ck0001652926-10k_20181231.htm

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company", and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

There is no established market for the registrant's shares of common stock. There were 6,038,914 shares of common stock held by non-affiliates at June 30, 2018, the last business day of the registrant's most recently completed second fiscal quarter, for an aggregate market value of $54,652,172, assuming an estimated value per share of $9.05, which amount was the Registrant’s estimated value per share as determined by its board of directors on June 27, 2018. For a full description of the methodologies used to calculate the Registrant’s estimated value per share as of March 31, 2018, see the Registrant’s Current Report on Form 8-K filed with the SEC on June 29, 2018. As of March 18, 2019, there were 636,367 outstanding shares of Class A common stock, 1,116,749 outstanding shares of Class T common stock, 8,410,341 outstanding shares of Class R common stock and 417,556 outstanding shares of Class I common stock of Resource Apartment REIT III, Inc.

Registrant incorporates by reference portions of the Resource Apartment REIT III, Inc. Definitive Proxy Statement for the 2019 Annual Meeting of Stockholders (Items 10, 11, 12, 13, and 14 of Part III).

Certain statements included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "could," "estimate," "expects," "intend," "may," "plan," "potential," "project," "should," "will" and "would" or the negative of these terms or other comparable terminology. Actual results may differ materially from those contemplated by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.

The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

All forward-looking statements should be read in light of the risks described above and identified in the "Risk Factors" section of our Registration Statement on Form S-11 (File No. 333-207740) filed with the Securities and Exchange Commission, as the same may be amended and supplemented from time to time.

Resource Apartment REIT III, Inc. is a Maryland corporation, formed on July 15, 2015, that intends to take advantage of its sponsor's multifamily investing and lending platforms to invest in apartment communities in order to provide stockholders with growing cash flow and increasing asset values. As used herein, the terms "we," "our" and "us" refer to Resource Apartment REIT III, Inc. and, as required by context, Resource Apartment OP III, LP, which we refer to as our "Operating Partnership" and to their subsidiaries. We intend to acquire underperforming apartment communities which we will renovate and stabilize in order to increase rents. To a lesser extent, we may also seek to originate and acquire commercial real estate debt secured by apartment communities. We cannot predict, however, the ultimate allocation of net proceeds from our initial public offering between property acquisitions and debt investments at this time because this allocation will depend, in part, on market conditions and opportunities and on the amount of financing that we are able to obtain with respect to the types of assets in which we seek to invest.

At December 31, 2018, we owned five multifamily properties, as described further in "Item 2. Properties". We intend to continue to purchase and manage a diversified portfolio of U.S. commercial real estate and real estate-related debt, including properties that may benefit from renovations that may increase their long-term values.

We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition. Thus, to the extent that our Advisor presents us with attractive investment opportunities that allow us to meet the real estate investment trust ("REIT") requirements under the Internal Revenue Code of 1986, as amended, our portfolio composition may vary from what we initially expect.

We are externally managed by Resource REIT Advisor, LLC, which we refer to as our Advisor. Our Advisor manages our day-to-day operations and our portfolio of real estate assets, including making certain decisions with respect to the acquisition of certain insignificant investments, subject to the limitations in our charter and the direction and oversight of our board of directors (our "Board"). Our Advisor also provides asset-management, marketing, investor-relations and other administrative services on our behalf.

We elected to be taxed as a REIT commencing with our taxable year that ended December 31, 2017. If we continue to qualify as a REIT for federal income tax purposes, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and cash available for distribution. However, we believe that we will continue to operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes so as to retain our REIT qualification.

Our Advisor is an indirect wholly owned subsidiary of Resource America, Inc. ("RAI"). RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate investment management and services company engaged in a broad range of activities. C-III controls our Advisor, our Dealer Manager and Resource Apartment Manager III, LLC (our "Manager"). C-III also controls all of the shares of our common stock held by RAI and our Advisor. To provide its services, the Advisor draws upon RAI, C-III, their management teams and their collective investment experience.

We intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940, as amended.

We are offering to the public up to $1.1 billion of shares of our common stock, consisting of up to $1.0 billion of shares in our primary offering and up to $100.0 million of shares pursuant to our distribution reinvestment plan ("DRIP"). Through July 2, 2017, we offered shares of Class A and Class T common stock. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering and commenced offering shares of Class R and Class I common stock.

The initial prices per share for each class of shares of our common stock through June 30, 2018 were as follows:

On June 27, 2018, our board of directors determined a net asset value (“NAV”) per share of our common stock of $9.05 based on the estimated market value of our portfolio of investments as of March 31, 2018. A full description of the methodologies used to calculate our estimated NAV per share as of March 31, 2018, is included in our Current Report on Form 8-K filed with the SEC on June 29, 2018. Based on this estimated NAV per share, our board of directors established updated offering prices for shares of Class R and Class I common stock to be sold in the primary portion of our initial public offering. Effective July 2, 2018, the price per share for each class of shares of our common stock became:

On March 21, 2019, our board of directors approved an estimated NAV per share of our common stock of $9.12 and approved updated offering prices for shares of our Class R and Class I common stock. See “Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Market Information.” Effective March 25, 2019, the price per share for each class of shares of our common stock became:

As of December 31, 2018, we have raised aggregate primary offering proceeds of approximately $86.3 million from the sale of 601,207 Class A shares, 1,049,996 Class T shares, 7,052,216 Class R shares and 328,958 Class I shares of common stock.

On August 10, 2015, our Advisor contributed $200,000 to us in exchange for 20,000 shares of common stock. On June 29, 2016, RAI purchased 222,222 shares of Class A common stock for $2.0 million in our offering. On August 5, 2016, our Advisor exchanged 5,000 shares of common stock for 50,000 shares of our convertible stock. Under limited circumstances, these shares may be converted into shares of our Class A common stock satisfying our obligation to pay the Advisor an incentive fee and diluting the stockholders’ interest in us.

Our business strategy has a particular focus on multifamily assets, although we may also purchase interests in other types of commercial property assets consistent with our investment objectives. We intend to acquire underperforming multifamily rental properties which we will renovate and stabilize in order to increase rents and to a lesser extent, we may also seek to acquire and originate commercial real estate debt secured by apartments. We believe multiple opportunities exist within the multifamily industry today and will continue to present themselves over the next few years to real estate investors who possess the following characteristics: (i) extensive experience in multifamily investing, (ii) strong management platforms specializing in operational and financial performance optimization, (iii) financial sophistication allowing them to benefit from complex opportunities and (iv) the overall scale and breadth of a national real estate platform in both the equity and debt markets. We seek to utilize our sponsor's dedicated multifamily investing and lending relationships to take advantage of the full range of opportunities across the entire multifamily spectrum of investments. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities.

We believe that the current market for properties that meet our investment objectives is extremely competitive and many of our competitors have greater resources than we do. We compete with numerous other entities engaged in real estate investment activities, including individuals, corporations, banks and insurance company investment accounts, other REITs, real estate limited partnerships, the U.S. government and other entities, to acquire, manage and sell real estate properties and real estate related assets. Many of our expected competitors enjoy significant competitive advantages that result from, among other things, a lower

cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase.

As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. Our management does not expect compliance with existing or future laws to have a material adverse effect on our financial condition or results of operations. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which we may hold an interest, or on properties that we may acquire directly or indirectly in the future.

We have no paid employees. The employees of our Advisor or its affiliates provide management, acquisition, advisory and certain administrative services for us. We are dependent on our Advisor and its affiliates for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments; management of the daily operations of our portfolio; and other general and administrative responsibilities. In the event that these affiliated companies are unable to provide the respective services, we will be required to obtain such services from other sources.

We electronically file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports with the United States Securities and Exchange Commission ("SEC"). The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.

We make available free of charge, the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports on our website, www.resourcereit3.com, or by responding to requests addressed to our investor relations group.

Risk factors have been omitted as permitted under rules applicable to smaller reporting companies.

At December 31, 2018, we owned five multifamily properties. The following is a summary of our real estate properties:

Multifamily Community Name	City and State	Date of Acquisition	Contractual Purchase Price ⁽¹⁾		Year of Construction	Number of Units		Average Unit Size (Sq. Ft.)		Physical Occupancy Rate ⁽²⁾			Effective Monthly Revenue per Unit⁽³⁾		Mortgage Debt Secured by Property
Payne Place	Alexandria, VA	8/19/2016	$	2,500,000	1950		11		605		100.0	%	$	1,604	$	1,625,000
Bay Club	Jacksonville, FL	7/31/2017		28,300,000	1990		220		1,016		92.7	%		1,154		21,520,000
Tramore Village	Austell, GA	3/22/2018		44,350,000	1999		324		1,077		96.3	%		1,066		32,625,000
Matthews Reserve	Matthews, NC	8/29/2018		33,800,000	1998		212		942		91.5	%		1,161		23,850,000
The Park at Kensington	Riverview, FL	9/14/2018		28,700,000	1990		204		1,007		94.6	%		1,139		21,760,000
							971

From time to time, we may become party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect

on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.

At March 18, 2019, 10,581,013 shares of our common stock were outstanding, of which 15,378 were held by the Advisor and 227,822 were held by RAI. At March 18, 2019, there were 104 holders of Class A shares, 298 holders of Class T shares, 2,243 holders of Class R shares, and 40 holders of Class I shares.

There is no established public trading market for our common stock. Therefore, there is a risk that a stockholder may not be able to sell our stock at a time or price acceptable to the stockholder. Unless and until our shares are listed on a national securities exchange, it is not expected that a public market for our shares will develop.

On March 21, 2019, our board of directors approved an estimated value per share of our common stock of $9.12 based on the estimated market value of our portfolio of investments as of December 31, 2018. There have been no material changes between December 31, 2018 and the date of this filing that would impact the overall estimated value per share. We are providing this estimated value per share to assist broker-dealers that participate in this offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340 as required by the Financial Industry Regulatory Authority (“FINRA”). This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (“IPA”) in April 2013 (the “IPA Valuation Guidelines”).

The conflicts committee of our board of directors, composed solely of all of our independent directors, is responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine the estimated value per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. With the approval of the conflicts committee, we engaged Duff & Phelps, LLC (“Duff & Phelps”) to provide a calculation of the range in estimated value per share of our common stock as of December 31, 2018. Duff & Phelps held discussions with senior management of the advisor and conducted appraisals, investigations, research, review and analysis as it deemed necessary. Duff & Phelps based this range in estimated value per share upon its estimates of the “as is” market values of our interests in three multifamily properties. Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect balance sheet assets and liabilities provided by our management, which are disclosed in this Annual Report on Form 10-K, before calculating a range of estimated values based on the number of outstanding shares of our common stock as of December 31, 2018. The Duff & Phelps valuation report ("Valuation Report") summarized the key inputs and assumptions involved in the appraisal of each of our investments. Duff & Phelps’s valuation was designed to follow the prescribed methodologies of the IPA Valuation Guidelines. The methodologies and assumptions used to determine the estimated value of our investments are described further below.

Upon the conflicts committee’s receipt and review of the Valuation Report and in light of other factors considered by the conflicts committee and the conflicts committee’s own extensive knowledge of our assets and liabilities, the conflicts committee concluded that the range in estimated value per share of $8.42 to $9.84, with an approximate midpoint value of $9.12 per share, as indicated in the Valuation Report, was appropriate. Upon recommendation by the advisor, the conflicts committee recommended to our board of directors that it adopt $9.12 as the estimated value per share of common stock, which approximates the midpoint value. Our board of directors unanimously agreed to accept the recommendation of the conflicts committee and approved $9.12 as the estimated value per share of our common stock, which determination is ultimately and solely the responsibility of our board of directors.

The following table summarizes the material components of the December 31, 2018 net asset value (in thousands, except per share amounts):

The following table sets forth the calculation of our estimated net asset value per share as of December 31, 2018, as well as the calculation of our prior estimated net asset value per share as of March 31, 2018:

As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. In particular, due in part to (i) the high concentration of our total assets in real estate, and (ii) the number of shares of common stock outstanding, even modest changes in key assumptions made in appraising the real estate properties could have a very significant impact on the estimated value of our shares. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of its liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of our assets and liabilities or the amount that the shares of common stock would trade at on a national securities exchange. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

Our goal in calculating an estimated value per share is to arrive at a value that is reasonable and supportable using what we deem to be appropriate valuation and appraisal methodologies and assumptions and a process that is in accordance with the IPA Valuation Guidelines. The following is a summary of the valuation and appraisal methodologies used to calculate the estimated value per share:

Duff & Phelps was recommended by our Advisor, and approved by our conflicts committee. Duff & Phelps is engaged in the business of appraising commercial real estate properties and is not affiliated with us or our Advisor. Neither us, our Advisor nor any of our affiliates have engaged Duff & Phelps for any other types of services during the two years prior to the date of this filing. Duff & Phelps and its affiliates may from time to time in the future perform other commercial real estate, appraisal and valuation services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of Duff & Phelps as certified in the applicable appraisal reports.

The compensation Duff & Phelps received for its appraisal of our real estate properties was based on the scope of work and was not contingent upon the development or reporting of a predetermined value or direction in value that favors our cause, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the appraisal. The appraisal was performed in accordance with the Code of Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation. The Valuation Report was reviewed, approved and signed by an individual with the professional designation of MAI (Member of the Appraisal Institute). The use of the Valuation Report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In preparing the Valuation Report, Duff & Phelps did not, and was not requested to, solicit third party indications of interest for our common stock in connection with possible purchase thereof or the acquisition of all or any part of us.

Duff & Phelps collected all reasonably available material information that it deemed relevant in estimating the market value of our real estate properties and other investments. In conducting its investigations and analyses, Duff & Phelps took into account customary and accepted financial and commercial procedures and considerations as it deemed relevant. Although Duff & Phelps reviewed information supplied or otherwise made available by us or our advisor for reasonableness, each assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party and did not independently verify any such information. Duff & Phelps relied on our management or our advisor to advise it promptly if any information previously provided became inaccurate or was required to be updated during the period of its review.

In performing its analysis of our real estate properties and other investments, Duff & Phelps made numerous other assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond its control and our control, as well as certain factual matters. For example, unless specifically informed to the contrary, Duff & Phelps assumed that we had clear and marketable title to each real estate property appraised, that no title defects existed, that no hazardous materials had been present or were present previously, that no deed restrictions existed, and that the properties were responsibly owned and managed by competent property management. Furthermore, Duff & Phelps’s analysis, opinions and conclusions were necessarily based upon market, economic, financial and other circumstances and conditions existing as of or prior to the date of the appraisals, and any material change in such circumstances and conditions may affect Duff & Phelps’s analyses and conclusions. The Valuation Report contains other assumptions, qualifications and limitations that qualify the analysis, opinions and conclusions set forth therein. Furthermore, the prices at which our real estate properties may actually be sold could differ from their appraised values. The Valuation Report, including the analyses, opinions and conclusions set forth in such report, is qualified by the assumptions, qualifications and limitations set forth in the Valuation Report.

The foregoing is a summary of the standard assumptions, qualifications and limitations that generally apply to the Valuation Report.

Duff & Phelps estimated the “as is” market value of each of our real estate properties owned as of December 31, 2018, using various methodologies, including the direct capitalization approach, discounted cash flow analyses and sales comparison approach, and relied primarily on the direct capitalization approach for our stabilized properties and discounted cash flow analyses for our unstabilized properties. The sales comparison approach was utilized as a secondary approach to value. The direct capitalization approach applies a current market capitalization rate to the properties’ net operating income. The capitalization rate was based on recent national overall capitalization rates, and the net operating income (“NOI”) was estimated based on Duff & Phelps’s expertise in appraising commercial real estate. The direct capitalization approach was utilized for one of our properties that has finished renovations and stabilized their operations. Discounted cash flow analyses focus on the operating cash flows expected from the properties and the anticipated proceeds of hypothetical sales at the end of assumed holding periods, which are then discounted to their present value. Discounted cash flow analyses were utilized for four of our properties that were recently acquired and either not yet stabilized or are currently undergoing renovations. Real estate is currently carried in our financial statements at its amortized cost basis. Duff & Phelps performed its appraisals as of December 31, 2018.

The following summarizes the range of overall capitalization rates used to arrive at the estimated market value of our one stabilized property:

The following summarizes the range of terminal capitalization rates and discount rates used to arrive at the estimated market values of our four unstabilized properties that are currently undergoing renovations:

While we believe that Duff & Phelps’ assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the calculation of the appraised value of our real estate properties and other assets and, thus, our estimated value per share. As of December 31, 2018, the majority of our real estate assets have non-stabilized occupancies. Appraisals may provide a sense of the value of the investment, but any appraisal of the property will be based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. An appraisal of a non-stabilized property, in particular, involves a high degree of subjectivity due to higher vacancy levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property.

