six months our Full Year Same Store

portfolio of 22,647 homes produced year over year revenue growth of

6.3%, NOI growth of 10.9% and Core NOI margin of 64.1%, while

maintaining occupancy of 95.7%. The momentum behind these results,

coupled with our high quality market selection, unique market density

and innovative technology platform provides a favorable catalyst for

future operating improvements and significant portfolio growth.”

The 2016 financial results of the Company (other than Quarterly Same

Store or Full Year 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.

Second Quarter 2016 Operating Results

Total revenues were $143.8 million for the three months ended June 30,

2016, and net loss attributable to common shareholders was approximately

$15.7 million, or ($0.15) per share, driven by depreciation and

amortization.

NAREIT FFO was $25.0 million for the three months ended June 30, 2016,

or $0.23 per share, and Core FFO was $41.9 million, or $0.39 per share.

NAREIT FFO and Core FFO are common supplemental measures of operating

performance for a REIT, and the Company believes both are useful to

investors as a complement to GAAP measures because they facilitate an

understanding of the operating performance of the Company’s properties.

Same Store Results

For the Company’s Quarterly Same Store portfolio of 24,657 homes,

revenue for the three months ended June 30, 2016 was $111.3 million, a

6.3% increase from those homes’ revenues for the three months ended June

30, 2015. For the Company’s Full Year Same Store portfolio of 22,647

homes, revenue for the six months ended June 30, 2016 was $201.1

million, a 6.3% increase for those homes’ revenues from the six months

ended June 30, 2015. For the Quarterly Same Store portfolio, property

operating expenses increased by 4.0% from the three months ended June

30, 2015, producing a 7.8% increase in Quarterly Same Store Core NOI for

the three months ended June 30, 2016 as compared to the three months

ended June 30, 2015. For the Full Year Same Store portfolio, property

operating expenses decreased by 0.4% from the six months ended June 30,

2015, producing a 10.9% increase in Full Year Same Store Core NOI for

the six months ended June 30, 2016 as compared to the six months ended

June 30, 2015. Quarterly Same Store Core NOI margin was 62.8%. The table

below summarizes Quarterly and Full Year Same Store operating results.

Investment Activity

The Company sold 608 homes during the second quarter, including 359

single-family rental homes and 249 real estate owned (“REO”) homes. The

single-family rental homes were sold for gross sales proceeds of $56

million, and the Company recorded a gain of approximately $0.5 million

on these sales. The REO homes were sold for gross sales proceeds of

$33.6 million, and the Company recorded a gain of $1.7 million which is

included in discontinued operations, net. During the three months ended

June 30, 2016, the Company acquired 87 homes for an aggregate estimated

total investment of approximately $17.0 million, or approximately

$196,000 per home, including estimated investment costs for renovation.

NPL Business

On May 4, 2016, the Company’s Board of Trustees (the “Board”) authorized

the marketing of the non-performing loan (“NPL”) portfolio, which the

Company commenced in the second quarter. The operations of the NPL

business segment are recorded as discontinued operations, net for the

three and six months ended June 30, 2016 and all comparable periods.

NPL resolutions and REO sales produced $46.8 million of gross cash

proceeds during the quarter, resulting in net proceeds of $29.4 million

after associated debt pay down of $17.4 million. As of June 30, 2016

there was $250.1 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.

Subsequent to June 30, 2016, the Company sold 339 re-performing loans in

a single sale transaction generating net sales proceeds of $45.9 million

of which $23.7 million was used to pay down debt.

Balance Sheet and Capital Markets Activities

As of June 30, 2016, the Company had $4.0 billion of debt outstanding

and approximately $525 million of undrawn commitments on its credit

facilities.

In June 2016, the Company closed its first debt financing transaction

post Merger, entering into a $485.6 million securitization (net of Class

F and G certificates retained by the Company) with an initial maturity

date of July 2018 and three one-year extension options. The Company

separately entered into an interest rate swap contract in June 2016,

effectively fixing the interest rate on approximately $450 million of

variable rate debt for five years. This swap transaction is structured

as a step-up swap, which locks in the forward LIBOR curve resulting in

an average effective fixed rate of 3.3% over the five-year term.

The Company did not repurchase any shares in the second quarter of 2016

under its $250 million repurchase program, which is authorized through

May 6, 2017. To date the Company has purchased 2.4 million shares for an

aggregate purchase price of $52.8 million at an average of $22.19 per

share.

On August 2, 2016, the Board declared a dividend of $0.22 per common

share for the third quarter of 2016, which will be paid on October 15,

2016 to shareholders of record on September 30, 2016.

Full Year 2016 Financial Guidance

Earlier this year the Company provided Core FFO per share, occupancy,

rent growth, and Core NOI margin guidance, which excludes the operations

of our NPL business. The Company has tightened its Core FFO per share,

occupancy, and rent growth guidance for the full year ending December

31, 2016, and re-affirms the Core NOI margin guidance for the 2016

fiscal year, as set forth below. The Company does not provide

forward-looking guidance for certain financial measures on a generally

accepted accounting principles (“GAAP”) basis because it is unable to

reasonably predict certain items contained in the GAAP measures,

including one-time and infrequent items that are not indicative of the

Company’s ongoing operations. Such items include, but are not limited

to, NPL operations, Merger and transaction related expenses, share-based

compensation and other items not reflective of the Company's ongoing

operations.

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.

Second Quarter 2016 Conference Call

A conference call is scheduled on Tuesday, August 9, 2016, at 11:00 a.m.

Eastern Time to discuss the Company’s financial results for the three

months and six months ended June 30, 2016. The domestic dial-in number

is 1-877-407-9039 (for U.S. and Canada) and the international dial-in

number is 1-201-689-8470 (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 September 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 13641395, 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 Second Quarter 2016 Supplemental Information Package (“Q2

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 Q2 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 the

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

Certain statements in this press release and the Q2 2016 supplement are

forward-looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995 and other federal securities laws.

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 due to

a variety of risks, uncertainties and other factors. 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 Merger

and associated transitions effectively and efficiently; the possibility

that the anticipated benefits from the Merger may not be realized or may

take longer to realize than expected; unexpected costs or unexpected

liabilities that may arise from 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 Merger and

associated transitions; 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; 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 objectives and business and

growth strategies; 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 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; 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; 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

Company’s ability and the ability of its subsidiaries to operate

effectively within the limitations imposed by these rules. 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.

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.

Investor Relations

John Christie, 510-982-5470

IR@colonystarwood.com

or

Media

Relations

Jason Chudoba, 646-277-1249

Jason.chudoba@icrinc.com

⁽¹⁾ For GAAP purposes, the Merger resulted in a reverse

acquisition of SWAY by CAH. Historical financial statements for periods

prior to the Merger include only the results of operations and financial

position of CAH.

⁽¹⁾ Common shares total 107,886,847 and 108,176,801 for the

three and six month periods, respectively. Comprised of 101,486,847 and

101,776,801 weighted-average shares for the three and six month periods

ended, respectively, and outstanding OP units exchangeable for 6,400,000

common shares.

⁽²⁾ Please see Appendix A for a

definition of Integration Costs, and Appendix B for a summary of

Integration Costs through the three and six months ended June 30, 2016,

both of which are contained in the Q2 2016 Supplement. We believe that

identifying Integration Costs is useful for investors as it allows

investors to separate these costs from the core operating performance of

our Single Family Rental business.

Contacts

Investor Relations

John Christie, 510-982-5470

IR@colonystarwood.com

or

Media

Relations

Jason Chudoba, 646-277-1249

Jason.chudoba@icrinc.com