The total appraised value of our real estate properties using the appraisal methodologies described above was $151.0 million compared to a total of purchase price and capital expenditures, through December 31, 2018, of $139.9 million.

The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to the real estate properties referenced in the table above. Additionally, the table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 5% in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged. The table is only hypothetical to illustrate possible results if only one change in assumptions was made, with all other factors held constant. Further, each of these assumptions could change by more than 25 basis points or 5%. Since the majority of the valuations employed utilized the discounted cash flow methodology, changes in overall capitalization rates yielded minimal variances and are therefore excluded from the table below:

Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect balance sheet assets and liabilities provided by us, which are disclosed in this Annual Report on Form 10-K.

As mentioned above, we are providing this estimated value per share to assist broker dealers that participate in our initial public offering in meeting their customer account statement reporting obligations. This valuation was performed in accordance with the provisions of the IPA Valuation Guidelines. The estimated value per share set forth above will first appear on the March 31, 2019 customer account statements that will be mailed in April 2019. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets or liabilities according to GAAP.

Accordingly, with respect to the estimated value per share, we can give no assurance that:

Further, the estimated value per share as of December 31, 2018 is based on the estimated value of our investments as of December 31, 2018. We did not make any adjustments to the valuation for the impact of other transactions occurring subsequent to December 31, 2018 including, but not limited to, (i) the sale of common stock in this offering, (ii) the issuance of common stock under the distribution reinvestment plan, (iii) net operating income earned and distributions declared, (iv) the redemption of shares and (v) the potential conversion of convertible stock into common stock. The value of our shares will fluctuate over time in response to developments related to individual assets in the portfolio and the management of those assets and in response to the real estate and finance markets. Because of, among other factors, our high concentration of total assets in real estate and the number of shares of common stock outstanding, any change in the value of individual assets in the portfolio, particularly changes affecting our real estate properties, could have a very significant impact on the value of the shares. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

In connection with the establishment of the estimated value per share, on March 21, 2019, our board of directors established updated offering prices for shares of common stock to be sold in the primary portion of our initial public offering. Effective March 25, 2019, Class R shares will be offered at a price of $9.75 per share and Class I shares will be offered at a price of $9.35 per share. Class R shares have discounts available to certain categories of purchasers. Subscriptions received on or before March 22, 2019 will be processed at the currently effective offering prices and subscriptions received after such date will be processed at the updated offering prices, in each case subject to discounts that may be available for some categories of investors.

The updated offering prices of shares of common stock to be sold in the primary offering was determined by adding certain offering costs to the estimated value per share as established by our board of directors on March 21, 2019 and discussed above. These costs include selling commissions, dealer manager fees and certain other offering costs so that any dilutive impact to our existing stockholders is minimized. The table below sets forth the calculation of the updated primary offering prices effective for purchases of shares of common stock to be sold in our initial public offering beginning March 25, 2019. Duff & Phelps did not participate in the determination of the updated primary offering prices.

In accordance with our distribution reinvestment plan, participants in the distribution reinvestment plan acquire shares of common stock under the plan at a price equal to the estimated value per share of our common stock. Commencing on the next distribution reinvestment plan purchase date, which is on March 29, 2019, participants will acquire shares of our common stock under the plan at a price equal to $9.12 per share.

As provided under the distribution reinvestment plan, for a participant to terminate participation effective for a particular distribution, we must receive notice of termination from the participant at least ten business days prior to the last day of the month to which the distribution relates. Notwithstanding the ten business day termination notice requirement under the distribution reinvestment plan, if a participant wishes to terminate participation in the distribution reinvestment plan for the March 2019 purchase date, participants must notify the Company of such decision and we must receive the notice by the close of business on

March 26, 2019, which is two business days following our announcement of an updated estimated value per share in this Annual Report on Form 10-K.

Notice of termination should be sent by facsimile to 877-894-1124 or by mail to c/o Resource Apartment REIT III, Inc., P.O. Box 219169, Kansas City, Missouri 64121.

Unless the shares of our common stock are repurchased in connection with a stockholder’s death or qualifying disability, the purchase price for shares repurchased under our share repurchase program will now be as follows:

For a stockholder’s shares to be eligible for redemption in June 2019 or to withdraw a redemption request, we must receive a written notice from the stockholder or from an authorized representative of the stockholder in good order and on a form approved by us by May 31, 2019.

The complete share redemption program plan document is filed as an exhibit to our Current Report on Form 8-K filed with the SEC on July 24, 2018 and is available at the SEC’s website at http://www.sec.gov.

The historical reported estimated values per share of our common stock approved by the board of directors are set forth below:

All securities sold by us during the year ended December 31, 2018 were sold in an offering registered under the Securities Act of 1933.

On April 28, 2016, our Registration Statement on Form S-11 (File No. 333-207740), covering our initial public offering of up to $1.1 billion in shares of common stock, was declared effective under the Securities Act of 1933. We retained our Dealer Manager as the dealer manager for our offering. We currently expect to offer shares of common stock in the primary offering until the registration statement relating to our proposed follow-on offering is declared effective by the SEC.

We are offering to the public up to $1.1 billion of shares of our common stock, consisting of up to $1.0 billion of shares in our primary offering and up to $100.0 million of shares pursuant to our DRIP. Through July 2, 2017, we offered shares of Class A and Class T common stock. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering and commenced offering shares of Class R and Class I common stock.

The initial prices per share for each class of shares of our common stock through June 30, 2018 were as follows:

On June 27, 2018, our board of directors determined a NAV per share of our common stock of $9.05 based on the estimated market value of our portfolio of investments as of March 31, 2018. A full description of the methodologies used to calculate our estimated NAV per share as of March 31, 2018, is included in our Current Report on Form 8-K filed with the SEC on June 29, 2018. Based on this estimated NAV per share, our board of directors established updated offering prices for shares of Class R and Class I common stock to be sold in the primary portion of our initial public offering. Effective July 2, 2018, the price per share for each class of shares of our common stock became:

At December 31, 2018, a total of 601,207 Class A shares, including shares purchased by both our Advisor and RAI, 1,049,996 Class T shares, 7,052,216 Class R shares and 328,958 Class I shares of common stock have been issued in connection with our public offering resulting in gross offering proceeds of approximately $86.3 million. From the commencement of our public offering through December 31, 2018, we incurred selling commissions, dealer manager fees, other underwriting compensation and other organization and offering costs in the amounts set forth below. We generally paid selling commissions and dealer manager fees to our Dealer Manager for the sale of shares in our primary offering and our Dealer Manager reallowed all selling commissions and a portion of the dealer manager fees to participating broker-dealers. In addition, we reimburse our Advisor and Dealer Manager for certain organizational and offering costs.

From the commencement of our initial public offering through December 31, 2018, the net offering proceeds to us, after deducting the total expenses incurred as described above, excluding the distribution and shareholder servicing fee as they do not reduce the net offering proceeds to us, were approximately $78.3 million. At December 31, 2018, we have used the net proceeds from our ongoing initial public offering and debt financing to acquire approximately $137.7 million in real estate investments. Of the amount used for the purchase of these investments, approximately $3.0 million was paid to our Advisor as acquisition fees and approximately $150,000 was paid to other affiliates for acquisition expense reimbursements.

Our common stock is currently not listed on a national securities exchange and we will not seek to list our common stock unless and until such time as our Board determines that the listing of our common stock would be in the best interests of our stockholders. In order to provide stockholders with the benefit of some interim liquidity, our Board has adopted a share repurchase program that enables our stockholders to sell their shares back to us after they have held them for at least one year, subject to significant conditions and limitations. The terms of our share repurchase program are more flexible in cases involving the death or disability of a stockholder.

We may reject any request for repurchase of shares. Repurchases of shares of our common stock, when requested, generally will be made quarterly. We will limit the number of shares repurchased during any calendar year to 5.0% of the weighted-average number of shares of common stock outstanding during the 12-month period immediately prior to the effective

date of redemption. In addition, we are only authorized to repurchase shares using proceeds from our DRIP plus 1.0% of the operating cash flow from the previous fiscal year (to the extent positive). Due to these limitations, we cannot guarantee that we will be able to accommodate all repurchase requests.

A stockholder must have beneficially held the shares for at least one year prior to offering them for sale to us through our share repurchase program, unless the shares are being repurchased in connection with a stockholder’s death, qualifying disability, or certain other involuntary exigent circumstances, in which our Board reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period requirement.

Prior to June 29, 2018, shares repurchased in connection with a stockholder’s death or qualifying disability were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, subject to any special distributions previously made to our stockholders. Effective June 29, 2018, shares repurchased in connection with a stockholder’s death or qualifying disability are repurchased at a price per share equal to 100% of the current NAV.

Shares repurchased in connection with a stockholder’s other involuntary exigent circumstances, such as bankruptcy or a mandatory distribution requirement under a stockholder’s IRA, within one year from the purchase date, will be repurchased at a price per share equal to the price per share we would pay had the stockholder held the shares for one year from the purchase date, and at all other times in accordance with the terms described below.

Notwithstanding the foregoing, prior to June 29, 2018, shares received as a stock dividend were redeemed at a purchase price of $0.00. Effective June 29, 2018, shares received as a stock dividend are redeemed at the redemption price applicable to that stockholder’s initial share purchase anniversary.

Unless the shares of our common stock were repurchased in connection with a stockholder’s death or qualifying disability, the purchase price for shares repurchased under our share repurchase program were as set forth below as of June 29, 2018 and were effective through December 31, 2018:

Prior to June 29, 2018, unless the shares of our common stock were repurchased in connection with a stockholder’s death or qualifying disability, the purchase price for shares repurchased under our share repurchase program were as set forth below:

During the three months ended December 31, 2018, we redeemed shares of our Class T common stock as follows:

All redemption requests tendered were honored for the year ended December 31, 2018.

During the year ended December 31, 2018, we declared and paid aggregate distributions, which were paid from debt financing and offering proceeds, as follows:

During the year ended December 31, 2017, we declared and paid aggregate distributions, which were paid from debt financing and offering proceeds, as follows:

On December 13, 2018, our Board declared cash distributions on the outstanding shares of all classes of our common stock based on daily record dates for the periods from December 31, 2018 through March 28, 2019, which distributions were paid or will be paid on January 31, 2019, February 28, 2019 and March 29, 2019, respectively. Distributions for these periods were or will be calculated based on stockholders of record each day during these periods at a rate of (i) $0.001458630 per share per day less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock.

Distributions declared, distributions paid and cash flows used in operating activities were as follows for the year ended December 31, 2018:

	Distributions Paid									Distributions Declared				Sources of Distributions Paid
														Operating Activities	Offering Proceeds	Debt Financing
2018	Cash		Distributions Reinvested (DRIP)		Total		Cash Provided by/ (Used in) Operating Activities			Total		Per Share⁽¹⁾		Amount Paid / Percent of Total	Amount Paid / Percent of Total	Amount Paid / Percent of Total
First quarter	$	137,027	$	172,518	$	309,545	$	39,801		$	587,812	$	0.131	$39,801 / 12.9%	$269,744 / 87.1%	- / -
Second quarter		359,130		433,009		792,139		317,894			757,120	$	0.133	$317,894 / 40.1%	$474,243 / 59.9%	- / -
Third quarter		351,255		413,957		765,212		84,318			930,594	$	0.137	$84,318 / 11.0%	$680,894 / 89.0%	- / -
Fourth quarter		429,609		508,932		938,541		(519,264	)		1,113,833	$	0.128	- / -	$938,541 / 100.0%	- / -
Total	$	1,277,021	$	1,528,416	$	2,805,437	$	(77,251	)	$	3,389,359

We elected to be taxed as a REIT and to operate as a REIT beginning with our taxable year ended December 31, 2017. To maintain our qualification as a REIT, we are required to make aggregate annual distributions to our common stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our Board may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our Board deems relevant.

Our Board considers many factors before authorizing a cash distribution, including current and projected cash flow from operations, capital expenditure needs, general financial conditions and REIT qualification requirements. To the extent permitted by Maryland law, we may borrow funds, issue new securities or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital. We may also fund such distributions from advances from our Advisor or sponsor or from our Advisor's deferral of its asset management fee, although we have no present intention to do so. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

Our net loss attributable to common stockholders for the year ended December 31, 2018 was approximately $6.9 million and net cash used in operating activities was $77,251. We have funded our cumulative distributions, which includes net cash distributions and distributions reinvested by stockholders, with proceeds from both our public offering and debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have fewer funds available for investment in commercial real estate and real estate-related debt, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders. We will make distributions with respect to our shares of common stock in the sole discretion of our Board.

On October 7, 2016, our Board authorized a stock dividend in the amount of 0.005 shares of common stock to all common stockholders of record as of the close of business on December 31, 2016. On February 22, 2017, our Board authorized a stock dividend, in the amount of 0.01 shares of common stock to all common stockholders of record as of the close of business on March 31, 2017. On April 25, 2017, our Board authorized a stock dividend in the amount of 0.01 shares of common stock to all common stockholders of record as of the close of business on July 1, 2017. The stock dividends were issued in the same class of shares as the shares for which such stockholder received the stock dividend. We issued the stock dividends on January 13, 2017, April 13, 2017, and July 14, 2017, respectively.

Selected financial data has been omitted as permitted under rules applicable to smaller reporting companies.

The following discussion and analysis relates to our financial statements and should be read in conjunction with the accompanying financial statements of Resource Apartment REIT III, Inc. and the notes thereto appearing elsewhere in this report. Statements contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" that are not historical facts may be forward-looking statements. See also "Forward-Looking Statements" preceding Part I.

We were formed on July 15, 2015. We commenced active real estate operations on August 19, 2016 with the acquisition of our first multifamily property. At December 31, 2018, we owned five multifamily properties. As such, we had limited operating results during the years ended December 31, 2018 and 2017.

Our management is not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting our targeted portfolio or the U.S. apartment community industry, which may reasonably be expected to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of such assets or those that we expect to acquire.

	Years Ended December 31,
	2018			2017
Revenues:
Rental income	$	7,698,144		$	1,372,503
Utility income		367,736			62,386
Ancillary tenant fees		109,976			8,974
Total revenues		8,175,856			1,443,863

Expenses:
Rental operating - expenses		1,668,426			400,432
Rental operating - payroll		852,546			165,558
Rental operating - real estate taxes		1,011,719			182,166
Subtotal - rental operating		3,532,691			748,156
Acquisition costs		—			906,644
Property management fees		9,488			9,505
Management fees - related parties		1,290,367			215,433
General and administrative		2,322,183			1,258,682
Loss on disposal of assets		108,844			186,078
Depreciation and amortization expense		5,239,781			908,624
Total expenses		12,503,354			4,233,122
Loss before other income (expense)		(4,327,498	)		(2,789,259	)

Other income (expense):
Other income		—			1,500
Interest income		159,631			16,639
Interest expense		(2,683,916	)		(360,725	)
Net loss	$	(6,851,783	)	$	(3,131,845	)

The following table presents the results of operations separated into two categories: property activity and company level activity for the year ended December 31, 2018 and 2017:

	Year Ended December 31, 2018									Year Ended December 31, 2017
	Property activity			Company level activity			Total			Property activity			Company level activity			Total
Revenues:
Rental income	$	7,698,144		$	—		$	7,698,144		$	1,372,503		$	—		$	1,372,503
Utility income		367,736			—			367,736			62,386			—			62,386
Ancillary tenant fees		109,976			—			109,976			8,974			—			8,974
Total revenues		8,175,856			—			8,175,856			1,443,863			—			1,443,863

Expenses:
Rental operating - expenses		1,668,426			—			1,668,426			400,432			—			400,432
Rental operating - payroll		847,041			5,505			852,546			165,558			—			165,558
Rental operating - real estate taxes		1,011,719			—			1,011,719			182,166			—			182,166
Subtotal- rental operating		3,527,186			5,505			3,532,691			748,156			—			748,156
Acquisition costs		—			—			—			906,644			—			906,644
Property management fees		9,488			—			9,488			9,505			—			9,505
Management fees - related parties		354,766			935,601			1,290,367			55,630			159,803			215,433
General and administrative		337,365			1,984,818			2,322,183			76,268			1,182,414			1,258,682
Loss on disposal of assets		108,844			—			108,844			186,078			—			186,078
Depreciation and amortization expense		5,239,781			—			5,239,781			908,624			—			908,624
Total expenses		9,577,430			2,925,924			12,503,354			2,890,905			1,342,217			4,233,122
Loss before other income (expense)		(1,401,574	)		(2,925,924	)		(4,327,498	)		(1,447,042	)		(1,342,217	)		(2,789,259	)

Other income (expense):
Other income		—			—			—			1,500			—			1,500
Interest income		362			159,269			159,631			197			16,442			16,639
Interest expense		(2,683,916	)		—			(2,683,916	)		(360,725	)		—			(360,725	)
Net loss	$	(4,085,128	)	$	(2,766,655	)	$	(6,851,783	)	$	(1,806,070	)	$	(1,325,775	)	$	(3,131,845	)

Total revenues for the year ended December 31, 2018 increased by approximately $6.7 million as compared to the year ended December 31, 2017 due to five properties owned at December 31, 2018 as compared to two properties owned at December 31, 2017.

Rental operating - expenses, payroll, and real estate taxes expense for the year ended December 31, 2018 increased by approximately $2.8 million as compared to the year ended December 31, 2017 due to five properties owned at December 31, 2018 as compared to two properties owned at December 31, 2017.

Acquisition costs for the year ended December 31, 2018 decreased by approximately $907,000 as compared to the year ended December 31, 2017 due to the adoption of ASU No. 2017-01 which allowed us to include acquisition costs in the purchase price that is allocated between land, building and improvements, furniture, fixtures, and equipment and intangible assets on the consolidated balance sheets.

Management fees - related parties expense for the year ended December 31, 2018 increased by approximately $1.1 million as compared to the year ended December 31, 2017 due to an increase in property management fees and asset management fees due to the acquisition of three additional properties.

General and administrative expense for the year ended December 31, 2018 increased by approximately $1.1 million as compared to the year ended December 31, 2017 due to the acquisition of three additional properties, as well as increases in payroll expense allocated from our Advisor, professional fees, and software costs related to internal and external reporting.

Loss on disposal of assets for the year ended December 31, 2018 decreased by approximately $77,000 as compared to the year ended December 31, 2017 due to the timing of the replacement of appliances at our rental properties in conjunction with unit upgrades.

Depreciation and amortization expense for the year ended December 31, 2018 increased by approximately $4.3 million as compared to the year ended December 31, 2017 due to five properties owned at December 31, 2018, with net asset value of approximately $136.1 million as compared to two properties owned at December 31, 2017, with a net asset value of approximately $29.4 million.

Interest expense for the year ended December 31, 2018 increased by approximately $2.3 million as compared to the year ended December 31, 2017 due to five properties owned at December 31, 2018, which secured debt totaling approximately $101.3 million, as compared to two properties owned at December 31, 2017, which secured debt totaling approximately $23.1 million.

We are offering to the public up to $1.1 billion of shares of our common stock, consisting of up to $1.0 billion of shares in our primary offering and up to $100.0 million of shares pursuant to our DRIP. Through July 2, 2017, we offered shares of Class A and Class T common stock. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering and commenced offering shares of Class R and Class I common stock.

The initial prices per share for each class of shares of our common stock through June 30, 2018 were as follows:

On June 29, 2018, we determined our net asset value ("NAV") per share. Effective July 2, 2018, the price per share for each class of shares of our common stock became:

We anticipate deriving the capital required to purchase real estate investments and conduct our operations from the proceeds of our initial public offering and any future offerings we may conduct, from secured or unsecured financings from banks or other lenders and from proceeds from the sale of assets. In addition, our Advisor has and will advance funds to us for certain organization and offering costs. At December 31, 2018, we have purchased five properties using both offering proceeds and debt financing.

If we are unable to raise substantial funds in the offering, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in our offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions. At December 31, 2018, we have raised approximately $86.3 million in our public offering.

We intend to make reserve allocations as necessary to aid our objective of preserving capital for our investors by supporting the maintenance and viability of properties we acquire in the future. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties, debt investments or other assets we may hold. We cannot assure you that we will be able to access additional funds when we need them or upon acceptable terms.

We deployed a total of $2,177,567 during the year ended December 31, 2018 for capital expenditures:

At December 31, 2018, shares of our $0.01 par value Class A, Class T, Class R, and Class I common stock have been issued as follows:

The following table presents additional information about our mortgage notes payable, net, as of December 31, 2018:

On December 15, 2016, we, through a wholly owned subsidiary, entered into a 30-year secured mortgage loan with JPMorgan Chase Bank, N.A., an unaffiliated lender, for borrowings of approximately $1.6 million secured by Payne Place (the "Payne Place Mortgage Loan"). The Payne Place Mortgage Loan matures on January 1, 2047. The Payne Place Mortgage Loan bears interest at an initial fixed rate of 3.11% until January 1, 2020. Beginning January 1, 2020, the loan will bear interest at a rate of LIBOR plus 2.25%. Monthly payments include repayments of principal and interest. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. We may prepay the Payne Place Mortgage Loan in full at any time or in part from time to time: (1) during the first year of the loan upon payment of a prepayment premium equal to 3% of the amount prepaid; (2) during the second year of the loan upon payment of a prepayment premium equal to 2% of the amount prepaid; (3) during the third year of the loan upon payment of a prepayment premium equal to 1% of the amount prepaid; and (3) after the third year of the loan with no prepayment premium. The Payne Place Mortgage Loan is guaranteed by us.

On July 31, 2017, we, through a wholly owned subsidiary, entered into a seven year, $21.5 million secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, secured by Bay Club (the "Bay Club Mortgage Loan"). The Bay Club Mortgage Loan matures on August 1, 2024. The Bay Club Mortgage Loan bears interest at a rate of LIBOR plus 1.87%, with a maximum interest rate of 5.75%. Monthly payments are interest only for the first 24 months. Beginning on August 1, 2019, we will pay both principal and interest based on 30 year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. We may prepay the Bay Club Mortgage Loan in full at any time: (1) after July 31, 2019 and until April 30, 2024 upon payment of a prepayment premium equal to 1% of the principal amount prepaid; and (2) after April 30, 2024 with no prepayment premium. The non-recourse carveouts under the loan documents for the Bay Club Mortgage Loan are guaranteed by us.

On March 22, 2018, we through a wholly owned subsidiary, entered into a seven-year, $32.6 million secured mortgage loan with Berkadia Commercial Mortgage LLC, an unaffiliated lender, secured by Tramore Village (the "Tramore Mortgage Loan"). The Tramore Mortgage Loan matures on April 1, 2025. The Tramore Mortgage Loan bears interest at a rate of LIBOR plus 1.80%, with a maximum interest rate of 6.25%. Monthly payments are interest only for the first 36 months. Beginning on May 1, 2021, we will pay both principal and interest based on a 30 year amortization period. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. We may prepay the Tramore Mortgage Loan in full at any time (1) after April 1, 2019 and until December 31, 2024 upon payment of a prepayment premium equal to 1% of the principal amount prepaid; and (2) after December 31, 2024 with no prepayment premium. The nonrecourse carveouts under the loan documents for the Tramore Mortgage Loan are guaranteed by us.

On August 29, 2018, we, through a wholly owned subsidiary, entered into a seven-year secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, for borrowings of approximately $23.9 million secured by Matthews Reserve (the “Matthews Mortgage Loan”). The Matthews Mortgage Loan matures on September 1, 2025. The Matthews Mortgage Loan bears interest at a fixed rate of 4.47%. Monthly payments are interest only for the first 36 months. Beginning on October 1, 2021, we will pay both principal and interest based on 30-year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. After any lockout period (if any), prepayment in full is permitted on any scheduled payment date, provided a prepayment premium is paid. The prepayment premium will be based on the yield maintenance prepayment formula for any prepayment made prior to September 1, 2023. The prepayment premium will be 1% of the amount of principal being repaid for any prepayment made from (and including) September 1, 2023 through May 31, 2025. No prepayment premium is required after June 1, 2025. The non-recourse carveouts under the loan documents for the Matthews Mortgage Loan are guaranteed by us.

On September 14, 2018, we, through a wholly owned subsidiary, entered into a seven-year secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, for borrowings of approximately $21.8 million secured by The Park at Kensington (the “Kensington Mortgage Loan”). The Kensington Mortgage Loan matures on October 1, 2025. The Kensington Mortgage Loan bears interest at a rate of 4.36%. Monthly payments are interest only for the first 36 months. Beginning on November 1, 2021, we will pay both principal and interest based on 30-year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. After any lockout period (if any), prepayment in full is permitted on any scheduled payment date, provided a prepayment premium is paid. The prepayment premium will be based on the greater of (i) the yield maintenance prepayment formula and (ii) 1% of the amount of the principal being repaid, for any prepayment made prior to October 1, 2023. The prepayment premium will be 1% of the amount of principal being repaid for any prepayment made from (and including) October 1, 2023 through June 30, 2025. No prepayment premium is required after July 1, 2025. The non-recourse carveouts under the loan documents for the Kensington Mortgage Loan are guaranteed by us.

Although there is no limit on the amount we can borrow to acquire a single real estate investment, we may not leverage our assets with debt financing such that our borrowings are in excess of 300% of our net assets unless a majority of our independent directors find substantial justification for borrowing a greater amount. Examples of such a substantial justification include, without limitation, obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the risk that we would become unable to meet our financial obligations as they became due. On a total portfolio basis, however, based on current lending market conditions, we expect to leverage our assets in an amount equal to 55% to 60% of the cost of our assets.

We may finance the acquisition costs of individual real estate investments, as well as the acquisition costs of all or a group of real estate investments acquired by us, by causing our subsidiaries to borrow directly from third-party financial institutions or other commercial lenders. Under these circumstances, our Advisor anticipates that certain properties acquired will serve as collateral for the debt we incur to acquire those particular properties and that we will seek to obtain nonrecourse financing for the acquisition of the properties. However, there is no guarantee that our Advisor will be successful in obtaining financing arrangements on a property-by-property basis and that the loans would be nonrecourse to us. Additionally, we may obtain corporate-level financing through a line of credit from third-party financial institutions or other commercial lenders. Our assets will serve as collateral for this type of debt incurred to acquire real estate investments. We may also obtain seller financing with respect to specific assets that we acquire.

We incur organization and offering costs in pursuit of our capital raise. Our organization and offering costs (other than selling commissions, dealer manager fees, and distribution and shareholder servicing fees) are initially paid by the Advisor on our behalf. Organization costs include all expenses that we incur in connection with our formation, including but not limited to legal fees and other costs to incorporate.

Pursuant to the Advisory Agreement, we are obligated to reimburse the Advisor for organization and offering costs paid by the Advisor on our behalf, up to an amount equal to 4% of gross offering proceeds as of the termination of this offering if we raise less than $500.0 million in the primary offering, and 2.5% of gross offering proceeds as of the termination of this offering if we raise $500.0 million or more in the primary offering. However, if we raise the maximum offering amount in the primary offering, we expect organization and offering expenses (other than selling commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be approximately $10.0 million or 1% of gross offering proceeds. These organization and offering expenses include all actual expenses (other than selling commissions, the dealer manager fee and the distribution and shareholder servicing fee), including reimbursements to our advisor for the portion of named executive officer salaries allocable to activities related to this offering, to be incurred on our behalf and paid by us in connection with the offering.

On April 13, 2018, our board of directors approved an amendment to the advisory agreement that provides that we are not responsible for the repayment of any unreimbursed organization and offering expenses or operational expenses incurred by our Advisor on our behalf through March 31, 2018 until after the termination of the primary portion of our ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and offering expenses or operational expenses incurred or paid by our Advisor on our behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of our ongoing initial public offering through April 30, 2021 for organization and offering expenses and through April 30, 2020 for operating expenses.

As of December 31, 2018, we have incurred approximately $8.5 million for public offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. As of December 31, 2018, our Advisor has advanced approximately $8.2 million of these costs on our behalf and we have paid approximately $249,000 of these costs directly.

As of December 31, 2018, we have charged approximately $3.5 million to equity, which represents the portion of deferred offering costs that are charged to equity upon the sale of each share of common stock sold under the public offering. Deferred offering costs of $5.0 million represent the portion of the total costs incurred that have not yet been charged to equity. Upon completion of the public offering, any deferred offering costs in excess of the limit on organization and offering costs discussed above, will be charged back to our Advisor.

Organization costs, which include all expenses incurred by us in connection with our formation, including but not limited to legal fees and other costs to incorporate, are expensed as incurred. There can be no assurance that our plans to raise capital will be successful.

Outstanding Class T shares issued in our primary offering are subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018) for five years from the date on which such share is issued. We will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of these events occur: (i) the date at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from the our primary offering (i.e., excluding proceeds from sales pursuant to our DRIP); (ii) the date on which we list our common stock on a national securities exchange; and (iii) the date of a merger or other extraordinary transaction in which we are a party and in which our common stock is exchanged for cash or other securities. We cannot predict if or when any of these events will occur.

Outstanding Class R shares issued in our primary offering are also subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018). We will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between the Dealer Manager and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and the Dealer Manager advises our transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through our distribution reinvestment plan).

We record the distribution and shareholder servicing fees as a reduction to additional paid-in capital and the related liability in an amount equal to the maximum fees payable in relation to the Class T and Class R shares on the date the shares are issued. The liability will be relieved over time, as the fees are paid to the Dealer Manager, or as the fees are adjusted (if the fees are no longer payable pursuant to the conditions described above). For issued Class T shares, we have accrued an estimate of total distribution and shareholder servicing fees for the full five year period of $472,106 at December 31, 2018, of which we paid 160,771 cumulatively through December 31, 2018. For issued Class R shares, we have accrued an estimate of total distribution and shareholder servicing fees of approximately $1.9 million at December 31, 2018, of which we paid $399,440 cumulatively through December 31, 2018. The total accrual of approximately $1.8 million is included in due to related parties on our consolidated balance sheet at December 31, 2018.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make payments to our Advisor. During our acquisition stage, we expect to make payments to our Advisor in connection with the acquisition of real estate investments. In addition, we expect to continue to make payments to our Advisor for the management of our assets and costs incurred by our Advisor in providing services to us.

At the end of each fiscal quarter, our Advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the Conflicts Committee of our Board has determined that such excess expenses were justified based on unusual and non-recurring factors.

Operating expenses for the four fiscal quarters ended December 31, 2018 exceeded the charter imposed limitation; however, the Conflicts Committee of our Board determined that the relationship of our operating expenses to our average invested assets was justified for these periods given the costs of operating a public company and the early stage of our operations.

"Average invested assets" means the average monthly book value of our assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. "Total operating expenses" means all expenses paid or incurred by us, as determined under accounting principles generally accepted in the United States ("GAAP"), that are in any way related to our operation, including advisory fees, but excluding (i) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (ii) interest payments; (iii) taxes; (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves; (v) incentive fees paid in accordance with the NASAA Statement of Policy Regarding Real Estate Investment Trusts (the "NASAA REIT Guidelines"); (vi) acquisition fees and expenses (including expenses relating to potential investments that we do not close); (vii) real estate commissions on the sale of property; and (viii) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, loans or other property (such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

Funds from operations, or FFO, is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. We use FFO as defined by the National Association of Real Estate Investment Trusts to be net income (loss), computed in accordance with GAAP excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property (including deemed sales and settlements of pre-existing relationships), plus depreciation and amortization on real estate assets, and after related adjustments for unconsolidated partnerships, joint ventures and subsidiaries and noncontrolling interests. We believe that FFO is helpful to our investors and our management as a measure of operating performance because it excludes real estate-related depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which are not immediately apparent from net income. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate and intangibles diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, is helpful for our investors in understanding our performance. Factors that impact FFO include start-up costs, fixed costs, delay in buying assets, lower yields on cash held in accounts, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses.

Since FFO was promulgated, GAAP has adopted several new accounting pronouncements, such that management and many investors and analysts have considered the presentation of FFO alone to be insufficient. Accordingly, in addition to FFO, we use modified funds from operations, or MFFO, as defined by the Investment Program Association, or IPA. MFFO excludes from FFO the following items:

We believe that MFFO is helpful in assisting management assess the sustainability of operating performance in future periods and, in particular, after our offering and acquisition stages are complete, primarily because, prior to January 1, 2018, as

explained below, it excluded acquisition expenses that affect property operations only in the period in which the property is acquired. Thus, MFFO provides helpful information relevant to evaluating our operating performance in periods in which there is no acquisition activity.

As explained below, management’s evaluation of our operating performance excludes the items considered in the calculation based on the following economic considerations. Many of the adjustments in arriving at MFFO are not applicable to us. Nevertheless, we explain below the reasons for each of the adjustments made in arriving at our MFFO definition:

By providing MFFO, we believe we are presenting useful information that also assists investors and analysts in the assessment of the sustainability of our operating performance after our offering and acquisition stages are completed. We also believe that MFFO is a recognized measure of sustainable operating performance by the real estate industry. MFFO is useful in comparing the sustainability of our operating performance after our acquisition stage is completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities or as affected by other MFFO adjustments.

Neither FFO nor MFFO should be considered as an alternative to net income attributable to common stockholders, nor is an indication of our liquidity, nor are any of these measures indicative of funds available to fund our cash needs, including our ability to fund distributions. In particular, as we intend to continue to acquire properties as part of our ongoing operations,

acquisition costs and other adjustments that are increases to MFFO are, and may continue to be, a significant use of cash. Accordingly, FFO and MFFO should be reviewed in connection with other GAAP measurements. Our FFO and MFFO as presented may not be comparable to amounts calculated by other REITs.

The following table presents our calculation of FFO and MFFO and provides additional information related to our operations:

We consider these policies critical because they involve significant management judgments and assumptions, they require estimates about matters that are inherently uncertain, and they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of our assets and liabilities and our disclosure of contingent assets and liabilities on the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

We record acquired real estate at fair value on its acquisition date. We consider the period of future benefit of an asset to determine its appropriate useful life. We anticipate the estimated useful lives of our assets by class as follows:

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. Our Manager earns a construction management fee of 5% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

On January 1, 2018, we adopted ASU 2017-01. Acquisitions that do not meet the definition of a business under this guidance are accounted for as asset acquisitions. In most cases, we believe acquisitions of real estate will no longer be considered a business combination as in most cases substantially all of the fair value is concentrated in a single identifiable asset or group of tangible assets that are physically attached to each other (land and building). However, if we determine that substantially all of the fair value of the gross assets acquired is not concentrated in either a single identifiable asset or in a group of similar identifiable assets, we will then perform an assessment to determine whether the set is a business by using the framework outlined in the ASU. If we determine that the acquired asset is not a business, we will allocate the cost of the acquisition including transaction costs to the assets acquired or liabilities assumed based on their related fair value.

Upon the acquisition of real properties, we allocate the purchase price to tangible assets, consisting of land, building, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, other value of in-place leases and value of tenant relationships, based in each case on their fair values.

We record above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. We amortize any capitalized above-market or below-market lease values as an increase or reduction to rental income over the remaining noncancelable terms of the respective leases, which we expect will range from one month to one year.

We measure the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered in the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

We also consider information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics to be considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

We amortize the value of in-place leases to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization periods for the intangible assets exceed the remaining depreciable life of the building. The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the fair value of these assets and liabilities, which could impact the amount of our reported net income.

We record acquired real estate loans at cost and review them for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that we will be unable to collect all amounts due according to the loan’s contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or the fair value of the collateral. If a loan is deemed to be impaired, we will record a reserve for loan losses through a charge to income for any shortfall. Failure to recognize impairment would result in the overstatement of the carrying values of our real estate loans receivable and an overstatement of our net income.

We may acquire real estate loans at a discount due to credit quality. Revenues from these loans are recorded under the effective interest method. Under this method an effective interest rate ("EIR") is applied to the cost basis of the real estate loan receivable. The EIR that is calculated when the real estate loan is acquired remains constant and is the basis for subsequent impairment testing and income recognition. If the amount and timing of future cash collections are not reasonably estimable, we account for the real estate loan receivable on the cost recovery method. Under the cost recovery method of accounting, no income is recognized until the basis of the real estate loan receivable has been fully recovered.

Interest income from loans receivable will be recognized based on the contractual terms of the debt instrument. Fees related to any buydown of the interest rate will be deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income. Closing costs related to the purchase of a loan receivable will be amortized over the term of the loan and accreted as an adjustment against interest income. There were no loans held for investment on our consolidated balance sheets at either December 31, 2018 or December 31, 2017.

We recognize minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease and includes amounts expected to be received in later years.

We make estimates of the collectability of our tenant receivables in relation to base rents, including straight-line rentals, expense reimbursements and other revenue or income. We specifically analyze accounts receivable and historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, we will make estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. These estimates have a direct impact on our net income because a higher bad debt reserve results in less net income.

Revenue is primarily derived from the rental of residential housing units for which we receive minimum rents and utility reimbursements pursuant to underlying tenant lease agreements. We also receive other ancillary fees for administration of leases, and from late payments, amenity fees and revenue sharing arrangements with cable providers at our properties for cable income. We adopted ASU No. 2014-09 beginning January 1, 2018. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. We record the utility reimbursement income and ancillary charges in the period when the performance obligation is completed, either at a point in time or on a monthly basis as the service is utilized.

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers”, which will replace most existing revenue recognition guidance in GAAP. Under the new standard, revenue is recognized by an entity in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. On January 1, 2018, we adopted ASU No. 2014-09 using the modified retrospective approach. The majority of our revenue is derived from residential rental income and other lease income, which are scoped out from this standard and included in the current lease accounting framework, and will be accounted for under ASU No. 2016-02, "Leases", as discussed below. Revenue streams that are in the scope of the new standards include (but are not limited to) administrative and late fees and revenue sharing arrangements of cable income from contracts with cable providers at our properties. The accounting for these revenue streams were not affected by the adoption of ASU No. 2014-09, nor was there a cumulative effect of initially applying the standard.

In August 2016, FASB issued ASU No. 2016-15 "Classification of Certain Cash Receipts and Cash Payments", which addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. On January 1, 2018, we adopted ASU No. 2016-15 and the adoption did not have a material effect on our consolidated financial statements and disclosures.

In November 2016, FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which provides guidance on the classification of restricted cash in the statement of cash flows. On January 1, 2018, we adopted ASU No. 2016-18. As a result of adopting the new guidance, $214,775 and $399,106 of restricted cash, which was previously included as operating and investing cash outflows within the consolidated statements of cash flows for the year ended December 31, 2017, respectively, has been removed and is now included in the cash and restricted cash line items at the beginning and the end of period.

In January 2017, FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of Business," which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. On January 1, 2018, we adopted ASU No. 2017-01. During the year ended December 31, 2018, we acquired three investment properties which did not meet the revised definition of a business and, accordingly, accounted for the acquisitions as asset acquisitions. For investment property additions accounted for as business combinations, acquisition fees and acquisition costs were included in acquisition costs on the consolidated statements of operations and comprehensive loss. For investment property additions accounted for as asset acquisitions, all such costs are included in the purchase price that is allocated between land, building and improvements, furniture, fixtures, and equipment and intangible assets on the consolidated balance sheets, based on their respective fair values. We believe all future acquisitions will be accounted for as asset acquisitions, not business combinations.

with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are continuing to evaluate this guidance; however, we expect that our operating leases where we are the lessor will be accounted for on our balance sheet similar to our current accounting with the underlying leased asset recognized as real estate. For leases in which we are the lessee, primarily consisting of office equipment leases, we expect to recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and to interest expense and the right-of-use asset being amortized to expense on a straight-line basis over the term of the lease. We intend to adopt this standard when it becomes effective and we estimate the impact on our consolidated financial statements will be immaterial.

In July 2018, FASB issued ASU No. 2018-11, “Leases: Targeted Improvements” an additional amendment to ASU No.2016-02. Although we are still evaluating this guidance, we believe we will apply the practical expedient allowed in this new guidance to combine lease and associated nonlease components by class of underlying asset. In addition, we are expected to utilize the optional method for adopting the new leasing guidance and not restate comparative periods. We intend to adopt this standard when it becomes effective and we estimate the impact on our consolidated financial statements will be immaterial.

In June 2016, FASB issued ASU No. 2016-03 "Financial Instruments - Credit Losses", which requires measurement and recognition of expected credit losses for financial assets held. The standard update is effective for us beginning January 1, 2019. We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2016-03 to have a significant impact on our consolidated financial statements due to the fact that we did not have instruments subject to this guidance at December 31, 2018.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for us beginning December 15, 2019. Early application is permitted. We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2017-04 to have a significant impact on our consolidated financial statements due to the fact that we did not have any goodwill subject to this guidance at December 31, 2018.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for us on January 1, 2019, with early adoption permitted in any interim period. We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2017-12 to have a significant impact on our consolidated financial statements.

In June 2018, FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. ASU 2018-07 will be effective for annual reporting periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted. We are continuing to evaluate this guidance; however we do not expect the adoption of ASU 2018-07 to have a significant impact on our consolidated financial statements.

In July 2018, FASB issued ASU No. 2018-09, "Codification Improvements". This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. Certain updates are applicable immediately while others provide for a transition period to adopt as part of the next fiscal year beginning after December 15, 2018. We are evaluating this guidance to determine the impact it may have on our consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. This update removes, modifies and adds certain disclosure requirements in the FASB Accounting Standards Codification ("ASC") 820, “Fair Value Measurement”. ASU No. 2018-13 will be effective for us beginning January 1, 2020 and early adoption is permitted. We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2018-13 to have a significant impact on our consolidated financial statements.

on the Federal Funds Effective Rate. For entities that have not already adopted ASU No. 2017-12, the amendments in ASU No. 2018-16 are required to be adopted concurrently with the amendments in ASU No. 2017-12. We intend to adopt ASU No. 2018-16 when ASU No. 2017-12 becomes effective on January 1, 2019. We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2018-16 to have a significant impact on our consolidated financial statements.

As of December 31, 2018, we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.

We have evaluated subsequent events and determined that no events have occurred, which would require an adjustment to or additional disclosure in the consolidated financial statements, except for the following:

On February 12, 2019, we purchased Wimbledon Oaks, a 248 unit multifamily apartment complex in Arlington, Texas for $25.9 million. The seller was an unaffiliated third party. In conjunction with the purchase, we entered into an $18.4 million mortgage on the property.

On March 21, 2019, our Board authorized a cash distribution on the outstanding shares of all classes of our common stock based on daily record dates for the period from March 29, 2019 through June 27, 2019, which we expect to pay on April 30, 2019, May 31, 2019, and June 28, 2019. The distribution will be calculated based on the stockholders of record each day during the period at a rate of (i) $0.001469178 per share per day, less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock divided by the number of shares of common stock of such class outstanding as of the close of business on the record date.

Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.

See the Index to Financial Statements at page F-1 of this Annual Report on Form 10-K.

There were no disagreements with our independent registered public accountants during the year ended December 31, 2018.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our principal executive officer and principal financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth in the 2013 version of the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this assessment, management believes that our internal control over financial reporting is effective as of December 31, 2018.

There has been no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We have adopted a Code of Conduct and Ethics that applies to all of our directors, executive officers and employees, including but not limited to, our chief executive officer and chief financial officer. Our Code of Conduct and Ethics may be found at www.resourcereit3.com, on the Materials & Filings page.

The other information required by this Item is incorporated by reference from our 2019 Proxy Statement.

The information required by this Item is incorporated by reference from our 2019 Proxy Statement.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized representative.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

We have audited the accompanying consolidated balance sheets of Resource Apartment REIT III, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes and financial statement schedule included under Item 15(b) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

	December 31,
	2018			2017
ASSETS
Investments:
Rental properties, net	$	136,061,586		$	29,443,089
Identified intangible assets, net		707,825			321,468
Total investments		136,769,411			29,764,557

Cash		32,827,390			23,752,810
Restricted cash		883,902			192,064
Tenant receivables, net		51,524			2,138
Due from related parties		13,772			4,571
Subscriptions receivable		1,431,000			413,084
Prepaid expenses and other assets		1,097,179			188,332
Deferred offering costs		5,046,364			5,409,942
Total assets	$	178,120,542		$	59,727,498

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable, net	$	100,044,640		$	22,778,370
Accounts payable and accrued expenses		1,167,901			257,060
Due to related parties		12,993,287			9,021,884
Tenant prepayments		116,102			21,078
Security deposits		271,246			62,724
Distributions payable		1,037,799			453,877
Total liabilities		115,630,975			32,594,993

Stockholders’ equity:
Preferred stock, par value $0.01: 10,000,000 shares authorized, none issued and outstanding		—			—
Convertible stock, par value $0.01: 50,000 shares authorized, 50,000 and 50,000 issued and outstanding, respectively		500			500
Class A common stock, par value $0.01: 25,000,000 shares authorized, 634,493 and 621,754 issued and outstanding, respectively		6,345			6,218
Class T common stock, par value $0.01: 25,000,000 shares authorized, 1,111,394 and 1,081,226 issued and outstanding, respectively		11,114			10,812
Class R common stock, par value $0.01: 750,000,000 shares authorized, 7,181,534 and 2,058,008 issued and outstanding, respectively		71,815			20,580
Class I common stock, par value $0.01: 75,000,000 shares authorized, 329,604 and 36,118 issued and outstanding, respectively		3,296			361
Additional paid-in capital		77,896,470			32,323,424
Accumulated other comprehensive loss		(40,633	)		(11,192	)
Accumulated deficit		(15,459,340	)		(5,218,198	)
Total stockholders’ equity		62,489,567			27,132,505
Total liabilities and stockholders’ equity	$	178,120,542		$	59,727,498

The accompanying notes are an integral part of these consolidated financial statements.

	Years Ended December 31,
	2018			2017
Revenues:
Rental income	$	7,698,144		$	1,372,503
Utility income		367,736			62,386
Ancillary tenant fees		109,976			8,974
Total revenues		8,175,856			1,443,863

Expenses:
Rental operating - expenses		1,668,426			400,432
Rental operating - payroll		852,546			165,558
Rental operating - real estate taxes		1,011,719			182,166
Subtotal - rental operating		3,532,691			748,156
Acquisition costs		—			906,644
Property management fees		9,488			9,505
Management fees - related parties		1,290,367			215,433
General and administrative		2,322,183			1,258,682
Loss on disposal of assets		108,844			186,078
Depreciation and amortization expense		5,239,781			908,624
Total expenses		12,503,354			4,233,122
Loss before other income (expense)		(4,327,498	)		(2,789,259	)

Other income (expense):
Other income		—			1,500
Interest income		159,631			16,639
Interest expense		(2,683,916	)		(360,725	)
Net loss	$	(6,851,783	)	$	(3,131,845	)

Other comprehensive loss:
Designated derivatives, fair value adjustments		(29,441	)		(11,192	)
Total other comprehensive loss	$	(29,441	)	$	(11,192	)
Comprehensive loss	$	(6,881,224	)	$	(3,143,037	)

The accompanying notes are an integral part of these consolidated financial statements.

	Common Stock																				Convertible Stock							Accumulated
	Shares										Amount														Additional			Other
	A Shares		T Shares			R Shares			I Shares		A Shares		T Shares			R Shares			I Shares		Shares		Amount		Paid-in Capital			Comprehensive Loss			Accumulated Deficit			Total
Balance at January 1, 2017		384,195		114,037			—			—	$	3,842	$	1,140		$	—		$	—		50,000	$	500	$	4,380,126		$	—		$	(841,115	)	$	3,544,493
Issuance of common stock		219,259		936,581			2,049,713			35,985		2,192		9,366			20,497			360		—		—		30,839,285			—						30,871,700
Offering costs		—		—			—			—		—		—			—			—		—		—		(3,436,423	)		—			—			(3,436,423	)
Cash distributions declared		—		—			—			—		—		—			—			—		—		—		—			—			(993,671	)		(993,671	)
Stock dividends		10,956		14,993			—			—		110		150			—			—		—		—		251,307			—			(251,567	)		—
Common stock issued through distribution reinvestment plan		7,344		15,615			8,295			133		74		156			83			1		—		—		289,129			—			—			289,443
Other comprehensive loss		—		—			—			—		—		—			—			—		—		—		—			(11,192	)		—			(11,192	)
Net loss		—		—			—			—		—		—			—			—		—		—		—			—			(3,131,845	)		(3,131,845	)
Balance at December 31, 2017		621,754		1,081,226			2,058,008			36,118	$	6,218	$	10,812		$	20,580		$	361		50,000		500	$	32,323,424		$	(11,192	)	$	(5,218,198	)	$	27,132,505
Issuance of common stock		—		—			5,002,503			292,973		—		—			50,024			2,930		—		—		50,685,082			—			—			50,738,036
Offering costs		—		—			—			—		—		—			—			—		—		—		(6,608,586	)		—			—			(6,608,586	)
Cash distributions declared		—		—			—			—		—		—			—			—		—		—		—			—			(3,389,359	)		(3,389,359	)
Common stock issued through distribution reinvestment plan		12,739		32,775			121,968			513		127		328			1,220			5		—		—		1,526,736			—			—			1,528,416
Other comprehensive loss		—		—			—			—		—		—			—			—		—		—		—			(29,441	)		—			(29,441	)
Net loss		—		—			—			—		—		—			—			—		—		—		—			—			(6,851,783	)		(6,851,783	)
Share redemptions		—		(2,607	)		(945	)		—		—		(26	)		(9	)		—		—		—		(30,186	)		—			—			(30,221	)
Balance at December 31, 2018		634,493		1,111,394			7,181,534			329,604	$	6,345	$	11,114		$	71,815		$	3,296		50,000	$	500	$	77,896,470		$	(40,633	)	$	(15,459,340	)	$	62,489,567

The accompanying notes are an integral part of these consolidated financial statements.

	Years Ended December 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(6,851,783	)	$	(3,131,845	)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Loss on disposal of assets		108,844			186,078
Depreciation and amortization		5,239,781			908,624
Amortization of deferred financing costs		126,856			22,314
Realized loss on change in fair value of interest rate cap		174			—
Changes in operating assets and liabilities:
Tenant receivable, net		(49,386	)		(1,350	)
Due from related parties		(9,201	)		4,953
Prepaid expenses and other assets		(59,923	)		(13,016	)
Due to related parties		764,400			1,127,499
Accounts payable and accrued expenses		479,127			(93,819	)
Tenant prepayments		80,781			18,346
Security deposits		93,079			5,880
Net cash used in operating activities		(77,251	)		(966,336	)

Cash flows from investing activities:
Property acquisitions		(31,484,946	)		(6,636,959	)
Deposit for property acquisition		(724,208	)		—
Capital expenditures		(2,177,567	)		(66,234	)
Net cash used in investing activities		(34,386,721	)		(6,703,193	)

Cash flows from financing activities:
Net proceeds from issuance of common stock		46,633,218			28,885,437
Redemptions on common stock		(30,221	)		—
Payments on borrowings		(34,271	)		(30,493	)
Payment of deferred financing costs		(1,061,315	)		(324,285	)
Distributions paid on common stock		(1,277,021	)		(275,525	)
Net cash provided by financing activities		44,230,390			28,255,134

Net increase in cash and restricted cash		9,766,418			20,585,605
Cash and restricted cash at beginning of year		23,944,874			3,359,269
Cash and restricted cash at end of year	$	33,711,292		$	23,944,874

Reconciliation to consolidated balance sheets:
Cash	$	32,827,390		$	23,752,810
Restricted Cash		883,902			192,064
Cash and restricted cash at end of period	$	33,711,292		$	23,944,874

The accompanying notes are an integral part of these consolidated financial statements.

Resource Apartment REIT III, Inc. (the "Company") was organized in Maryland on July 15, 2015. The Company is offering up to $1.1 billion of shares of its common stock, consisting of up to $1.0 billion of shares in its primary offering and up to $100.0 million of shares pursuant to its distribution reinvestment plan (the "DRIP"). The Company’s primary offering is currently scheduled to close on April 27, 2019. However, the Company expects to file a registration statement for a follow-on offering and to offer shares of common stock in the primary initial public offering until such registration statement relating to its proposed follow-on offering is declared effective by the Securities and Exchange Commission. If the Company decides to terminate the primary offering at an earlier date, it will provide that information in a prospectus supplement.

Through July 2, 2017, the Company offered shares of Class A and Class T common stock. As of July 3, 2017, the Company ceased offering shares of Class A and Class T common stock in its primary offering and commenced offering shares of Class R and Class I common stock.

The initial prices per share for each class of shares of the Company's common stock through June 30, 2018 were as follows:

On June 27, 2018, the board of directors of the Company determined a net asset value (“NAV”) per share of its common stock of $9.05 based on the estimated market value of the portfolio of investments of the Company as of March 31, 2018. A full description of the methodologies used to calculate the estimated NAV per share as of March 31, 2018, is included in the Current Report on Form 8-K filed with the SEC on June 29, 2018. Based on this estimated NAV per share, the board of directors of the Company established updated offering prices for shares of Class R and Class I common stock to be sold in the primary portion of the initial public offering. Effective July 2, 2018, the price per share for each class of shares of the Company's common stock became:

As of December 31, 2018, the Company has raised aggregate gross primary offering proceeds of approximately $86.3 million from the sale of 601,207 Class A shares, 1,049,996 Class T shares, 7,052,216 Class R shares, and 328,958 Class I shares of common stock.

Resource REIT Advisor, LLC (the "Advisor"), an indirect wholly-owned subsidiary of Resource America, Inc. ("RAI"), contributed $200,000 to the Company in exchange for 20,000 shares of Class A common stock on August 10, 2015. On June 29, 2016, RAI purchased 222,222 shares of Class A common stock for $2.0 million in the offering. On August 5, 2016, the Advisor exchanged 5,000 shares of common stock for 50,000 shares of convertible stock. Under limited circumstances, these shares may be converted into shares of the Company's Class A common stock satisfying its obligation to pay the Advisor an incentive fee and diluting its other stockholders’ interest in the Company.

RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate investment management and services company engaged in a broad range of activities. C-III controls the Advisor, Resource Securities LLC ("Resource Securities"), the Company's dealer manager, and Resource Apartment Manager III, LLC (the "Manager"), the Company's property manager. C-III also controls all of the shares of the Company's common stock held by RAI and the Advisor.

The Company’s objective is to take advantage of the multifamily investing and lending platforms of Resource Real Estate, LLC (its "Sponsor") to invest in apartment communities in order to provide the investor with growing cash flow and increasing asset values. The Company intends to acquire underperforming apartments which it will renovate and stabilize in order

to increase rents. To a lesser extent, the Company may also seek to originate and acquire commercial real estate debt secured by apartments having the same characteristics.

The Company elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ending December 31, 2017. As such, to maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its net income (excluding net capital gains) to its stockholders as well as comply with certain other requirements. Accordingly, the Company generally will not be subject to U.S. federal income taxes to the extent that it annually distributes all of its REIT taxable income to its stockholders. The Company also operates its business in a manner that will permit it to maintain its exemption from registration under the Investment Company Act of 1940, as amended.

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

The accompanying consolidated financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America ("GAAP").

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:

All intercompany accounts and transactions have been eliminated in consolidation.

The Company does not evaluate performance on a relationship-specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

Financial instruments, which potentially subject the Company to concentration of credit risk, consist of periodic temporary deposits of cash. At December 31, 2018, the Company had approximately $33.0 million of deposits at various banks, of which approximately $31.6 million were over the insurance limit of the Federal Deposit Insurance Corporation. The Company has not experienced any loss on such deposits.

At December 31, 2018, the Company’s real estate investments in Florida, Georgia, and North Carolina represented approximately 41%, 33%, and 25%, respectively, of the net book value of its rental property assets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, adverse weather events, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting

from the local business climate, could adversely affect the Company's operating results and its ability to make distributions to stockholders.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers”, which will replace most existing revenue recognition guidance in GAAP. Under the new standard, revenue is recognized by an entity in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. On January 1, 2018, the Company adopted ASU No. 2014-09 using the modified retrospective approach. The majority of the Company’s revenue is derived from residential rental income and other lease income, which are scoped out from this standard and included in the current lease accounting framework, and will be accounted for under ASU No. 2016-02, "Leases", as discussed below. Revenue streams that are in the scope of the new standards include (but are not limited to) administrative and late fees and revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. The accounting for these revenue streams were not affected by the adoption of ASU No. 2014-09, nor was there a cumulative effect of initially applying the standard.

In August 2016, FASB issued ASU No. 2016-15 "Classification of Certain Cash Receipts and Cash Payments", which addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. On January 1, 2018, the Company adopted ASU No. 2016-15 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

In November 2016, FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which provides guidance on the classification of restricted cash in the statement of cash flows. On January 1, 2018, the Company adopted ASU No. 2016-18. As a result of adopting the new guidance, $214,775 and $399,106 of restricted cash, which was previously included as operating and investing cash outflows within the consolidated statements of cash flows for the year ended December 31, 2017, respectively, has been removed and is now included in the cash and restricted cash line items at the beginning and the end of period.

In January 2017, FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of Business," which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. On January 1, 2018, the Company adopted ASU No. 2017-01. During the year ended December 31, 2018, the Company acquired three investment properties which did not meet the revised definition of a business and, accordingly, accounted for the acquisitions as asset acquisitions. For investment property additions accounted for as business combinations, acquisition fees and acquisition costs were included in acquisition costs on the consolidated statements of operations and comprehensive loss. For investment property additions accounted for as asset acquisitions, all such costs are included in the purchase price that is allocated between land, building and improvements, furniture, fixtures, and equipment and intangible assets on the consolidated balance sheets, based on their respective fair values.

In February 2016, FASB issued ASU No. 2016-02, "Leases" and amended by ASU No. 2018-09, “Codification Improvements" in July 2018, which is intended to improve financial reporting about leasing transactions and requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, FASB issued ASU No. 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is continuing to evaluate this guidance; however, the Company expects

that its operating leases where it is the lessor will be accounted for on its balance sheet similar to its current accounting with the underlying leased asset (multifamily properties) recognized as real estate. For leases in which the Company is the lessee, primarily consisting of office equipment leases, the Company expects to recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and to interest expense and the right-of-use asset being amortized to expense on a straight-line basis over the term of the lease. The Company intends to adopt this standard when it becomes effective and it estimates the impact on its consolidated financial statements will be immaterial.

In July 2018, FASB issued ASU No. 2018-11, “Leases: Targeted Improvements” an additional amendment to ASU No. 2016-02. Although the Company is still evaluating this guidance, the Company believes it will apply the practical expedient allowed in this new guidance to combine lease and associated nonlease components by class of underlying asset. In addition, the Company is expected to utilize the optional method for adopting the new leasing guidance and not restate comparative periods. The Company intends to adopt this standard when it becomes effective and it estimates the impact on its consolidated financial statements will be immaterial.

In June 2016, FASB issued ASU No. 2016-03 "Financial Instruments - Credit Losses", which requires measurement and recognition of expected credit losses for financial assets held. The standard update is effective for the Company beginning January 1, 2019. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2016-03 to have a significant impact on its consolidated financial statements due to the fact that the Company did not have instruments subject to this guidance at December 31, 2018.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning December 15, 2019. Early application is permitted. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2017-04 to have a significant impact on its consolidated financial statements due to the fact that the Company did not have any goodwill subject to this guidance at December 31, 2018.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for the Company on January 1, 2019, with early adoption permitted in any interim period. The Company is continuing to evaluate this guidance; however it does not expect the adoption of ASU 2017-12 to have a significant impact on its consolidated financial statements.

In June 2018, FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. ASU 2018-07 will be effective for annual reporting periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted. The Company is continuing to evaluate this guidance; however it does not expect the adoption of ASU 2018-07 to have a significant impact on its consolidated financial statements.

In July 2018, FASB issued ASU No. 2018-09, "Codification Improvements". This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. Certain updates are applicable immediately while others provide for a transition period to adopt as part of the next fiscal year beginning after December 15, 2018. The Company is continuing to evaluate this guidance and assessing the impact of this guidance on its consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”. This update removes, modifies and adds certain disclosure requirements in the FASB Accounting Standards Codification ("ASC") 820, “Fair Value Measurement”. ASU No. 2018-13 will be effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2018-13 to have a significant impact on its consolidated financial statements.

In October 2018, FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. For entities that have not already adopted ASU No. 2017-12, the amendments in ASU No. 2018-16 are required to be adopted concurrently with the amendments in ASU No. 2017-12. The Company intends to adopt ASU No. 2018-16 when ASU No. 2017-12 becomes effective on January 1, 2019. The Company is continuing to evaluate this guidance; however, the Company does not expect the adoption of ASU No. 2018-16 to have a significant impact on its consolidated financial statements.

The Company records acquired real estate at fair value on their respective acquisition dates. The Company considers the period of future benefit of an asset to determine its appropriate useful life and depreciates the asset using the straight line method. The Company anticipates the estimated useful lives of its assets by class as follows:

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of 5% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. The review also considers factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.

If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. There were no impairment losses recorded on long lived assets during the years ended December 31, 2018 and 2017.

The Company records acquired real estate loans at cost and reviews them for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or the fair value of the collateral. If a loan is deemed to be impaired, the Company will record a reserve for loan losses through a charge to income for any shortfall. Failure to recognize impairment would result in the overstatement of the carrying values of the Company’s real estate loans receivable and an overstatement of the Company’s net income.

The Company may acquire real estate loans at a discount due to credit quality. Revenues from these loans are recorded under the effective interest method. Under this method an effective interest rate ("EIR") is applied to the cost basis of the real estate loan receivable. The EIR that is calculated when the real estate loan is acquired remains constant and is the basis for subsequent impairment testing and income recognition. If the amount and timing of future cash collections are not reasonably

estimable, the Company accounts for the real estate loan receivable on the cost recovery method. Under the cost recovery method of accounting, no income is recognized until the basis of the real estate loan receivable has been fully recovered.

Interest income from loans receivable will be recognized based on the contractual terms of the debt instrument. Fees related to any buydown of the interest rate will be deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income. Closing costs related to the purchase of a loan receivable will be amortized over the term of the loan and accreted as an adjustment against interest income. There were no loans held for investment on the Company's consolidated balance sheets as of both December 31, 2018 and 2017.

On January 1, 2018, the Company adopted ASU 2017-01. Acquisitions that do not meet the definition of a business under this guidance are accounted for as asset acquisitions. In most cases, the Company believes acquisitions of real estate will no longer be considered a business combination as in most cases substantially all of the fair value is concentrated in a single identifiable asset or group of tangible assets that are physically attached to each other (land and building). However, if the Company determines that substantially all of the fair value of the gross assets acquired is not concentrated in either a single identifiable asset or in a group of similar identifiable assets, the Company will then perform an assessment to determine whether the set is a business by using the framework outlined in the ASU. If the Company determines that the acquired asset is not a business, the Company will allocate the cost of the acquisition including transaction costs to the assets acquired or liabilities assumed based on their related fair value.

Upon the acquisition of real properties, the Company allocates the purchase price to tangible assets, consisting of land, building, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, other value of in-place leases and value of tenant relationships, based in each case on their fair values.

The Company records above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company amortizes any capitalized above-market or below-market lease values as an increase or reduction to rental income over the remaining non-cancelable terms of the respective leases, which the Company expects will range from one month to one year.

The Company measures the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered in the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics to be considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

The Company amortizes the value of in-place leases to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization periods for the intangible assets exceed the remaining depreciable life of the building.

The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. The use of inappropriate estimates would result in an

incorrect assessment of the fair value of these assets and liabilities, which could impact the amount of the Company’s reported net income.

The Company recognizes minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease. The future minimum rental payments to be received from noncancelable operating leases for residential rental properties are approximately $6.4 million and $94,204 for the years ending December 31, 2019 and 2020, respectively, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements. The Company also receives other ancillary fees for administration of leases, late payments, amenities and revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. As discussed earlier, the Company adopted ASU No. 2014-09 beginning January 1, 2018. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. The Company records the utility reimbursement income and ancillary charges in the period when the performance obligation is completed, either at a point in time or on a monthly basis as the service is utilized.

Tenant receivables are stated in the consolidated financial statements as amounts due from tenants net of an allowance for uncollectible receivables. Payment terms vary and receivables outstanding longer than the payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time receivables are past due, security deposits held, the Company’s previous loss history, the tenants’ current ability to pay their obligations to the Company, the condition of the general economy and the industry as a whole. The Company writes off receivables when they become uncollectible. At December 31, 2018 and 2017, the Company recorded $5,593 and $370 of allowances for uncollectible receivables, respectively.

The Company elected to be taxed as a REIT, commencing with its taxable year ending December 31, 2017. As a REIT, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions to its stockholders, and provided it satisfies, on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it lost its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.

The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income as opposed to net income reported on the financial statements. Taxable income, generally, differs from net income reported on the financial statements because the determination of taxable income is based on tax provisions and not financial accounting principles.

The Company may elect to treat certain of its subsidiaries as a taxable REIT subsidiary ("TRS"). In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes. At December 31, 2018 and 2017, the Company did not treat any of its subsidiaries as a TRS.

While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity.

Legislation commonly known as the Tax Cuts and Jobs Act ("TCJA") was signed into law on December 22, 2017. The TCJA makes significant changes to the U.S. federal income tax rules for taxation of individuals and corporations (including REITs), generally effective for taxable years beginning after December 31, 2017. The Company does not expect this legislation to have a significant impact on its consolidated financial statements.

Basic earnings per share are computed by dividing net income (loss) attributable to common stockholders for each period by the weighted-average common shares outstanding during the period for each share class. Diluted net income (loss) per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the 50,000 shares of convertible stock (discussed in Note 10) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of December 31, 2018 (were such date to represent the end of the contingency period). For the purposes of calculating earnings per share, all common shares and per share information in the financial statements have been retroactively adjusted for the effect of any stock dividends and stock splits. For the years ended December 31, 2018 and 2017, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.

In accordance with ASC 260-10-45, "Earnings Per Share", the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on their relative percentage of each class of shares to the total number of outstanding shares. The Company did not have any participating securities outstanding other than Class A common stock, Class T common stock, Class R common stock, and Class I common stock during the periods presented (see Note 10).

Organization and offering costs (other than selling commissions, dealer manager fees, and distribution and shareholder servicing fees) of the Company are initially being paid by the Advisor on behalf of the Company.

Pursuant to the Advisory Agreement between the Company and the Advisor, the Company is obligated to reimburse the Advisor for organization and other offering costs paid by the Advisor on behalf of the Company, up to an amount equal to 4.0% of gross offering proceeds as of the termination of the initial public offering if the Company raises less than $500.0 million in the primary portion of the initial public offering and 2.5% of gross offering proceeds as of the termination of the initial public offering if the Company raises $500.0 million or more in the primary portion of the initial public offering.

On April 13, 2018, the board of directors approved an amendment to the advisory agreement that provides that the Company is not responsible for the repayment of any unreimbursed organization and offering expenses or operational expenses incurred by the Advisor on the Company’s behalf through March 31, 2018 until after the termination of the primary portion of the Company’s ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and offering expenses or operational expenses incurred or paid by the Advisor on the Company’s behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of the Company’s ongoing initial public offering through April 30, 2021 for organization and offering expenses and through April 30, 2020 for operating expenses. As of December 31, 2018, the Company has incurred approximately $8.5 million for public offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. As of December 31, 2018, the Advisor has advanced approximately $8.2 million of these costs on behalf of the Company and the Company has paid approximately $249,000 of these costs directly.

As of December 31, 2018, the Company has charged approximately $3.5 million to equity, which represents the portion of deferred offering costs that are charged to equity upon the sale of each share of common stock sold under the public offering. Deferred offering costs of $5.0 million represent the portion of the total costs incurred that have not yet been charged to equity. Upon completion of the public offering, any deferred offering costs in excess of the limit on organization and offering costs discussed above, will be charged back to the Advisor.

Organization costs, which include all expenses incurred by the Company in connection with its formation, including but not limited to legal fees and other costs to incorporate, are expensed as incurred. There can be no assurance that the Company's plans to raise capital will be successful. Prior to the Company breaking escrow, the Advisor incurred approximately $104,266 of formation and other operating expenses on the Company's behalf, which will not be reimbursed to the Advisor.

Outstanding Class T shares issued in the Company's primary offering are subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018) for five years from the date on which such share is issued. The Company will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of

these events occur: (i) the date at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from the Company's primary offering (i.e., excluding proceeds from sales pursuant to the DRIP); (ii) the date on which the Company lists its common stock on a national securities exchange; and (iii) the date of a merger or other extraordinary transaction in which the Company is a party and in which the common stock is exchanged for cash or other securities. The Company cannot predict if or when any of these events will occur.

Outstanding Class R shares issued in the Company's primary offering are also subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018). The Company will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from its primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of its assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between the Resource Securities and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and Resource Securities advises the Company's transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through its distribution reinvestment plan).

The Company records distribution and shareholder servicing fees as a reduction to additional paid-in capital and the related liability in an amount equal to the maximum fees payable in relation to the Class T and Class R shares on the date the shares are issued. The liability will be relieved over time, as the fees are paid to the Dealer Manager, or as the fees are adjusted (if the fees are no longer payable pursuant to the conditions described above.) For issued Class T shares, the Company has accrued an estimate of total distribution and shareholder servicing fees for the full five year period of $472,106 at December 31, 2018 based on a total of 5% of the gross proceeds from all Class T shares sold, of which the Company paid $160,771 cumulatively through December 31, 2018. For issued Class R shares, the Company has accrued an estimate of total distribution and shareholder servicing fees of $1,906,660 at December 31, 2018 based on a total of 5% of the gross proceeds from all Class R shares sold, of which the Company paid $399,440 cumulatively through December 31, 2018. The total accrual of approximately $1.8 million is included in due to related parties on the Company's consolidated balance sheets at December 31, 2018.

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. The impact of the reclassifications made to prior year amounts are not material and did not affect net loss.

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvement. The following table presents a summary of the components of the Company's restricted cash:

In addition, the Company designated unrestricted cash for capital expenditures of approximately $9.2 million and $1.9 million at December 31, 2018 and 2017, respectively.

On March 22, 2018, the Company, through its wholly-owned subsidiary, purchased a multifamily community located in Austell, Georgia ("Tramore Village"). Tramore Village, constructed in 1999, contains 324 units plus amenities, including private garages for each unit, a clubhouse, pool, fitness center and business center. Tramore Village encompasses 348,804 rentable square feet. At December 31, 2018, Tramore Village was 96% leased.

On August 29, 2018, the Company, through its wholly-owned subsidiary, purchased a multifamily community located in Matthews, North Carolina ("Matthews Reserve"). Matthews Reserve, constructed in 1998, contains 212 units plus amenities, including a swimming pool, clubhouse, a fitness center, playgrounds, and a dog park. Matthews Reserve encompasses 199,744 rentable square feet. At December 31, 2018, Matthews Reserve was 92% leased.

On September 14, 2018, the Company, through its wholly-owned subsidiary, purchased a multifamily community located in Riverview, Florida ("The Park at Kensington"). The Park at Kensington, constructed in 1990, contains 204 units plus amenities, including a swimming pool, clubhouse, a fitness center, and a dog park. The Park at Kensington encompasses 205,471 rentable square feet. At December 31, 2018, The Park at Kensington was 95% leased.

The following table presents the allocated contract purchase price, acquisition fee, and acquisition costs of the Company's three acquired properties during the year ended December 31, 2018:

	Contract Purchase Price		Acquisition Fee ⁽¹⁾		Acquisition Costs ⁽²⁾		Total Real Estate, Cost
Tramore Village
Land	$	6,549,731	$	144,847	$	34,503	$	6,729,081
Building and Improvements		36,220,010		801,006		190,800		37,211,816
Furniture, fixtures and equipment		654,973		14,485		3,450		672,908
Intangible Assets		925,286		20,463		4,874		950,623
	$	44,350,000	$	980,801	$	233,627	$	45,564,428

Matthews Reserve
Land	$	4,023,750	$	88,239	$	26,799	$	4,138,788
Building and Improvements		28,738,626		630,223		191,407		29,560,256
Furniture, fixtures and equipment		372,197		8,162		2,479		382,838
Intangible Assets		665,427		14,592		4,432		684,451
	$	33,800,000	$	741,216	$	225,117	$	34,766,333

The Park at Kensington
Land	$	3,052,176	$	66,511	$	33,588	$	3,152,275
Building and Improvements		24,634,579		536,818		271,095		25,442,492
Furniture, fixtures and equipment		360,000		7,845		3,962		371,807
Intangible Assets		653,245		14,235		7,189		674,669
	$	28,700,000	$	625,409	$	315,834	$	29,641,243

(1) Represents acquisition fee of 2% of the cost of investments, paid to the Advisor.

(2) Represents transaction costs paid at both closing and post-closing, excluding Acquisition Fees.

Depreciation expense for the year ended December 31, 2018 and 2017 was $3.3 million and $478,920, respectively.

Loss on disposal of assets: During the year ended December 31, 2018, the Company recorded losses of $108,844 on the disposal of assets, due to the replacement of appliances at its rental properties in conjunction with unit upgrades.

Identified intangible assets, net, consist of acquired in-place rental leases. The net carrying value of the leases at December 31, 2018 and 2017 was $707,825 and $321,468, respectively, net of accumulated amortization of $2.4 million and $451,775, respectively. The weighted average remaining life of the leases is 4 months at December 31, 2018.

Amortization for the years ended December 31, 2018 and 2017 was $1.9 million and $429,704, respectively. At December 31, 2018, expected amortization for the in-place rental leases for the next 12 months is $707,825 and none thereafter.

The following table presents a summary of the Company's mortgage notes payable, net:

The following table presents additional information about the Company's mortgage notes payable, net:

All of the mortgage notes are collateralized by a first mortgage lien on the assets of the respective property named in the table above. The amount outstanding on the mortgages may be prepaid in full during the entire term with a prepayment penalty for a period of the term.

On March 22, 2018, the Company, through a wholly owned subsidiary, entered into a seven-year, $32.6 million secured mortgage loan with Berkadia Commercial Mortgage LLC, an unaffiliated lender, secured by Tramore Village (the "Tramore Mortgage Loan"). The Tramore Mortgage Loan matures on April 1, 2025. The Tramore Mortgage Loan bears interest at a rate of LIBOR plus 1.80%, with a maximum interest rate of 6.25%. Monthly payments are interest only for the first 36 months.

Beginning on May 1, 2021, the Company will pay both principal and interest based on a 30 year amortization period. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. The Company may prepay the Tramore Mortgage Loan in full at any time (1) after April 1, 2019 and until December 31, 2024 upon payment of a prepayment premium equal to 1% of the principal amount prepaid; and (2) after December 31, 2024 with no prepayment premium. The non-recourse carveouts under the loan documents for the Tramore Mortgage Loan are guaranteed by the Company.

On August 29, 2018, the Company, through a wholly owned subsidiary, entered into a seven-year secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, for borrowings of approximately $23.9 million secured by Matthews Reserve (the “Matthews Mortgage Loan”). The Matthews Mortgage Loan matures on September 1, 2025. The Matthews Mortgage Loan bears interest at a fixed rate of 4.47%. Monthly payments are interest only for the first 36 months.

Beginning on October 1, 2021, the Company will pay both principal and interest based on 30-year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. After any lockout period (if any), prepayment in full is permitted on any scheduled payment date, provided a prepayment premium is paid. The prepayment premium will be based on the yield maintenance prepayment formula for any prepayment made prior to September 1, 2023. The prepayment premium will be 1% of the amount of principal being repaid for any prepayment made from (and including) September 1, 2023 through May 31, 2025. No prepayment premium is required after June 1, 2025. The non-recourse carveouts under the loan documents for the Matthews Mortgage Loan are guaranteed by the Company.

On September 14, 2018, the Company, through a wholly owned subsidiary, entered into a seven-year secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, for borrowings of approximately $21.8 million secured by The Park at Kensington (the “Kensington Mortgage Loan”). The Kensington Mortgage Loan matures on October 1, 2025. The Kensington Mortgage Loan bears interest at a fixed rate of 4.36%. Monthly payments are interest only for the first 36 months.

Beginning on November 1, 2021, the Company will pay both principal and interest based on 30-year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. After any lockout period (if any), prepayment in full is permitted on any scheduled payment date, provided a prepayment premium is paid. The prepayment premium will be based on the greater of (i) the yield maintenance prepayment formula and (ii) 1% of the amount of the principal being repaid, for any prepayment made prior to October 1, 2023. The prepayment premium will be 1% of the amount of principal being repaid for any prepayment made from (and including) October 1, 2023 through June 30, 2025. No prepayment premium is required after July 1, 2025. The non-recourse carveouts under the loan documents for the Kensington Mortgage Loan are guaranteed by the Company.

The following table presents the Company's annual principal payments on outstanding borrowings for each of the next five years ending December 31, and thereafter:

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. During the year ended December 31, 2018 and 2017, amortization of deferred financing costs of $126,856 and $22,314, respectively, was included in interest expense. The amortization during the year ended December 31, 2017 related to the fully repaid bridge loan to the Advisor. Accumulated amortization at December 31, 2018 and 2017 was $149,170 and $22,314, respectively.

The following table presents the Company's estimated amortization of the existing deferred financing costs for the next five years ending December 31, and thereafter:

The Company is externally managed and advised by the Advisor. Pursuant to the terms of the Advisory Agreement, the Advisor provides the Company with its management team, including its officers, along with appropriate support personnel. The Advisor will be reimbursed for the Company’s allocable share of costs for Advisor personnel, including allocable personnel salaries and benefits. Each of the Company’s officers is an employee of the Sponsor or one of its affiliates. The Company does not expect to have any employees. The Advisor is not obligated to dedicate any specific portion of its time or its employees' time to the Company’s business. The Advisor and any employees of the Sponsor or its affiliates acting on behalf of the Advisor, are at all times subject to the supervision and oversight of the Company’s board of directors and have only such functions and authority as the Company delegates to it. Effective April 28, 2018, the Company renewed the Advisory Agreement with the Advisor through April 27, 2019. The terms of the agreement are identical to those of the Advisory Agreement in effect through April 27, 2018 except that it includes the amendment described below.

During the course of the offering, the Advisor will provide offering-related services to the Company and will advance funds to the Company for both operating costs and organization and offering costs. These amounts will be reimbursed to the Advisor from the proceeds from the offering, subject to the aforementioned limits on organization and offering expense reimbursements, although there can be no assurance that the Company’s plans to raise capital will be successful. As of December 31, 2018, the Advisor has advanced organization and offering costs on a cumulative basis on behalf of the Company of approximately $8.2 million.

The Advisory Agreement has a one-year term and may be renewed for an unlimited number of successive one-year terms upon the approval of the Conflicts Committee of the Company's board of directors. Under the Advisory Agreement, the Advisor will receive fees and will be reimbursed for its expenses as set forth below:

Acquisition fees. The Advisor earns an acquisition fee of 2.0% of the cost of investments acquired on behalf of the Company, plus any capital reserves allocated, or the amount funded by the Company to acquire or originate loans, including acquisition expenses and any debt attributable to such investments.

Asset management fees. The Advisor earns a monthly asset management fee equal to 0.083% (one-twelfth of 1.0%) of the cost of each asset at the end of each month, without deduction for depreciation, bad debts or other non-cash reserves. The asset management fee is based only on the portion of the costs or value attributable to the Company’s investment in an asset if the Company does not own all of an asset and does not manage or control the asset.

Disposition fees. The Advisor will earn a disposition fee in connection with the sale of a property equal to the lesser of one-half of the aggregate brokerage commission paid, or if none is paid, 2.0% of the contract sales price.

Debt financing fees. The Advisor will earn a debt financing fee equal to 0.5% of the amount available under any debt financing obtained.

Expense reimbursements. The Company also will pay directly or reimburse the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with the services provided to the Company in relation to its public offering, including its distribution reinvestment plan offering. This includes all organization and offering costs of up to 4.0% of gross offering proceeds if the Company raises less than $500.0 million in the primary offering and 2.5% of gross offering proceeds if the Company raises $500.0 million or more in the primary offering. Reimbursements also include expenses the Advisor incurs in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees. Prior to the Company breaking escrow, the Advisor incurred approximately $104,266 of formation and other operating expenses the Company's behalf, which will not be reimbursed to the Advisor.

On April 13, 2018, the board of directors approved an amendment to the advisory agreement that provides that the Company is not responsible for the reimbursement of any unreimbursed organization and offering expenses or operational expenses incurred by the Advisor on the Company’s behalf through March 31, 2018 until after the termination of the primary portion of the Company’s ongoing initial public offering. Additionally, the amendment provides that such unreimbursed

organization and offering expenses or operational expenses incurred or paid by the Advisor on the Company’s behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of the Company’s ongoing initial public offering through April 30, 2021 for organization and offering expenses and through April 30, 2020 for operating expenses.

The Manager manages real estate properties and real estate-related debt investments and coordinates the leasing of, and manages construction activities related to, some of the Company’s real estate properties pursuant to the terms of the management agreement with the Manager.

Property management fees. The Manager earns a property management fee equal to 4.5% of actual gross cash receipts from the operations of real property investments that it manages and an oversight fee on any real property investments that are managed by third parties. Property management fees are deducted directly from the property's operating account by the property manager. Any property management fees paid to unaffiliated third party property managers in excess of 4.5% of actual gross receipts will be reimbursed to the Company by the Advisor. At December 31, 2018 and 2017, the Advisor owes the Company $291 and $4,192, respectively, for property management fees in excess of the 4.5% cap paid to the unaffiliated third party property manager.

Construction management fees. The Manager earns a construction management fee equal to 5.0% of actual aggregate costs to construct improvements to a property.

Debt servicing fees. The Manager will earn a debt servicing fee equal to 2.75% of gross receipts from real estate-related debt investments.

Expense reimbursement. During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared operating expenses on behalf of the Company. The Company is obligated to reimburse the Manager or other affiliates for such shared operating expenses.

Resource Securities, an affiliate of the Advisor, serves as the Company’s dealer manager and is responsible for marketing the Company’s shares during the public offering.

Dealer manager fee and selling commissions. Pursuant to the terms of the amended and restated dealer manager agreement with Resource Securities, the Company generally pays Resource Securities a selling commission of up to 3.0% of gross offering proceeds from the sale of Class R shares and a dealer manager fee of up to 3.5% of gross offering proceeds from the sale of Class R shares (but the aggregate of such fees shall not exceed 5.5% of gross offering proceeds). The Company generally pays Resource Securities a dealer manager fee of up to 1.5% of gross offering proceeds from the sale of the Class I shares. Prior to July 3, 2017, the Company generally paid the Dealer Manager a selling commission of up to 7.0% of gross primary offering proceeds from the sale of Class A shares and up to 2.0% of gross primary offering proceeds from the sale of Class T shares and a dealer manager fee of up to 3.0% of gross primary offering proceeds from the sale of either Class A or Class T shares. Resource Securities allows all selling commissions earned and a portion of the dealer manager fee as a marketing fee to participating broker-dealers. No selling commissions or dealer manager fees are earned by Resource Securities in connection with sales under the distribution reinvestment plan. Additionally, the Company may reimburse the Resource Securities for bona fide due diligence expenses. No selling commissions or dealer manager fees were paid in connection with the sales of Class A shares to the Advisor or RAI.

Distribution and shareholder servicing fee. Resource Securities is paid an annual fee of 1.0% of the NAV (purchase price prior to June 29, 2018) per share of Class T common stock sold in the primary offering for five years from the date on which each share is issued up to a total of 5.0%. Resource Securities is also paid an annual fee of 1.0% of the NAV (purchase price prior to June 29, 2018) per share of Class R common stock sold in the primary offering. The Company will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from the primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the Company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to

such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between Resource Securities and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and Resource Securities advises the Company’s transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through the distribution reinvestment plan).

Property loss pool. The Company's properties participate in a property loss self-insurance pool with other properties directly and indirectly managed by RAI and C-III, which is backed by a catastrophic insurance policy. Substantially all of the receivables from related parties represent insurance deposits held in escrow by RAI and C-III related to the self-insurance pool which, if unused, will be returned to the Company. The pool covers losses up to $2.5 million in aggregate, after a $25,000 deductible per incident. Claims beyond the insurance pool limits will be covered by the catastrophic insurance policy, which covers claims up to $250.0 million, after either a $25,000 or a $100,000 deductible per incident, depending on location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results. During the year ended December 31, 2018, the Company paid $53,119 into the insurance pools.

General liability loss pool. The Company's properties also participated in a general liability pool with other properties directly and indirectly managed by RAI and C-III until April 22, 2017. The pool covered claims up to $50,000 per incident through April 22, 2017. Effective April 23, 2017, the loss pool was eliminated and the Company now participates (with other properties directly and indirectly managed by RAI and C-III) in a general liability policy. The insured limit for the general liability policy is $76.0 million in total claims, after a $25,000 deductible per incident.

Other transactions. Through December 18, 2018, RAI co-guaranteed the mortgage on Payne Place with the Company until such time as the Company achieved the following: (a) owned a minimum of five apartment complexes; (b) had a minimum net worth of $50.0 million; (c) had liquidity of no less than $5.0 million; and (d) had an aggregate portfolio leverage of no more than 65% (see Note 8 for further details). As of December 18, 2018, RAI has been released from the guaranty.

The Company paid The Planning & Zoning Resource Company, a subsidiary of C-III, $4,187 for a zoning report in connection with its acquisition of Tramore Village, Matthews Reserve, and The Park at Kensington during the year ended December 31, 2018.

The Company participates in a liability insurance program for directors and officers coverage with other C-III managed entities and subsidiaries for coverage up to $100.0 million.

The following table presents the Company's amounts receivable from and amounts payable to such related parties:

	December 31,
	2018		2017
Due from related parties:
Advisor	$	291	$	4,192
RAI and affiliate - insurance funds held in escrow		12,799		379
Resource Securities		682	—
	$	13,772	$	4,571

Due to related parties:
Advisor:
Acquisition-related reimbursements	$	—	$	6,533
Asset management fees		5,238	—
Organization and offering costs		8,249,864		6,167,941
Operating expense reimbursements (including prepaid expenses)		2,700,703		1,810,658
	$	10,955,805		7,985,132

Manager:
Property management fees		50,912		10,800
Operating expense reimbursements		62,717		3,592
		113,629		14,392

RAI:
Internal audit fee		11,750		3,500
Operating expense reimbursements		14,843		6,625
		26,593		10,125

Resource Securities:
Selling commissions and dealer-manager fees		78,705		22,720
Distribution and shareholder servicing fee		1,818,555		989,515
		1,897,260		1,012,235

	$	12,993,287	$	9,021,884

The following table presents the Company's fees earned by and expenses incurred from such related parties:

	Years Ended December 31,
	2018		2017
Fees earned / expenses incurred:
Advisor:
Acquisition fees and acquisition related reimbursements ⁽¹⁾	$	2,449,431	$	641,193
Asset management fees⁽²⁾		935,601		159,803
Debt financing fees⁽³⁾		391,175		107,600
Organization and offering costs ⁽⁴⁾		2,107,337		3,319,624
Operating expense reimbursement ⁽⁵⁾		1,205,125		660,219

Manager:
Property management fees⁽²⁾	$	354,766	$	55,630
Construction management fees⁽¹⁾		95,791		1,517
Operating expense reimbursements ⁽⁶⁾		59,121		24,858

RAI:
Internal audit fee⁽⁵⁾	$	38,750	$	13,250

Resource Securities:
Selling commissions and dealer-manager fees⁽⁷⁾	$	2,668,910	$	1,709,990
Distribution and shareholder servicing fee⁽⁷⁾		1,303,017		1,022,047

Other:
The Planning & Zoning Resource Company ⁽¹⁾	$	4,187	$	1,079

The following table presents a reconciliation of basic and diluted earnings/(loss) per share for the periods presented as follows:

	Years Ended December 31,
	2018			2017
Net loss	$	(6,851,783	)	$	(3,131,845	)
Less: Class A common stock cash distributions declared		333,455			253,708
Less: Class T common stock cash distributions declared		477,264			332,545
Less: Class R common stock cash distributions declared		2,458,309			396,088
Less: Class I common stock cash distributions declared		120,331			11,330
Undistributed net loss attributable to common stockholders	$	(10,241,142	)	$	(4,125,516	)

Class A common stock:
Undistributed net loss attributable to Class A common stockholders	$	(1,012,356	)	$	(1,257,702	)
Class A common stock cash distributions declared		333,455			253,708
Net loss attributable to Class A common stockholders	$	(678,901	)	$	(1,003,994	)
Net loss per Class A common share, basic and diluted	$	(1.08	)	$	(1.79	)
Weighted-average number of Class A common shares outstanding, basic and diluted⁽¹⁾		627,773			560,110

Class T common stock:
Undistributed net loss attributable to Class T common stockholders	$	(1,765,273	)	$	(1,756,053	)
Class T common stock cash distributions declared		477,264			332,545
Net loss attributable to Class T common stockholders	$	(1,288,009	)	$	(1,423,508	)
Net loss per Class T common share, basic and diluted	$	(1.18	)	$	(1.82	)
Weighted-average number of Class T common shares outstanding, basic and diluted		1,094,666			782,047

Class R common stock:
Undistributed net loss attributable to Class R common stockholders	$	(7,223,274	)	$	(1,073,411	)
Class R common stock cash distributions declared		2,458,309			396,088
Net loss attributable to Class R common stockholders	$	(4,764,965	)	$	(677,323	)
Net loss per Class R common share, basic and diluted	$	(1.06	)	$	(1.42	)
Weighted-average number of Class R common shares outstanding, basic and diluted		4,479,230			478,037

Class I common stock:
Undistributed net loss attributable to Class I common stockholders	$	(240,239	)	$	(38,350	)
Class I common stock cash distributions declared		120,331			11,330
Net loss attributable to Class I common stockholders	$	(119,908	)	$	(27,020	)
Net loss per Class I common share, basic and diluted	$	(0.80	)	$	(1.58	)
Weighted-average number of Class I common shares outstanding, basic and diluted		148,975			17,079

(1)Weighted-average number of shares excludes the convertible stock as they are not participating securities.

The Company’s charter authorizes the Company to issue 10 million shares of its $0.01 par value preferred stock. As of December 31, 2018, no shares of preferred stock were issued or outstanding.

The Company’s charter authorizes the Company to issue 50,000 shares of its $0.01 par value convertible stock. On August 5, 2016, the Company's board of directors approved the issuance of 50,000 convertible shares in exchange for 5,000 shares of Class A common stock. As of December 31, 2018, the Company had 50,000 shares of $0.01 par value convertible stock

outstanding, which are owned by the Advisor. The convertible stock will convert into shares of the Company’s Class A common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 6% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange or the Company consummates a merger pursuant to which consideration received by the stockholders is securities of another issuer that are listed on a national securities exchange.

Each of these two events is a "Triggering Event." Upon a Triggering Event, the Company's convertible stock will, unless its Advisory Agreement has been terminated or not renewed on account of a material breach by its Advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

The Company’s charter authorizes the issuance of 1 billion shares of common stock with a par value of $0.01 per share, of which, the Company has allocated 750 million shares as Class R common stock, 75 million shares as Class I common stock, 25 million shares as Class A common stock and 25 million shares as Class T common stock. 125 million shares of the Company's $0.01 par value common stock remain undesignated. As of July 3, 2017, the Company ceased offering shares of Class A and Class T common stock and commenced the offering of Class R and Class I common stock in its primary offering.

At December 31, 2018, shares of the company's $0.01 par value Class A, Class T, Class R, and Class I common stock have been issued as follows:

	Class A				Class T					Class R					Class I
	Shares		Gross Proceeds		Shares			Gross Proceeds		Shares			Gross Proceeds		Shares		Gross Proceeds
Shared issued through primary offering ⁽¹⁾		586,207	$	5,601,476		1,049,996		$	9,943,465		7,052,216		$	67,558,115		328,958	$	3,016,305
Shares issued through stock dividends		12,860	—			15,495		—		—			—		—		—
Shares issued through distribution reinvestment plan		20,426		192,652		48,510			440,289		130,263			1,183,513		646		5,786
Shares issued in conjunction with the Advisor's initial investment, net of 5,000 share conversion		15,000		200,000	—			—		—			—		—		—
Total		634,493	$	5,994,128		1,114,001		$	10,383,754		7,182,479		$	68,741,628		329,604	$	3,022,091
Shares redeemed and retired	—					(2,607	)				(945	)			—
Total shares issued and outstanding at December 31, 2018		634,493				1,111,394					7,181,534					329,604

During the year ended December 31, 2018, the Company redeemed shares of its outstanding Class T and Class R common stock. During the year ended December 31, 2018, there were no redemptions of Class A or Class I common stock. Redemptions for the year ended December 31, 2018 were as follows:

All redemptions requests tendered were honored during the year ended December 31, 2018.

The Company will not redeem in excess of 5% of the weighted-average number of shares of common stock outstanding during the 12-month period immediately prior to the effective date of redemption. The Company's board of directors will determine at least quarterly whether it has sufficient excess cash to repurchase shares. Generally, the cash available for redemptions will be limited to proceeds from the Company's distribution reinvestment plan plus, if the Company has positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous year.

The Company's board of directors, in its sole discretion, may suspend, terminate or amend the Company's share redemption program without stockholder approval upon 30 days' notice if it determines that such suspension, termination or amendment is in the Company's best interest. The Company's board may also reduce the number of shares purchased under the share redemption program if it determines the funds otherwise available to fund the Company's share redemption program are needed for other purposes.

These limitations apply to all redemptions, including redemptions sought upon a stockholder's death, qualifying disability or confinement to a long-term care facility.

During the year ended December 31, 2018, the Company's board of directors declared a cash distribution on the outstanding shares of all classes of its common stock based on daily record dates for the period from March 30, 2018 through March 28, 2019, which were or will be paid on April 30, 2018, May 31, 2018, June 29, 2018, July 31, 2018, August 31, 2018, September 28, 2018, October 31, 2018, November 30, 2018, December 31, 2018, January 31, 2019, February 28, 2019, and March 29, 2019.

The distributions declared for the periods from March 30, 2018 through June 28, 2018 were calculated based on stockholders of record each day during these periods at a rate of (i) $0.001434521 per share per day less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock.

The distributions declared for the periods from June 29, 2018 through March 28, 2019 were calculated based on stockholders of record each day during these periods at a rate of (i) $0.001458630 per share per day less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock.

Distributions are generally paid to stockholders on the last business day of the month for which the distribution has accrued. Distributions reinvested pursuant to the distribution reinvestment plan are reinvested in shares of the same class as the shares on which distributions are made.

The following table presents information regarding the Company's distributions declared and paid to stockholders during the year ended December 31, 2018:

At December 31, 2018, the Company had accrued approximately $1.0 million for the cash distributions paid or to be paid on January 31, 2019, February 28, 2019, and March 29, 2019, which is reported in distributions payable in the consolidated balance sheet.

On October 7, 2016, the Company's board of directors authorized a stock dividend in the amount of 0.005 shares of common stock to all common stockholders of record as of the close of business on December 31, 2016. On February 22, 2017, the Company's board of directors authorized a stock dividend, in the amount of 0.01 shares of common stock to all common stockholders of record as of the close of business on March 31, 2017. On April 25, 2017, the Company's board of directors authorized a stock dividend in the amount of 0.01 shares of common stock to all common stockholders of record as of the close of business on July 1, 2017. The stock dividends were issued in the same class of shares as the shares for which such stockholder received the stock dividend. The Company issued the stock dividends on January 13, 2017, April 13, 2017, and July 14, 2017, respectively.

In analyzing the fair value of its financial investments accounted for on a fair value basis, the Company follows the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company determines fair value based on quoted prices when available or, if quoted prices are not available, through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The fair value of cash, tenant receivables and accounts

payable, approximate their carrying value due to their short nature. The hierarchy followed defines three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter; depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

The fair value of rental properties is usually estimated based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities. The Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases and the value of tenant relationships, based in each case on their fair values.

During the year ended December 31, 2018, derivatives (interest rate caps) of $28,500 were acquired in conjunction with the acquisition financing of Tramore Village. Derivatives are reported at fair value in the consolidated balance sheets and are valued by a third party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors. (Level 2).

The following table presents information about the Company's assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

The carrying and fair values of the Company’s mortgage notes payable- outstanding borrowings, which were not carried at fair value on the consolidated balance sheets at December 31, 2018 and 2017, were as follows:

The carrying amount of the mortgage notes payable presented above is the outstanding borrowings excluding premium or discount and deferred finance costs, net. At December 31, 2018, the fair value of mortgage notes payable was estimated using a discounted cash flow model and rates available to the Company for debt with similar terms and remaining maturity.

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

As a condition to certain of the Company’s financing facilities, from time to time the Company may be required to enter into certain derivative transactions as may be required by the lender. These transactions would generally be in line with the Company’s own risk management objectives and also serve to protect the lender.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company entered into two interest rate caps that were designated as cash flow hedges. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2018, such derivatives were used to hedge the variable cash flows, indexed to USD-LIBOR, associated with existing variable-rate loan agreements. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the year ended December 31, 2018, the Company recorded $174 of hedge ineffectiveness in earnings. During the year ended December 31, 2017, the Company recorded no hedge ineffectiveness in earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. At December 31, 2018, the Company estimates that an additional $10,511 will be reclassified as an increase to interest expense over the next 12 months.

The following table presents the Company's outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk at December 31, 2018 and 2017:

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The following table presents the fair value of the Company’s derivative financial instruments, as well as their classification on the consolidated balance sheets at December 31, 2018 and 2017:

Under its charter, the Company must limit its total operating expenses to the greater of 2% of its average invested assets or 25% of its net income for the four most recently completed fiscal quarters, unless the Conflicts Committee of the Company’s board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors.

Operating expenses for the four fiscal quarters ended December 31, 2018 exceeded the charter imposed limitation; however, the Conflicts Committee of the Company's board of directors determined that the relationship of the Company's operating expenses to its average invested assets was justified for these periods given the costs of operating a public company and the early stage of the Company's operations.

The Company has evaluated subsequent events through the filing of this report and determined that there have been any events that have occurred that would require adjustments to or disclosures in the consolidated financial statements, except for the following:

On February 12, 2019, the Company purchased Wimbledon Oaks, a 248 unit multifamily apartment complex in Arlington, Texas for $25.9 million. The seller was an unaffiliated third party. In conjunction with the purchase, the Company entered into an $18.4 million mortgage on the property.

On March 21, 2019, the Company’s Board of Directors authorized a cash distribution on the outstanding shares of all classes of common stock based on daily record dates for the period from March 29, 2019 through June 27, 2019, which the Company expects to pay on April 30, 2019, May 31, 2019, and June 28, 2019. The distribution will be calculated based on the stockholders of record each day during the period at a rate of (i) $0.001469178 per share per day, less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock divided by the number of shares of common stock of such class outstanding as of the close of business on the record date.

				Initial Cost to Company								Gross Amount at which Carried at Close of Period
Description	Location	Encumbrances		Land		Building and Improvements		Total		Cost Capitalized Subsequent to Acquisition		Land		Building and Improvements		Total		Accumulated Depreciation			Date of Construction	Date Acquired	Life on Which Depreciated- Latest Income Statement
Payne Place	Alexandria, Virginia	$	1,560,236	$	1,419,898	$	1,030,161	$	2,450,059	$	37,076	$	1,419,898	$	1,067,237	$	2,487,135	$	(101,793	)	1950	8/19/2016	3 - 27.5 years
Bay Club	Jacksonville, Florida		21,520,000		3,321,081		24,255,617		27,576,698		870,568		3,321,081		25,126,185		28,447,266		(1,588,567	)	1990	7/31/2017	3 - 27.5 years
Tramore Village	Austell, Georgia		32,625,000		6,729,081		37,884,724		44,613,805		1,041,871		6,729,081		38,926,595		45,655,676		(1,290,598	)	1999	3/22/2018	3 - 27.5 years
Matthews Reserve	Matthews, North Carolina		23,850,000		4,138,788		29,943,094		34,081,882		78,746		4,138,788		30,021,840		34,160,628		(441,450	)	1998	8/29/2018	3 - 27.5 years
The Park at Kensington	Riverview, Florida		21,760,000		3,152,275		25,814,299		28,966,574		136,917		3,152,275		25,951,216		29,103,491		(370,202	)	1990	9/14/2018	3 - 27.5 years
		$	101,315,236	$	18,761,123	$	118,927,895	$	137,689,018	$	2,165,178	$	18,761,123	$	121,093,073	$	139,854,196	$	(3,792,610	)

		PAGE
	Forward Looking Statements
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	6
Item 2.	Properties	6
Item 3.	Legal Proceedings	6
Item 4.	Mine Safety Disclosures	7
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6.	Selected Financial Data	17
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 8.	Financial Statements and Supplementary Data	31
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	31
Item 9A.	Controls and Procedures	31
Item 9B.	Other Information	32
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	33
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	33
Item 13.	Certain Relationships and Related Transactions, and Director Independence	33
Item 14.	Principal Accounting Fees and Services	33
PART IV.
Item 15.	Exhibits and Financial Statement Schedule	34
Item 16.	Form 10-K Summary	36

SIGNATURES		37

	Class A		Class T		Class R		Class I
Primary Offering Price	$	10.00	$	9.47	$	9.52	$	9.13
Offering Price under the DRIP	$	9.60	$	9.09	$	9.14	$	8.90

	December 31, 2018 Net Asset Value			December 31, 2018 Net Asset Value per Share
Investments	$	151,000		$	16.32
Cash		32,827			3.55
Other Assets		3,469			0.37
Mortgage Notes Payable		(100,809	)		(10.89	)
Other Liabilities		(2,088	)		(0.23	)
Net asset value	$	84,399		$	9.12

	December 31, 2018 Net Asset Value per Share			March 31, 2018 Net Asset Value per Share ⁽¹⁾			Change in Estimated Value per Share
Investments	$	16.32		$	15.73		$	0.59
Cash		3.55			4.11			(0.56	)
Other Assets		0.37			0.28			0.09
Mortgage Notes Payable		(10.89	)		(10.92	)		0.03
Other Liabilities		(0.23	)		(0.15	)		(0.08	)
	$	9.12		$	9.05		$	0.07

		Value				Weighted Average Basis
Overall Capitalization Rate			5.00	%			5.00	%

Title of each class		Name of each exchange on which registered
None		None

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☑

	Change in Estimated Value per Share
	Increase of 25 Basis Points		Decrease of 25 Basis Points		Increase of 5%		Decrease of 5%
Terminal Capitalization Rate	$	8.42	$	9.86	$	8.35	$	9.93
Discount Rate	$	9.00	$	9.21	$	8.97	$	9.26

	December 31, 2018 Net Asset Value per Share
Class R Common Stock:
Estimated NAV per share	$	9.12
Offering related costs		0.63
Updated primary offering price per share	$	9.75
Class I Common Stock:
Estimated NAV per share	$	9.12
Offering related costs		0.23
Updated primary offering price per share	$	9.35

Share Purchase Anniversary	Redemption Price
Less than 1 year	No repurchase allowed
1 year	$	8.44
2 years	$	8.66
3 years	$	8.89
4 years	$	9.12

Estimated Value per Share		Valuation Date		Filing with the Securities and Exchange Commission
$9.05		March 31, 2018		Form 8-K filed June 27, 2018

Type of Expense	Amount
Selling commissions	$	1,985,971
Dealer manager fees		2,579,685
Distribution and shareholder service fee ⁽¹⁾		2,378,766
Other organization and offering costs ⁽²⁾		3,452,775
Total expenses	$	10,397,197

Share Purchase Anniversary		Redemption Price as a Percentage of Purchase Price
Less than 1 year		No repurchase allowed
1 year		92.50%
2 years		95.00%
3 years		97.50%
4 years		100.00%

Period	Total Number of Shares Redeemed ⁽¹⁾	Average Price Paid per Share	Year-to-Date Number of Shares Purchased as Part of a Publicly Announced Plan or Program ⁽²⁾	Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
October 2018	—	—	—	(3)
November 2018	—	—	—	(3)
December 2018	453	$8.37	2,607	(3)
	453

Fiscal Period Paid	Per Share⁽¹⁾	Distributions Reinvested in Shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
12 months ended December 31, 2016	$0.000547945 per day	$	4,380	$	11,524	$	15,904
Seven months ended July 31, 2017	$0.000547945 per day		41,012		47,682		88,694
Five months ended December 31, 2017	$0.001434521 per day		248,431		227,843		476,274
Six months ended June 30, 2018	$0.001434521 per day		605,527		496,157		1,101,684
Six months ended December 31, 2018	$0.001458630 per day		922,889		780,864		1,703,753
		$	1,822,239	$	1,564,070	$	3,386,309

Multifamily Community	Capital Deployed during the year ended December 31, 2018		Remaining capital budgeted
Payne Place	$	11,700	$	39,367
Bay Club		1,012,009		1,025,480
Tramore Village		1,077,266		3,075,470
Matthews Reserve		55,258		2,927,312
The Park at Kensington		21,334		2,112,330
	$	2,177,567

	December 31, 2018			December 31, 2017
Collateral	Outstanding Borrowings	Deferred Financing Costs, net	Carrying Value	Outstanding borrowings	Deferred Financing Costs, net	Carrying Value
Payne Place	$1,560,236	$(30,220)	$1,530,016	$1,594,507	$(32,126)	$1,562,381
Bay Club	21,520,000	(255,957)	21,264,043	21,520,000	(304,011)	21,215,989
Tramore Village	32,625,000	(363,784)	32,261,216	-	-	-
Matthews Reserve	23,850,000	(315,236)	23,534,764	-	-	-
The Park at Kensington	21,760,000	(305,399)	21,454,601	-	-	-
Total	$101,315,236	$(1,270,596)	$100,044,640	$23,114,507	$(336,137)	$22,778,370

Collateral	Maturity Date	Annual Interest Rate		Average Monthly Debt Service	Average Monthly Escrow
Payne Place	1/1/2047	3.11%	⁽¹⁾⁽⁵⁾	6,948	2,036
Bay Club	8/1/2024	4.37%	⁽²⁾⁽⁶⁾	88,769	39,125
Tramore Village	4/1/2025	4.30%	⁽³⁾⁽⁶⁾	118,239	36,104
Matthews Reserve	9/1/2025	4.47%	⁽⁴⁾⁽⁶⁾	90,075	20,127
The Park at Kensington	10/1/2025	4.36%	⁽⁴⁾⁽⁶⁾	80,159	43,998

Buildings		27.5 years
Building improvements		5.0 to 27.5 years
Furniture, fixtures, and equipment		3.0 to 5.0 years
Tenant improvements		Shorter of lease term or expected useful life
Lease intangibles		Weighted average remaining term of related leases


Exhibit No.		Description
3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed April 11, 2016)
3.2		Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 2, 2015)
3.3		Articles of Amendment (incorporated by reference to Exhibit 3.3 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
3.4		Articles Supplementary for the Class R shares of common stock (incorporated by reference to Exhibit 3.4 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
3.5		Articles Supplementary for the Class I shares of common stock (incorporated by reference to Exhibit 3.5 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
4.1		Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 10 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 29, 2018)
4.2		Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 2, 2015)
4.3		Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.3 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 8 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed April 27, 2018)
4.4		Second Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.3 to Post-Effective Amendment No. 10 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 29, 2018)
4.5		Escrow Agreement among the Company, Resource Securities, Inc. and UMB Bank, N.A., dated April 28, 2016 (incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q filed November 14, 2016)
10.1		Dealer Manager Agreement, including Form of Selected Dealer Agreement and Form of Placement Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed November 14, 2016)
10.2		Amended and Restated Dealer Manager Agreement, including Form of Selected Dealer Agreement and Form of Placement Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed July 5, 2017)
10.3		Selected Dealer Agreement, dated November 18, 2016, by and among Resource Apartment REIT III, Inc., Ameriprise Financial Services, Inc., Resource Securities, Inc., Resource REIT Advisor, LLC, and Resource Real Estate, Inc. (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed November 23, 2016)


10.4		Amendment to Selected Dealer Agreement, effective July 3, 2017, by and among Resource Apartment REIT III, Inc., Ameriprise Financial Services, Inc., Resource Securities, Inc., Resource REIT Advisor, LLC, and Resource Real Estate, Inc. (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed July 13, 2017)
10.5		First Amendment to Advisory Agreement by and between Resource Apartment REIT III, Inc. and REIT Advisor, LLC, dated April 13, 2018 (incorporated by reference to Exhibit No. 10.13 to the Company's Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (No. 333-207740) filed April 13, 2018)
10.6		Advisory Agreement by and between the Resource Apartment REIT III, Inc. and REIT Advisor, LLC, dated April 28, 2018 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed August 10, 2018)
10.7		Property Management Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed November 14, 2016)
10.8		Real Estate Contract by and between Tramore Apartments, LLC and Resource Apartment OP III, LP, dated February 13, 2018 (incorporated by reference to Exhibit No. 10.10 to the Company's Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (No. 333-207740) filed April 13, 2018)
10.9		Multifamily Loan and Security Agreement by and between RRE Tramore Village Holdings, LLC and Berkadia Commercial Mortgage LLC, dated March 22, 2018 (incorporated by reference to Exhibit No. 10.11 to the Company's Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (No. 333-207740) filed April 13, 2018)
10.10		Multifamily Note by RRE Tramore Village Holdings, LLC in favor of Berkadia Commercial Mortgage LLC, dated March 22, 2018 (incorporated by reference to Exhibit No. 10.12 to the Company's Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (No. 333-207740) filed April 13, 2018)
10.11		Sale, Purchase, and Escrow Agreement by and between Matthews Reserve II, LLC and Resource Apartment OP III, LP, dated July 9, 2018 (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.12		Multifamily Loan and Security Agreement by and between RRE Matthews Reserve Holdings, LLC and CBRE Capital Markets, Inc., dated August 28, 2018 (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.13		Multifamily Note by RRE Matthews Reserve Holdings, LLC in favor of CBRE Capital Markets, Inc., dated August 28, 2018 (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.14		Purchase and Sale Agreement by and between Kensington Property Holdings, LLC and Resource Apartment OP III, LP, dated July 23, 2018 (incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.15		First Amendment to Purchase and Sale Agreement by and between Kensington Property Holdings, LLC and Resource Apartment OP III, LP, dated August 2, 2018 (incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.16		Second Amendment to Purchase and Sale Agreement by and between Kensington Property Holdings, LLC and Resource Apartment OP III, LP, dated September 11, 2018 (incorporated by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.17		Third Amendment to Purchase and Sale Agreement by and between Kensington Property Holdings, LLC and Resource Apartment OP III, LP, dated September 13, 2018 (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.18		Multifamily Loan and Security Agreement by and between RRE Kensington Holdings, LLC and CBRE Capital Markets, Inc., dated September 14, 2018 (incorporated by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
10.19		Multifamily Note by RRE Kensington Holdings, LLC in favor of CBRE Capital Markets, Inc., dated September 14, 2018 (incorporated by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q filed November 9, 2018)
21.1		Subsidiaries of the Company (incorporated by reference to Exhibit No. 21.1 to the Company’s Post-Effective Amendment No. 11 to the Registration Statement on Form S-11 (No. 333-207740) filed March 1, 2019)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed July 5, 2017)
99.2		Second Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed July 24, 2018)
101.1		Interactive Data Files

	RESOURCE APARTMENT REIT III, INC.

March 22, 2019	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer
		(Principal Executive Officer)


Name	Title	Date

/s/ Alan F. Feldman	Chief Executive Officer (Principal Executive Officer)	March 22, 2019
Alan F. Feldman	Chief Executive Officer (Principal Executive Officer)

/s/ Steven R. Saltzman	Chief Financial Officer, Senior Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer)	March 22, 2019
Steven R. Saltzman

/s/ George E. Carleton	Chief Operating Officer, President, and Director	March 22, 2019
George E. Carleton	Chief Operating Officer, President, and Director

/s/ Harvey Magarick	Independent Director	March 22, 2019
Harvey Magarick	Independent Director

/s/ Lee F. Shlifer	Independent Director	March 22, 2019
Lee F. Shlifer	Independent Director

/s/ David Spoont	Independent Director	March 22, 2019
David Spoont	Independent Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements		Page

Report of Independent Registered Public Accounting Firm		F-1

Consolidated Balance Sheets at December 31, 2018 and 2017		F-2

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2018 and 2017		F-3

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2018 and 2017		F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017		F-6

Notes to Consolidated Financial Statements- December 31, 2018		F-7

Subsidiaries	Number of Units	Property Location
Resource Apartment REIT III Holdings, LLC	N/A	N/A
Resource Apartment REIT III OP, LP	N/A	N/A
RRE Payne Place Holdings, LLC	11	Alexandria, VA
RRE Bay Club Holdings, LLC	220	Jacksonville, FL
RRE Tramore Village Holdings, LLC	324	Austell, GA
RRE Matthews Reserve Holdings, LLC	212	Matthews, NC
RRE Kensington Holdings, LLC	204	Riverview, FL
	971

2019	$	150,016
2020		390,839
2021		915,574
2022		1,720,252
2023		1,797,483
Thereafter		96,341,072
	$	101,315,236

2019	$	203,776
2020		203,496
2021		201,570
2022		198,321
2023		194,477
Thereafter		268,956
	$	1,270,596

	Level 1		Level 2		Level 3		Total
December 31, 2018
Assets:
Interest rate caps	$	—	$	2,293	$	—	$	2,293

December 31, 2017
Assets:
Interest rate caps	$	—	$	3,408	$	—	$	3,408